Month: May 2018

Real estate spin-off coming soon in Bologna

29 May, Il Sole 24 Ore

“Conspiracy of silence” is the word that unions and politicians use when talking about the current situation of the expo in Bologna. The Board of Directors of the district of Michelino gathered yesterday to approve the financial statement, which was anticipated as excellent, with a production value increased by over 6 points and 120 million euro and an Ebitda over 20 million. The Board was also to vote on the decision whether to split the company into two divisions, one for property management and the other for event organisation. There are also rumours about a possible listing on the stock exchange or a merger with the Milan Expo. Either way, the boards didn’t make any disclosure after the meeting. The president Gianpiero Calzolari, appointed last July to appease the shareholders divided on the governance and capitalisation, didn’t make any comment, but he announced a conference for tomorrow to present the financial statement.

The bad mood also prevails in the Town Hall, where Virginio Meroleais the first shareholder of Bologna Fiere with a 24% stake (the sum of the shares held by the Municipality and the Metropolitan City). The City Councillor Piergiorgio Licciardello decided to call the high management to clarify the situation: “We’ve read the surprising news these days – commented Licciardello – I requested to access the files, but the answer was negative. Fiera claimed the privacy of the Board of Directors meetings.”

“The silence from Bologna Fiere is terrifying – says Gian Luca Taddia from the local trade union Filcams Cgil – we had the last official meeting with the company 20 days ago on the matters concerning the organisation of the works. Everything else is just assumptions by the local press: from the potential spin-off of the company to the potential alliance with Milan. We’re against both the operations: the former because would trigger real estate speculations, the latter because Bologna is destined to be subdued by Milan concerning numbers”. The feeling is that Bologna Fiere wants to avoid debates and polemics on the matter that will be discussed by the members in the June meeting.

Certainly, the alliance with Milan would deny the possibility of a holding for the whole region together with the Rimini and Parma expo as wished by the Bonaccini administration, like the previous administrations. The idea of two twin companies, one owning the properties (provided by the public partners) and the other one holding the management of the area, risks being a deja-vu since. In fact, it was already proposed in 2007, when the expo then guided by Luca Cordero di Montezemolo split up precisely on the decision whether to separate the assets from the activities.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

How the Naples property market is doing

28 May, La Repubblica

Has the Naples property market recovered? Are people buying houses? Who is buying and why?

The figures concerning transactions in Naples talk about a weak recovery. Prices have slightly increased on average in the last few months (less than 2%) after a recession phase lasted ten years.

House is seen again as a safe-haven asset due to the uncertainty of politics. The more difficult starting the new government is, the more money savers are discouraged from investing in securities and bank deposits, and they instead look at real estate, seen as a safer investment.

Moreover, other factors influence the property market. For example, Naples benefited from tourism, the growth of the hospitality and catering sectors, with positive consequences on minor constructions and renovation works. The families with spacious houses and more rooms than needed made some remodelling to rent short-term those spaces to tourists.

The future of tourism in Naples and its impact on the property market is at the centre of the debate at the moment. Some observers believe that in the next few years the number of tourists visiting the city will double, at the condition that the travel and accommodation costs will remain the same, indeed very convenient if compared with other cities such a Venice, Florence and Rome. Other analysts worry that an excessive number of tourists might compromise the social composition of the city centre, confining the low-income population in the suburbs since they’ll be no longer able to afford the increased rents and the higher living costs. In this case, there is some concern about the gentrification of the old town of Naples. Gentrification, from the verb gentrify, means making exclusive a particular neighbourhood, promoting the presence of the wealthy middle-class with the consequent reduction of the smaller middle class, forced to move elsewhere.

Finally, tourism has an ambivalent effect on the city administration, the public institutions, and indirectly on the property market.

With the increased presence of tourists, there is a growth of the popular consent to the politicians that praising the benefits of tourism (especially in terms of new jobs and higher purchasing power of the locals), even though such benefits are not due to the work of the institutions. But with the arrival of tourists, the flaws of the local infrastructure become more evident: public transportation is not adequate, poor public hygiene, greater concerns about safety in the overcrowded city centre. Therefore, if the quality of living in the city gets worse, property prices will go down.

