Engel & Völkers on luxury homes: “The market in Italy has restarted”

26 February, Corriere della Sera

Engel & Völkers is looking at Italy. The German company is looking for professionals, new cities, and, more importantly, new homes. To sell and to buy. Because “Italy is the most beautiful country in the world”. The real estate company from Hamburg with 40 years of activity, present in over 30 countries and staffing 11 thousand people around the world, bets on Italy for 2019. 2018 saw a double-digit growth. The net returns of the German company increased by 33% from 2017, having gone from 18.8 million to 25 million euro. The residential division which also includes the direct activity in the Metropolitan Market Center in Rome (31 thousand transactions in the Capital in 2018) grew by 22% with 31.8 million euro (they were 26.1 million in 2017), while they reached 728 million globally (from 667.8 in 2017).

Alberto Cogliati, Engel & Völkers commercial director for Italy, commented: “The results are not that obvious. We operate in a niche market, which is luxury homes. In the past few years, buyers have been mostly foreigners. 100% of the buyers in Porto Cervo were foreigners. In 2018, Italians returned buying luxury properties”, from the lakes of Lombardy to Tuscany, Sardinia, Milan and Rome. On the Garda Lake, for instance, “we’ve gone from 90% of foreigners in 2016-2017 to 75%, while 25% were Italians”. Even better on the Como Lake: “In Cernobbio, 75-80% of the buyers were foreigners. In 2018, 50% were Italians”. We’re talking about luxury homes in prime areas, as Cogliati explains:” We’re the leaders for this niche, holding 10% of the market”. This market, despite the recession, “never known a crisis”.

Foreigners are the main target. Cogliati says: “They’re our core clients. They love Italy: its climate, its arts, its food”. As a result, British, Germans, Dutch, French, Belgians and Americans continue dreaming about a house on the lake in Lombardy o in Argentario, in Siena, or Venice, or Rome. For what concerns 2019, Cogliati is positive: “we aim at increasing sales by 20% and expand further in Italy”.  Engel & Völkers will hire about 130 people for its new offices.

Source: Corriere della Sera

Translator: Cristina Ambrosi

Positive outlook for real estate

22 February, Italia Oggi

According to the survey by Banca d’Italia on the Italian residential market in the fourth quarter of 2018, the expectations on the domestic residential market decreased in the third quarter compared to the previous quarter, but they’re still positive. The balance between positive and negative opinions decreased by 13%, while it was 17% in October. On a two-year horizon, the outlook is generally positive: the balance between a positive outlook and a negative outlook is equal to 30% (it was 32% in the previous report).

The number of real estate agents that are positively judging the market in the third quarter surpassed by 9% the number of those believing the market had worsened. Such a result follows the trend of the previous survey. The balance concerning the expectations for new assignments is also steady at 9%. The share of operators reporting a reduction in the prices in the current quarter had grown (from 19.3% to 17.7%), while the number of those forecasting a growth is substantially stable.

According to the market survey referred to the period from the 2nd January to the 1st February 2019 involving 1,476 agencies, the balance between the operators reporting a price increase and those reporting a price reduction has not changed from the previous quarter, continuing being negative. The discount margin on the initial price has reduced, along with the time to sell a property, having both returned to the last two years average values.

The number of agencies that had sold at least a property on the fourth quarter of 2018 decreased from 80.2% to 77.9%. Homes with surfaces between 80 and 140 Sq m represented 51.4% of the total, while those smaller than 80 Sq m were 45.2%, although these are the majority in the big cities and in central Italy. Nearly all the houses sold were immediately available (95.8%), mostly inhabitable although to be renovated (78.8%, while houses in good conditions were 18.2%) or low-price range (61.4%, while prime properties were 34.5%). Even though the transactions mainly concerned low energy efficiency properties, the number of sales for energy-efficient properties continued growing. The number of potential buyers increased from the previous quarter according to 16.1% of the people surveyed, having decreased from the previous 17.2%. The quota of agencies reporting a growing number of assignments has reduced from the previous three months (from 9% to 10.8%), as well as the share of agencies reporting more assignments at the end of the fourth quarter from the end of the third quarter (from 11% to 9.8%). The percentage of those believes in a stable trend has raised, setting at 75%. Among the reasons for the terminations of the assignment, there is an increased lack of offers for purchase due to the prices deemed too high. Following the general reduction of the demand, transactions concentrated in more energy-efficient properties.

