The Carlyle Group quadruples the size of its European real estate portfolio through milestone acquisition in Italy

Mipim, Cannes -- The Carlyle Group, a global private equity firm, has acquired a portfolio of 36 properties in Italy from the country’s Ministero dell’Economia e delle Finanze for €230 million. The transaction is likely to be one of the most significant sales to take place in the European real estate market in 2003 and quadruples the number of properties held by Carlyle in Europe. This is Carlyle’s largest single real estate investment to date, globally.

The portfolio was put up for auction on January 22^nd 2003 in a single lot, giving potential bidders until February 24^th to respond. Funds to secure Carlyle’s agreement to acquire the property portfolio were transferred today and the transaction is set to close by the end of the month.

“I am delighted that we completed this significant transaction in such a short space of time,” said Guido Audagna, a Milan-based director of The Carlyle Group, who led the transaction. “We were able to couple local knowledge with global resources to complete extensive due diligence as well as put in place financing on a significant scale within one month.”

“This portfolio fits perfectly within our investment strategy to acquire commercial buildings in off-prime business districts across France, Italy and Germany. By directing active asset-management programmes from within our own team we are able to take swift action to improve the properties we acquire, offering very attractive commercial space to tenants operating in a highly cost conscious environment,” said Eric Sasson, a managing director of The Carlyle Group, who heads up the firm’s European real estate team.

The sale of the portfolio is the penultimate lot put up for auction by Italy’s Ministry of Economy and Finance within a €1.5 billon disposal programme that has been in progress for three years and is managed by Consorzio G6 Advisor. The portfolio includes 36 buildings with a total of 290,000 square metres. The buildings are located on the outskirts of Milan and Rome as well as in the centre of Bari, Genoa, Naples and Reggio Emilia. Due to the fact that new leases could not be signed during the auction process the properties have a 40% vacancy rate upon acquisition, providing Carlyle with an outstanding opportunity to increase yields swiftly and increase the value of the portfolio.

“In Italy, there is a huge demand for properties that offer more space per person within a flexible layout that provides a state of the art technical infrastructure. We will begin refurbishment programmes on 60% of the properties to create attractive, modern facilities for new and existing tenants. Another 30% will be placed for sale directly, while the remaining 10% will be sold in a few years’ time following minor works,” said Mr Audagna.

Carlyle’s legal advisers on the transaction were Clifford Chance, while technical due diligence was provided by CB Richard Ellis.