Real estate funds still reporting a negative performance

15 December, Milano Finanza

After having collapsed in October, real estate funds registered an additional (although moderate) decrease. After all, the tensions on the global financial markets have inevitably impacted also real estate. In November, the Bnp Paribas Reim index for listed real estate funds set at 191.75 with a 0.47% reduction from the previous 30 days. Anyway, the index performed better than the Ftse Mib index and the Government bonds, while it was aligned with the European real estate index Epra. Meanwhile, the discount between the stock value and net asset value set at 43.86%, having slightly grown from the 43.45% of the previous month.

Considering that all the funds are reaching their maturity (many already on 31st December), they’re currently selling the assets still in their portfolios, and the capitalisation for the whole sector amounts to 1.01 billion euro with 14 listed real estate funds from the 15 reported in October. Trading is steady.

Source: Milano Finanza

Translator: Cristina Ambrosi

Property funds down by 7.7%

17 November, Milano Finanza

The storm that shook the global stock markets, from Wall Street to Europe, especially Milan, till Asia, didn’t spare real estate and property funds in particular. In the last month, the Bnp Paribas Reim Index for listed property funds registered a 7.7% drop, having gone from 208.74 to 192.66 points. It’s the most dramatic decrease of the last few years, with the index returned to the levels of January 2017. The slump also concerns the Ftse Mib and State bonds, although this latter recorded more contained losses. The Epra index has also reported a negative performance concerning European property funds, having gone from 206.44 points to 199.77 at present. In the meanwhile, the discount between stock prices and NAV of property funds has broadened setting at 43.35% from the 39.09% of the previous month. The capitalisation of the sector has decreased to 1.02 billion euro from the previous 1.11 billion for the 16 listed real estate funds. Finally, transactions have also reduced.

Source: Milano Finanza

Translator: Cristina Ambrosi

Record year for property funds: 53 billion (Nav) managed in Italy

20 September, Il Sole 24 Ore

Property funds have been outperforming the other investment instruments with an increase of the assets under management (Nav, net asset value) equal to 10.4% from 2016, bringing the total Nav at 53 billion euro at the end of 2017. Breglia stresses that “the goal of reaching 55 billion this year is realistic”.

The real estate assets directly owned amount to 58 billion euro (included the foreign investments), reporting an 8.4% increase over 2016. The active funds have increased with 420 vehicles, thanks also to the increasing number of international players using funds to operate on the Italian market. Another positive factor is the reduction of indebtedness of these instruments, “currently set at 41.3% over the total assets. To make a comparison, it was 57% in 2010”, as reads the Scenari Immobiliari.

Turnover of asset managers and types of investment

The report includes, for the first time, also the data of the asset management companies operating in the sector, whose total turnover amounted to approximately 320 million euro in 2017, employing about 1,200 people.

Concerning the types of investment, the global asset allocation sees a slight increase in offices, commercial properties and hotels. Throughout the year, the acquisitions have been equal to 7.6 billion euro, against divestitures for 4.4 billion. More in detail, 63% of the assets have been invested in offices, 19% in commercial properties (shopping centres, retail parks, high-street shops), 4% in logistics, 4% in development areas and projects, 10% in residential/other.

What are the returns of property funds? Difficult to tell, as only the so-called retail funds (listed on the Stock Exchange and dedicated to private investors) must report their performance. Scenari Immobiliari says that in 2017 the Roe for retail funds and of some closed-end funds was 0.4%, having improved from the 0.2% of 2016, but still rather meagre.

Operators’ (cautious) forecasts

Also for this edition of the report, Scenari Immobiliari proposed to the companies participating at the taskforce a questionnaire to find out how they perceive the future of the national real estate market and of property funds. Regarding the current year, the outlook for asset management companies is for a stable trend (33%) or a little increase (40%). 20% of the surveyed operators expect the national economy to get worse.

Unlike last year, the expectations regarding the performance on the medium-term are not optimistic. In the previous edition, 70% of the asset managers were expecting an improvement, while this year they’re only 27%, 46% see a stable trend of the performance and 20% a worsening.

Concerning the outlook for the real estate trend on the medium-term, the operators believe in an increase for all the segments, unlike last year when a contained optimism prevailed. However, the figures show only a stable trend of the transactions for commercial properties. There are high expectations for the residential segment, as last year, and for hospitality, where over 50% of the asset managers expect a moderate growth, against the 20% of the previous year. Concerning industrial properties, 47% of the players see an increase, in contrast with the numbers registered in 2017 that forecasted a slight reduction.

“The asset management companies think it’s necessary to pay attention to certain matters that are overlooked or that haven’t been dealt properly, making the implementation of the activities even more complicated – explains the report. Asset managers warn about taxation, which penalises the relaunch of the industry, and the long times to get the necessary authorisations and documents”.

Funds in Europe

With approximately a 1,959 billion-euro Nav, increased by 10% from 2016, the success of property funds in Europe is evident, although there are some variations in the trends depending on the geographical area. The forecast for 2018 for the leading European operators is for a growth of the assets by over 5% along with an increase in the number of funds.

France is at the centre of attention, due to the solid growth of OPCI, which have become one of the top financial instruments, and the positive trend of SCPI. Today, French assets represent about 21% of the total European assets, with OPCI constituting the 13% and SCPI the 8%.

“French OPCI continue to grow, after having increased in 2017 by over 25%, especially thanks to the retail instruments, which have registered collections for over four billion euro in one year – highlights the report. “If we sum this amount to that of SPCI, we obtain collections for ten billion euro on a yearly basis. SPCIs have also significantly grown (+16%). The increase is slightly higher than that of the previous year, showing the great interest in these instruments”.

At the end of 2017, the assets of SPCI amounted to 50.3 billion euro, while those of OPCI were 78.1 billion. 2018 is expected to close with respectively 55 and 90 billion.

British funds require a separate analysis. As a consequence of Brexit, their asset value significantly decreased in 2016, due to the weak pound. The 18% decrease in Nav in 2016 was little higher than the loss in value of the pound against the euro. Today, the situation is rather the opposite. In 2017 the assets were over 77 billion euro, with an increase in the number of funds. At the end of 2017, the assets held by British funds amounted to 77.37 billion euro, and they’re expected to reach 79 billion by the end of 2018.

Germany has always held the biggest quota of managed assets, which have grown by five times in the last ten years, thanks to the growth of reserved funds, confirming the leading position of the country. In 2017 Germany represented over 28% of the total assets, 15% constituted by open-end funds and 13% by closed-end funds. Of the 1,550 active funds in the eight European countries surveyed, the German ones represent the 13%.

“The German reserved funds went through a phase of standstill in 2017”, according to the report. The moderate growth of the number of funds dedicated to qualified investors was accompanied by the increase of the assets by 19%. The open-end funds continue the trend of the last two years characterised by the gradual closing of the funds as they reached the maturity. In December 2017, there were 30 open-end funds on the German market supported by a Nav increased by 2% on a yearly basis, including settlements and four new instruments. At the end of 2017, the assets of open-end funds amounted to 89.2 billion (expected to reach 92 by the end of 2018), while those of closed-end funds were 77 billion (the outlook is for 85 billion by the end of the year).

Dutch funds have reported a positive trend for the third time in a row, although the growth has been moderate, after several years of standstill. They closed 2017 with 75 billion euro, and the outlook is for 78 billion by the end of 2018. Luxemburgish funds are still very interesting for international investors, thanks to their broad diversification concerning sector and legal entity. In 2017 the funds grew by about 12% with assets amounting to 55.628 billion and expected to reach 58 billion by the end of the year.

For what concerns dimensions, the biggest funds are still the German open-end funds, close to achieving three billion euro, followed by the Dutch ones with 2.3 billion. Unlike the open-end funds, German closed-end funds hold average assets for 440 million euro, slightly over the European average of 380 million euro. Italy has the smallest funds, with an average Nav around 125 million euro. The average European Nav is comprised between 120 million of Spain and 175 of Luxembourg, till the 1,200 euro of Great Britain, where 8% of the funds exceed three billion euro, and 30% exceed one billion. Among the first ten funds, there are seven open-end German funds, one Dutch fund, one Swiss and one French, with assets comprised between 4.6 billion euro of Deka Immobilien Global and 14.7 billion euro of Deka Immobilien Europa. The ten leading companies hold total assets for 88 billion euro, representing 15% of the total European assets, having decreased from last year, confirming the increased strength of a growing number of companies.

