EXCLUSIVE: Fabrica chief Marco Doglio on Italy's institutional market

Marco Doglio, CEO of Fabrica sgr, talks to PropertyEU about its recently launched joint venture with CBRE Global Investors and fundraising opportunities among Italian institutional investors.

PropertyEU: In late 2012 Fabrica set up a partnership with CBREGI to structure and distribute Italian closed-end regulated real estate vehicles. How is this joint venture progressing?

Doglio: We started the search for an international partner after having identified a need for diversification among Italian institutional investors such as pension funds, banks and insurance companies. Italy’s domestic institutions need to diversify their asset allocation which has little exposure to property and is mainly concentrated on the home market. According to data from Inrev, the association of non-listed real estate funds, foreign real estate investment accounts for just 1% of the total in Italy, compared to an average of 9% in Europe, and versus a peak of 60% in the Netherlands. On the other hand, real estate has shown little or even a slightly positive correlation with Italian government bonds in the recent past, showing that there are advantages in diversifying into this sector. The partnership with CBREGI is aimed at enabling investors to reap these benefits.

PropertyEU: Are you working on new fund products at the moment?
Doglio: We seek to offer a tailor-made strategy of specific interest to investors, spanning from direct to indirect real estate, in Italy and abroad. We have already had meetings with the main pension funds and insurance companies, including in particular the pension fund for lawyers, which is currently looking for an investment manager by way of a public tender. We have come up with a number of proposals, which are currently being considered. We hope to have positive feedback on at least one before the summer.

PropertyEU: What are Fabrica’s priorities this year?
Doglio: We are working on a new three-year industrial plan at the moment following the recent confirmation of the management board members. That said, our priorities are developing the partnership with CBREGI as well as strengthening the social housing investment business, which revolves around the Aristotele and Erasmo property funds. On this subject, we have recently been awarded a mandate by the public authorities to launch a social housing fund in Cesena, while a similar operation is being studied in Rome. Furthermore we are looking to develop further the €250 mln property vehicle we manage for Inarcassa RE, the pension fund for engineers and architects.

PropertyEU: Five years after the onset of the financial crisis, the market remains challenging in Italy. What are the prospects for the future? Should we accept the situation as a ‘new normality’?
Doglio: The Italian property industry is changing and moving towards more transparency. This revolution is slow and difficult. The market does not need opportunistic players, but long-term and transparent investors. There are several sectors which offer opportunities today, including that of social housing. However, I believe we could still see some further repricing and investors remain cautious. The market is grappling with the issue of the enormous real estate portfolio in the hands of the banking sector. This theme is attracting growing attention from the public authorities.

PropertyEU: Where do you see opportunities in the market?
Doglio: In total, Italian institutions own real estate assets worth over €40 bn which, according to existing regulations and our own research, has the potential to increase by another €34 bn in the future. Institutional investors have a double need, that of extracting value from their existing real estate assets, for instance through the conversion of vacant buildings, and that of increasing their portfolios through investments which allow them to meet their liabilities.
Against this background, we have decided to launch Erasmo, the first fund in Italy which is fully focused on student housing, and we have offered pension fund Inps an opportunity to lift its exposure to this sector through its existing property fund, Aristotele. Erasmo has a long-term investment horizon and will provide sustainable returns. We are planning a €300 mln spending spree for this vehicle and the development of a total of 3,000 beds in Italy. The fund -which is co-invested by state-owned Cassa Depositi e Prestiti - aims to take advantage of the shortage of student housing facilities in our country. It is noteworthy that the Italian market currently lacks as much as 75,000 beds and meets only 10% of the total demand.
Our first project for Erasmo was the development of 600 beds in Turin, which is now under way. We are however planning a round of meetings with the main universities in Italy and new projects should follow in the near future. We are also verifying whether there are other sophisticated institutional investors interested in investing in projects which relaunch the territory and support the welfare of our country.