The composition of the local population is another factor influencing the property market. When old people prevail, there is the tendency to separate the ownership from the use of the property. Owners sell the bare ownership reserving the right to live in the property till they die. The separation of the ownership from the use has its advantages: it decreases the price of properties, the seller will have some savings to allow him/her to live comfortably, it avoids the successors to turn to the market when the property is available after the death of the occupant.

Selling the bare ownership encourages the presence of young people among propriety owners. Hence, it helps to have a more balanced composition of the population regarding age. In fact, it’s very common for middle-class to buy the bare ownership of a property to pass it to the sons, especially in case of daughters. There are also cases of young people that temporarily moved to northern Italy or abroad for work and plan to go back to Naples living in the houses whose bare ownership was bought by the parents. These are all examples contradicting the belief that Naples is a city in an irreversible state of decline, without a future. These youths don’t believe that the only hope is rebelling against a power which oppresses the city.

Source: La Repubblica

Translator: Cristina Ambrosi

Milan, renting a house gives little more than 2%

28 May, Corriere della Sera

Is renting a house a good investment? We’ve tried many times to answer this question using the figures of the market. We’ll try here by starting from a real story: a house in a residential neighbourhood of Milan inherited by somebody that doesn’t intend moving there and that was sold for little more than 363-thousand-euro net of expenses. With all the necessary data about the property (real selling price, land registry data, condominium records), we’ve calculated the returns that it would have provided if the property was rented.

It’s possible to make an estimate assuming a long-term lease. A house of this type is generally leased for 1,200 euro a month. Subtracting the yearly Imu, Tasi and the flat coupon and considering 1,200 set aside to deal with the extraordinary expenses, the property owner will be left with 8,615 euro, which correspond to a 2.4% return concerning the 363 thousand euro initially invested. Not bad, but we have to find a tenant that pays rent regularly. With the regulated rent, the return decrease to 1.8%, despite the lighter taxation, since the property’s parameters dictate a maximum lease of 816 euro a month.

What about the alternative ways of leasing? Let’s exclude DIY short-term rentals like Airbnb: such solutions can provide good returns, but managing check-ins and check-outs is an actual job by itself. In this case, the return will be the remuneration for a business, rather than the dividend for an investment.

Hence, we offer here three different solutions to have the property managed by professionals.

Solutions

We need, however, to make an introduction: the property, in this case, needs to be optimised to contain more bedrooms and furnished according to the manager’s requirements at the owner’s expenses that will be around 20 thousand euro.

The first solution would be an eight-year lease contract with a company that will sublet the property. Despite the reasonable certainty to receive an income, there is a quite disadvantage of fiscal nature: the flat coupon is not applicable, as we’re leasing through a company, and even assuming a monthly rent of 1,400 euro, the performance will drop to 1.4%.

Delegating the management of the property to a third party for a 25% commission (there are offers of this type on the market), even though it will grant double gross income compared to traditional rents, will make returns fall to 1.7% since we’ll have to pay for all the utilities, plus the flat coupon payable on the commission.

Finally, if we assume a contract with a company operating as a broker with a mandate and commissions for the total management of the property equal to 40% gross, the returns drop to 0.4%.

Source: Corriere della Sera

Translator: Cristina Ambrosi

From Enpam to Schroders: the alternative assets look at real estate

28 May, La Repubblica

In a scenario of low returns of obligations, the tangible assets such as real estate and infrastructure are destined to play a significant role in the portfolios of big investors. The consulting company Mercer believes that the alternative assets are evolving into a mainstream asset class and it estimates a weight in the portfolios up to 30%. The asset management companies are preparing themselves, strengthening their presence in the alternative investments sector. For instance, Schroders has already managed assets for 33 billion pounds in its Alternative and Private Assets division, with about 13 billion pounds invested in the real estate sector. The company has recently acquired Algonquin, a company specialised in hotel investment and management, with managed assets for 1.8 billion euro. According to Scenari Immobiliari, the assets of the property funds and Reit (Real estate Investment Trust) in Europe amounted to one thousand billion euro at the end of 2017. In Italy, the assets of the 407 property funds, retail and reserved, were 55 billion at the end of 2017, while Siiq (listed real estate investment companies) and the listed real estate companies had still a marginal role.