The share of purchases funded by mortgage grew by nearly 2% from the third quarter of 2018, set at 80.5%. The ratio between the amount loaned and the property value continues being high, slightly below 75%. The market players’ expectations have not registered significant changes and are generally positive.

Source: Italia Oggi

Translator: Cristina Ambrosi

The cities attracting investments. Florence surpassed Rome and is just behind Milan

22 February, Il Sole 24 Ore

Florence, the cradle of the Renaissance culture which will never go out of fashion, surpassed Rome in terms of investment attractivity placing just after Milan. The results come from Nomisma, which gathered the data in Italy2Invest-Urban Data Intelligence, its integrated platform measuring the attractivity, competitivity and wellbeing of the Italian market in order to support investors and policymakers. A novelty worth to see in detail.

The Italy2Invest indicator

The general index generated from the analysis of the data included in the Nomisma platform shows a score from 0 to 100 placing Milan first with a rating of 75.2. Florence ranks second with a score of 71.4, followed by Bologna and Turin. Rome is only fifth with a score of 63.5. The city ranks 22nd in the Municipality chart, where Milan and Florence are again respectively first and second. The promoters of the Capital in terms of investment attractivity will undoubtedly disagree with this chart.

To give a more precise idea, we must clarify that the general index includes 250 indicators referring to 7,998 Italian cities. The 2018 overview shows a total average score of the various towns equal to 52.7 for 2018, 60.8 for the provincial capitals only and 63.4 for metropolitan cities. The average incorporates a minimum value, referred to all the cites, equal to 28.8, and a maximum value of 75.2, referred to Milan. Among the provincial capitals, Rome ranks 17th, surpassed by cities such as Como, Pavia, Monza and Padova.

Florence’s appeal

The Nomisma general index is based on the identification of eight main “domains”, 601 indicators and 22 information resources, both public and private. Florence not only ranked second but also reported the highest performance, with a positive spread of 17.4 points in comparison with the average of provincial capitals and of 12.6 points compared to the average of metropolitan cities. Three “domains” contributed to such high score: tourism, real estate market and services, and consumptions. Florence’s touristic sector scored 100, while real estate scored 90.

The main four parameters measuring Florence’s excellent ranking in tourism are the number of business for Sq km, the total tourists’ arrivals for Sq km, the impact of international tourism and the utilisation rate. Visits in Florence were 3,826,699 in 2017 (this is the period analysed by Nomisma), reporting a 6.6% growth from 2016; presences were 10,056,157 (+7.74%), and the average duration of stays was 2,63 nights.

The property market

Concerning this domain, Nomisma took into consideration the prices of shops and the intensity index of the real estate market. Specifically, the weighted average price of shops in Florence in the second quarter of 2018 was 2,766 euro/Sq m, against the 2,361 euro/Sq m of houses and the 2,136 euro/Sq m of offices. The weighted average rents were 182 euro/Sq m/year for shops (the numbers refer to the second quarter of 2018), 118 euro/Sq m/year for houses and 105 euro/Sq m/year for offices.

For what concerns services, the Nomisma indicator considers the number of nursing homes and hospitals in relation to the population, the Municipality’s expenditure concerning support to families and children and the Municipality’s expenditure concerning social protection and support to homeless people. Florence places very high in the chart for this indicator. For instance, nursing homes and hospitals per Sq km are equal to 0.74 in comparison with the average of 0.41 of metropolitan cities and 0.32 of provincial capitals.

A new prospect

The general index Italy2Invest offers a new outlook to assess the attractivity of Italian regions, and it breaks with the tradition of the Milan-Rome axis generally used when talking about real estate deals, introducing investors to a new point of view. Large players may disagree, but it’s important to stress that cities like Florence are currently the object of important deals such as the acquisition of the Four Season’s hotel. Not only, the city is also undergoing important requalification interventions, as well as important real estate developments.

