Changes to Italy’s REIT rules will 'significantly' enhance the appeal of the country’s listed property sector to international investors, the European Public Real Estate Association (EPRA) said this week.

Changes to Italy’s REIT rules will 'significantly' enhance the appeal of the country’s listed property sector
to international investors, the European Public Real Estate Association (EPRA) said this week.


The Italian government presented the proposed changes to Italian REITs (Società di Investimento Immobiliare Quotate, or SIIQs) in late August and included them in its 'Unblock Italy' package which contains measures to improve the competitiveness of the economy and to ease the disposal of surplus state property.

They also appeared in the previous government’s Destination Italy and DEF 2014 financial budget documents. The decree, which was published in the Gazzetta Ufficiale this week, is scheduled to be ratified by the Italian Parliament in the next 60 days. Once approved, the changes will take immediate effect.

Assoimmobiliare, the industry body representing SIIQs, real estate companies and funds, said the new rules are a 'positive step forward' for the Italian real estate market, where the REIT regime has not seen great development since its introduction in 2007.

EPRA board member Aldo Mazzocco, who is president of Assoimmobiliare and CEO of Italian SIIQ Beni Stabili, said: 'The political will and the technical steps taken to simplify the rules and make the Italian real estate market more attractive for long-term investments are clear and very welcome. These are very important decisions that align Italy with the best European real estate markets, especially the French and the English ones. The government has done what it was asked to do, now it’s up to private companies to get the most out of this new and more flexible regulatory framework.'

KEY CHANGES
Key changes to the new SIIQ rules include lifting the ceiling for a majority shareholding in a SIIQ to 60% from 51%; lowering the dividend distribution requirement to 70% of recurring rental income from 85%; making the income from net capital gains subject to a 50% distribution obligation in the 24 months that follow the year that they are realised.

EPRA CEO Philip Charls commented: 'Italy’s government has clearly had an eye on the robust health of the French REIT sector and how the changes to the regime in Spain and the launch of the structure in Ireland have spawned a series of successful IPOs.'

According to Henri Quadrelli, an analyst at Société Générale, the softening of the current SIIQ rules will benefit Italy's minuscule listed real estate sector, helping it to attract more foreign investors as well as facilitating new IPOs.

In a report named 'The beginning of a new story', Quadrelli said that the decree will allow property funds to more easily convert to REIT status as tax transparency will also concern property fund management activities and not only direct property-owned rental businesses, while the lowering of the dividend payout commitment means companies will be able to conserve cashflow.

Société Générale's Quadrelli said he expects more IPOs to take place in the future, with banks expected to take part in the action after the next ECB stress test. A larger listed sector is also expected to bring more transparency into valuations, which in turn means a more attractive sector for international investors.

Italy, which introduced the REIT regime in 2007, has only seen the launch of two structures over the past years. Beni Stabili, the Italian arm of Foncière des Régions, is currently the largest SIIQ in the market, followed by IGD, a Bologna-based retail specialist.