In preparation for the upcoming Italia GRI 2015, we have recently interviewed Paolo Crisafi, Managing Director, Assoimmobiliare about the Real Estate market in Italy. Topics for discussion included: international investors appetite for Italy, 'Unlock Italy' law, NPLs, where are the best opportunities and in which asset classes ...

1. Q A&
Interview with
Paolo Crisafi
Managing Director , Assoimmobiliare
ItalIA
GRI2015

2. Q A&
Paolo Crisafi
Managing Director, Assoimmobiliare
Paolo Crisafi, 45 years old, Managing Director of Assoimmobiliare and General Counsel of Federimmobiliare, FRICS RICS, Professor at Luiss University, several
institutional/financial positions (ANCI, CONFINDUSTRIA, etc), Knight Commander of The Republic of Italy.
1. Where do you see Italy in the real estate
investment cycle?
P.C.: Italy is bouncing back after a particularly challenging
period. The volume of investments is growing in the wake of
a favourable trend across Europe and of investors’ regained
appetite for our Country. The improved economic outlook
and the re-appreciation of real estate assets are the key driv-
ers of the recovery.
Continuing discussions are being held with the competent
bodies to set up financial vehicles increasingly in line with
international standards and to enhance the significant value
brought by the world of real estate services: the goal is to
build an industrial policy for the real estate sector, in a joint
effort with all the players involved.
2. Do you see more international investors becoming
more active? What do they look for in Italy?
P.C.: Foreign investors are essential to the on-going im-
provement process, given the significant increase of foreign
investments in Italy. To them we owe the market’s recent
dynamism which, combined with activity by domestic in-
vestors, will lead to a new surge of transactions involving
high-end properties. The search is currently focused on core
products. We will see a change of pace in the recovery when
the range of asset types expands and the share of Italian in-
stitutional investors, presently quite low, starts to increase.
3. How will the new provisions, and in particular ‘Unlock
Italy’, boost the Italian real estate industry? How long
will it take to see significant changes?
P.C.: It has been repeatedly emphasized that the limited
availability of financial vehicles linked to the real estate in-
dustry, along with the progressive erosion of capitalization,
have resulted in the narrowing and loss of appeal of this
sector. Against this backdrop, significant innovations were
introduced in the latter part of 2014 in the area of Real Estate
Funds and listed real estate investment companies (SIIQs),
through the legislative measure known as “Unlock Italy” and
the recent introduction of SICAF vehicles, in accordance with
the Alternative Investment Fund Managers Directive (AIFMD).
Thanks to the targeted regulatory improvements contained
in the Decree, the Italian real estate market can now rely on a
regulatory and tax framework among the most advanced and
flexible in Europe. With a wide choice between Real Estate
Funds, SIIQs and SICAFs, as well as ordinary companies, the
market can now efficiently and competitively attract the cap-
ital and financing resources required to get this sector going
again after six long years of downturn.
Additionally, the opening to international standards, without
reservations, for the tax regimes applicable to real estate
investment companies is a clear sign to foreign investors of
Italy’s will to fill the unjustified gap that still exists between
our Country and most others in terms of attractiveness of
real estate investments.
The positive results of these regulatory actions are already
visible, considering that investors are already reopening the
Italy file and showing interest in properties located not only
in Milan and Rome but also in our art cities.
4. Assuming that no ‘Bad Bank’ is created, what is the
future of NPLs?
P.C.: I agree with that assumption. The future will depend
on the ability to expand the size of the end market. The
identification of vehicles and the changes in tax regulations
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3. Q A&
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concerning write-downs are part of a process, rather than
the solution to the problem. Unless a permanent solution is
found to this situation, banks can hardly be expected to pro-
vide the necessary support to real estate investments.
5. Should investors continue to look at Milan & Rome?
Which are the most interesting secondary cities?
P.C.: Rome and Milan continue to constitute the core mar-
ket. Art cities maintain their appeal. This diversification will
benefit the territory, not necessarily the urban context. It
will depend on the functions; we can expect a more wide-
spread interest in – and a more careful selection of – availa-
ble opportunities, also on the basis of an assessment of the
sustainability of returns.
6. Retail: How do you see the retail format evolving in
the next 10 years?
P.C.: It is hard to tell. There are two on-going processes that
should be taken into account: the increase in the number
of online purchases, and in digitalization in general, and a
trend among the population towards partial re-urbanisation.
We will have to rethink the old hypermarket concept; at the
same time, the challenge will be to build a widespread retail
industry able to provide the variety and cost-effectiveness of
a big-box store.
7. Hotels: Will the sector flourish in the short term,
and if so, where?
P.C.: For business customers, the market will continue to be
restricted to the major cities. For the tourism component,
apart from art cities, we will have to understand the role that
tourism will play in the Country’s development plans.
8. Residential: Are investors starting to look at the
residential segment? Where are the best opportunities?
P.C.: The residential segment is an opportunity. Clearly, the
potential returns are moderate and available measures to
protect owners are hardly adequate; however, the demand
for rentals is high. On the other hand, the approach to this
market should be based on an effort to reduce construction
and management costs, to meet the needs of segments
of the population that are often not in a position to buy a
house. As with tourism, we need to understand whether
there is a will to actually walk the talk and to develop an or-
ganic action plan.
9. Which alternative assets would you suggest an investor
should look to in Italy?
P.C.: It is anachronistic to think that there are unexplored
market segments ready to provide satisfactory returns. The
product should be developed through hard work and aware-
ness of the facts, on the basis of the local potential and char-
acteristics.
10. What are the major innovations in terms of
investments vehicles now available in the Italian real
estate market? How will they impact the industry?
P.C.: As a result of the recently introduced regulatory meas-
ures, Real Estate Funds as well as SIIQs and SICAFs have be-
come substantially transparent vehicles from a tax point of
view.
What we hope is that the new regulatory structure will bring
a change of pace for listed real estate companies, whose cap-
italization has literally collapsed in the last few years: from
approximately €8.5 billion in 2006 to roughly €1.6 billion
today. In this regard, continuing discussions are being held
with the competent bodies to improve these vehicles.
The financial markets are certainly an opportunity: however,
in order to seize it we need a change in culture and in struc-
ture, beyond the ability to meet the formal listing require-
ments. It is now urgent for the market to reorganise itself
on the supply side, creating a new generation of modern,
efficient vehicles, abandoning once and for all a way of man-
aging real estate investments that belongs to the past.