Generali Real Estate S.p.A. Società di gestione del risparmio is launching its second fund focused on commercial real estate (CRE) debt, denominated ‘Generali Real Estate Debt Investment Fund II’ (GREDIF II), reserved for professional investors.
In the current growing interest rates environment, commercial real estate debt offers investors a defensive exposure to real estate, fairly stable returns despite market volatility1 (especially for well-diversified portfolios with a multi-sector and multi-country approach, with a disciplined investment strategy), as well as hedging opportunity for interest rates hike. For these reasons, paired with the shift in the debt market which sees banks covering a smaller market share compared to the past, and consequently more opportunities for private alternative lenders, the CRE debt market in Europe is witnessing significant growth: in 2021, real estate debt has represented 50% share of the real estate European market, corresponding to about € 180 bn.
The ‘Generali Real Estate Debt Investment Fund II’ (GREDIF II) aims to capture the opportunities offered by the CRE debt market, leveraging the Generali Real Estate long-term expertise in this segment. The fund’s investment strategy relies on the Generali Real Estate capabilities to rigorously select high-quality underlying assets in terms of location and leasing market dynamics, in order to build a diversified portfolio across asset classes, geographical distribution and risk/return profile, with Environmental and Social characteristics.
GREDIF II has a target size of € 1 bn and targets senior debt loans financing, with a loan-to-value (LTV) up to 60% and variable rates. To build a well-diversified and resilient investments portfolio, the fund aims to invests across Europe (primarily in continental Europe countries, but also in the UK), and across different asset classes (mainly office, logistics and residential).
Thanks to the ESG focus of its investment strategy, GREDIF II is a product referred to under SFDR art. 8. The investment process includes, as a binding element, the assessment of the loan against a tailored and proprietary ESG scorecard, which analyzes both the project sponsor and the underlying asset; the investment can be approved only if a minimum threshold is reached.
GREDIF II leverages the track record in commercial real estate debt that Generali Real Estate has developed over time, thanks to the management of €1 bn of financing with underlying assets on behalf of Generali Group insurance companies, and more recently with the dedicated predecessor ‘Generali Real Estate Debt Investment Fund” (GREDIF), launched in 2019 and focused on commercial real estate debt. The GREDIF fund has successfully raised €1.45 bn from Generali Group companies and third party clients, now fully deployed in the financing of high-quality assets across Europe.
Nunzio Laurenziello, Head of CRE Debt Funds at Generali Real Estate, commented: “Following the successful deployment of GREDIF, we continue our growth strategy on Private Real Estate Debt with the launch of GREDIF II. The Fund has an ESG angle, focusing on investments with high environmental and social credentials, and has already closed its first deal in France. With the traditional lenders’ regulation constraints increasing since the global financial crisis, we see strong opportunities on the CRE Debt market to provide financing on a selective basis. With the growing interest rate environment and the moderate leverage of the Fund allowing 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.”
