Union Investment has entered the Italian market with the purchase of Piazza San Fedele 1–3 office building in Milan’s business district in an off-market deal. It has been described as “the most significant transaction in the Milan office market this year.”
The building is currently being comprehensively refurbished and modernised by the seller, COIMA. The refurbishment is set to be completed in the fourth quarter of 2023, when the building will be handed over to its new tenant.
Off-market historic Milan property
The historic property, in the Duomo area, lies near Milan Cathedral and La Scala opera house and by the Galleria Vittorio Emanuele II shopping arcade. It dates from 1872 and was originally used as the famous Teatro Manzoni theatre.
Bottega Veneta, a brand of luxury goods company Kering, will set up its global headquarters in the building and will occupy the entire rental space of around 10,000 square metres across nine floors. Bottega Veneta has committed to a 12-year lease.
Union Investment, a Hamburg-based real estate investment manager, is acquiring the project from a real estate fund managed by Italian investor and developer COIMA in an off-market transaction. It s acquiring the project through Unilmmo: Deutschland, an open-ended real estate fund, from the QIA Italian Property Fund.
COIMA will continue to manage the investment for Union Investment through a new fund vehicle following completion. The purchase price was not disclosed.
Italy’s main commercial centre
Martin Schellein, Head of Investment Management Europe at Union Investment, says, “As Italy’s main commercial centre and one of the world’s leading fashion and design capitals, Milan offers excellent conditions for investments in the office sector. With its prestigious location in the historic city centre, high sustainability standards and long-term lease to Bottega Veneta, Piazza San Fedele 1–3 is the perfect first investment for our anticyclical entry into the Milan office market. We look forward to continuing our cooperation with COIMA, who will manage the Italian fund vehicle set up for this purpose on our behalf.”
The acquisition of its first office property in Italy contributes to the international diversification of the UniImmo: Deutschland fund’s real estate portfolio. This grade A investment also reinforces the sustainability profile of the fund: Piazza San Fedele 1–3 will achieve an EPC rating of A, thus meeting the EU Taxonomy criteria. The aim is to obtain at least LEED Gold certification.
Union Investment was advised on the deal by DILS, DLA Piper, McDermott and Aecom, while COIMA was advised by Shearman & Sterling and Maisto & Associati.
COIMA SGR purchased Palazzo San Fedele on behalf of the QIA Italian Property Fund in 2018. The Qatar Investment Authority is the investor, with COIMA managing the fund and the asset. The Fund’s portfolio currently includes direct investments for a total of six properties in Milan comprising approximately 40,000 square metres.
The refurbishment project also entails the complete redevelopment of Via Carlo Cattaneo, the portion of Via Silvio Pellico that goes from the Galleria to Piazza Duomo, improving the public realm and street furniture in the historic Milan neighbourhood.
The most significant transaction in the Milan office market this year
Gabriele Bonfiglioli, COIMA’s Chief Investment Officer, says, “The sale of this historic office building following a sustainable refurbishment represents the most significant transaction in the Milan office market this year. The deal confirms the continued strong demand from international tenants and investors for future-proofed sustainable buildings in central locations with strong amenity offerings. The acquisition represents the conclusion of our business plan for the asset, with a return for our investor of over 18% IRR. The transaction also represents Union Investment’s first move into the Italian office sector and the start of a partnership with COIMA aimed at expanding the portfolio with additional acquisitions.”
