CROSS-BORDER REAL ESTATE INVESTMENTS IN ITALY:

recent market trends, current situation and perspectives

Italian Real Estate market evolutionThroughout Europe and the rest of the world, the 1997-2007 decade was one of enormous growth of the Real Estate market.

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Average housing prices in the main Italian cities (1991-2009)

During this period, Italy too went through an extraordinary moment with the domestic Real Estate market being transformed quickly as ever before

Source: Nomisma processing of data from Consulente Immobiliare.

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Italian Real Estate market evolution 2/3

During these years several innovations took place in financial instruments, magnifying investment opportunities and raising foreign investors’ interest:

Italian banks went through mortgages’ securitization;

the professional management of corporate portfolios and state-owned properties became more and more important;

an increasing number of real estate assets’ spin-offs took place to retain a core business;

new forms of retail business were found;

abandoned urban areas were upgraded;

alliances and JV between foreign and domestic Investors/operators were set up;

the first Real Estate funds under Italian law were launched.

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Real Estate funds have been one of the instruments that mostly contributed to the development of the Italian real estate market whilst increasing market transparency. Their success and quick diffusion was mainly related to their status of tax efficient vehicle, as well as of a financial instrument subject to a well defined regulatory frame.

Italian Real Estate market evolution 3/3

NAV trends of real estate funds in the major European countries (2000=100)

Source: Nomisma processing of Scenari Immobiliari data.

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Over the 2000–2010 period Italian Real Estate funds have shown (and are still showing) an interesting trend with a compound annual growth rate of ca. 31%

Cross-border investments in theItalian Real Estate market 1/3

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Source: Jones Lang LaSalle.

Transparency score trend of the Italian real estate market

This market trend evolution, together with the introduction of the Euro, was both the cause and effect of the opening of the domestic market to foreign investments, rendering the Italian market less provincial.

Over the last decade, the country has risen its competitiveness in several factors and the Italian property market has grown much more transparent in terms of activities,

players in the market and financial instruments used

Cross-border investments in theItalian Real Estate market 2/3

In this context the Italian Real Estate market has been gradually clearing the ground for the arrival of cross-border investors, granting the expansion of new players such as merchant banks, investment funds, pension funds, specialist finance companies, securitizers, developers and asset managers, improving the sector and its overall transparency.

Italy cross-border investments by purchaser origin (%)

Source: DTZ (2008).

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The main foreign players operating in Italy are primarily represented by Middle-Asian investors, followed by France Real Estate funds and German Open funds

Cross-border investments in theItalian Real Estate market 3/3

Italy cross-border investments by sector (€ bn)

Source: CB Richard Ellis (2009).

Cross-border Investors remain focused on high quality assets, mainly in the retail sector

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Italian Real Estate market during the crisis phase

After the global financial melt-down of 2007/2008, strengthening in Q1 2009, markets changed quickly. Over 2008, Real Estate investments in Europe slowed out of lack of finance and due to the dependence of the sector on leverage. By the end 2008, the total volume of investments in Europe was drastically down and in 2 years (2008-2009) investments dropped to about a quarter of the peak period.

European Investment Turnover (€ mn)

Source: CB Richard Ellis.

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-70%

Italian Real Estate market during the crisis phase

Italian Investment Turnover (€ mn)

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-51%

Source: DTZ.

In Italy the situation is less dramatic than in other countries

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The main reasons that have been driving the different shortfall of the crisis on the Italian Real Estate market, contributing to its greater resilience, are the following:

Italian Real Estate market has not been experiencing an unsustainable growth rate during the past cycle…

Italian Real Estate market during the crisis phase

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1997-2007 change in house prices in leading markets (%)

Source: Economist.

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2008 – 2009 investments volume (%)

Italian Real Estate market during the crisis phase

2008 2009

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… the decrease in investment volumes, registered during 2009, was primarily driven by a reduction in cross-border investments, while domestic equity Investors, less affected by the economic crisis, haven’t stop their investment activity.

Source: DTZ.

Perspectives for the Italian Real Estate market

By the end of 2009 and moving into 2010 (after about 2 years of falling investments), the global economy and the real estate market seems to have passed its worst moments.

In this context, a general review of the approach of the major investors has occurred, focusing on a “back to basics” approach.

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Perspectives for the Italian Real Estate market

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Solidity of the real estate market

Substantial defensive trend of Italy compared to other foreign countries

Transparency Italian market has been reaching top rankings

New credit available Credit institutions starting back to grant financing

New investment opportunities

Public real estate assets disposalDistressed-property opportunitiesNew spin-offs from companies evaluating assets disposalReal estate funds industry’s increaseRetail and tourist assets

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Considering the current market trend, the Italian real estate cross-border investments could be driven by the following factors:

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Fondi Immobiliari Italiani Sgr S.p.A.Via Crescenzio,1400193 Roma

Tel. +39 06 68163250 Fax. +39 06 68192090