Sicily forms property fund with RREEF, Pirelli

Sicily, the southernmost region of Italy, has launched a private fund to own occupational property.

Along with several financial institutions, the region is selling a total of 34 properties such as municipal administrative offices into a 15-year fund called FIPRS-Fondo Immobiliare Pubblico Regione Siciliana.

The fund is to be owned 35 percent by the Region of Sicily, 33 percent by RREEF’s Global Opportunities Fund II and 22 percent by Pirelli RE. The remaining 10 percent will be underwritten by RREEF and placed with international institutional investors.

The portfolio will be managed by Pirelli’s asset management division and supported by RREEF Opportunities Management.

The deal is one of the earliest examples of Italian municipalities selling off property. It is estimated that public Italian institutions own some €400 billion ($526 billion) of property and are actively seeking ways to exploit their estates.

To date, at least six regions have sold off mass portfolios, created funds or have plans in place to do so, including Tuscany, Sardinia, Lazio, Umbria, Liguria and Milan. In the case of Milan, the public authority plans to spin off its real estate portfolio of approximately 1,600 properties into a private vehicle. Tuscany has sold off a package of 150 properties, a portfolio of council houses and established a real estate fund that owns hospitals and universities. Lazio contributed 926 assets for €203 million  to a real estate fund.

In a statement today, Pirelli says the Sicily fund is a closed-end vehicle and that the assets have a transaction value of €263 million. The fund has taken on €158 million of debt secured against the properties.

There are plans to further expand the fund with additional properties “with the goal of enhancing the value of the Region’s enormous property portfolio,” Pirelli said in the statement.