Kennedy Wilson Europe Real Estate has conditionally acquired a portfolio of nine offices in Italy fully let to the Italian government. The portfolio is being acquired from InvestiRE SGR, as the management company of the closed-end mutual property investment fund known as Fondo Immobili Pubblici (“FIP”). The portfolio net purchase price is EUR185.5 million, reflecting a yield on cost of 6.3%.
The portfolio comprises nine high quality office buildings 100% occupied by Italian government ministries (see Table 1), across 1.1 million sq ft (99,200 sq m) of lettable space, generating a day one NOI of EUR12.1 million, subject to annual indexation of 75% of CPI. The majority of the offices have been comprehensively refurbished with 50% of NOI being generated from properties refurbished from 2014. The unexpired lease term is 7.1 years with all the existing leases expiring simultaneously in December 2022.
At Via Valtellina, Milan, the local council approved a resolution to grant planning consent in September, to take effect in 2016, for the redevelopment of the adjoining Farini rail exchange, including the KWE’s Via Valtellina property. This will see significant regeneration of the area and development of new offices, residential property and parks over an area comprising c. 5 million sq ft.
The portfolio will be held by a closed-end real estate alternative investment fund named Olimpia Investment Fund, wholly-owned by KWE and managed by Savills Investment Management SGR. The conditional acquisition by the Olimpia Investment Fund is expected to close on or around 30 December 2015 and will be funded from the Company’s cash resources.
KWE : Kennedy Wilson Europe buys Italian office portfolio