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Big international investors conquering Italian real estate

31 December: Il Sole 24 Ore

The international interest in Italian real estate is growing. It may concern international investments for the purchase of offices or shopping centres, or it may be the acquisition of non-performing loans backed by real estate. If 2016 closed with operations for a value of 9.5 billion euro, half of which from international investors, in 2017 the investments might amount to 10 billion euro, registering a new record. 70% of the investments come from abroad.

Scenari Immobiliari estimates that the international investors have spent in Italy about 26.5 billion euro from 2000 to 2017, ten billion from 200 to 2010, and approximately 16.5 billion from 2011 until the end of 2017. While the Middle-Eastern sovereign funds focused on the hospitality and luxury segments, with the acquisition by the Qatar sovereign fund of five-starts hotels in Costa Smeralda and other companies buying hotels in Venice and Florence, the American groups chose instead to invest in offices, shopping centres and outlets, and they’ve recently started investing in logistics.

The most attractive asset class are still offices. While retail is in a descending phase, operators are looking for new assets capable of providing high returns since the yields for core and core plus assets have reduced. They’re looking in particular for elderly assisted living facilities, clinics, hospitals and student housing.

There is still the uncertainty concerning the results of the upcoming elections, scheduled for 4th March, but they shouldn’t discourage investors.

Who are the most dynamic investors aiming at the Italian market? British and American hold most part of the assets, NPLs included.

Blackstone holds a two-billion portfolio in Italy, starting from Milan with the acquisition of the former Corriere della Sera headquarters in Via Solferino, to the old Poste Italiane building in Piazza Cordusio that will accommodate the first Italian Starbucks, as well as several deals for logistics assets and five outlets. Not only. According to rumours, Blackstone has made an offer for Palazzo Broggi owned by the Chinese Fosun. The assets owned by Blackstone are managed by Kryalos, guided by Paolo Bottelli, that manages funds also on behalf of York and Barings.

The American giant Hines guided by Mario Abbadessa has accumulated over two years assets in Italy for a value of nearly one billion. In the past few weeks, Hines has signed an agreement with Pggm – one the main Dutch funds with assets under management for 206 billion – for the creation of a real estate fund, Milan Green Fund, that will invest one billion euro in the Italian market. The fund seeks an average return of 4-5%, with a starting capital of 155 million euro and it will develop buildings for mixed-use, offices and high-street commercial spaces.

Other players such as Cerberus are focused on the NPL segment.

Always concerning offices, the segment sees investments also from the French group Ardian, that has acquired the assets of the fund Cloe owned by Prelios, six office buildings in Milan, Rome and Bari, for a value of 300 million euro. “Offices are the assets class that interests use the most – says Rodolfo Petrosino, managing director for Southern Europe of Ardian Real Estate – it’s possible to market this asset class also in less favourable market conditions, whereas other categories, such as Logistics and shopping centres, have a higher risk level connected with the location and the reconversion costs in case the business is no longer profitable”. Once invested the whole equity of the first fund, Ardian is intending to start a new Pan European fund, with a quota destined also to Italy.

“Luckily, nowadays international investors represent an important share of the market and this is very positive since it brings more transparency, liquidity and best practices for the growth of the market – stresses Paolo Bellacosa, Vitale & Co Real Estate partner. Today, we’re assisting at the participation of investors also in selected development and urban regeneration projects since the local developers and operating partners are lacking, with very rare but excellent exceptions. This may bring new players capable of supporting international investments both in the real estate and in NPLs sector”.

Among the French investors, there are Amundi, Edf and Credit Agricole Assurance, whose Sicav has received from Beni Stabili properties for 1.5 billion. Axa has also been quite active lately, with the acquisition in early December of the assets of the group Humanitas, among which there are a hospital in Rozzano and a campus.

Dea Capital Real Estate, the first Italian asset management company, sees among its investors Gic, Government of Singapore. Investment Corporation, and one of the main investors of a reserved fund managing a portfolio of properties acquired through a sale & leaseback operation from Unicredit in 2008 and 2009. Another Dea Capital shareholder, TPG (Texas Pacific Group) invested in a reserved fund managing 158 telephone exchange buildings and 20 mixed-use properties. Other shareholders are Investcorp, a global investment management company based in Bahrain, Green Oak with investments in two reserved funds focused in value-added assets in the logistics sector, Aermont, York, and Tristan Capital Partners.

For what concerns NPLs, international companies manage assets for 30 billion. The main investors are the big American private equity companies such as Cerberus, Bain Capital Credit, Kkr, Fortress, Pimco, as well as Algebris and Crc.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi