Italy's Sorgente revives plans for €500m IPO

Italian asset manager Sorgente has announced it is reviving plans to list its Sorgente Real Estate System arm on the Milan stock exchange after postponing the IPO due to difficult market conditions.

In a filing to the stock market regulator Consob, Sorgente said it will list the shares of Sorgente Res and convert the unit to real estate investment trust status, or SIIQ, thereby taking advantage of recent changes to the Italian REIT legislation.

The company is expected to target between €500 and €600 mln with the placement.

The listing will involve around €1.5 bn of assets including the group's 7.4% share in the Flatiron building in New York, as well as a number of trophy assets in Bari (Grand Hotel delle Nazioni), Milan (the head office of Banco Santander at via Senato) and Rome (the headquarters of Sorgente at Via Tritone).

Sorgente's partner Ipi will also transfer the renowned Lingotto building in Turin. Upon closing of the operation, Sorgente Group is expected to own less than 50% in the unit.

Banca Imi, Barclays Bank and BofA Merrill Lynch are acting as joint global coordinators and joint bookrunners for the listing. Intermonte will act as sponsor, joint bookrunner and advisor. Société Générale will act as co-lead manager.

Sorgente, an Italian fund manager with some €5 bn of assets, had long been planning the IPO for November last year but was forced to postpone the operation as a result of 'volatility in the financial markets'.

The Rome-based asset manager said at the time that the listing remained a 'strategic objective'.

Italian REIT changes
Changes to Italy’s REIT rules enforced at year end 2014 likely contributed in the group's decision to re-launch the listing this year. Key changes to the new SIIQ rules included 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.

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.

Sorgente is one of three players which recently announced plans to list shares or convert to REIT status. Italian property entrepreneur Giuseppe Statuto, owner of some of Italy's best known luxury hotels, including the Hotel Danieli in Venice, also said last year that he was planning an IPO of his company which owns assets valued at €1.5 bn. The company is expected to carry out the listing between the end of the year and the beginning of 2015.

Similarly, HI Real sold 80.1% of its hotel holdings in September to the Alawadhi Investment Europe fund, representing the first step in the company's plan to become a SIIQ, the Italian equivalent of a REIT. In a second step, the company plans to carry out a 'reverse takeover' with three partners, which will yield the company seven buildings for a total value of €48 mln.