there is some room for optimism, Antonio Fabrizio
discovers.
of Siena-based MPS Leasing & Factoring, the recession is more
something he hears about than is directly affected by, it would
appear. His company is seeing near unprecedented levels of growth.
In the first nine months of 2008, new production totalled €1.36
billion, more than 20 percent up compared with the previous year.
Of this, real estate leasing represented around 38 percent of the
company’s transactions and some 418 contracts valued at about €514
million.
MPS’s strategy is simple: to target the SME sector, the backbone
of Italy’s economy. On the real estate leasing front, this modus
operandi appears to be reaping rewards as business continues to
flood in – from contracts for a hotel and a motor show structure,
to fuel stations.
Considering the doom and gloom surrounding real estate leasing
in Italy, such success appears to be somewhat mystifying.
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However, the inherent nature of real estate leasing potentially
insulates it from downturns. In particular, real estate currently
enjoys tax benefits. As property deals are generally large-scale,
any tax change can have a huge impact, greater than most equipment
lease transactions.
Furthermore, lessors receive slightly more tax advantages than
their mortgage counterparts, and this is one reason why the former
has an edge in this competition – although this benefit was
slightly watered down recently when new laws were introduced
requiring lease contracts to be extended to between 15 and 18 years
from the previous 8 to 10 years.
Furthermore, according to Rosario Corso, chairman of Locat and
head of Assilea, lessors retain ownership of a real estate asset
throughout the term of the lease, and thus, says Corso, they can
recover the asset in case of default more “quickly and to a greater
extent”.
Leasing is also perceived to be an attractive option for those
seeking flexibility.
Pietro Bembo, an Italian lawyer specialising in real estate,
points to the ability of lessors in this sector to cater to
individual needs.
This includes the length of the agreement, the amount of
up-front payments (usually between 10 and 30 percent of the total
value of the asset), the amount of the balloon payment (which can
be as low as 1 percent), and the size of periodic instalments.
A peculiarity of real estate leasing, which is found both in
Italy and abroad, is that it can relate to already existing
buildings – leasing of costruito – as well as property still to be
built – leasing of costruendo.
In the first case the lessor buys a property and then leases it
to a customer. The lessor takes care of technical and
administrative aspects, while the lessee assumes all costs and
risks concerning the maintenance and use of the asset.
At the end of the contract, the lessee chooses whether to
purchase the property after paying a final agreed instalment.
The purchase option also applies to the leasing of costruendo,
although in this case the property has to be built first. In such
deals, a lessor purchases the site where the property will be built
and then finances its construction based on the lessee’s
specifications.
The lessor holds all the risks related to the construction of
the property. Only once the property is ready does the lessee begin
payment of the instalments.
This is because, Bembo said, “as an operation aimed at the
purchase of property still to be built, [the contract] comes into
existence only after its construction, whereas before that moment,
it is merely a loan with the only burden for the client to refund
the financial expenses”.
Another cause for optimism is that in 2007 the Italian public
sector opened up to real estate lessors. A budget report of that
year stated that real estate leasing is admissible for the
“creation, acquisition and completion of public works”.
Because of this report, Antognoli anticipated that “more
emphasis” will be put on the public sector.
