Investing in Italy

Real Estate for a changing world
BNP PARIBAS REAL ESTATE

GUIDE TO
INVESTING
IN ITALY
2012
IN COLLABORATION WITH
BONELLI EREDE PAPPALARDO

STUDIO LEGALE
Italy overview / INVESTING IN ITALY - 2012
About BNP Paribas Real Estate

BNP Paribas Real Estate is the market leader in commercial
real estate services across Europe with 658 million of gross turnover,
156 million of gross operating
and 3,400 employees.
We manage 31 million m2
13 billion
in commercial real estate
of assets under management

across Europe
T
ES
MA TME
NA N
G
CO
p.
Foreword
p.
Top 10 reasons to invest in Italy
p.
Investor case study
p.
Guide to Milan
p. 10
Guide to Rome
p. 12
Guide to Retail in Italy
p. 14
ITALY OVERVIEW
INVESTOR TOOLKIT
206,000 m2
Key legal and technical terms
p. 16
RO
NS
UL
TI
Real Estate advisory 66 %

Building consultancy 24 %
Occupier services 10 %
Italy by numbers
YOU
PE
DE RTY
VE L
O P ME NT
completed across
Europe in 2011
VA L U AT I O N
76,300 valuations
Y
EN
RT GEM
PE ANA
O
R M
INTRODUCTION
INV
NT
T ME
E
across Europe
Contents
NG
IO
TRAN SACT
in 2011
One transaction every 16 minutes

3,900 commercial real estate
FUTURE ITALY
Key Transport Changes
p. 28
Our Hot Spots in Italy
p. 30
transactions completed in 2011
www.realestate.bnpparibas.com
BNP Paribas Real Estate Italia

Corso Italia 15/A - 20122 - Milano
www.realestate.bnpparibas.it
Tel: +39 02 5833 141
BNP Paribas Real Estate is part of the BNP Paribas Banking Group
Cover photo (Fotolia.com): The

Colosseum built in the centre of Rome
(80 AD) is considered one of the greatest
works of Roman architecture and Roman
engineering.
INVESTING IN ITALY - 2012 / Italy overview
NEED TO KNOW
Italy by numbers
Foreword
Where past meets present
60M
There are no megalopolis, but medium-large cities all along the

boot: Rome (2.6 million persons), Milan (1.2 million persons),
Naples (0.9 million persons) and Turin (0.9 million persons)
A country
to discover
Italian cities have a long
1,560bn
Milano
Trieste
Torino
Venezia
Bologna
Genova
Firenze
Italian GDP is the

eight worldwide,
making the country
the fourth European
economy
history where architecture

goes from the classical
Roman in the historical
centres to modern
skyscrapers. However,
Italy is more known for its
buildings and palaces
realised in the past than
for what was realised in
modern times.
ROMA
Bari
Napoli
Cagliari
200,000
Average net private
wealth of the Italian
adults in 2010
Palermo
47
Italy is home to the greatest number
of UNESCO World Heritage sites
The great heritage from the past is

Italys treasure but represent also a
constraint, making slow and difficult
the renewal of the cities. Indeed, the
real estate operators, especially from
abroad, consider the Italian market
not simple and not transparent.
Our aim is not to demonstrate the
contrary, but to give a key to
understand it since there are
opportunities that are unfortunately
unknown, in particular for foreign
investors.
Indeed, for being one of the

largest economies in the world, Italy
offers a variety of investment
opportunities, for those seeking
stable and secure income to those
with higher return.
This guide outlines the top ten
reasons to invest in Italy alongside
key statistics and investors interview.
We will describe the Milan, Rome
and retail markets and the major
infrastructure projects realised and
undergoing in Italy.
Together with the law firm Bonelli
Erede Pappalardo (BEP) we have
collated practical information on
navigating the fiscal and legal
aspects of investing in Italy.
We hope you find this guide a useful
insight into the Italian real estate
market.
Cesare Ferrero
Country Manager
Simone Roberti
Head of Research
TOP 10 REASONS
High private
wealth
10 reasons
to invest in
Italy
One of the largest economies
in the world
With a GDP of 1,560bn, Italy represents the third economy in
the Euro area and ranks eight in the world. Moreover, living
standards have a considerable north-south divide: the average GDP per capita
in Northern and Central Italy exceeds by far the EU average, whilst some
regions and provinces in Southern Italy are almost all classified under the
Convergence objective (GPD per capita less than 75% of the EU average).
Diversied economy
Italy has a diversified economy, representing the second European industrial
economy after Germany. The country was the worlds seventh largest
exporter in 2010, mainly towards the other countries of the European Union
(60%). Italy has a smaller number of global multinational corporations than
other countries of comparable size, but there are a large number of small and mediumsized enterprises, in particular in the North where there is an area of intense industrial
and machinery production, notably in their several specialized industrial districts. Finally,
the economic heart of Italy is not concentrated in just one city (i.e. the capital) or in a few
(i.e. the former industrial triangle Turin-Milan-Genoa) but in several cities. Indeed, of the
twenty Italian largest companies, just half are based in Rome and Milan.
Italian families investment habits are strongly risk adverse. Indeed,

