By

By Marzia De Giuli

MILAN, Italy, Nov. 29 (Xinhua) — With the Italian economy still mired in recession, real-estate analysts expect further declines in property prices but foresee less unfavorable developments in the market.

The outbreak of the global financial crisis in 2008 and the consecutive debt crisis in 2011 led to credit freeze and decreased household income in Italy.

But differently from other European states, where prices reached unsustainable levels and then plunged, construction companies and banks in the Mediterranean country were keeping prices artificially high.

Such price rigidity in Italy resulted in a sharp decrease of transactions which fell from some 869,000 in 2006 to around 407,000 expected this year, according to a report from the Bologna-based Nomisma think tank.

The trend is continuing, but a real-estate bubble is unlikely to occur in the final phase of the crisis, Nomisma Managing Director Luca Dondi explained. “Repricing in Italy is taking longer than in other markets,” he told Xinhua. “Here the bubble was smaller, we let the air out little by little.”

According to a recent report from Italy’s central bank, residential property prices should record a decline of 5 per cent on average in 2013 and a modest rise throughout 2014. But the risk for this projection was downside and real-estate agents expect further declines in prices, the report said.

Dondi estimated further downward price correction during a period up to two years, which will encourage demand. He said he did not expect price appreciation before three to five years.

“Italy’s property market is not in a restart phase though is showing timid improvement and will recovery gradually, if Italy is not hit by other unpredictable economic shocks,” he said.

He highlighted however that the double-digit growth rates experienced by the sector between 2003 and 2007 were irreparably lost with the country’s longest recession in 20 years, and will be “only a memory.”

But why the repricing process has been much slower in Italy than in other European countries? Dondi and other experts pointed out three main reasons.

“The first wave of crisis was very short, so operators thought the property market could recover soon and kept prices high,” Dondi said. Meanwhile Italian banks did not want to mark-to-market their considerable exposure to the real estate sector because they would have big losses, he also noted.

Guido Lodigiani, Corporate Director of Italy’s largest real estate portal Gruppo Immobiliare.it, added that “Italy is a nation of homeowners, where some 75-80 percent of all homes are owner-occupied.”

“Homes are an essential part of Italian families’ assets, and a significant price reduction would mean feeling much poorer,” he explained to Xinhua.

Lodigiani agreed with Dondi that prices would continue to fall in the course of 2014. He estimated however that the number of transactions could slightly improve for effect of an easing of contraction in loans for house purchase, as also expected by the central bank’s report, assuming a modest strengthening of the economy.

This could be a good moment for foreign players to invest in the Italian real-estate market, especially in key cities like Milan – which will host the next world exposition in 2015 – and Rome, Lodigiani said. “In a basket for investors, the Italian market is a defensive one,” he noted.

According to Real Capital Analytics Inc., a global research and consulting firm, from January through early October, the volume of Italian cross-border transactions totaled 2.7 billion euros (3.6 billion U.S. dollars), the largest amount of foreign investment in the country’s commercial real estate since 2007.

For example, Morgan Stanley, which had not purchased property in Italy since 2007, said it had acquired a majority stake in 13 shopping malls and two retail parks, while Allianz Real Estate’s takeover of two office buildings in Milan and Rome was its first investment in Italy since 2008.

For more information visit:

http://news.xinhuanet.com/english/indepth/2013-11/29/c_132929638.htm

Italy is considering steps to make real estate investment trusts more profitable as it seeks to attract 1 billion euros ($1.3 billion) a year to a market that has failed to gain popularity since its 2006 creation.

The Economic Development Ministry proposed cutting the size of dividends REITs must distribute and easing rules for stock market listings, according to a draft bill. The ministry aims to increase the number of REITs to seven from two and raise their combined assets to 11.1 billion euros from 6.1 billion euros. The proposal hasn’t been scheduled for discussion in Prime Minister Enrico Letta’s cabinet.

The proposed changes are part of a wider package of measures designed to improve productivity and increase foreign investment in Italy. A bigger REIT market may boost Letta’s plan to sell 1.5 billion euros of state real estate assets over three years.

“REITs are seen as an indispensable vehicle for the state privatizations coming up,” said Francesco Galietti, founder of research company Policy Sonar in Rome. The creation of new REITs may help the government get better prices when it sells its buildings, he said.

REITs, which trade on stock exchanges, provide tax breaks for their owners in return for guarantees that a set amount of their profit is distributed to shareholders. The specifics vary from country to country and the Italian ministry seeks align its rules more closely with France, which has 37 REITs with a combined market value of $68 billion, according to a study by the European Public Real Estate Association. The U.K. has 23 REITs with a total market value of $49 billion.

Rulebook Needed

“Professional investors must be assured profitability and a rulebook” that’s in line with European peers, the ministry said in the draft. “The property market’s efficiency, and especially in the non-residential segment, depends in large part on the presence of institutional investors.”

The proposal includes cutting the minimum company stake that must be publicly traded to 25 percent from 35 percent and raising the maximum holding by a single investor to 60 percent from 51 percent. The changes would make Italy’s rules similar to those in France and Germany, the ministry said. The plan would also lower the dividend requirement to 70 percent of earnings from 85 percent, allowing REITs to reinvest more of their profit.

Struggling Market

Regulatory changes alone may not be enough to invigorate an industry that has struggled compared with other European countries. Beni Stabili SpA (BNS), the bigger of the two Italian REITs, had a market value of 970 million euros at the end of June, about 43 percent of its net asset value of 2.28 billion euros. Unibail-Rodamco SE (UL), France’s largest REIT, traded at about 125 percent of its NAV on June 30, while French No. 2 Klepierre SA (LI) was at about 107 percent.

Italian REITs have borrowed too much and failed to attract significant investment from Italian insurers and pension funds, said John Lutzius, managing director with Green Street Advisors in London.

“A significant portion of the failure of Italian REITs to grow is due to self-inflicted wounds,” Lutzius said in an interview. “For the right management team and the right incentives, it’s a very strong platform and an interesting way to play the Italian market.”

The Italian property market has contracted since the financial crisis as two recessions curbed investment and bank lending. Non-residential transactions in 2012 were 49 percent lower than the peak in 2006 and inflation-adjusted prices fell 8.9 percent in that period, Bloomberg Newscalculated based on data from national statistics institute Istat, the Economy Ministry and the Bank of Italy. Transactions are expected to slide 6.8 percent in 2013 and prices are forecast to slip 5.6 percent, Nomisma Institute said in a September report.

For more information visit:

http://www.bloomberg.com/news/2013-11-13/italy-seeks-to-ease-reit-rules-to-attract-1-3-billion-a-year.html

The first signs of improvement of the European economy are being seen in the form of increased commercial property sales in Italy. The country has traditionally been seen as one of Europe’s weaker markets.

Foreign investment

The data for the period from January to early October says it all. According to Real Capital Analytics Inc. Foreign investors pumped in a total of 2.75 billion euros or approximately 79% of all real estate transactions of a commercial nature in Italy. This is the biggest foreign investment involving commercial property in Italy since 2007. According to Joseph Kelly of Real Capital Analytics, this is only half the year’s total.

Buyer profile

This surge in Italian commercial real estate demand reflects a rise in overall confidence within the euro zone. Investors are now willing to buy into potentially riskier nations like Italy and Spain. It helps that Italy has good quality assets.

It is observed that the biggest investors in 2013 are the ones who had never purchased property in Italy before the global financial crisis. To cite an example, Morgan Stanley snapped up a majority holding in two retail parks and 13 Italian shopping malls for about 635 million euros. The company had made its last purchase in 2007.

Allianz Real Estate’s purchase of two office buildings in Rome and Milan for 90 million euros was its first investment in the country since 2008. According to Mauro Montagner, CEO, Allianz Real Estate Italy, the German Insurance conglomerate is planning more investments to the tune of $500 million.

Europe’s saturated markets

According to Alessandro Mazzanti, CEO, CBRE Group Inc’s Italian division, the year 2013 will end with almost two-thirds of Italian commercial real estate buyers being foreign. This is about double the average of the period between 2009 and 2012. Qatar Holding LLC took a 40% stake in Porto Nuovo in May. It is a two billion euro mixed-use development in the Italian city Milan. This is the biggest transaction until now.

Qatar Holding’s bold move has led to other investors taking a close look at the Italian market. Other foreign investors who have expressed interest include KKR & Co, Cerberus Capital Management LP and Oaktree Capital Management. According to Manfredi Catella, CEO, Hines Italy SGR, Cerberus is close to signing two transactions valued at 400 million euros in total.

Blackstone is heavily invested in shopping malls spread across northern Italy and is engaged in talks to purchase the Milan headquarters of the Italian newspaper Corriere della Sera for 120 million euros. The newspaper is in deep financial debt.

Written by Les Calvert

For more information visit:

http://www.property-abroad.com/italy/news-story/commercial-property-in-italy-attracts-foreign-real-estate-investors-19317796/

Confidence in Euro Zone Is Prompting Bets on Weaker Markets

Foreign investors are showing a growing appetite for Italian commercial real estate, a sign that the gradual improvement of the European economy is being felt in some of the Continent’s weaker property markets.

From January through early October, the volume of Italian cross-border transactions totaled €2.75 billion ($3.71 billion), or about 79% of all commercial real-estate transactions in Italy so far this year, according to Real Capital Analytics Inc. That is the largest amount of foreign investment in Italian commercial real estate since 2007, though it still is only half that year’s total, says Joseph Kelly, a European analyst at Real Capital Analytics.

With overall confidence in the euro zone rising, investors are becoming more willing to buy into riskier countries such as Spain and Italy, experts say.

“Now that the euro-zone crisis is no longer as relevant, people look to Italy. It has a real economy and good quality assets,” says Stephen Screene, chief operating officer of European capital markets at Cushman & Wakefield Inc.

The buyers in the biggest deals of 2013 are investors who haven’t bought property in Italy since before the global financial crisis, or ever. For example, in early October Morgan Stanley, MS -0.37% which hadn’t purchased property in Italy since 2007, said it had acquired a majority stake in 13 Italian shopping malls and two retail parks in a deal valued at about €635 million.

Allianz Real Estate’s acquisition last May of two office buildings in Milan and Rome was its first investment in Italy since 2008. Following this roughly €90 million deal, the German insurance company is planning further investments worth about €500 million, according to Mauro Montagner, CEO of Allianz Real Estate Italy.

Investors say that in havens such as London, Paris, Germany and Sweden, prices have jumped in some cases to prerecession levels, making investments less appealing. Investors buying properties in those markets are accepting initial yields as low as 5%, analysts say.

By contrast, in the second quarter of 2013, yields in Europe’s harder-hit markets such as Italy, Spain, Portugal, Ireland and Greece were on average 7.3% for retail property and 8.4% for office property, according to Real Capital Analytics.

By the end of 2013, about two thirds of the year’s deals will have involved foreign buyers, says Alessandro Mazzanti, chief executive CBRE Group Inc. CBG +0.11% ‘s Italian division. This is about double the average between 2009 and 2012, he says.

In May, Qatar Holding LLC, which before 2012 was completely absent from the Italian market, closed on a 40% stake of Porta Nuova, a €2 billion mixed-use development in Milan, the largest transaction so far this year in Italy.

Qatar Holding’s move piqued the interest of foreign investors, says Manfredi Catella, CEO of Hines Italia SGR, the developer of Porta Nuova.

Newly interested foreign investors include U.S. private-equity firms Cerberus Capital Management LP, KKR & Co. and Oaktree Capital Management, Mr. Catella says. In particular, Cerberus is close to completing two transactions for a value that could reach €400 million, according to people familiar with the matter.

Blackstone Group BX -4.13% LP, which in recent months has invested in shopping centers across northern Italy, is in exclusive talks to buy the historic Milan headquarters of the heavily indebted Italian newspaper Corriere della Sera for €120 million, according to people familiar with the matter. Blackstone didn’t respond to requests for comment.

But not everyone in Italy is eager to see real estate sold to foreign buyers. After the announcement of the possible sale of the building that has been Corriere’s home since 1904, the paper’s union of journalists called a strike.

Also, many foreign investors are deterred by an Italian political and economic system that they say lacks transparency and a clear set of rules.

“It is important that the government should adopt laws to erase rules that penalize real estate,” says Massimo Caputi, vice chairman of the Italian real-estate management firm Prelios SpA.

For more information visit: 

http://online.wsj.com/news/articles/SB10001424052702304330904579137381040342114

Investment in Italy’s office, retail and industrial markets increased 54 percent during the first half of 2013, compared to last year, according to data from Cushman & Wakefield.

Transactions during the first six months totaled €760 million ($1 billion), compared to €495 million last year. Investments in offices led the markets, with 13 single office transactions totaling €430 million, 57 percent of the overall deals during the first half, the firm reports.

The most active Italian city for office investors was Milan, which had six transactions totaling €235 million, excluding the Qatar-Hines Porta Nuova joint venture. (In May Qatar Holding announced plans to invest $2.65 billion into the Milan mixed use development.) Coming in second for office investment, Rome had four transactions totaling €130 million.

Investment activity in the country’s industrial market reached €160 million during the first six months, compared to no activity last year.

Retail transactions totaled €170 million during the first half, representing just 22 percent of the deal volume. However, as investment picks up, the firm expects retail volumes will exceed office investments by year end.