Big requalification projects in Florence

Hotels, luxury residences, shopping centres and offices are the main requalification opportunities in Florence, where the urban renewal process started in 2015. According to the City of Florence and the Region of Tuscany, the potential investments are assessed at around 1.5 billion euro, for requalification projects covering a total surface of 800 thousand Sq m. Among the most interesting projects, there are Villa Mondeggi, the Sant’Orsola monastery, the Lupi di Toscana barracks, Officine Grandi Riparazioni (“the repair workshop”) and the former military hospital San Gallo.

Villa Mondeggi

An agricultural and historical property just outside Florence, in Bagno a Ripoli, it offers breath-taking views for a total surface of 170 hectares, 46 olive groves, 22 vineyards, and 34 wooded areas. The main villa covers 6 thousand Sq m, while farms occupy other 3 thousand Sq m. The construction dates back to the 15th century. As decided by the city administration, the property’s use intended is mixed, from hospitality to residential and agricultural production. The asset was put on auction at the end of last year. The public auction will take place on 1st March at 7 pm.

Sant’Orsola monastery

This requalification project concerns a 5,356 Sq m area extendable to 17,500 Sq m. The area dates back to the 16th century. The total investments for touristic use amount to 35 million euro. The property is located in the heart of the old town, close to the Medici Chapel, the Cathedral and the San Lorenzo market. The area has been completely neglected. It will become a multifunctional centre which will also host the Bocelli Academy Music School along with a guesthouse and a 17 thousand Sq m public square. The proposal for the site’s requalification arrived at the beginning of February, and it’s currently being assessed by the city administration.

Lupi di Toscana barracks

Its intended use will be disclosed in detail based on the offers and the ideas which will be submitted. The site concerns an area of 34 thousand Sq m, with the addition of approximately other 20 thousand Sq m, for a total surface of 53 thousand Sq m to be requalified and investments for about 100 million euro. The site benefits from excellent connections thanks to the tramway line nearby. It’s already certain that the project will include a residential component, comprising social housing dedicated to young people and mixed-use assets. In January, the relaunch process of the barracks was accelerated, as announced by City Councillor for urban planning Giovanni Bettarini, after having met with the experts and the winners of the bid.

“We’ve chosen to bring forward at the same time the recovery plan and the related variant to the planning regulations – said Bettarini – in order to accelerate with the schedule and to recover quickly such a precious metropolitan area. In April, the urban planning commission will check the status of the project before preparing the final documents, so that we’ll be able to make the last amendments based on the requests and remarks”.

Officine Grandi Riparazioni

The potential investment amounts to 16.5 million euro concerning an area of 82 thousand Sq m, 54 thousand of which will be requalified. The complex is located in the Porta al Prato area, which is currently vacant, near Teatro dell’Opera designed by the architect Paolo Desideri and the Leopolda station, not far from the city centre. The asset has a mixed intended use including hotels and residences, commercial spaces and services.

Old San Gallo hospital

The buildable area covers 16,200 Sq m. The property was built between 1100 and 1700. The potential investment amounts to 45 million euro. This asset is located in the old town, which is a Unesco heritage site.  The project implies the mix of functions such as hotels, residences and public spaces. As shown in the preliminary masterplan, there will be hotel suites and luxury apartments overlooking the San Marco Dome.

There are also plans to implement a bus terminal close by for a surface of over 11,800 Sq m, whose intended use can’t be modified, but for which the bus company Ataf is ready to pay a yearly rent of 3.1 million euro.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Mps is ready to sell UTPs for 500 million

22 February, Finanza Report

Mps is accelerating its de-risking process. The bank is preparing two new operations to dispose of its unlikely-to-pay loans for a nominal value of 500 million.

According to Milano Finanza, Mps is meant to put on the market the first portfolio in the next week, while the other one will be sold in March.

Mps has carried out UTP single name operations so far in order to maximise the value. The management headed by Marco Morelli, however, decided to speed up with the de-risking activity. By the end of the year, the bank will have sold a UTP stock amounting to 2 billion of nominal value.

Concerning the potential buyers, it’s likely that they will be the same that participated in the latest operations. Among the players, there are the teams composed of Aurora Recovery Capital-Gwm and Frontis-Algebris that acquired the portfolio named Alpha2 for 420 million euro at the beginning of the year. The American groups Fortress and Cerberus as well as the fund Bain Capital Credit might also take part in the competition.

