Previdente Re set the template for Italian retirement real estate funds

Several deals between real estate fund managers and pension funds are expected to be announced over the next months in Italy, as pension funds will have to comply with a new regulatory regime that limits their possibility of holding directly real estate properties, says Elena Pagnoni, lawyer at Hogan Lovells in Rome.

The law firm advised the deal between real estate funds manager EstCapital Sgr and the Italian pension fund of the BNL/BNP Group (Fondo Pensioni BNL), announced on May 23 to develop real estate closed-end fund Previdente RE.

While similar solutions have already been developed in other markets, such as the United States, the deal has seen the creation of the first real estate fund for retirement planning in Italy.

“This means that their investors can be only pension funds, similar institutions providing pension to specific categories of workers (‘casse di previdenza’) and insurance companies specialized in offering retirement planning products. They may enter into the fund either contributing in kind their real estate assets or paying their quotas in cash,” Pagnoni tells Investment Europe.

She expects that given the highly visible nature of BNP-BNL and the amounts involved, the deal will be taken as a template for further initiatives in this area. In future deals, similar arrangements are also likely to be taken into account.

In order to find a balance between the needs of the pension fund and of real estate managers in the structure of the fund, Hogan Lovells looked for a low leverage and a risk-adverse investment management policy, a stable performance, an acceptable level of liquidity in the interest of the quotaholders, the regular issuing of dividends and the possibility to obtain partial reimbursement of the quotas during all the life of the fund.

Pagnoni adds: “In addition the fund’s rules have been drafted in an innovative way to provide a system of corporate governance, composed by a shareholders committee and an ethics committee, tailored to continuously monitor and enforce the retirement planning mission of the fund.”

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