Cromwell acquires Pirelli R&D facility in Milan

Diversified real estate investor and manager Cromwell Property Group (Cromwell) (ASX:CMW) has today announced the acquisition of the Pirelli Tyre Research & Development Facility in Milan, Italy on behalf of a new Korean capital partner.

The asset was acquired for €88 million and is fully leased to Pirelli Tyre on a triple net lease, with a net lettable area of 21,668 square metres (sqm) and a Weighted Average Lease Expiry (WALE) of 13.75 years.

The facility is in the Bicocca district and has six floors, with three above ground and three below. It is currently used as an office and laboratory for Pirelli’s research and development activities.

“As part of our invest to manage strategy we have been engaging with potential capital partners who are keen to access our unique funds and asset management platform in Europe,” said Cromwell CEO Paul Weightman.

“We all know that real estate is local and with 200 experienced real estate professionals on the ground in 20 local offices throughout 12 European countries, we are well-placed to be able to find the right opportunities to meet the requirements of potential capital partners,” he declared.

“Europe comprised approximately 40% of total transactions in the global real estate market in 2018, and its sheer size across so many different markets creates complexity for investors looking for opportunities in the region. Cromwell’s unique platform with local teams, on-the-ground in key regions and sub-markets allows us to expertly advise our clients and source new opportunities,” he said.

“We have also submitted a bid on behalf of another Asian capital partner in the Nordics for more than €100 million. These opportunities are the first of what we anticipate will be a series of single-asset mandates for Asian capital partners,” he concluded.

Lorenzo Caroleo, Cromwell’s Head of Italy added, “the asset is in a good micro-location in the most liquid and dynamic city in Italy and one of the fastest growing cities in Europe in terms of office rental growth.”

“Bicocca is a consolidated mixed-use district undergoing a redevelopment phase. There is growing investor interest in the area due to its location and accessibility and increasing ability to attract significant commercial tenants,” he added.

As at 31 December 2018, Cromwell managed 18 assets in Italy valued at $751 million / €464 million, covering over 350,000 sqm, and let to more than 50 tenants.

European commercial real estate update

European commercial real estate investment volumes reached €273 billion in 2018, the fourth year in a row they were above €250 billion. Total activity was down 15% on 2017 but investor sentiment is still generally upbeat as capital continues to look for opportunities despite global uncertainties and geopolitical headwinds. Investors are increasingly looking to de-risk, making core liquid markets and long income streams attractive.

Germany’s €66.9 billion of commercial investment surpassed the UK (€61.7 billion) in volume in 2018 and both markets continue to take the majority of investment. The Top five is rounded out by France (€31.7 billion), The Netherlands (€20.4 billion) and Spain (€17.9 billion). Sweden, Austria, Poland, Italy and Finland collectively account for €36.2 billion and round out the top ten.