Meanwhile, the Mps stocks registered a +0.66% at 1.2915 euro on the Milan Stock Exchange.

Source: Finanza Report

Translator: Cristina Ambrosi

The innovative shopping centre Milanord2 to open in 2022

21 February, Idealista

Milanord2 will open in 2022. It will be an innovative shopping centre for a total surface of 180 thousand Sq m currently under construction just outside Milan.

The French-Luxemburgish holding Société Generale Immobilière is in charge of the construction through SCC Italia in Cinisello Balsamo. The plan implies investments for over 1.2 billion euro to build a structure covering 178 thousand Sq m, 40 thousand of which will be dedicated to leisure and family activities. The project also includes the construction of a station of the red line metro line which will be built right inside the shopping centre.

The official presentation of the project to the press is on the 5th of March, at the presence of Birger Strom, LSGI Italia president, and SCC Italia Ceo Davide Zanchi. According to the promoters, the new shopping centre will be “an example of innovation, technology, excellent transport infrastructure, and environmental sustainability. Moreover, it will create new jobs and generate income for the benefit of the territory”.

Source: Idealista

Translator: Cristina Ambrosi

E-commerce is driving logistics

22 February, Milano Finanza

E-commerce is currently the fastest-growing sector in Italy, with positive consequences on the logistics and transport industry. Concerning real estate, the growth of the related asset classes is an indicator of this trend, for logistics is one of the most dynamic segments.

The report by the consulting company Jones Lang Lasalle in the last quarter of 2018 shows a growing activity of the warehouse segment, registering record investments. “2018 was an important year for logistics, which is the most dynamic segment of real estate, despite the decreasing absorption rate (-13% from 2017 for a total of 1.5 million Sq m and 94 transactions). Logistics, however, represents a significant part of the market, having grown by 22% in the last five years”, reads the report.

The performance is mainly driven by Third-Party Logistics or 3PL (42%) and by the city of Milan (64%). The past year also saw the acceleration in the completion of operations which have reached 1.1 million Sq m, growing by 18% from the previous year. As a result, rents have increased mainly in Milan, Rome, Bologna and Veneto.

In 2018 the industry recorded total investments for 1.1 billion, reporting a 40% growth, the best result of all times we exclude 2017 which saw the closing of a large operation by Logicor Group. The market has become increasingly international. International investors (especially Europeans) completed 23 of the 24 transactions that started in the previous year.

The real estate report by the consulting company World Capital Real Estate also showed the growth of the logistics real estate market in the second half of 2018. According to the report, thanks to the rise of e-commerce, companies have been looking for spaces with surfaces larger than 5 thousand Sq m. Lucia Dattola from World Capital research division explains that “e-commerce represents a great impulse for the domestic logistics real estate sector, especially for what concerns new properties. Not only new construction has grown, but also the average duration of negotiations has reduced, as only 11% of the negotiations take longer than 12 months. The discounts are generally comprised between 10% and 20%”.

In the second part of 2018, the real estate market continued the positive trend also concerning gross returns. Bologna (6.3-7.2%), Rome (6.2-7.2%), Verona (6.4-7.2%), Genoa (6.5-7.2%), Piacenza (6.5-7.4%) and Catania (6.8-7.8%) reported good performances. Milan’s prime area registered lower values with gross returns set around 6% for new construction, although the interest of companies in this location remains high.

According to the Real Estate Market Outlook by Cbre, logistics will be the key segment in 2019, while the Italian real estate market will grow further. According to the investors surveyed, the biggest challenges for the Italian real estate market in 2019 the asset availability, the cost of properties and the political instability (which has gone from 8% to 14%).

The report also states that “the logistics property market lacks quality assets. Companies can’t find suitable assets, and investors’ needs are being met. The renewed interest for speculative developments is nothing surprising”. The focus is on established locations, for which the demand remains strong. The preference is for large properties (30-50 thousand Sq m). Meanwhile, yields are reducing.