Performances

The performance of the European funds has grown from the previous year, setting around 3.8%, thanks to the reduction of funds reporting negative performances, as well as the diversification concerning the type of investments and the performance of Great Britain. If we exclude the UK, with a performance set at 8.4% which moves Europe’s average upwards, we can see a connection between the returns and the dimensions of the funds and the intended purpose of the assets. In fact, the returns of the first ten funds vary by nearly one percentage point and a half between the lowest and the highest value. Switzerland is second after Great Britain, with an average of 4.9%, France 4.1%, the Netherlands 3.4%, Luxembourg 3% and Germany 2.4%. The Italian funds are at the bottom of the chart, with an estimated Roe equal to 0.4%, although they have increased from 2016.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

 

The fund Obelisco plummets as it approaches the maturity

11 August, Il Sole 24 Ore

The funds that are approaching the maturity have seen the value of their equity decrease. The funds have been registering considerable capital losses in comparison with the forecasts of six months ago, as the assets were being sold and were left unsold, without mentioning the initial book values. The most striking example is the fund Obelisco, whose Nav plummet by over 70% in just one semester. Since the start, the fund lost more than 25% of its value per annum, falling straightaway in the category “betrayed saving”. The sharp value reduction also concerned the funds Securfondo (-16.8%) and Polis (-11.8%). Atlantic 2 has completed the divestiture of its assets and will distribute 67 euro per share on 13th August. Even in this case, the Nav fell by over 12%.

Funds whose deadlines are far ahead have performed better: Opportunità Italia (+4.3%), Mediolanum Re (+5.7%) and Immobiliare Dinamico (+0.7%). Amundi RE Europa is pursuing its divestiture process and it will re-pay 230 euro by the end of August, limiting the operational losses (-0.5%). It’s not by chance that the Stock Exchange awarded the fund with a +16.8% since the start of the year. Finally, some funds have struggled with completing the transactions due to the increased uncertainty perceived by the international players.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Dea Capital launched a 200-million fund

06 August, Milano Finanza

Dea Capital Real Estate sgr launched Tessalo, the new property fund specialised in healthcare. The fund has six healthcare facilities in its portfolio at present. All the facilities are prime assets, located in central Italy and belonging to the group Eurosanità, a leading company in the healthcare sector in Italy, which will continue to manage the facilities. The assets are worth approximately 200 million euro. They are clinics, nursing homes, private hospitals or part of public or private entities, assisted living facilities, research centres, analysis laboratories and radiology and physiotherapy centres. The total beds are over 500. Among the assets, there are the clinic Quisisana, the nursing home Villa Stuart, the general hospital Casilino and the fertility treatment division in Rome, as well as the assisting living facility Santa Elisabetta I and II, both in Fiuggi. The fund’s objective is to provide 6% dividends a year. With this operation, Dea Capital Real Estate confirms its product diversification strategy and its research for innovative asset classes.

Source: Milano Finanza

Translator: Cristina Ambrosi

The Sorgente sgr fund gets properties for 37 mln

31 July, Italia Oggi

The third and last transfer to the Sant’Alessio fund has been completed. The fund was constituted by Sorgente sgr as a special purpose vehicle to revaluate the many assets including historical buildings and nursing homes owned by Ipab (Sant’Alessio regional centre – Margherita di Savoia for blind people). After a public tender concluded in autumn 2016, the institute appointed the asset manager from Rome for the incorporation and management of the fund. Other five properties have been transferred to the fund for a total value of approximately 37 million euro, with the addition of some plots of land, valued at 116 million.

Source: Italia Oggi

Translator: Cristina Ambrosi

Sorgente sgr: a fund to invest in credits

12 July, Italia Oggi

Sorgente sgr has constituted the fund Botticelli which will invest in the equity gathered from Italian performing loans. The credits in the portfolio will mainly consist of commercial invoices bought from SMEs in exchange for readily available liquidity. The operation will be carried out in a new financial marketplace for secured invoices, based on an online platform created by Cash Trading, which will assist Sorgente in the role of advisor and for the collection of credits.

