A few Italian property companies endure a long wait to see vehicle’s final structure
Late last year, Giulio Rolandino, director of real estate at Italian investment bank Mediobanca, told attendees at Italy’s EPIC conference that he expected only “two, maybe three” companies to become a real estate investment trust (REIT). Even then, that figure seemed modest. Three months later – and almost 18 months since Italy announced it would be introducing REITs, or Società d’Investimento Immobiliare Quotate (SIIQs) – the country still has no tax-efficient real estate investment vehicle.
While neighbouring France boasts the status of leader of European REITs, Italy continues to stall and stutter. Last June, the SIIQ was expected to go live. But nothing happened, and two months later the country was on holiday. Now, it seems, everything is more or less in place. And if all goes to plan, companies will be able to adopt the new vehicle from April, retrospectively to 1 January this year. But few expect long queues of companies wanting to become or establish a SIIQ.
“It is taking too long, and I think it will be quite a while before the Italian REIT market takes off,” says Marcus Cieleback, EuroHypo head of research.
In Germany – which got its own REIT in March last year, introduced retroactively from 1 January 2007 – the model has failed to take off. So far, Alstria remains Germany’s only REIT.
Property company IVG has amassed a €3.5bn portfolio and is more or less ready to go live, but has pushed back its plans owing to poor market conditions. DIC is looking at a REIT too, but also does not seem to be in a rush. A number of closed-end property fund managers are looking at REITs to give their vehicles a new lease of life.
“The traditional property companies in Italy are more developed, so in that respect they are better placed than their German equivalents,” says Cieleback.
It was only a matter of months between REITs becoming law in Germany and the arrival of the first REIT – but Italian companies have had a long wait.
To complicate matters, Italy now once again finds itself in turmoil following the resignation of prime minister Romano Prodi. There is even the possibility of a return for former PM Silvio Berlusconi. An increasingly shaky US economy and unsteady global economics suggest now may not be the time to launch a REIT.
A number of Italian property companies have, however, mulled over a REIT launch. Last year, Pirelli chief executive Puri Negri openly criticised delays in finalising the vehicle’s rules. Beni Stabili, Immobiliare Grande Distribuzione (IGD) and Aedes are expected to convert to SIIQ status. But Aedes has of late adopted a “wait and see” policy. A company spokesperson recently said that Aedes had not decided on the timing of any adoption, blaming “the bad situation of the market” and regulatory fine-tuning for the hold-up.
Italian company Beni Stabili Hospitality could be closer to adoption if its plans for a hotel REIT succeed. So far, the vehicle, backed by French company Foncière des Murs, is, just like Alstria’s German REIT, out there on its own. Being at the front of the queue may seem bold, but a REIT focused on the Italian leisure sector is arguably a safer bet than office or retail.
The fact that Beni Stabili is now backed by its French sister, Paris-based Foncière des Régions, could prove helpful. FdR now has almost five years’ experience as a French REIT (Société d’Investissement Immobiliare Cotée).
Through Italy’s fund management vehicles, Societa di Risparmio Gestione (SGR), property companies have found a middle ground, one that could be an effective stepping stone to SIIQ adoption. But with conversion charges that could be higher than predicted, Italy’s REIT now looks less appetising.
“Final changes to the SIIQ have made it less attractive than it once appeared,” says Jones Lang LaSalle’s Italy director, Douglas Babington Smith. “And existing tax legislation for SGRs is generous.” This begs the question: did Italy ever really need a REIT to start with?
