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PIRELLI RE BUSINESS MODEL

Pirelli RE has developed a new, distinctive business model and created a management team of experience and specialist expertise gained over the years. The company’s aim is to export its model abroad, to Central-Eastern Europe.

This model is based on certain strategic guidelines: constantly proactive approach to the market, co-investment with the top institutional investors, the opportunistic management of portfolios, strong sector specialization both in Investment & Asset Management and the provision of services relating to the development of real estate assets.

The mix of these kinds of activities gives rise to strong synergies between all areas of business, making it possible to maintain high growth in value during the market’s different cycles.

The activities making up the business model have undergone a significant change in recent years, with a major shift in their respective proportions of the company’s overall net worth.

In brief, the business model allows several competitive advantages to be combined:
  • it attracts top international investors and operators who are able to delegate management of all phases of their investments to a single party;

  • it reduces the overall risk of investments through qualified minority shareholdings in a number of companies and funds specialized by type and purpose;

  • it increases the investment opportunities by participating, for the same amount of invested capital, in a greater number of operations;

  • it transfers its expertise in asset management and specialized services to the sector of real estate investment funds by capitalizing on its specialization and resources and by benefiting from changes in the retail market;

  • it manages assets whose value is considerably higher than the amount directly invested, thanks to fund and asset management services as well as service provider contracts;

  • it increases the return on transactions by offering specialized direct and indirect services through the franchising network in addition to fund and asset management services.

The activity of strategic investment management involves identifying investment opportunities in the various sectors (residential, commercial and non performing loans) and co-ordinating the specialized services aimed at enhancing the value of portfolios for their subsequent disposal.
Deals are concluded with institutional investors by creating funds and companies, in which Pirelli RE takes a qualified minority stake and is entirely responsible for managing the real estate portfolios and related services. This approach sets the Group apart from real estate companies who invest with majority stakes and pure Asset Management companies, who usually do not participate in transactions with their own risk capital.

The active management of the portfolios acquired (residential, commercial, non performing loans) involves a strong, specialized knowledge of the product itself. This is one of the most attractive elements of the model of Pirelli RE which has created its own internal culture and model of innovation by importing state-of-the-art experience drawn from international markets.

In fact, Pirelli RE maximizes the value of its investments through its service provider business, being the only operator on the Italian market to offer private and public customers alike a wide range of specialized services involving the acquisition, construction, management and sale of property. The specialized services, offered by the leading companies in their respective fields, help boost operating margins. The interlinking nature of the services offered by these companies also means that they are able to co-ordinate the various stages in a property’s development, by identifying direct and specific responsibilities for every phase.

The specialized approach geared to the active management of properties also underlies activities involving core assets, whose management model is directly derived from the Group’s experience in opportunistic ventures. More specifically, in the case of private contribution funds, potential investors are able to know and evaluate in advance the fund’s initial portfolio and return, thus allowing them to diversify their assets by sector. The decision for each fund to be “specialized” has been fundamental, allowing them to be managed better by using specific asset management expertise and know-how in the different real estate markets.

Pirelli RE has created an Advisory & Acquisitions team, forming part of the Investment & Asset Management Department and serving all the business units. Consisting of a small team of qualified individuals, it structures deals and gives Pirelli RE a competitive edge on the market. In fact, the work involved in closing acquisition deals is highly specific and complex in nature: it involves the search and selection of institutional partners, the identification of the financial and corporate structure, the rules governing relationships with shareholders including the way out from the investment, and the preparation of the business plan for demonstrating its consistency with the Group’s overall strategy and for the purposes of evaluation by the heads of the business areas involved.
The presence of such a qualified, in-house structure verticalizes the investment screening activities and helps maximize profits, by making the most of the technical procedures distinguishing the Pirelli RE acquisition model.

Pirelli RE’s sale of services through franchising is an important change in the way of doing business which derives directly from its specific business model and the Group’s specialist real estate and financial expertise.