LONDON-REIT Asset Management has paid euro 217 million ($256 million) for a property portfolio in Italy. The private group picked up 21 retail properties in Italian cities including Rome and Milan in a joint venture with its local partner, Aedes Financial Services. The transaction expands REIT Asset Management's holdings outside the UK to euro 1.33 billion ($1.57 billion).

The REIT plans to open an office in Milan and will work with Aedes on more deals in Italy. The group has hired Chris Horler, a former Royal Bank of Scotland and Bank of Scotland executive, to head its European expansion drive.

A growing number of British investors, including Slough and Prudential, are turning to continental Europe for deals, because yields in their home market have reached record lows. A recent report by CB Richard Ellis predicted that European investment in 2005 is set for a record high, easily surpassing 2004's total of euro 103 billion ($121 billion). Investment in the 15 pre-enlargement European Union members was euro 55.2 billion ($65 billion) for the first half of 2005--22% higher than the same period last year.

The report also found that 54% of the total value of transactions in the EU-15 involved properties or portfolios in excess of euro 100 million ($118 million). Eight deals in the first half of 2005 exceeded euro 500 million ($591 million), two more than in the first half of 2004.

Non-EU investors made almost 50% of acquisitions in the first half of 2005, compared with 33% in 2004, reflecting growing investor interest from the Middle East and Far East. Germany has seen a large number of public housing acquisitions by US investors.

"Non-German investors, who have shown little interest in German real estate in previous years, now account for a significant proportion of deals," says Nick Axford, head of Europe, Middle East and Africa research at CBRE. "Foreign interest has grown as yields have increased relative to other European markets."