The fund can amount up to 150 million euro, with a duration of five years with the possibility of extension. It can make continuous investments in new credits, thanks to the liquidity obtained from the collection of the credits object of the initial investment.

The operation avail itself of a platform providing immediate liquidity to the companies that sell their invoices, with no excessive paperwork, no hidden commissions or personal guarantees. The platform is accessible by small newly-constituted corporations. The coordinator of the operation is Giovanni Cerrone, general director at the time of institution of the fund and now finance director for Nova Re Siiq, a listed company of the group. “Through this partnership with Cash Trading, we’ll be able to favour the internal capital market, disinvesting part of the assets of the selling companies, resulting in a more efficient management of their working capital”, explained Cerrone. In this way, we give the opportunity to start-ups and developing companies to have immediate access to liquidity, supporting the national economy, where there is plenty of small and medium companies with such needs”.

For Sorgente Sgr, led by Carlo Petagna, the operation is a further step in its investment strategy and diversification process. As observed by the Cambridge University, the performing loans market is very active at the moment, and it might give a new impulse to SMEs.

Source: Italia Oggi

Translator: Cristina Ambrosi

Funds, the recovery goes on

07 July, Milano Finanza

The recovery of the Italian property market continues at a fast pace, and the property funds market is gradually consolidating. The growth is aligned with the global trend of the sector which reached last year assets for 2,830 billion euro, the second-best performance ever, as confirmed by the 2018 report “Property funds in Italy and abroad” by Scenari Immobiliari in collaboration with Casadei. The Nav (Net Asset Value) of property funds reached 53 billion euro in 2017, having increased by 10.4% from the previous year. According to Scenari Immobiliari, the outlook for 2018 is for a “realistic” 55 billion, aligned with the rest of Europe, where the sector is mature. The real estate assets directly owned are equal to 58 billion, including international investments, increased by 8.4% from the previous twelve months.

2018 looks positive, and the trend is aligned with the previous year based on the figures gathered by the asset management companies. These manage around 420 property funds, with 1,200 employees and with total revenues of around 320 million euro. Asset managers are confident regarding the future of the sector, and more in general of the country, whereas the long-term outlook is uncertain. For what concerns the next three to five years, only one-third of the companies expects a negative trend, while another one-third expects an improvement, and over a half thinks the market will stay stable. Concerning transaction prices, asset managers believe these will remain unchanged across all the segments, except for warehouses whose values are expected to reduce according to 40% of the players. 40% think that the hospitality sector will grow.

Concerning the areas of the country where to find the best investment opportunities in the next three years, the companies of the sector believe that the best areas are the north and the centre for all segments, expect the hotel one, where the centre and the south are the favourites for attracting real estate investments.

More in detail, the asset managers think that the north-west of Italy might be the best area where to invest in coworking spaces (93%), student housing and offices (87%). Regarding the north-east, there’s a lot of interest in logistics (80%) and industrial properties (67%). Central Italy has the most interesting investment opportunities concerning hotel (73%), residential properties (53%), offices and warehouses (87%).  Finally, the south is the most attractive for investing in hotels (67%), followed by commercial properties specialised in mass retailing (27%).

Source: Milano Finanza

Translator: Cristina Ambrosi

Breglia (Scenari Immobiliari): offices and houses will lead the market

07 July, Milano Finanza

According to Mario Breglia, Scenari Immobiliari president, property funds are expected to report a double-digit growth this year between 10 and 15%. Offices will be once again the main drivers of the sector, together with residential properties. “The political changes don’t seem to have impacted the strategies of the players so far. On the contrary, we believe that in the next three years the sector will grow even further, with more funds and more product diversification”, he explains.

What was the data the surprised you the most and why?

Property funds are growing more than the real estate market. This trend is global, and Italy is no exception. It means that investors appreciate professional management, and the results are better than the market average.

The future looks good: is it too early to suppose a double-digit growth in the next years?