compared to other large world developed economies, investments in
the financial market are lower (less than 40% of their wealth) and this avoided strong
wealth losses during the 2008/2009 financial crisis. Instead, Italian families prefer
safer assets, such as the real estate: 80% of the Italian families own their home.
They have a much lower level of debt per adult than in other advanced economies:
according to the Credit Suisse Global Wealth Report, Italian families are the less
indebted within the G7 countries with less than 25,000 of debt per adult (less than
10% of wealth).
Italian property
funds
Italian property funds
started as real estate
financial vehicles for individuals in
1999 (which are listed at the Milan
stock exchange) and since 2004 as
institutional funds (which instead are
not listed). The sector, under the
surveillance and the monitoring of
the Bank of Italy, grew during the last
ten years from some 4bn of assets
under management to 51bn,
continuing the growth also during the
crisis even if at slower pace.
Healthy
banking sector
The Italian banking sector is healthy
allowing, during the 2008/2009 crisis,
Italy to account among one of the few countries
registering no banks bailout. However, some banks
had to recapitalise recently, mainly to respond to
the EBA change in the accounting rules for public
debt. Such characteristics have a stabilisation effect
on the real estate market that, according to IPD
index, is one of the most stable in the world,
showing a limited capital growth in positive times,
but also a limited capital loss in bad times.
TOP 10 REASONS
Rome,
the
Eternal
City
Long
leases
Italian leases for commercial
premises must legally be at
least 6 years in length with an option for
the tenant to renew for 6 additional years.
For hotels, the length is even longer
(9+6 or 9+9 years). This characteristic
gives more stability and security in
revenues for the landlord. Moreover, rents
are annually reviewed, since they are
linked to the Italian inflation Index (based
upon 75% of the Index, although in some
cases it is 100%).
Retail remains
attractive
With a wealth per adult of 200,000,
Italy belongs to the richest
countries in the world. Therefore, retail sector can
count on the wealth of the Italian families.
As a coincidence, retail property market has
experienced a period of strong growth especially
in the last years when retail assets appeared
more secure compared to other ones. Indeed, the
largest deals concerned this kind of product and
were the favourite by foreign investors.
A new era for Milan ofce market

Milan city is living a strong renewal process, both for infrastructure and real estate.
The high speed trains have increased the interest for the areas around the stations
and the same could happen to areas where new metro lines will be built in the next
few years. New business districts are emerging around these areas, bringing new supply of high
quality, in line with the international standard level. On the other side, the demand for offices is
much diversified since Milan is the financial capital of Italy, it is in the middle of one of the most
important industrial area in Europe and it is a global leader for fashion and design.
The Roman real estate market is

strongly characterised by being
the Italian Capital city. Therefore,
all the ministries and the most
important public authorities have
their offices in Rome, as well as
the political parties and
companies involved in public
activities. Moreover, tourists and
Christians pilgrimage flows
assure a constant demand in the
hospitality sector. Such
characteristics, together with
a strong presence of private local
investors, make Rome one of the
most stable markets in Europe.
Il Bel
Paese
Italy is, with no
doubt, a global
leader for historical monuments and
artistic works (Italy is the country with
more UNESCO world heritage sites). Thanks
to that there are roughly 43 millions of
tourists coming each year, making Italy the
fifth destination in the world. Furthermore,
even if the hospitality sector is still relying
a lot on familys hotels, Italy has the
highest level of room revenues among the
main European countries.
Lana
(Bolzano)
INVESTOR CASE STUDY
Pordenone
How we did it
Silea (Treviso)
Cinisello
Balsamo
Brescia
Mestre
Baranzate
S.Donato M.se
Rubano (Padova)
Torino
Piacenza
Ferrara
Lucca
Bastia
Umbra
San Giovanni Teatino
(Chieti)
Roma Laurentina
As long term investors, we

look beyond shorter term
economic cycles to the strength
of the tenants business
Roma GRA
Bari
Salerno
Elmas
(Cagliari)
JennIFeR LUCAS
Director - W. P. Carey
Why did you decide to invest in the Italian

property market, especially in this economic
framework?
In 2011, W. P. Carey completed a transaction
with Metro Cash & Carry Italia S.p.A. As long
term investors, we look beyond shorter term
economic cycles to the strength of the tenants
business and the criticality of a particular
property or properties for their business. The
Metro transaction involved 20 cash and carry
stores throughout Italy, leased to Metro Cash &

Carry Italia S.p.A. We saw the cash and carry
business in Italy as an enduring sector and the
assets themselves as critical to Metros
operations in this market. We also look
carefully at the financial strength and credit
quality of the tenant company. In the case of
the Metro transaction, the German parent
Metro AG guaranteed the obligations of the
Italian subsidiary under the leases.
Consequently in spite of the current economic

vagaries of the market, the investment met our
key criteria of critical assets leased to a
financially strong entity, in an industry with
solid long term market viability.
What do you consider the main weakness of
the Italian property market?
The weakness of the Italian property market
parallels the overall economic uncertainty
which the larger Eurozone is now experiencing.
Although this does not necessarily impact our
investing decisions, particularly if a property is
leased on a long term basis to a financially
solid company in what we view as an enduring
business sector, it can affect the availability
and pricing of debt. Whilst this must be
reflected in our pricing, we use low leverage
for our investments so the impact is not as

great as it might be for more highly levered
investors.
What do you see as the most attractive assets
in the Italian market?
Since our investment objective is to generate
steady income and preserve capital for our
investors, the assets we find most attractive
are those leased on a long term basis to single
tenants as opposed to multi tenanted
properties with shorter term leases. We do
have the flexibility to invest in almost any type
of asset as long as it meets our criteria in
terms of the financial strength of the corporate
tenant, the criticality of the asset to their
business and the long term strength of the
sector or sectors in which they operate.

MILAN
1.5bn
Guide to Milan
Transacted in
5.80%
Gross Prime Ofce Yield
In the last quarters, investments in properties

which involve higher risk are still being
avoided and were increasingly more
concentrated in the City Centre and the
surroundings of the Central Station or the
peripheral areas, only if well connected by
public transportations.
The number of user investment deals was
particularly high. Excluding this type of
purchase, investors are increasingly more
focused on properties that are already fully
rented: from an average level of around

40/50% until 2009 to 65% in 2010-2011, and
now at 100% in the first months of 2012.
To the contrary, there were almost no
investments in completely vacant properties
(therefore, which need to be renovated or fully
commercialized).
It is probably due to this concentration of
interest in fully rented properties located in
the CBD that the yields for this asset type,
although increasing, remained close to the
Italian 10-year government bond yields.
In the best parts of
Milan's Semi-Central
area (such as the area
between the Porta
Garibaldi Station and
the Central station), the
prime yield is estimated
to be 6.2%, while in
the other areas of the
city, it is difficult to
sell properties with a
yield of less than 7%.
Office space take-up
levels came out at
339,000 m in 2011,
with the same
volume of
transactions over
3,000 m as were
carried out in 2010.
On the other hand,
transactions
between 1,000 and
3,000 m increased
by 40%.
Therefore, companies with 60-180 employees,

which occupy medium-sized areas, are the
most actively seeking more efficient spaces.
337,000 m
Take-up in
In the course of 2011, industrial companies

accounted for 41% of the office space take-up
volume, an increase compared to 14% in 2010.
In fact, the three largest transactions involved
companies from this industry sector that took
spaces in new projects that were just
introduced into the market or which have not
yet begun to be built.
510/m/year
The CBD area suffers from a lack of modern

and new products. In fact, it is outside of this
area where new developments are being
made, and where companies can find new and
modern offices.
Immediate supply
Prime rent
404/m/year
CBD average rent
1.395,000 m
11.6%
Vacancy rate
Occupier Breakdown since 2006
exAMpLe DeALS
OffICe
MilanoFiori U15 - Q1 2012
The , m building was sold for m,
reflecting a yield below %.
Via Moscova 3 - Q4 2011
The , m building was bought by
Inarcassa Re fund managed by fabrica for
.m, reflecting a yield of .%.
ReTAIL
Via Certosa 29 - Q4 2010
The , m department store located to
Saturn was bought by Immobiliare Dinamico
fund managed by BNP Paribas ReIM
for .m, reflecting a yield above %.
Rinascente piazza Duomo - Q1 2011
The , m department store was bought
by Ippocrate fund managed today by Idea
fimit for m, reflecting a yield of .%.
14%
4%
29%
7%
11%
23%
12%
Industries
Financial
ICT
Legal - Consultancy
Media - Culture
Public Sector
Other

ROME
850m
Guide to Rome
Transacted in
6.30%
Gross Prime Ofce Yield
In the last four years, Rome experienced a

trend of continuous reduction in volumes
invested (some 10% each year). While the
office market is traditionally closed off from
foreign investors and realised by Italian
players, the Roman retail sector showed to be
able to attract big foreign investors: Porta di
Roma for 440m, Roma Est for 400m and
Euroma2 for 350m.
In a market such as the Roman one which has

always been dominated by local players, the
effect of uncertainty characterising global
financial markets (and the increase in country
risk perception in Italy) seems to have had a
lower impact. Prime yields for office property
investments in the city centre were stable
throughout the year, after a slight decrease
(-10 bps) in the first months of 2011
(an increase in the next few months should
not be ruled out). In the Eur area, prime yields
were even revised to 25 bps lower, with the
gross prime yield estimated to be
around 6.9% today.
During 2011, office take-up levels came out at

182,000 m, thanks to two large transactions.
In general, medium-small transactions take
place in the City Centre, given the layout of
offices in this sector, while large deals take
place in the Eur district since it is in this area
of the city where companies can find large
offices with modern and therefore more
efficient energy performance.
In Rome, the public sector and industry
accounted for 30% and 22%, respectively, of
transaction volumes in the last five years. In
2011, unlike in the past, the main market
driver was industry, with 42% of the
transaction volume thanks to MBDA, ENEL,
Saipem and GDF-Suez, to name only a few.
The public sector, understood in the strict
sense, accounted for only 19% of transaction
volumes, since aside the Ministry of Economy,
other public bodies were not very active in the
market. With 7% of the total, other non-profit
bodies, including the transactions of the Italian
Football Federation, the Kenyan Embassy and
the Democratic Party, outperformed the longterm average of 4%.
182,000 m
Take-up in
420/m/year
Prime rent
344/m/year
CBD average rent
603,000 m
Immediate supply
6.2%
Vacancy rate
Occupier Breakdown since 2006
14%
6%
30%
9%
exAMpLe DeALS
OffICe
Via Cristoforo Colombo 416/420 - Q3 2011
The , m building was bought by
Amundi Re europa fund for .m, reflecting
a yield of .%.
ReTAIL
Casal Bertone Shopping Centre - Q1 2011
The , m gallery of the Casal Bertone
shopping centre was acquired for m by
Union Investment Real estate.
11%
22%
11%
Public Sector & No Profit

Industries
Financial
ICT
Legal - Consultancy
Transport - Logistics - Distribution
Other

RETAIL
Guide to Retail in Italy

Thanks to these transactions, that of la
Rinascente in Milan and others of lesser
value, Italian real estate investment funds
were the most active investor category
for retail properties in 2011, with a large
growth in volumes invested compared
to the recent past.
Surprisingly, 2011 was characterised by very

high retail property investments:
approximately 2.3bn, while in the five
previous years, the average annual volume
was only 1.8bn. As noted, the peculiar
situation of the supply and demand in the
Italian retail sector contributed to this result.
However, besides this factor, it seems that
investment in retail properties, especially in
relation to shops on the main shopping
streets of Italian cities, has been considered
a refuge asset in a highly uncertain time such
as the present.
So, on one hand Italian investors took refuge

in retail property investments given this
period of uncertainty, and on the other
foreign investors continue to invest in Italy
almost only in this type of asset.
The result was a very positive year for the
Italian retail sector, at least in terms of
invested volumes.
In fact, on closer inspection, the volume

invested in structures located outside of
cities (such as shopping centres, retail parks
and outlets) decreased in 2011. To the
contrary, both shops and large department
stores in city centres and supermarket or
cash and carry portfolios recorded a strong
growth in investment activities.
In fact only in 2011, la Rinascente in Milan
(the largest deal of 2011) and in Palermo, as
well as Coin in Milan, Zara in Milan and
Florence and the new Apple store in the
centre of Bologna all changed hands.
Overall, investments in retail properties were
concentrated in Northern Italy in 2011
(particularly in Milan where almost 900m
were invested in retail properties) unlike
what was recorded in the last few years.
For example, in Rome there was at least one
transaction recorded every year for the last
few years (in 2010 Porta di Roma, in 2009
galleria Colonna, in 2008 the Roma Est
shopping centre, etc.), while this year, there
were no investment of over 50m.
2.4bn
Transacted in
4.90%
High Street Retail Yield
6.90%
Shopping Centre Yield
Retail Investment Volume since 2006
exAMpLe DeALS
3%
Turin - Former palazzo del Lavoro - Q1 2011

This building, designed by famous Architect
Nervi, was bought by Corio for m
and will be transformed into a , m
shopping centre.
Sale & leaseback transactions on retail

properties were also quite significant in 2011.
Just to name the most significant, W.P. Carey
purchased the entirety of the units of a fund
completely invested in Metro stores for
274m and Banca Marche sold a portfolio of
135 branches for 243m.
In general, in all of these sale & leaseback
transactions, the buyers were Italian real
estate investment funds.
Bologna - Via Rizzoli 18 - Q2 2011

The , m street retail located
to Apple and MelBooks was bought by IGD
Siiq for m.
Chieti - Shopping Centre Megal - Q4 2011
The , m shopping centre was bought
by the european Prime Shopping Centre
fund managed by eCe Projektmanagement
for m.
Milan - Zara - Q4 2011
The , m department store was bought
by Zara itself for m.
6%
6%
48%
14%
19%
Shopping Center
Department store
Street Retail
Outlet
Cash & Carry
Retail Park
Hypermarket
Supermarket

INVESTING IN ITALY - 2012 / Investor toolkit
Investor toolkit / INVESTING IN ITALY - 2012
NEED TO KNOW
Key Legal and

Technical terms
Careful planning is required for the
successful structuring of property
acquisitions in the highly regulated Italian
real estate market. Law rm Bonelli erede
Pappalardo (BeP) partner Alessandro Balp
outlines the key information and terminology
you need to know.
LAnD ReGISTeR
DIFFeRenT TYpeS
OF ReAL eSTATe InTeReSTS
In Italy real estate is usually held as freehold
(propriet), this grants its holder the full right to
use and manage the property. Other rights in rem
over real estate are limited in scope and grant
only one or more of the attributions of the full
property right, these include the following:
surface right: the right to build and maintain
a building over the property of a third party;
right of usufruct: the right to the use and the
benefits of a third party property; and
easements: which impose an obligation on
a property for the benefit of another property
(e.g., a right of way; water right; a limitation
in the building capacity; etc.).
Properties in Italy must be registered with the

Cadastral Register (Catasto) and rights over real
estate must be recorded in the Land Register
(Registri Immobiliari).
Registration in the Cadastral Register is required
for tax purposes and does not attest ownership.
Property transfers, interests in real estate (e.g.,
easements), certain long-term leases (exceeding
9 years), and guarantees over real estate must
be registered with the Land Register to be
enforceable and to give the holder of the right
priority against third parties.
In Italy there is no state guarantee of title;
however, the land registration system and the
intervention of a notary public ensure that the
title to real estate is properly registered.
MAIn TYpeS OF LeASeS

The main types of leases in Italy are commercial
leases and residential leases.
Lease agreements are governed by the Civil
Code and by the Italian Lease Act. The provisions
of the Lease Act significantly reduce the ability of
the parties to shape the terms of the lease
agreements, which are substantially predefined
by law in several material respects (duration,
renewal, rights of withdrawal of the parties, rent
indexation and common charges). Provisions
limiting the contractual terms set by law or
introducing terms favoring the landlord in
violation of the Lease Act are null and void.
COMMeRCIAL LeASeS:
LeASe TeRM
The minimum term for a commercial lease is 6
years (9 years for hotels). Thereafter the lease is
automatically renewed for a further 6-year term
(9 years for hotels), unless terminated by either
party with prior written notice. However, the
landlords right to terminate the lease upon its
first expiration is limited to very specific
circumstances. The maximum lease term is 30
years. Notwithstanding the provisions of the
lease, the tenant has a statutory non-waivable
6-month prior notice termination right due to
material circumstances (gravi motivi).
COMMeRCIAL LeASeS:
RenT AnD RenT ADJUSTMenT
The initial rent may be freely determined by the
parties and subsequently may be annually
adjusted based on the variation of the consumer
price index. Unless the lease is for a term
exceeding the minimum 6-year term, the
adjustment cannot exceed 75% of the annual
CPI variation.
Rent increase mechanisms on grounds other
than inflation adjustment (e.g., step up rent, rent
based on turnover) are admissible but are
closely scrutinised by the Italian courts and
cannot amount to a means to circumvent the
statutory limitations on inflation adjustment.
COMMeRCIAL LeASeS:
pROpeRTIeS Open TO THe pUBLIC
If the leased premises are used for activities
involving contact with the public (such as retail
units, supermarket, hotels, etc.), the tenant has
certain additional protections.
Right of pre-emption. The tenant
has a statutory pre-emption right if the leased
premises are to be sold.
Goodwill indemnity. If the lease is terminated
for reasons not attributable to the tenant, the
tenant is entitled to receive 18 months rent as
goodwill indemnity (the indemnity is doubled
if a new activity of the same kind is
established in the premises after the
termination of the lease).
New leases of the rented premises. The tenant
has the right of first refusal for the lease of the
premises at the expiration of the lease.

NEED TO KNOW
STRUCTURInG
ReAL eSTATe InVeSTMenTS
eneRGY CeRTIFICATeS
AnD GReen LeASeS
Sustainability concerns and energy efficiency are
an increasingly important features of the Italian
real estate market, and the EU directives on the
energy performance of buildings are currently
being implemented in Italy. Recent developments
include the following requirements:
all deeds of sale and most lease agreements
must indicate that the buyer/tenant has
received the information and documentation
on the energy performance of the building;
new buildings and existing buildings that are
subject to major renovation must satisfy a
portion of their energy requirements from
renewable sources; and
all for sale advertisements (and in some
Regions, also rental advertisements) must
indicate the energy performance grade of the
building.
FInAnCe AnD SeCURITY

Real estate loans are often granted as mutuo
fondiario, a special regime applicable to
medium and long-term loans (18 months or
longer), granted by Italian or EU banks that are
secured by first-rank mortgages and have a
loan-to-value ratio not exceeding 80%.
In a mutuo fondiario: (i) rent payments are not
subject to claw back in the event of insolvency
and the mortgage is subject to an accelerated
consolidation (10 days from its registration, as
opposed to 6/12 months for ordinary
mortgages); and (ii) the borrower has the right
to obtain partial releases of the mortgage upon
each repayment of 20% of the loan, and there
are restrictions to the lenders ability to
accelerate the loan if there are delays in
payment.
The typical forms of security include, in addition
to a mortgage over the property: (i) the
assignment of the lease, interest-hedging, VAT
and insurance receivables; (ii) a pledge over the
borrowers bank accounts; and, possibly, (iii) a
security over the share capital of the borrower
or a parent company guarantee.
The main investment structures that are used to

invest in Italian real estate include the following:
Ordinary corporate vehicles. Rental income
and capital gains are taxed at the ordinary
corporate tax rates: corporate income tax
(IRES) at 27.5% and regional tax
(IRAP) at 3.9%. Special rules apply to the
deduction of interests (a 30% EBITDA
limitation on interest deductions, subject to
exemption for debt secured by mortgage).
Partnerships. Partnerships are transparent
for tax purposes, and partners are taxed
directly on income deriving from real estate
investments, irrespective of its distribution.
The 30% EBITDA limitation on interest
deduction does not apply to Italian
partnerships.
Real estate funds. Real estate funds (REIFs)

are externally managed entities with the
participation of a plurality of investors. REIFs
are not subject to corporate income tax (IRES)
or regional tax (IRAP). The tax regime
applicable to investors varies depending on
the nature of the fund. Investors in
institutional funds are generally subject to a
20% withholding tax on income distributed by
the fund (that can be further mitigated by
applicable tax treaties), while for
non- institutional funds, the funds income is
directly attributed to the investors holding
5% or more of the funds units, irrespective of
its distribution.
Listed real estate investment companies
(SIIQ). To qualify as a SIIQ, the company must
be listed on a stock exchange, no shareholder
may hold more than 51% of voting and profit
rights, and at least 35% of the shares must be
owned by shareholders each individually
holding no more than 2% of the voting and
profit rights. Italian SIIQs must annually
distribute at least 85% of their profits derived
from leases, and benefit from a total
exemption on lease income.

NEED TO KNOW
A comparative view of acquisition specicati ons in key European jurisdictions

ITALY
GeRMANY
fRANCe
eNGLAND & WALeS
SPAIN
How can real

estate be held?
Freehold (full ownership)

Surface right (right to build and maintain
a building over a third party property)
Usufruct (right to the use and the benefits
over a third party property)
Leasehold
Freehold ownership
Part- or condominium ownership
Ground lease (real estate-like right in rem
entitling its holder to use the land and
construct / own buildings on the land
during the term of the ground lease
Freehold ownership (which may

take the form of co-ownership or
volume division if the property is
held by more than one owner)
Long-term leasehold agreements
(bail construction and bail
emphytotique)
Freehold
Leasehold (which can be registered
with the property registry)
Other limited rights in rem
(usufruct, surface right - derecho
de superficie)
What rights over

real property have
to be to be
registered?
Property transfers, interests in real estate

(e.g. easements), long-term leases
(exceeding 9 years) and guarantees over
real estate must be recorded in the Land
Register to be enforceable and to give the
holder of the right priority against third
parties.
All rights in rem over real estate require

registration in the land registry (Grundbuch)
to be valid, including ownership rights,
encumbrances (e.g. easements, pre-emption
rights, usufruct rights, priority notices,
ground leases) and security rights (e.g. land
charges, mortgages).
All documents transferring or

encumbering real estate must be
published at the land registry
(conservation des hypothques) in
order to be binding upon third
parties. This is also the case for
security rights (e.g. land charges,
mortgages).
All documents transferring or

encumbering real estate or creating
leaseholds of certain types of more
than 7 years in length must be
registered at the land registry in
order to be binding upon third
parties.
Some specific real estate rights need

to be registered in order to be effective,
such as mortgages or surface rights.
Although in principle real estate
rights must not be registered to be
effective, in practice any transfer of
real estate assets is registered in
order to benefit from the publicity
provided by the property registry.
Are there
nationality
restrictions on
land ownership?
Generally, no restrictions apply to the

foreign ownership of Italian real estate.
Purchase of real estate by non-EU or nonEFTA nationals is subject to a principle of
reciprocity.
Generally no restrictions except for certain

intervention rights of public authorities
based on exchange control provisions.
Generally no restrictions except

under certain circumstances where
exchange control provisions trigger
filing obligations.
No.
Generally no restrictions except under

certain circumstances (investments
in ammunition production / war
material, real estate to be used as
embassy); obligation to notify
foreign investments / disinvestments
to Spanish Foreign Investment Registry
(Registro de Inversiones Extranjeras).
Who usually
produces the
documentation in
real estate
transactions?
Typically, Italian public notaries when it is a

direct sale of real estate properties. In the
context of larger transactions, lawyers
usually draft the transfer agreements.
When it is an indirect sale by way of a share
deal, usually, the sellers lawyer prepares
the first draft of the sale and purchase
agreement which is subsequently negotiated
between the parties.
Typically, sellers legal counsel prepares

first draft, which is subsequently negotiated
between the parties before being notarized.
In the professional real estate market,
German notary has a powerful but more
executive role in the implementation of
agreements.
French notaries have a monopoly

for the execution of property
conveyance deeds. However, in
large commercial transactions
structured as asset deals, lawyers
often participate in the drafting and
negotiation of the documentation.
Drafting exclusively done by legal
counsel in case of a share deal.
Generally, the sellers legal counsel

prepares the documentation in
relation to an asset sale and often
in relation to share sales.
Generally, the parties lawyers

prepare the draft of the purchase
agreement which is subsequently
notarized by a notary public
through a public deed. Apart from
very specific exceptions, only public
deeds authorised by a notary public
have access to the property registry.
What are the

standard
documents used in
a real estate
acquisition?
Offer letter
Due diligence report
Property or share sale and purchase
agreement under conditions (promesse)
precedent, if such conditions
precedent are provided
Property deed of sale and purchase
agreement (if no conditions precedent
were provided or if such conditions
precedent have been fulfilled)
Due Diligence report

Purchase agreement
Transfer deed to be executed
before a Notary Public
What property
documentation do
you need to
register?
Confidentiality agreement
Offer letter / LOI
Preliminary sale and purchase agreement
Transfer deed to be executed before
a Notary Public
Confidentiality agreement
Heads of terms / LOI
Sale and purchase agreement
(to be notarized before a notary public)
Freehold ownership
Leasehold
Commonhold
Licence
Heads of Terms
Sale contract
Transfer document

NEED TO KNOW
Leasing - what is the market standard in Italy vis--vis its European neighbours?
ITALY
What types of real Commercial leases
estate leases exist? Residential leases
Ordinary leases (other than commercial
or residential)
GeRMANY
fRANCe
eNGLAND & WALeS
SPAIN
Commercial leases
Residential leases
Tenancy agreements (Pachtvertrge),
i.e. lease agreements where the tenant is
entitled to reap the benefits from the
intrinsic value of the real estate
Commercial leases
Residential leases
Building/Ground leases (whereby

the tenant undertakes to
construct buildings on landlords
plot of land)
Commercial leases
Residential leases
Residential Lease
Non-Residential Lease
(e.g. all other purposes than
residential, such as leases of
retail premises, offices, etc.)
Are commercial
lease provisions
freely negotiable?
Commercial lease agreements are governed

by the Lease Act and the Civil Code.
The Lease Act significantly reduces the
ability of the parties to shape the terms of
the lease in many significant respects (term
of the lease, rent increases, charges payable
by the tenant, etc.).
Commercial leases are subject to certain

mandatory provisions but less regulated
than residential leases. Additionally, if the
commercial lease qualifies as standard
terms and conditions, it is subject to a
specific regime and rather strict court
rulings.
While certain provisions of the

Yes. However some landlords
commercial lease regime
subscribe to a voluntary lease code.
mandatorily apply under French
law (e.g. minimum duration, right of
renewal), commercial leases
remain freely negotiable within
such regime.
The non-residential lease is in principle

governed by the will of the parties
and only very few provisions of the
1994 Urban Leases Act (Ley de
Arrendamientos Urbanos) are mandatory
(such as the delivery by the tenant
to the landlord of a legal deposit
equivalent to two months of rent).
Is there a
maximum term for
commercial
leases?
Commercial leases have a minimum

duration of 6 years (9 years for hotels) and
are automatically renewed for further 6 year
(9 years for hotels) terms, unless
terminated by either party upon 12 months
(18 months for hotels) prior written notice.
Commercial leases cannot exceed a term of
30 years.
The maximum lease term is 30 years - if a

lease provides for a longer term it may be
terminated after this 30-years-period by
either party within the statutory termination
periods.
Commercial leases have a minimum No. However leases longer than

duration of 9 years. Tenants benefit seven years must be registered at
from a break-option at the end of
the land registry.
each 3-year term. Such right may
be waived in the lease.
Commercial leases entered into for
a duration of over 12 years must be
published with the land registry.
The term is freely negotiable between

the parties.
How are
commercial rents
reviewed?
Commercial rents may be indexed on an

annual based on variations of the CPI (75%
or 100% of the CPI variation, based on the
duration of the lease).
Commercial leases cannot generally provide
for a stepped rent or a lease review clause
to adjust the rent to market value.
Agreed rent indexation in accordance with

changes of the consumer price index or
agreed increase by stepped rent. Without
having contractually agreed such rent
adjustment, no party is entitled to claim for
a fair market rent review in commercial
leases.
Commercial rents may contain

automatic indexation provisions.
In addition, legal rent review can be
claimed before court every three
years at the request of either party
if specific criteria are met.
Indexation in accordance with

changes of the consumer price index
(ndice de Precios al Consumo) or any
other rent review regime (e.g. stepped
rent or fair market rent, which is
not unusual in long term leases in
combination with annual indexation).
What are the

standard
obligations of
landlords?
Hand over the leased premises in the

agreed condition
Maintenance and repair of the leased
premises (generally major
repairs/extraordinary maintenance)
Hand over the leased space in the

agreed condition
Maintenance and repair of the leased
property (usually, the parties shift this
obligation to the tenant)
Guarantee that the tenant enjoys To provide and allow the tenant
Hand over the leased premises in
peaceful possession of the property
the agreed condition
to occupy the leased premises
through the lease term and can
Duty to make all repairs necessary
In a multi-occupied building, to
use it for the purposes established
to preserve the property in good
insure and maintain the structure
in the lease agreement
condition for leasing purposes
and common parts of the building
Insure the rented premises (premiums Where there is a superior lease, to The landlord might be obliged to
may be charged to the tenants)
indemnify the tenant (who has
comply with its terms to the
carried out a retail activity in the
extent this obligation has not
premises) in case of refusal of
been passed on to the tenant
extension of the lease term once
(principally this will refer to the
the initially agreed terms expire.
obligation to pay rent under the
This indemnity payment is usually
superior lease)
specifically excluded from the lease
What are the

standard
obligations of
tenants?
Pay rent and service charges

Keep the leased premises in good condition
Use the leased premises for the purpose
stated in the lease

Providing a collateral (usually three
times monthly rent)
Keep the leased property in good maintenance
and repair (only if contractually agreed, structure
and roof remain within responsibility of landlord)
Insure its belongings, merchandise and
goods within the rented premises

Operate the leased premises
Keep the leased property in good
maintained and repaired status
Insure its belongings,
merchandise and goods within
the rented premises
Commercial rents are commonly

subject to regular (often 3 or 5
years) upwards only rent review (on
an open market basis). However,
parties can agree indexation or any
other basis.

condition
Insure its belongings, merchandise
and goods within the rented
premises

condition
Use of the leased property for the
activity agreed under the lease
Providing the legal deposit (fianza)
equal to two months of rent

TAX CLINIC
Tax clinic
This overview highlights the potential tax

consequences of direct or indirect investments in
Italian real estate by non-resident investors.
In this respect, law rm Bonelli erede Pappalardo
(BeP) partner Alessandro Balp, has outlined below
the principle tax issues raised by the acquisition,
rental and sale of Italian real estate by foreign
investors, both individual and corporate.
1. InCOMe TAx
On RenTAL InCOMe
As a general rule, income from the
ownership of real estate assets
located in Italy is subject to Italian
taxation irrespective of whether
the owner is tax resident in Italy or
abroad. For individuals, real estate
income is subject to ordinary
taxation at a progressive tax rate

(ranging from 23% to 43%, plus
applicable provincial and
municipal surcharges). Individuals
may opt for the application of a
21% substitute tax on rental
income (the so-called cedolare
secca), an optional regime
replacing ordinary income tax,
registration tax, stamp duty,
provincial and municipal

surcharges. For corporate entities
rental income is subject to
corporate income tax (IRES at
the rate of 27.5%) plus regional tax
on productive activities (IRAP at
the rate of 3.9%) for an aggregate
tax rate of 31.4%.
Commercial real estate may be
generally amortised for tax
purposes at rates ranging from 3%
to 5%. Land is not depreciable.
Interest expenses derived from
real estate debt-financing are in
principle deductible from
corporate income tax, subject to
certain exceptions, and in
particular to a cap equal to 30% of
EBITDA. Partnerships are treated
as tax transparent entities. Rental
income is subject to taxation in the
hands of the partners depending of
the status of the partner and
irrespective of its distribution.
2. CApITAL
GAInS/LOSSeS
Capital gains from the sale of real
estate, if achieved by individuals
not carrying out a business activity,
are subject to personal income tax,
unless the seller has held the
property for more than 5 years.

Capital losses are normally
non-deductible. Capital gains
achieved by corporate entities are
subject to corporate income tax at
the ordinary rates. Capital losses
are generally included in the
positive/negative result of the
corporate entity.
3. TRAnSFeR
TAxeS
Transfers of real estate are usually
subject to registration assessed on
the purchase price (or the fair
market value of the property
if higher). The standard rate
is 7%, but it may rise to 15%
(e.g., agricultural land).
However, if the sale is subject to
VAT, a fixed EUR 168 registration
tax is due. Transfers of real estate
are also subject to mortgage and
cadastral taxes normally at the
rate of 3% (4% for commercial
property, reduced to 2% if
the buyer or the seller is a real
estate fund).
Real estate leases are normally
subject to registration tax at rates
of 1% for commercial leases and
2% for residential leases.

TAX CLINIC
4. WITHHOLDInG TAx
6. ReAL eSTATe TAx
7. ReAL eSTATe FUnDS
Profit distributions from Italian

resident companies to Italian
shareholders are not generally
subject to Italian withholding tax.
Profit distributions to non-resident
shareholders are in principle
subject to Italian withholding tax
that can be mitigated by the
application of the EU
Parent-Subsidiary Directive or
double taxation treaties.
From 2012, real estate assets in

Italy became subject to a
municipal tax (IMU). IMU is
generally levied at the rate of
0.76%. Specific reductions and
exemptions are provided.
Italian real estate funds are not

subject to corporate income tax
(IRES) or regional tax (IRAP). Real
estate properties owned by Italian
REIFs are subject to IMU. In
general, profit distributions made
by Italian REIFs are subject to a
20% withholding tax. However,
specific exceptions apply, for
example, Italian REIFs are treated
as tax transparent entities for
non-institutional investors that
own 5% or more of the funds unit.
In this case, the funds income is
directly imputed to the investors,
irrespective of its distribution.
5. VAT
As a rule, transfer and lease of real
estate assets are exempt from the
application of VAT. However,
specific exceptions apply.
In particular, for commercial real
estate, VAT applies if the
purchaser/lessee is an entity that
is entitled to deduct VAT at a
maximum 25% or is a non-VAT
entity. VAT also applies if the
seller/lessor opts for its
application.
VAT deduction is generally allowed.
Specific rules apply to the
deduction of VAT referable to
exempt supplies.
7. SIIQ
A specific tax regime applies to
Italian listed real estate
investment companies (SIIQ).
If a company qualifies as a SIIQ,
income derived from a real estate
leasing activity and the dividends
received from other SIIQs or
unlisted SIIQs (to the extent these
dividends comprise income derived
from a leasing activity) are exempt
from corporate income tax (IRES)
and from regional tax (IRAP).
In general, SIIQs apply a 20%
withholding tax on all profit
distributions made to shareholders
(other than SIIQs) on profits
derived from real property leasing
activities or from the participation
in SIIQs or unlisted SIIQs.
KeY LeGAL AnD TeCHnICAL

TeRMS AUTHORS
Alessandro Balp
Partner
Bonelli Erede
Pappalardo
Riccardo Ubaldini
Partner
Bonelli Erede
Pappalardo
Lucia Lancellotti
Associate
Bonelli Erede
Pappalardo

INVESTING IN ITALY - 2012 / Future Italy
Future Italy / INVESTING IN ITALY - 2012
KEY TRANSPORT CHANGES

Milan stands in a central position in the Italian
high speed rail network, but is also centre to
the development of 3 of the 30 priority axis of
the Trans European Network:
Priority Axis 1, from Berlin to Palermo.
Priority Axis 6, from Lisbon to Kiev:
the Turin-Lyon section should be finished
in 2020 (including a new tunnel of some
57 Km), realising the junction between
the French TGV and Italian TAV networks.
Italian Railways
Brenner
Gotthard
Simplon
Ljubljana
Paris
Lyon
Milan
Padua
Novara
Turin
Trieste
Venice
Verona
High-speed lines
Tortona
Existing
Under construction
Planned
Alessandria
Genoa
Bologna
Savona
Marseille
La Spezia
Normal lines
Florence
Existing
Upgrading
Livorno
Nowadays, it is possible to go from Turin to

Milan in 44 minutes, from Milan to Rome in
3 hours and from Milan to Naples in 4 hours
20 minutes (cutting by half the travel time).
If the development of the high speed train in
Italy has changed peoples habits, it is an
opportunity to redesign the railway systems
in the cities. Moreover, new modern stations,
like in Rome and Turin, are built and lot of
development space is recovered with the
possibility to create new business (office and
retail) districts.
Milan Underground
Milan underground network is the strongest in Italy, and is continuing to grow. Two new metro lines,
representing almost 17 km with 22 new metro stops, will be operating in view of the 2015 Expo. This
will take place in several stages. The first part of Line 5, opened in 2012, connects the north-eastern
periphery with Line 3 in Zara station. Successively, the line will arrive in 2015 to the stadium, passing
through the new business district of Garibaldi-Repubblica (planned to open in 2013) and CityLife
(former exhibition area). Secondly, the first part of Line 4 (three stops, representing 4 km) will open in
2015, connecting the Linate airport with the city railway network in Forlanini FS.
Foggia
ROMA
Since 2009, the high-capacity/ high speed
rail lines are operating from Turin to Salerno
through two corridors representing a T:
Milan-Salerno (north-south) and Turin-Trieste
(west-east). If the first one is completed, part
of the second one (from Milan to Trieste) is
still under construction or under planning.
Priority Axis 24, from Rotterdam to Genoa:

the Genoa-Novara and the Genoa-Milan
sections should be completed in 2020,
making possible to go from Milan to Genoa
in only 58 minutes. Moreover, the new
Gotthard base tunnel in Switzerland should
be completed in 2016 opening another
precious tunnel under the Alps.
Bari
Naples
Taranto
Salerno
Gioia Tauro
Palermo
Messina
Reggio Calabria
Catania
MM1
MM2
MM3
MM4
MM5

Future Italy / INVESTING IN ITALY - 2012
HOT SPOTS
Our Hot Spots in Italy

Crespi 26 is a new Grade A freehold
office property. This independent
building enjoys a corner position
that ensures excellent visibility
and recognisability. The building
has a surface of some 8,500 m2 of
offices. The property gives an
elegant, modern image with
glazed, ventilated double-skin
faade fronting onto Via Crespi
and, at the corner with Via Pavoni,
a glass cylinder that joins the
two wings of the building.
The complex, with a regular and
modern design, in a L shape, is
composed by 5 upper floors and
2 underground floors. The property
also enjoys a large private garden.
Preliminary rendering
Crespi 26 Milano
CRESPI
26
Architect: Paolo Valeriani

Certification: HQe (Haute Qualit
environnementale) energy certification
Completion: Q
ROMA
TIBURTINA
Bernina 12 Milano
BERNINA
Architect: Studio fZ S.r.l.
and Consorzio ReD S.r.l.
Certification: Leed Gold
Completion: Q
12
Bernina 12 is owned by BNL Portfolio

Immobiliare fund and is located near Milans
new business park Maciachini Center in the
North-West of the city, close to the
underground stations of Maciachini and Zara
(MM3 line).
The project is composed by two office
buildings of a total surface of 10,650 m2.
The building on Via Bernina, under
refurbishment, is distributed on four levels; the faade
has an external insulation layer with plaster coating. The
building on the back is a new building of five levels (the
ground level will be a parking) with a cellular faade. The
faade being on Via Piazzi will use a grid technology. The
internal spaces will have floating flours, false ceiling and
a large flexibility that will permit to have multi-tenants.
new BnL Headquarter Roma

At the end of October, BNP Paribas
Real Estate Italy won the tender
published by Ferrovie dello Stato
(FS) - the government-owned
holding which manages
infrastructure and service on the
Italian rail network - with a
73.2m bid on the areas in the
new Tiburtina railway station in
Rome. On the 7,300 m2 space right
in front of the new high speed
train station that connects Milan
to Rome in less than 3 hours, will
be constructed the new
headquarter of BNL, the retail bank
acquired by BNP Paribas in 2006.
The project designed by the

architectural studio 5+1aa
develops 70,000 gross m2 and will
host over 3.000 headcounts,
drawing together BNL employees
from 6 buildings throughout Rome.
Beside the office spaces, the
building will include the BNL
campus, a gym, an auditorium, a
restaurant and a company crche.
The total amount of the
investment for the group BNP
Paribas is estimated in around
280m.
Architect:
+aa
Completion:
Q
32
BNP PARIBAS REAL ESTATE IN ITALY
HOT SPOTS
Dalia Milano
Residenze Dalia is new residential
development taking place in Milan
on a former office building, in the
West part of the city.
Each apartment, from the little
two-roomed flat to the penthouse
duplex all with balconies or
terraces, is already furnished with
a purpose-made kitchen signed
Ernestomeda. This brand, known
for its design and constant stylistic RESIDENZE
DALIA
and technological innovation,
offers a product featuring carefully
Architect: Architetti Associati
crafted details, quality, safety and
Certification: High Energy Performance - Class A
environment-friendliness.
Completion: Q4 2013
All users have common places on
Our Italian team deals with investors (Investment Funds, Insurances/Pension

Funds, Property Developers, Private Investors...) offering them all our
competences to build/develop a new project (Property Development), advise
them for asset transfer or acquisition (Advisory), optimise and maintain their
assets (Property Management) and propose them investments in new funds
(Investment Management).
Our consultants will make you profit from our deep knowledge of the Italian
real estate market. Dynamic analysis of different actors, including their
investment criteria and their acquisition or arbitrage policy, allows us to offer
you a personalised view whatever your strategy.
Through our extensive geographic coverage (30 countries worldwide), we

have 3,400 employees to support you as you expand your business and real
estate portfolio internationally. Using our intimate knowledge of local
markets, we work alongside you to assist you with all your real estate needs.
CONTACTS
the ground floor, a main hall at the

entrance, bicycle parking, a private
garden of 3,000 m2 and a dedicated
area with childrens equipments.
Residenze Dalia is a building with
energy efficiency Class A thanks
to its high-performance thermal
and acoustic insulated partition
and external walls.
The air-conditioning system uses
geothermal heat pump that

reduces energy consumption by
some 50% because the water
produced, feeds the radiating
panels on the floor that heat or
refresh the environment. Moreover
a dehumidifying fan will be
installed to increase the comfort
and implement the summer
conditioning.
Cesare Ferrero
Ivano Ilardo
Country Manager
& Property Development
cesare.ferrero@bnpparibas.com
Investment Management
ivano.ilardo@bnpparibas.com
Roberto Nicosia
Simone Roberti
Advisory
roberto.nicosia@bnpparibas.com
Research
simone.roberti@bnpparibas.com
Vincenzo Noviello
Property Management
vincenzo.noviello@bnpparibas.com
www.realestate.bnpparibas.com

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Real Estate for a changing world

BNP PARIBAS REAL ESTATE

BONELLI EREDE PAPPALARDO

Italy overview / INVESTING IN ITALY - 2012

About BNP Paribas Real Estate

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Top 10 reasons to invest in Italy

Investor case study

Guide to Retail in Italy

Key legal and technical terms

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