QI: Interview with Massimo Caputi

 Italy As you claim, a product with attractive prices for foreign investors is currently missing.  How much should prices decrease, in your opinion? At this stage are we talking about speculative operators  or do asset management funds also show any interest?

The market price is determined by investors having enough equity for asset purchase.  In the last few months we observed a renewed interest in our Country by international investors, mainly in the retail asset class (shopping centers, department stores, retail parks, etc), however with 30-40% repricing. For the time being, large speculative funds started to show interest in the Italian market, however a repricing is essential to attract institutional investors, as it is unthinkable to offer the same assets keeping the book value of 2007.      

The office sector is also interesting, in which a price downtrend is still expected for two reasons:  this sector is strictly related to the Italian economic trend and is characterized by an increasing vacancy rate entailing competitiveness on the lease market with consequent decreasing rents.  In my opinion, a further 15% price drop should be expected, also considering that transactions are closed at lower prices compared to asking prices.   

 Which are the properties investors are interested in?

The common expectation is to make the best deal, as it happened in the Irish and Spanish market in the past years.    The key difference is the asset class: speculative players are also considering assets in secondary locations, focusing on an entry discount and entry yield  close to 10% (also considering transactions regarding distressed assets to reposition), while less opportunistic investors are increasingly interested in premium assets, though at a lower discount against face value, and focusing on innovative improvement projects.

Is Prelios a seller or a purchaser at this stage?

Both.  In line with the new business model as "pure management company" with a strong focus on service platforms, the competent operating companies are implementing a selective disposition of the co-investments inherited from the past.   Our aim is to recover value for our investors. We are also very active on investments, working with leading Italian and foreign investors. We are also organized to structure transactions with different profiles according to the different counterparties involved.   Currently, those operating on the buy side may make extremely profitable transactions, with the assistance of competent experts.   

What do you intend to do in the next months and which are your concrete objectives?

We will certainly strengthen our three main segments: asset management, through Prelios SGR, property management and technical services, through Prelios Integra, and NPL management, through Prelios Credit Servicing. The goal is to increase AuM in both the real estate and non performing loan sectors. We are waiting for the end of the asset quality review by banks, that will certainly lead to the opening of a new market with many investment opportunities. For those who are not ready to make dispositions in the short term, we have studied management solutions aimed at repositioning the assets on the market so as to envisage innovative real estate concepts and reduce competitiveness in the future.

More generally, is the Italian market showing any real signs of recovery?

I believe that it will take some more time. The first signs are evident, however they are due to an excess of liquidity in our Country compared to the past years.  However, this step is necessary for the market to start again. I expect a real recovery starting from half 2015, but only if the banking system will grant credit again on a fairly selected basis.