Real Estate in Italy

[lathinker]

Two bloggers I read, Alphavulture and Wertart Capital, recently outlined their investment thesis on Italian closed-end real estate funds. These funds own mostly Italian commercial real estate. They have a fixed maturity, in some cases with a grace period to allow for additional time to sell their real estate. Many of the funds trade at sizeable discount to their NAV, in some cases 50% or more, and can be traded at the Borsa Italiana in Milan.

Given Italian real estate prices have been tanking in the last few years, the funds had to report decreases in the value of their property. While I am not a friend of most closed-end fund structures, the discounts look very big to me. See here for the

 

http://alphavulture.com/2015/03/02/italian-real-estate-liquidating-cefs-at-a-50-discount/

 

http://wertartcapital.com/2015/02/03/increase-allocation-to-italian-reifs/

 

I would be interested to know if anybody takes a view on the real estate market in Italy. I think that the Italian economic policy has improved considerably and the government is following a reasonable course. Italy will be one of the countries to benefit from the ECB QE and of a broader European recovery (if it materializes). I also think that low rates will help the property market at some point.

 

Are closed-end  real estate investment funds a good way to play this? Are there listed companies levered to it (one firm I could think of was MOL.IM)? Generally interested in what people think here.

 

LT

[giofranchi]

I would be interested to know if anybody takes a view on the real estate market in Italy. I think that the Italian economic policy has improved considerably and the government is following a reasonable course. Italy will be one of the countries to benefit from the ECB QE and of a broader European recovery (if it materializes). I also think that low rates will help the property market at some point.

 

It surely could be a great short term trade.

 

But for the long term… I just don’t see how this is ending well…

Italy’s debt is unsustainable. And there is no real evidence its load is decreasing… On the contrary, it is still increasing.

QE and the following low interests are means to buy some (very welcomed!) time.

But then more substance must follow, if we truly are to reverse course, and start decreasing our debt load. Unfortunately, I don’t know what that lucky event (or series of events) could be, and certainly I am not seeing it happen right now!

 

This being said, the Italian stock market has already enjoyed a wonderful run this year: if I am not wrong, it is up almost +30%! If you still can find deeply undervalued situations, they could work very fine… at least for some time! ;)

 

Gio