Generali rolls out second European real estate debt fund

The firm, which launched the predecessor Generali Real Estate Debt Investment Fund in 2019, is targeting a €1bn raise.

Generali Real Estate, the property asset management arm of Italian insurer Generali, is launching its second European commercial real estate debt fund.

The manager is aiming to raise €1 billion from institutional investors for the senior lending vehicle, Generali Real Estate Debt Investment Fund II. It raised €1.45 billion for its predecessor fund, which was launched in 2019.

Through the Luxembourg domiciled GREDIF II, Generali will focus on providing financing facilities with a loan-to-value of up to 60 percent. It will have a keen focus on office, logistics and residential in continental Europe and the UK.

Nunzio Laurenziello, head of commercial debt funds at Generali Real Estate, said following the “successful deployment” of GREDIF the firm is continuing its growth in the private real estate debt market with the launch of a successor strategy.

“With the growing interest rate environment, and the moderate leverage of the fund [GREDIF II] allowing [it] to absorb a potential severe market correction without affecting the loan itself, we expect that GREDIF II will attract third-party investors in addition to the Generali insurance companies that have already committed,” he added.

In July 2019, Real Estate Capital Europe reported that the firm had launched GREDIF with Laurenziello saying at the time the firm was looking to grow its commercial real estate debt exposure up to €3 billion in the subsequent three years.

The latest strategy is understood to have been tweaked slightly from the original strategy, with GREDIF II not investing in mezzanine or junior debt. The predecessor vintage allocated 25 percent of the capital raised to mezzanine and junior debt.

Laurenziello added that Generali has already concluded its first financing deal through the new fund.

Active lender

The Italian insurer was relatively active in the debt market last year. According to Real Estate Capital Europe’s list of Europe’s Top 50 Lenders, published in December, it provided €440 million of financing in European markets during the first three quarters of 2022.

By November, it had done €181.3 million of deals in Italy across four transactions. Its total expected investment volume for Southern Europe was €235.6 million at that point.

In March it was sole lender of €42.5 million to refinance the acquisition of a retail asset located on Corso Buenos Aires in Milan. In July it provided 50 percent of a Milan office acquisition and refurbishment financing.

The manager was also active outside Southern Europe. In June, it provided a £102 million (€116 million) financing for the refurbishment of The Burlian, a prime mixed-use building in London’s West End, which Hines bought in March 2020. The loan will support the complete refurbishment of the building targeting BREEAM “Outstanding” and WELL “Platinum” certifications. The scheme will provide retail and office space.

UK expansion

Generali Real Estate expanded its operations into the UK in 2022 with the appointment of Fraser D’Arcy, a former investment professional from Columbia Threadneedle Investment and developer Frogmore, as director and head of UK.

This was preceded by the November 2021 acquisition by Generali’s real estate equity business, of the Times Square building in London for a reported €500 million, marking its return to the London market following a hiatus due to Brexit and the covid-19 pandemic.