Wednesday, August 08, 2012

Italian Palaces, Castles Put on Market

For investors longing to own an Italian palace, castle or other historic property, now might be the time to strike. The Italian government and numerous cities and other public agencies are putting billions of euros of surplus properties on the block as a way of raising revenue.

Prime Minister Mario Monti's plan for the economy, which is close to final passage, includes the sale of 350 buildings along with cuts to public spending and other austerity measures. The government hopes to raise about €1.5 billion ($1.86 billion) through the property sales, according to the Agenzia del Demanio, the agency that manages the state's real-estate assets.

The 350 properties include army barracks in Bologna, which were formerly occupied by the Defense Ministry, and Soriano nel Cimino's Orsini Castle, in the Lazio region, which was built by a pope in the 1270s and later used as a prison.

The city of Venice has put a €19 million price tag on the 18th century Diedo Palace, which served as a criminal court for years and is now being marketed to foreign investors by Hera Immobiliare. It is one of 18 properties Venice has put on the block.

Milan is selling more than 100 buildings, including the Palazzo Bolis Gualdo at 12 Via Bagutta, in the city's famous fashion district. That building's price tag: €31 million.

Italian agencies at all levels of government own about €42 billion of properties that are surplus or underused, according to a report by Edoardo Reviglio, chief economist of Cassa Depositi e Prestiti, a bank that is 70%-owned by the government.

Turning some of this real estate into cash would be a fast way to raise revenue for the country's cash-strapped municipalities, states and national government.

But the plan to sell properties faces headwinds. Many institutional investors, fearing a collapse of the euro, essentially have redlined Italy as well as other members of the euro zone with the biggest financial problems, including Spain and Greece. Moreover, investors would have to assume the risk of dealing with the notoriously slow Italian bureaucracy, fixing up the properties and then finding tenants at a time of anemic economic growth.

That isn't to say some investors aren't giving the properties a look. Alessandro Mazzanti, chief executive of real-estate services firm CBRE Group Inc.'s Italian operation, says many U.S. opportunity funds, which look for high-risk, high-return deals, are looking. "Names that you know have been in here the last week talking to us," he said, declining to be more specific.