The property market in Italy continues to enjoy a steady flow of overseas fund managers in the wake of its property market recovery. Hedge funds and private equity groups are finding ways to improve exposure as real-estate investors look around for opportunities with lucrative yields in the Italian property market.
Industry giants place their bets on Italy
Quantum Strategic Partners, a private fund steered by Soros Fund Management, invested nearly €19.7 million in one of Italy’s shopping center groups-Immobiliare Grande Distribuzione. The private fund group held a stake of five percent in Immobiliare Grande Distribuzione to become its third biggest investor. Another property fund manager, Prelios SGR, has two funds that are close-ended, Tecla and Olinda. The €400 million fund, Olinda, invests in many retail properties in Italy that include shopping centers, and recently received numerous buyout bids.
Blackstone Senior MD, James Seppala, says that the real-estate market in Italy has noticed an improved investor sentiment on the domestic as well as the overseas front. Property owners are quoting prices that are within the market levels instead of quoting sky-high prices. Due to this, the transaction volumes in 2013 picked up by nearly 80 percent, and the trend is expected to continue in 2014 as well, he added. He explained saying that they tendered the bid as most of the assets are based in Rome and Milan and are rented by institutional tenants.
Structured credit markets
Italian banks are planning on revisiting the balance sheets soon, which is why many investors are planning to enter the property market by purchasing property loans or bonds that are supported by commercial properties. An asset manager who makes notable investments in the structured credit market, says that their firm is currently shifting its focus to Italy. The capital pockets have already been worked on, in terms of both property assets and loans, sources confirmed.
Although the current market in Italy is enticing, the group looks at making its entry into the Italian property market in the coming few years, says the source. Another source from the firm said that for each €100 million worth of non-performing loans that surface in Italy, Spain reports €1 billion worth of non-performing loans. The non-performing loans in Spain are at more distressing levels than those in Italy, he explained. Fund managers have been exploring different real-estate properties in Italy, many of which are headed towards Rome, say sources.
Meanwhile, Ellington Management Group, a hedge fund manager, is drifting away from Italy steering towards other European markets like Ireland, Germany, Spain and the UK, due to the complex legal framework. Purchasing non-performing loans in Italy would limit them as it would be on a basis of making risk adjustments, said Ellington MD, Daniel Turner.
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