Which are the institutional investors that choose Italian real estate? Insurance companies used to hold a significant directly managed real estate portfolio. Today, the investments in real estate are barely the 1% d the total investments by class C life insurances and damages. Some created their own real estate asset manager: Generali Real estate Sgr, for example, manages ten funds, 30% of which are allocated to third-parties institutional investors. The market value of the portfolios is about five billion, but the asset manager also operates a consultant for the real estate assets of the company for a similar amount. Also banking foundations appreciate real estate, with the 4.5% of the equity invested in properties, according to the figures by Itinerari Previdenziali concerning the first 23 foundations. Anyway, social insurance is the primary investor in real estate, even though the social insurance funds were involved in some not very transparent transactions in the past. According to the figures by Itinerari Previdenziali for 2016, real estate weighted on professionals’ social insurance funds for 25%, 11% represented by business and rented properties as well as by interests in real estate companies, while investments through property funds, both national and international, represent approximately 14%. There are some cases, however, where property investments are a bigger part. In the equity of Enasarco, such investments reach 40%. Enasarco has been recently at the centre of a dispute with the asset manager of the group Sorgente of Valter Mainetti around the management of two funds, Megas and Michelagelo II. Whereas the social insurance fund for doctors, Enpam, has a real estate component equal to 29%, between owned properties and investments distributed among 19 property funds.

Generally speaking, the trend is fewer properties and more funds, according to the latest Covip report. The survey, in fact, shows a decrease in property investments for the 2013-2015 period, from 29.7% to 24.5%, with a sharp reduction of direct investments that went from 17.6% to 8.9%, compensated though by fund investments, grown from 11.3% to 15%. The survey “Property Funds in Italy and Abroad” by Scenari Immobiliari reads that “this tendency to outsource is connected to the necessity of focusing on the core business, saving on operational costs and increasing the specific skills with the objective of revaluating the portfolio”.

For what concerns retirement funds before the regulations on the complementary social protection system, the direct and indirect investments were 12% of the total assets of autonomous funds, according to the data from Covip referred to 2016. In this case, however, there is the predominance of direct investments. Besides, 90% of the equity is concentrated among eight funds, the properties directly owned are related to 19 funds – mainly of banks–, whereas investments in property funds concern 11 retirement funds, for six of which these are the only form of real estate investment. While contractual funds, retirement funds and Pip are not present at all in the portfolios of the complementary social insurance instruments. The only exception is represented by the fund for railway workers, Eurofer, one of the few contractual funds directly managing part of the assets. Eurofer, in fact, decided to take advantage of the opportunities offered by the regulation on the direct subscription or acquisition of shares of real estate companies or interests in closed-end investment funds, investing 3.2% of its assets in the closed-end fund Caesar of Axa Investment Managers Real Estate.

Source: La Repubblica

Translator: Cristina Ambrosi

Coima Res shops again in Milan

28 May, Il Sole 24 Ore

One week ago, the acquisition of Unicredit’s Pavillion, today the purchase from Mediolanum of the office building in Via Tocqueville.

In this way, Coima Res has spent 100 million in total to grow its presence in the Porta Nuova area, whose 30% is owned by the company. The presence in Milan has reached now 76% of the portfolio.

The office in Via Tocqueville has been acquired for 56 million euro and have net fix returns equal to 5%. The closing of the operation is expected by the end of the third quarter of 2018.

“Tocqueville is a ten-storey building with a 12,300 Sq m surface, and it represents an asset core. The average gross rent is currently 245 euro/Sq m. Such price might increase by repositioning the property (there are plans for investments equal to the 15% of the purchasing price), bringing in this way the prices close to the prime rents of Porta Nuova, which are currently set around 550 euro/Sq m”, reads the memo.

The offices are currently leased by Sisal which occupies 89% of the space and pays a total rent of around 2.4 million a year.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Invimit increased tenfold the asset under management in three years

26 May, Milano Finanza

The Invimit assets under management increased tenfold in three years, going from 120 million to one billion and 200 million euro. “Today, we have 122 assets from ground to roof level and 1,283 properties distributed among nine funds, five of which were incorporated in the last three years”, explained the Ceo Elisabetta Spitz and the president Massimo Ferrarese. “The total leasing amount is around 27 million, which will reach 35 million by the end of the year considering the acquisition planned and the operations currently in process. The yearly return is 4.33%”. In the last year, Invimit sold properties for 48 million, and it aims at earning other 60 million by 2018. Moreover, it completed 13 urban regeneration projects in the main cities for nearly 600 thousand Sq m in total, where the construction sites will start soon, and launched five additional projects concerning 400 thousand Sq m. Spitz explained: “Our operations brought Invimit in profit and made the income double in three years”, reducing the public debt consequently by over 450 million euro. “Finally, with the most recent funds Valore Italia and Silver, Invimit provided the foundations to build new assisted living facilities for elderly people and schools throughout Italy”.

Source: Milano Finanza

Translator: Cristina Ambrosi

The big projects that will transform Milan and Rome

25 May, Re Quadro

The Italian real estate market is going through a significant transformation. There are external factors such as the socio-demographic dynamics and tourism, as well the macro and microeconomic factors that picture a rather changeable demand of the sector.

The figures concerning the latest investments reflect such a scenario. Despite having been above the average of the first quarters of the last ten years, transactions’ volumes have registered a physiological period of adjustment.

Among the reasons for this adjustment, there is the lack of core products and the harsh competition among the players to acquire high-quality and high-efficiency buildings. The demonstration of this transition phase is the sold out of the prime offices in Italy’s main gateway, Milan, and the consequent odd performance of transactions for offices in the city.

In other words, the demand is awaiting new or renovated properties, plus the currently ongoing real estate projects on the national territory have attracted the investors’ attention. For example, the implementation of innovative logistics and sustainable platforms in strategic locations such as Bologna or Padua show the high interest in the advanced manufacturing sector in Italy.

Narrowing down the analysis to the main developments in the two Italian biggest cities, Milan and Rome, it turns out that the common element of the operations is the revaluation of the existing urban spaces and the regeneration of the suburbs.

Rome is the one that needs the most a change. Among the developments, there are, for example, co-housing spaces and much more. In the capital, the new Business City of Rome Fiumicino is currently under construction with the endorsement of Aeroporti di Roma, and it aims at using the area between the airport and the train station to build ad hoc spaces to satisfy the operators of the technology, advertising, media and information sectors.

The new IBM headquarters is another project taking advantage of a prestigious tenant to revitalise the services and the infrastructure of the Rome exhibition fair.

Whereas in Milan, besides the anticipated completion of Symbiosis and CityLife, there are also the requalification project of the train stations and the conversion of the Exo area into a science district, with a strong urban and social regeneration component.

Besides, there are the projects concerning the requalification or the construction of stadiums and sports facilities, as Stadio Olimpico in Rome and SportLife City in Milan. They’re both aimed at transforming monofunctional spaces into hybrid and multifunctional facilities. Certainly, one of the most important projects for the future of Italian real estate is Westfield in Milan, Europe’s biggest shopping centre, which will offer plenty of opportunities not only to the players of the real estate sector.

Source: Re Quadro

Translator: Cristina Ambrosi

Funds are rising again

26 May, Milano Finanza

After having decreased for the last three months, property funds signalled a countertrend in April. In fact, last month, the Bnp Paribas Reim index monitoring listed property funds reported a 1.54% increase, hiking at 193.53 points compared to the previous 190.6. The activity in the real estate market, also at European level, as well as in the share and bond markets (naturally before the fall registered in the past few days due to the tensions around the new government) resulted in this positive performance by property funds.

In the meanwhile, the discount between the stock exchange quotations and the net asset value of property funds slightly reduced, setting at 40.53%. Still a good value, but far from the 60% during the most challenging phase for the sector.

Finally, over the past months, the capitalisation continued reducing for the whole sector, reaching 1.17 billion euro, along with a decrease of transactions. The phenomenon, however, is physiological, considering that the maturity for nearly all the funds of the index is getting closer. The impending closing implies the progressive sale of all the assets included in the portfolio, with the consequent decrease of the capitalisation as well as of the amounts transacted (some funds have already concluded or almost concluded all the operations; hence, they’re no longer negotiated). Another consequence is the volatility of the sector and the persistence of significant discounts between the values and NAV. Investors clearly worry that the selling prices will be lower than NAV.

Source: Milano Finanza

Translator: Cristina Ambrosi

The property market is thriving in Florence

26 May, Milano Finanza

After Milan and Rome, Florence is the third real estate market in Italy, concerning number and amount of the development projects as well as of capacity to attracting international investors, both institutional and private. The market has benefitted from the recovery of Italian real estate and the local administration that encourages urban regeneration. The scenario emerges from the 2018 report on real estate in Tuscany by Scenari Immobiliari in collaboration with Casa.it.

Tuscany is one of the first regions in Italy for regarding transactions in the residential segment, 35,000 in 2017, namely 6.3% of the transactions at a national level, and this trend is supposed to continue also in the current year. In fact, the outlook is for 39,500 transactions by the end of the year, 11.3% more compared to 2017, slightly lower than the 12.5% of the national average. Florence leads this trend, registering on average the double of the transactions than the other provincial capitals of the region.

The average nominal prices in Tuscany are also under control. 2017 saw a slight adjustment (-0.5% against the -0.2% of the rest of Italy), but the forecast for 2018 is for a countertrend and an overtaking with a 0.5% increase compared from last year, while the rest of Italy will set at +0.3%.

Regarding Florence, the residential market has left recession behind and has reported a positive trend since already a couple of years. The transactions – about 5,300 in 2017 – are expected to reach the 13.3% in 2018. The offer is composed of approximately 7 thousand properties, with the increase of renovation and revaluation operations of already existing properties thanks to private investments. Hence, the market will be dynamic in terms of transactions, driven by the offer of renovated properties. The revenue, currently slightly over 1.4 billion euro, has been growing since 2014 and it’s expected to reach 1.5 billion in 2018, surpassing the 2010 figures, the year before the collapse reported two years after.

“The market of main dwellings is not the only driver of the real estate market in Tuscany”, explains Mario Breglia, president of Scenari Immobiliari, “since there are also interesting opportunities in the second house segment, either to rent or to live in. For foreign buyers, Tuscany is one of the favourite tourist destinations in Italy together with Sicily. Beach and cultural destinations are the most sought-after, better if not too close to cities, along with trendy locations, especially if they offer amazing views and are well connected”.

Concerning second houses, the Tuscany market reports better results than the rest of Italy. If in 2017 transactions increased by 6.7% reaching 38 thousand deals, Tuscany alone registered 10% thanks to its many popular tourist destinations on the coast attracting buyers from Italy and abroad. Prices in beach destinations have increased in the last twelve months by 3.2% on average, with a focus on Porto Ercole and Porto Santo Stefano in the province of Grosseto and Forte dei Marmi in Versilia, where prices span from 7,500 euro/Sq m to 14,300 euro/Sq m. The locations in the province of Lucca, especially Viareggio, are the most expensive, with a maximum value of over 16 thousand euro/Sq m. They’re followed by Viareggio, Camaiore and Pietrasanta, with approximately 10 thousand euro/Sq m.

Good results also for province capitals. Luca Rossetto, Ceo of the group Casa.it, confirms that “the requests registered on our portal show an average growth of the transactions in the region equal to 35% compared to the same period of the previous year, especially in the provinces: Pistoia is doing very well with a 58% increase in requests, followed by Livorno with 48% and Prato with 39%, while Grosseto and Arezzo are respectively set at 38% and 34% in comparison with the previous year”. Besides, we must remember that in Florence the time to sell a property is reducing, while transactions and prices are increasing. The most dynamic areas are those close to the old town with prices grew by 4%-7% over the first months of 2018.

Source: Milano Finanza

Translator: Cristina Ambrosi