Invesco sees opportunities in Italian real estate
Carlo Romanò (pictured) has joined Invesco Real Estate in Italy as head of Transactions and he has plenty of ideas on how to make the most out of the sector.
Invesco Real Estate recently reinforced its commitment to the Italian market. Not only did it hire Carlo Romanò as head of Transactions but it acquired a prime asset located in Via Sassetti
in Milan, Italy which was done on behalf of a separate account client.
But the opportunities do not end there, Romanò says. He explains that at the moment the company is focused on direct investing and is looking for opportunities on behalf of Invesco Real Estate’s fund and separate account clients.
Having worked for Doughty Hanson and Pirelli Real Estate in the past, Romanò has been around the Italian real estate industry long enough to be able to identify what works and what does not.
Faced with a market of falling prices and a complicated bureaucratic system, Romanò says: “The Italian real estate market is somehow unique in Europe: it is very complicated to execute a mortgage, which has made the sector much more stable than usual – but it also got it more stuck.”
“However, we see a number of opportunities for us; rather than from a dramatic collapse in prices within a distressed scenario, we actually seeopportunities arising from a real value-add strategy whereby we ultimately create our own core product.
“This would be particularly true in the office sector, with Via Sassetti being the first example of our build-to-core strategy. But, we also see interesting opportunities in the retail sector for value creation.”
As Romanò explains, the Italian real estate development market has historically been quite local on the retail side, with a small presence of international players – which gives an opportunity to Invesco Real Estate to create value on existing retail assets.
The focus at the moment is mainly on commercial property, as the residential space is almost entirely covered by the local players. At present, Romanò is looking for offices in Milan rather than in Rome, and shopping centres elsewhere in the country.
OBJECTIVES AND RISK
Looking at his first full year in action, Romanò says he is working to buy at least another property in Milan. In the retail space he says there is an interesting angle from being able to optimise the existing stocks already tenanted: “We believe that our knowledge will give us opportunities to buy shopping centres with interesting angles to boost returns in the medium-long term.”
In terms of risk, Romanò points to the macroeconomic scenario as the major problem in Italy at present. “We are focusing on proper underwriting and value creation rather than playing with the market favourable movements.
“We are not expecting a golden market. We don’t expect rental growth in the next couple of years, therefore we focus on creating assets capable of satisfying tenants’ new needs – efficient layout, cost savings, green labelling, employee comfort – more than other things,” he says.
Overall, Invesco Real Estate is focusing on the fundamentals and investments for the long run, and expects returns from the stabilisation of the market which should reduce the number of players entering and leaving the market.
“In the long term, yields in Milan will be similar to those in Paris and other big cities within the real estate space,” he concludes.