Zurich Insurance is putting down some major real estate chips on Italy with a €400 million core investment mandate handed to UBS Asset Management this week.
The Zurich-based insurer has plans to grow its real estate assets under management by approximately $1 billion in 2016 through mandates and via direct investing and this mandate has played a first major part of that plan. The next mandate anticipated to be awarded by the insurer will be for Asian investments.
Zurich said it chose to mandate an Italian real estate account for diversification purposes and for what it said was its good mid-term growth prospects.
That being said, while Italian property will be the primary target for the mandate, investments elsewhere in Europe will be selected on a case-by-case basis, again with an eye toward diversification.
While a major initiative, the UBS mandate is not in fact the insurer's first foray into the Italian property market this year. In March, Zurich teamed up with the real estate subsidiary of the Italian post office to buy a three-property portfolio in Rome for $242 million, according to real estate data provider Real Capital Analytics (RCA). The 490,000 square feet of offices includes the world's oldest pawnshop, located in a four-story property built in 1588, Bloomberg reported.
Taking a step back, Zurich's $1 billion deployment target for 2016 represents a slight decrease in real estate activity compared with last year, when the insurer transacted around $1.8 billion of deals altogether, including a small amount of dispositions.
At this year's MIPIM conference in Cannes in March, the Swiss insurer's head of group real estate, Cornel Widmer (pictured), told PERE how the insurer's broad real estate strategy for the year included targeting multifamily residential, retail and logistics assets. He said he expected US and European markets to figure prominently in its transactional activity and, to a lesser extent, investments in developed markets in Asia would also form part of the strategy.
“We think the US is two years ahead of Europe. There, we will be very selective with our strategies and we will have a particular focus on 24-hour cities on the West and East Coasts,” Widmer said.
In the first half of 2016, Zurich's direct US real estate investments have ranged from a Chicago multifamily building to Philadelphia office space. The insurer's most recent publicly-disclosed transaction was the June purchase of a 13-story Miami office building for $57.5 million, according to (RCA).