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Falling dollar attracts Italians to properties in the US

July 20, 2009

by Guy Dinmore, published on the FT on July 20 2009

Falling property prices in the US and a weaker dollar are attracting investors from Italy which has been largely spared the bursting of housing bubbles elsewhere in Europe.

Rome-based Sorgente Group, which operates property investment funds and this year bought a 53 per cent stake in New York’s iconic Flatiron building, says it is trying to persuade Dutch insurer Aegon to sell San Francisco’s Transamerica Pyramid, Valter Mainetti, chief executive of Sorgente, said in an interview.“There are good opportunities in the US. Prices are falling,” Mr Mainetti said. But he is happy to wait, predicting the dollar will fall further to $1.45 to the euro by the end of the year.

Sorgente, which traces its origins to the 19th century, last month beat out a Libyan sovereign wealth fund to buy the Galleria Sordi shopping mall in central Rome for 180m euros.

But opportunities to buy historic and “trophy” properties in Rome or even new developments are limited so while the Libyans are looking to invest some of their $80bn sovereign wealth fund in their former colonial ruler, Sorgente, with a portfolio valued at 1.8bn euros, is focusing more abroad.

“You can build on 5th Avenue but not on Piazza Spagna. New York and London are expanding along its rivers, but we (Italy) are not building along the Tiber,” he remarked. Sorgente, he said, buys for the long term and is not highly leveraged.

“We are looking for stable returns on rent,” he said, noting that pension funds are major shareholders in his property funds. Its Caravaggio fund, the only one open to retail investors and quoted on the Milan stock exchange, has posted a 35.2 per cent increase in net asset value since its launch in 2004.

Italians bought 14,500 residential properties in the US in the first six months of this year, an increase of 15 per cent over the first half of 2008, according to a study by the Scenari property group. New York and Miami are favourites, with prices in the latter falling by an average of 35 per cent.

Since 2007 the US has become the prime property market overseas for Italians, after years of dominance by France and then Spain in 2006. The US accounted for 26 per cent of overseas purchases so far this year.

Falls in London property prices, especially in the Notting Hill area, are also attracting Italians who carry far less personal debt that their average US and European equivalents and have historically viewed property as their most important investment.

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