This year we’ll definitely close with a double-digit growth. Concerning the future, there are too many variables to make a prediction. Asset management gets stronger in a climate of general uncertainty, and it represents an excellent asset class. Should the uncertainties increase in the next years, the scenario will get more confusing.

In your opinion, where the growth of the sector will originate from? From offices, houses or somewhere else?

Offices are traditionally the funds’ favourites. Buildings with one or just a few tenants reduce the complexity of managing them and allow durable performances. Residential is one of the emerging segments, especially short-term rentals to some specific categories such as students or managers. However, we must design a new product regarding form and management, and there’s a lot to do in Italy in this matter. Asset management companies work with skilled and efficient developers, but only a few companies are operating in real estate management with a modern view.

Might foreign investors contribute in reaching this objective?

Foreign companies are still marginal in Italian property investments, although the percentage is destined to grow.

In your opinion, what is the Italian market lacking in comparison with the European one?

The economic recession and the crisis of real estate have reduced the developments, and the territorial requalification objects to the bare minimum, while these are two primary aspects in Europe. There are no opportunities to constitute funds on big projects. They can be found only in single properties, with the risk of paying them too much.

What is your advice or request to the new Government?

As international investors are currently considering investing in real estate in Italy, we must incentivise urban development projects, which won’t find the necessary resources on the domestic market. Of course, it’s not possible to implement such plans everywhere in Italy. Nevertheless, not obstructing this process would be already a beginning.

Source: Milano Finanza

Translator: Cristina Ambrosi

Funds are increasingly popular among Italians

23 June, Il Sole 24 Ore

Italians are back to saving. At the end of 2017, the subscribers of trust funds were 7.2 million, over 500 thousand more than the previous year. 12% of the Italians are investors. Half of the money-savers have holdings in funds for over 14,400 euro. The profile emerging from the recent survey by Assogestioni is rather interesting: the gap between men and women has considerably reduced, the average investor lives in northern Italy and invests 31,200 euro on average.

Long gone are the days when Government bonds offered double digits returns. Since the diminished liquidity of the real estate market nowadays, investors are increasingly looking at asset management. As finding “safe” investments on the market is not easy, more and more people are assisted now by a consultant to diversify and reduce the risk.

People who invested in funds (for instance, Italian equity funds) last year obtained averaged returns for 21.15%, while Piazza Affari grew only by 21.15%. If we consider the last ten years (hence, including the recession years), the funds in Italy resisted better the crisis: they gave 16.1% returns against the 12.65% of the stock market. The performance in the first part of the year, however, is less brilliant: funds have grown by 1.33%, against the 3.13% of the stock exchange.

As stressed by Assogestioni, PIR provided a great impulse to investments. PIR are individual saving plans that allow savers to have a tax relief on the capital gain at the end of the five-year duration. Last year, PIR provided excellent results to investors. The Ftse Italia Pir Pmi All index grew by 34% in 2017, even though its yield has been 0 since the start of 2018. The investments in PIR are continuing to grow nonetheless. According to the number of Assogestioni, the Italians investing in PIR compliant national funds are more than 690 thousand, about 800 thousand if including international funds. Half of the investors are at their first time with collective asset management instruments. The numbers exceed the expectations of the Government as well as of the market, confirming the success of such products.  PIR have indeed awakened the interest of Italian towards investing, but this is not enough to protect investors from risk completely. Funds have risks too, along with costs (very high in some cases), and they not always meet the expected returns. The industry has to make a preliminary effort. Financial education is needed. For this purpose, Mario Nava, Consob president, comments: “There is still a lot to do. 40% of the Italians are not able to assess their financial knowledge, 50% are not comfortable dealing with financial matters, and another 50% are simply not interested”. Moreover, most Italians “does not have a financial plan, nor reads the financial news, while nearly 40% invest without a full understanding”. It’s indeed investors’ lack of awareness that, according to the Consob president, “generates a wrong attitude towards the financial choices”, reporting consequently “not satisfactory results, as over a half of the investors rely on informal advice”, rather than on professional consultants. Filling this gap must be a priority since it’s in the interest of both financial industry and investors.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi