EXCLUSIVE: Italy’s Beni Stabili aims to hold firm in 2013

Aldo Mazzocco, chief executive of Italian real estate investment trust Beni Stabili, talks to PropertyEU about his views on the market and his targets for the year.

PropertyEU: The first-quarter results have showed a slight slowdown in activity compared to the first quarter of last year. What was the reason and what is the target for this year?
Mazzocco: This decline was mostly linked to slightly higher financial costs, the payment of a higher IMU property tax and a slowdown in the services business.
The market continues to be demanding and, against this background, confirming once again the results achieved in 2012 would mean having performed very well and achieved a challenging target. The property investment market remains frozen with just a handful of transactions and this has an impact on values. Our assets are well let to a majority of high-profile tenants and the occupancy rate is 98% on the Core portfolio; this should make values really resilient. (Note PropertyEU: Last year the company saw devaluations for a total of €82 mln on a €4.3 bn portfolio). However, in the overall market values remain under pressure because of distressed sellers and/or foreign opportunistic investors.

PropertyEU: The company has recently diversified its financing sources with the issue of a €225 mln five-year bond. Was the issue well received?
Mazzocco: We have tapped the debt market for the first time in over three years, placing bonds which are convertible into shares at a price of €0.60. We have received subscriptions from around 190 institutions, and the bonds were allocated to a vast majority of international players, which accounted for 88%. This demonstrates that we have been able to create a vehicle which appeals to foreign institutions and attracts international capital. We cannot do without bank lending at this point but the idea is to further diversify the sources of financing. We currently have gross debt of €2.3 bn, of which roughly 51% is bank lending while the other 49% comes from alternative sources.

PropertyEU: Beni Stabili has recently delivered its landmark development project, Torre Garibaldi. What comes next?
Mazzocco: Torre Garibaldi is a long success story. We bought it in 2004 and started restructuring in 2008. We completed the two towers with just two months of delay and fully on budget despite changes that the municipality of Milan made in the local strategic plan. Today the 43,000 m2 asset is fully let to Maire Tecnimont and generates a yield of around 6%.
More recently, we took control of a 100,000 m2 plot of land located south of the Porta Romana district and two kilometres from the central Duomo square. Now that the area is totally controlled by Beni Stabili, plans are to develop a total of 11 buildings with some 119,000 m2 of mostly offices with a minority of light industrial facilities. The building permit has already been approved and we have hired CBRE on an exclusive basis to start marketing the assets. We will start construction as soon as we have signed with the first tenant.

PropertyEU: What are the company’s priorities for the year?
Mazzocco: For now, we are targeting stable rental income and dividends. The business is holding up while the country’s economy continues to worsen. Against this background it is fair to say that we are outperforming. As soon as the market gets into recovery mode we will be able to take advantage of our strong position in the Italian property industry. We went through the worst years of 2008 and 2009 almost without a scratch. As soon as the wind starts blowing again we will gain speed.

PropertyEU: Is recovery in sight at last?
Mazzocco: The market remains very weak. Banks are being forced to reduce their exposure to real estate and demand is feeble. The cost of debt has increased significantly and bureaucracy remains an issue in our country. We need the government to speed up on the reforms and a Europe that continues on its integration path. We want to think positive and hope these changes will take place in the near future.