Italy in talks with Saudi fund for $1bn Milan renewal plan

Reuters/Yara Nardi

Italy is in talks with sovereign wealth funds (SWFs) from Norway, Saudi Arabia and Singapore over plans worth €1 billion ($1.09 billion) to develop a residential area of Milan, the head of a state-owned company told Reuters on Thursday.

Prime Minister Giorgia Meloni’s administration is seeking to forge closer ties with Gulf states and generally make Italy more attractive to foreign investors.

Invimit, an asset-management company run by the treasury, is seeking partners to invest €650 million to regenerate a run-down 388,000 square metre site in the western suburbs of Milan with a combination of housing and what will be the city’s second largest park.

The site’s value at the end of the planned investment is estimated at €1 billion and it is expected to yield returns of around 15 percent, Invimit CEO Giovanna Della Posta said.

The firm is in talks with global private equity firms focused on real estate as well as the SWFs, she said.

In all, Invimit has granted 20 potential investors access to confidential data and others are expected to join “as they are already negotiating non-disclosure agreements with us,” the CEO added.

Milan will continue to attract big national and international investors, think tank Scenari Immobiliari has said. It added that the financial capital of Italy is expected to record a 5.1 million square meter increase in its potential building space and six percent average price rise this year.

Invimit set a deadline of July 24 for expressions of interest, but will extend this until September to attract more market players.

The company will launch a fund whose stakes will be sold to one or more investors, with the state as a minority investor.

“The deal is specifically structured for both domestic and foreign capital,” Invimit CEO said.

The government is also courting SWFs to invest in a separate, state-backed fund to support firms operating in strategic sectors, including energy and procurement of raw materials, Reuters reported in May.

Data from Milan’s Bocconi University Sovereign Investment Lab shows that money from Middle East SWFs into Italy peaked in 2010 at $2.3 billion in terms of deal value. Over the past five years, they have put in barely $1 billion.