The sale of Market Central Da Vinci Rome, the largest retail center in Italy, by AIG/Lincoln to GWM for €130 million, represents the beginning of increased activity, the firm states.

“Good quality retail investments have proven to be resilient in the downturn and as a company we are assisting an increasing number of new international investors and players which are now actively negotiating significant transactions in Italy,” Cushman & Wakefield’s head of capital markets in Italy, Stephen Screene, said in the release.

For more information visit:

http://www.worldpropertychannel.com/europe-commercial-news/italian-real-estate-investment-italy-commercial-property-cushman-wakefield-office-market-retail-7304.php

Italy is battling France to become the new playground for Russia’s billionaires as Europe’s luxury destinations seek buyers of property and companies to weather the debt crisis.

“It’s incredible stuff,” Riccardo Monti, head of the Italian Trade Agency, said last month on a promotional tour of Russia, touting a palace for sale in Venice’s Grand Canal and a villa that once belonged to the King of Naples. “Trophy assets are really loved by big Russian entrepreneurs.”

The agency has sent him to Russia three times since May, while envoys from Nice in France were there last month. Both seek investments by Russians, whose foreign-property purchases more than doubled since 2007 to $12 billion, even as values risk falling due to a worsening economy. The 10 richest Russians are worth a combined $150 billion, Bloomberg estimates.

“Purchases are going at full steam,” said Georgy Kachamzov, head of research at Moscow-based Tranio.ru, which surveys more than 200 Russian brokers selling real estate in 43 countries. “The most popular locations for elite residences are London, followed by the Cote D’Azur. Then comes Spanish Marbella, the Italian Riviera and Tuscany.”

Italy, mired in a fourth recession since 2001, has turned to real estate sales to help cut the euro area’s second-biggest debt burden after Greece. The government has targeted for sale 46,000 state properties valued at a combined 55 billion euros.

Tom Cruise

Among them are medieval Orsini Castle outside Rome, built for a pope and the site of the wedding of Hollywood actors Tom Cruise and Katie Holmes, and a Sicilian villa redone in Oriental style by Ferdinand IV of Naples in the 19th century.

Scenari Immobiliari, an Italian property research company, forecasts a record 4,600 property transactions in Italy by foreigners this year, valued at 2.1 billion euros ($2.7 billion). Russians, who made up 2 percent of buyers in 2005, held a 13 percent share in the first half of this year after Britons and Germans.

“The opportunity is there now with the crisis,” Monti of the trade agency said. “Foreign investors want to buy cheap and they know that at one point they have to enter the market.”

While more Russians have purchased property in Italy than France, the French Riviera has drawn Russia’s biggest buyers, such as Roman Abramovich, who has a residence in Cap D’Antibes.

Nice, once a holiday spot for the Tsars, is seeking to leverage that history as it competes for Russian cash. Two years ago, the city reopened a luxury railway from Moscow that had run from the imperial capital St. Petersburg from 1864 until the Bolshevik Revolution in 1914.

Russian Visitors

About 250,000 Russian visited Nice last year 2011, up 15 percent on the previous year, and they were the third-biggest foreign spenders although in fifth place in terms of numbers, according to the city’s tourism office.

“Many of the Russian tourists we welcome are major businessmen who run big companies and want to establish themselves overseas,” said Rudy Salles, head of Nice’s tourism office and deputy mayor. He recently visited Moscow with a delegation of hotel owners and investment-promotion officials.

Even with France’s economy in its fifth consecutive quarter without growth, luxury real estate prices have held steady since dipping slightly between 2008 and 2009, according to the website Priximmo, which tracks the French market.

“Prices on the French Riviera continue to remain stable,” Maria McLean of Burger Sotheby’s in St. Tropez said in an e- mail. The Mediterranean climate “and of course its luxury lifestyle” are attracting buyers mainly from “eastern and northern Europe.”

Possible Risks

Buying luxury properties isn’t without risk, however. Real estate prices in exclusive Italian resorts such as Capri fell an average 4.4 percent in the year through September, according to Bologna-based research institute Nomisma.

There’s also the threat of tax increases as euro-area governments enact austerity measures to tackle the debt crisis, as well as legal disputes. Russian tycoon Mikhail Prokhorov had to forfeit a 39 million-euro deposit in 2010 after failing to conclude a deal to pay 390 million euros for a mansion near Nice built for Belgian King Leopold II.

For more information visit:

http://www.businessweek.com/news/2012-10-31/italy-battles-french-tsarist-playground-for-russia-riches