Source: Milano Finanza

Translator: Cristina Ambrosi

Transactions for non-residential properties have decreased

22 October, Italia Oggi

Transactions for properties for artisanal, commercial, industrial and office use have fallen by 27.1% in the span of one year. The data is taken from the real estate report published today by Istat which compared the third quarter of 2018 with the same period in 2017.

The north-west of Italy has reduced by 26.6%, the north-east by 41.1%, the centre by 22.1%, the south by 13.7% and the islands by 17.1%.

Confedilizia president Giorgio Spaziani Testa commented: “These results confirm that it’s necessary to implement strategies to revitalise the sector of non-residential properties, which suffers from various factors, especially from the heavy taxation”.

Source: Italia Oggi

Translator: Cristina Ambrosi

Mps is speeding up the operations

22 February, Milano Finanza

Mps is ready to launch its first de-risking operation of 2019. According to Milano Finanza, the bank is about to sell two UTP portfolios for a nominal value of approximately 500 million. The first portfolio is expected to be put on the market next week, while the sale of the second one won’t happen before the beginning of March. It might be the biggest operation of this type ever launched so far, as the deal will have approximately the same amount as the one launched last years (Project Alpha2) for 420 million.

So far, Mps has been selling UTPs through single name operations to obtain the best value and to reach the right investors to work in the stock. The strategy is similar to the one adopted by Unicredit, which is selling UTPs through small operations. Now, Mps decided to intensify the activities and to proceed with selling credits in bulk in order to accelerate the de-risking transactions. The sale of a UTP stock for a nominal value of 2 billion is expected by the end of the year. These operations follow the last year’s activities which saw the bank disposing of NPLs worth 29 billion by transferring them (27 billion) and reducing its UTP stock (2.3 billion). By the end of the year, the coverage rate was 53.1% (NPLs were 62.4%), and the cost of credit was 72 basis points.

Concerning the potential buyers of the new portfolio, it’s possible that they will be the same who took part in the recent operations: from the team composed of Aurora Recovery Capital – Gwm and the one consisting in Frontis – Algebris which got the Alpha2 portfolio at the beginning of the year. American groups such as Fortress and Cerberus and the fund Bain Capital Credit might be other participants in the competition.

There are operations in the pipeline also for what concerns the bank’s real estate properties. Mps is about to receive soon the offers for its portfolio amounting approximately to 600 million euro which was put on the market in the past months. Duff & Phelps is the advisor for the operation, which mostly concerns the bank branches that had been closed with the reorganisation process. It’s not to be excluded though that a part of the operation might involve sales & leaseback solutions, as other banks had done in the past few years. The portfolio includes the bank’s offices in Milan in Via Santa Margherita, as well as office buildings in Rome and Florence. Among the potential buyers, there are Blackstone, Starwood, Tristan Capital Partners, Lonestar, Apollo and Cerberus.

Finally, the Mps IT platform is also on the market, although there are no updates yet in this regard.

Source: Milano Finanza

Translator: Cristina Ambrosi

The Human Company Group sold two hotels in Florence and Berlin

21 February, Hotel Seeker

Plus Hostel Berlin and Plus Hostel Firenze were sold by The Human Company to a fund managed by PGIM Real Estate, a real estate company of the group Prudential Financial Inc.

The Human Company will keep managing the hotels for the next 27 years. The price disclosed to the market was 54 million euro. The sale of the two hotels is included in the group’s development plan, as the company intends to focus on the development of open-air hotels, in which The Human Company is specialised.

Three new resorts are in the pipeline. The locations are Porto Tolle (Rovigo), Eraclea (Venezia) and Cavriglia (Arezzo). According to Ceo Marco Galletti, the operation will generate the necessary cash flow for the development of the group.

Source: Hotel Seeker

Translator: Cristina Ambrosi

Ferrovie: Altarea Cogedim acquired Centostazioni Retail

22 February, Il Sole 24 Ore

Ferrovie dello Stato sold Centostazioni Retail to the French real estate company Altarea Cogedim. The group headed by Gianfranco Battisti selected the French company following the bid to sell 100% of the company active in the commercial and advertising promotion of Milano Porta Garibaldi, Torino Porta Susa, Roma Ostiense and Napoli Afragola.  Ferrovie dello Stato will obtain from the sale 45 million along with the earnings from the economic use contract. The closing is expected in March.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi