Real Estate Market Overview

Transcription

1 Real Estate Market Overview Italy

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3 01 Italian Macroeconomic Indicators 02 Italian Real Estate Market Overview Market of residential mortgages Real estate market trends Market of residential rental trends Investments in construction Real estate leasing Investment trends in the real estate market Real estate funds p.5 p.11 p.12 p.27 p.46 p.44 p.61 p.63 p Milan p.73 Residential market Investment trends in the real estate market Office market 04 Rome Residential market Investment trends in the real estate market Office market 05 Contacts p.74 p.78 p.79 p.89 p.90 p.94 p.95 p.98

4 4 Italian Real Estate Market Overview

5 Italian Macroeconomic Indicators 01 5

6 Key data In Q2 2017, the Gross Domestic Product (GDP), with 2010 as the base year (adjusted for calendar effects and seasonality), has increased by 0.3% compared to the previous quarter and by 1.5% when compared to Q Gross Domestic Product National demand % -0.6% % -5.6% % -2.5% % -0.7% % 0.5% % 1.4% 2017 I 0.4% 0.1% 2017 II 0.3% 0.3% Macroeconomic environment in Italy In Q2 2017, GDP increased by 0.3% on a quarterly basis, after the acceleration recorded in the first. National demand, excluding stock, contributed o.3% to growth. The increase in investment (0.9% compared to the previous quarter) was most significant in the transportation equipment component (8.9%), with fewer investments in machinery and equipment; there was a moderate drop in activity in construction, though it remained above the levels recorded a year earlier. Spending by households and non-profit institutions slowed slightly from 0.4% to 0.1% as a result of the drop in purchases of semidurable goods and the stagnation in purchases of non-durable goods. Bank of Italy, Economic Bulletin October 2017 Imports have recorded a strong growth (+1.2%) while exports remained stable; The contribution of foreign trade to GDP was negative by 0.3%. Value added grew by 0.8% in industry excluding construction and by 0.3% in services. In the agricultural sector value added fell by 2.4%. In the first three months of the year inflation, as measured by the twelve month change in the harmonized index of consumer prices (HICP), reached its highest levels since 2013; Inflation fell slightly in September reaching 1.3% (from 1.4% in August), and continue to be low due to the slowdown in the prices of energy commodities and services. +0.3% GDP change Q vs Q % GDP change Q vs Q Gross Domestic Product trend 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% +1.5% -4.0% 01/12/ /02/ /04/ /06/ /08/ /10/ /12/ /02/ /04/ /06/ /08/ /10/ /12/ /02/ /04/ /06/ /08/ /10/ /12/ /02/ /04/ /06/ /08/ /10/ /12/ /02/ /04/ /06/ /08/ /10/ /12/ /02/ /04/ /06/ /08/ /10/ /12/ /02/ /04/ /06/ /08/ /10/ /12/ /02/ /04/ /06/2017 Source: PwC based on data from Italian National Statistical Institute (INSI) 6 Italian Real Estate Market Overview

7 Key data 1.3% Inflation September % Core inflation September % Employment rate growth Q vs Q % Unemployment rate September 2017 Changing prices Consumer price inflation, sustained by the change in its most volatile components (energy and unprocessed food products), has risen since last autumn, reaching, in the first quarter of 2017, its highest levels since early In September consumer price inflation stood at 1.3%, compared with 1.4% of the previous month, continues to be low, owning in part to persistently weak wage growth. Households, firms and the leading analysts have revised downward their expectations for average inflation in The producer prices of industrial products sold on the domestic market continue to accelerate in August (1.6% over twelve months, from 0.9% in July), driven mainly by the energy component and other intermediate goods. The change in the prices of non-food final consumption products recorded a modest increase, rising to 0.3% from 0.1%. The producers revised their expectations of consumer price inflation slightly downward, though still well above the lows recorded at the end of According to INSI survey, in the summer months the balance between the share of manufacturing firms expecting to raise their prices and those planning to reduce them expanded very slightly compared with the previous period. The percentage of consumers expecting prices to remain unchanged or to decline over the next twelve months rose slightly (from 60.1% in the first quarter to 61.5%). The analysts polled in October by Consensus Economics were revised downward, to 1.3% on average in 2017, below that forecast for the euro area as a whole. Labour market In Q4 2016, the number of employed persons and hours worked both rose. Fixed-term payroll jobs increased and open ended employment contracts stabilized. The number of persons employed almost returned to pre-crisis levels, while the number of hours worked is still low, indicating the general underutilization of the labour force. The latest cyclical data indicate that employment continued to expand in July and August 2017 despite the termination of social contribution relief at the end of Growth in labour costs remained very modest. The number of hours worked and the number of employed persons, as reported in the national accounts, continued to grow in Q2 (an increase of 0.5% and 0.3%, respectively, on the previous period). The growth in employment in the second quarter is due to a 4.8% rise in the number of fixed-term payroll contracts. The number of permanent contracts also increased by 0.2% in line with the previous quarter. Since 2015, fixedterm payroll employment has grown by 366,000 jobs (+15.8%), permanent contracts by 437,000 (+3.0%). In Q2, the unemployment rate fell by 0.4% to 11.2%, reflecting an increase in the participation rate. In the age group unemployment remained stable at 35.4% ( equal to 9.2% of this population segment). According to Istat s provisional data, the average overall unemployment rate for the months of July and August remained unchanged at 11.2% while the youth unemployment rate fell to 35.2%. Source: Bank of Italy, Economic Bulletin April - October

8 Key data +0.2% Change in consumption Q vs Q % Italian household debt as a percentage of disposable income Q Italian households In Q2 2017, household spending, continued to increase, especially purchases of services, while the propensity to save declined. Household consumption continued to expand in the spring (+0.2% compared to the first quarter). Growth in expenditure on services more than offset the contraction in goods purchases, with those of durable and semi-durable goods hardest hit. New car registration turned upward again, reaching 3.5%, following the decline of 1.8% recorded during the spring. The consumer confidence indicator improved sharply over the third quarter as a whole, thanks above all to assessments of the general economic situation and future expectations. In Q2 2017, Italian household debt in relation to disposable income declined to 61.3%, still well below the euro area average of 94.3% recorded at the end of September. Interest rates on new mortgage loans remained stable in the quarter at extremely low levels by historical standards. Source: Bank of Italy, Economic Bulletin October 2017 Expediture on total expense Current prices Constant prices Var. % 2015/2014 Var. % 2015/2000 Var. % 2015/2014 Var. % 2015/2000 Groceries and non-alcoholic beverages 15% 14% 1.3% 25.0% 0.2% -11.0% Spirits and tobacco 4% 4% 2.1% 31.0% -0.2% 1.0% Clothing and footwear 8% 6% 1.5% 9.0% 1.4% -7.0% Residences and users 18% 24% -0.1% 72.0% 0.3% 7.0% Furniture and eletrical appliances 8% 6% 0.9% 9.0% 0.5% -16.0% Healthcare 3% 3% 2.9% 34.0% 1.9% -2.0% Transportation 14% 12% 2.4% 16.0% 5.5% -20.0% Communications 3% 2% -1.7% 6.0% 0.0% 83.0% Entertainment and culture 7% 7% 2.6% 21.0% 2.4% 13.0% Education 1% 1% 4.4% 45.0% 2.7% -5.0% Hotel and restaurants 9% 10% 2.4% 51.0% 1.1% 5.0% Other goods and services 10% 10% -1.0% 29.0% -1.5% 5.0% f e e fi e ce Source: PwC based on data from COOP Report Italian Real Estate Market Overview

9 Consumer confidence of manufacturing firms (indexed base 2005=100) Jan-2011 Feb-2011 Mar-2011 Apr-2011 May-2011 Jun-2011 Jul-2011 Aug-2011 Sep-2011 Oct-2011 Nov-2011 Dec-2011 Jan-2012 Feb-2012 Mar-2012 Apr-2012 May-2012 Jun-2012 Jul-2012 Aug-2012 Sep-2012 Oct-2012 Nov-2012 Dec-2012 Jan-2013 Feb-2013 Mar-2013 Apr-2013 May-2013 Jun-2013 Jul-2013 Aug-2013 Sep-2013 Oct-2013 Nov-2013 Dec-2013 Jan-2014 Feb-2014 Mar-2014 Apr-2014 May-2014 Jun-2014 Jul-2014 Aug-2014 Sep-2014 Oct-2014 Nov-2014 Dec-2014 Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 Jul-2015 Aug-2015 Sep-2015 Oct-2015 Nov-2015 Dec-2015 Jan-2016 Feb-2016 Mar-2016 Apr-2016 May-2016 Jun-2016 Jul-2016 Aug-2016 Sep-2016 Oct-2016 Nov-2016 Dec-2016 Jan-2017 Feb-2017 Mar-2017 Apr-2017 May-2017 Jun-2017 Jul-2017 Aug-2017 Sep-2017 Source: PwC based on data from Italian National Statistical Institute (INSI) 9

10 10 Italian Real Estate Market Overview

11 Italian Real Estate Market Overview 02 11

12 Market of residential mortgages Mortgage distribution by contract type H % New contracts efi c 1.4% 79.2% Transfers (surroghe) Mortgage volume trend in Italy The cash amount supplied by banks to households from according to NAB has been recovering since 2013, although it has not returned to its historical peak was the start of recovery for mortgages to households: the number of mortgages signed to purchase a house in 2014 was 13% higher compared to 2013, while 2015 recorded a substantial increase of 70.6% over In 2016, mortgages for houses are up to 20.5% over The growth rate during Q continue to show positive signs with +11.5%, even though the pace of growth seems to slow down compared to the growth rates of the last quarters. These trends are important signs that show a renewed interest of the financing industry in the real estate sector, although an important share is represented by transfer loans (surroghe) and loan refinancing. The Bank of Italy provides data on new mortgages, transfer loans and refinancing starting from the third quarter of In the first six months of 2017, 89.2% of the new supply actually covered new mortgage contracts, while transfers (surroghe) loans accounted 19.4% of the market, and refinancing accounted for only 1.4% Q12017 Var. % 2016/ ,758 56,980 51,047 55,592 49,120 24,757 21,393 24,183 41,247 49,704 12,304 % change from the same period of the previous year % Source: PwC based on data provided by NAB 12 Italian Real Estate Market Overview

13 Cash amount supplied by banks to households Q ( million) 70,000 62,758 60,000 56,980 55,592 50,000 51,047 49,120 49,704 40,000 41,247 30,000 20,000 24,757 21,393 24,183 12,304 10, Q Source: PwC based on data provided by NAB Quarterly cash amount supplied by banks to households Q ( million) 16,000 14,000 12,000 10,000 13,973 13,183 13,223 12,304 11,455 10,223 10,768 11,053 8,000 6,000 5,238 6,280 5,746 7,077 7,073 4,000 2,000 0 Q Q Q Q Q Q Q Q Q Q Q Q Q Source: PwC based on data provided by NAB 13

14 NNT Mo share 2016 Mortgages 2016 Italy 14% 22% North West South 7% 21% North East Islands 37% Center In 2016, the transactions regarding residential units covered by mortgages (NNT Mo) are equal to 246,182 units, which is a 27.3% increase over The growth was consistent at more than 25% in each macro territory of Italy. The performances registered in the province capitals and in rest of the provinces were similar, with growth of 27.2% and 27.4%, respectively. The best performance was registered in the North-Eastern province capitals with an increase of 32.4% compared to The largest share of transactions of residential units covered by a mortgage was registered in the North-Western area with 36.7% of the total residential transactions, followed by the Center with almost 22%. In 2016, the share of transactions covered by a mortgage compared to the total purchases is 3 percentage points higher, reaching 48.5% (nearly 5 percentage points were recovered in 2015), and over 50% in the North and Center areas. The share approaches 40% in the South and Islands. Compared to 2015, the shares are more pronounced in the South (+3.5%) and Islands (+3.3%) than the other territories. The province capitals of the Center of Italy registered the maximum share of mortgages used to purchase a residence by persons at 54%; the rest of province of the Islands have the lowest share, just under 35% of purchases. 21.0% NNT Mo 2016 North East 36.7% NNT Mo 2016 North West NNT Mo 2016 Var. % NNT Mo 2015/2016 Share NNT Mo per area Share on total NNT % NNT Mo 2016 Center 6.9% NNT Mo 2016 Islands 13.7% NNT Mo 2016 South North West % 36.7% 52.4% North East % 21.0% 53.2% Center % 21.7% 50.5% South % 13.7% 38.6% Islands % 6.9% 38.2% Total % 100.0% 48.5% Province capitals North West % 31.7% 51.1% North East % 18.5% 52.7% Center % 30.3% 53.9% South % 11.7% 46.0% Islands % 7.8% 45.0% Total % 100.0% 51.0% Rest of provinces North West % 39.5% 53.1% North East % 22.4% 53.4% Center % 16.8% 47.5% South % 14.9% 36.0% Islands % 6.4% 34.6% Total % 100.0% 47.2% Source: PwC analysis on data provided by Italian IRS 14 Italian Real Estate Market Overview

15 Share NNT Mo Province capitals Share NNT Mo 2016 Rest of province 8% 6% 12% 32% 15% 40% 30% 17% 19% 22% North West North East Center North West North East Center South Islands South Islands Source: PwC analysis on data provided by Italian IRS 15

16 Key data 57.8% NNT Mo share on total NNT in 2016 for medium-sized houses NNT Mo (n ) Studio Apartment Var. % NNT Mo 2015/2016 Share on total NNT 2016 NNT Mo (n ) Small Var. % NNT IP 2015/2016 Share on total NNT 2016 Mortgages 2016 Volume In 2016, 89,726 medium-sized houses were purchased using a mortgage, which is the most common apartment type by NNT Mo, followed by smallmedium (50,325 NNT Mo), and small (47,902 NNT Mo). The highest growth rates in 2016 for house transactions with mortgages by asset size have been registered for large houses (+28.3%), followed by medium (+22.6%). The only decrease of NNT Mo over the previous year was recorded for studio apartments in the province capitals of the Southern territory (-0.8%). The percentage of transactions regarding residential units covered by mortgages exceeds 55% for medium and large houses (57.8% for medium and 56.8% for large). The share for small medium houses is at 51.7%. North West 3, % 26.3% ,9% 44.5% North East 1, % 26.4% ,6% 42.3% Center 2, % 30.7% ,4% 45.9% South % 8.9% ,6% 29.7% Islands % 12.3% ,5% 28.9% Total 8, % 21.0% ,3% 41.1% Provinces capitals North West 1, % 27.9% ,5% 44.7% North East % 25.9% ,5% 43.1% Center 1, % 38.4% ,1% 50.4% South % 10.8% ,1% 37.7% Islands % 14.3% 807 7,9% 32.1% Total 3, % 26.5% ,1% 44.6% Rest of provinces North West 1, % 25.2% ,2% 44.4% North East % 26.7% ,7% 41.9% Center % 23.3% ,2% 41.4% South % 8.5% ,9% 27.2% Islands % 11.5% ,0% 28.0% Total 4, % 18.0% ,0% 39.1% Dimensional classes: Studio apartment: up to 45 sqm (2.5 cadastral units); Small: between 45 and 60 sqm (2.5-4 cadastral units); Small-Medium: between 60 and 90 sqm (4 5.5 cadastral units); Medium: between 90 to 120 sqm (5.5-7 cadastral units); Large: 120 sqm and above (more than 7 cadastral units) Source: PwC analysis on data provided by Italian IRS 16 Italian Real Estate Market Overview

17 NNT Mo (n ) Small medium Medium Large Total Var. % NNT Mo 2015/2016 Share on total NNT 2016 NNT Mo (n ) Var. % NNT Mo 2015/2016 Share on total NNT 2016 NNT Mo (n ) Var. % NNT Mo 2015/2016 Share on total NNT 2016 NNT Mo (n ) Var. % NNT Mo 2015/2016 Share on total NNT , % 55.8% 31, % 61.3% 11, % 59.5% 90, % 52.4% 10, % 54.1% 19, % 61.0% 8, % 60.5% 51, % 53.2% 10, % 53.2% 17, % 57.2% 6, % 53.8% 53, % 50.5% 7, % 43.4% 13, % 51.3% 4, % 52.4% 33, % 38.6% 2, % 39.9% 6, % 50.3% 2, % 49.6% 17, % 38.2% 50, % 51.7% 89, % 57.8% 32, % 56.8% 246, % 48.5% 6, % 55.0% 8, % 60.0% 2, % 58.3% 28, % 51.1% 3, % 54.1% 6, % 60.6% 2, % 59.4% 16, % 52.7% 5, % 55.4% 8, % 59.4% 2, % 56.7% 26, % 53.9% 2, % 49.7% 4, % 55.5% 1, % 59.1% 10, % 46.0% 1, % 43.9% 3, % 57.1% 1, % 57.2% 6, % 45.0% 18, % 53.5% 31, % 59.0% 9, % 58.1% 88, % 51.0% 13, % 56.2% 22, % 61.9% 8, % 60.0% 62, % 53.1% 6, % 54.1% 13, % 61.2% 6, % 60.9% 35, % 53.4% 5, % 51.2% 8, % 55.3% 3, % 51.5% 26, % 47.5% 4, % 41.1% 9, % 49.7% 2, % 49.4% 23, % 36.0% 1, % 37.8% 3, % 45.9% 1, % 45.3% 10, % 34.6% 31, % 50.7% 58, % 57.1% 22, % 56.3% 157, % 47.2% 17

18 NNT Mo 2016 Mortgages 2016 Regions Veneto 9.9% 0.2% Aosta Valley 1.3% Umbria Tuscany 7.2% Sicily 4.8% 2.1% Sardinia Apulia 5.2% Piedmont 8.9% 0.3% Molise 2.1% Marche Lombardy 3.4% Liguria Lazio 11.1% 1.7% Friuli V. G. E. Romag. 9.4% 5.1% Campania 1.1% Calabria 0.5% Basilicata 1.6% Abruzzo 24.1% The number of residences purchased with a mortgage (NNT Mo) is growing throughout all regions of Italy by more than 20%, except for Basilicata (+19.1%); the largest increase in terms of absolute amount of NNT Mo has been registered in Emilia Romagna, Liguria and Piedmont where growth has exceeded 30%. The share of mortgages on housing sales finalized by an individual is on average higher in the Northern regions, but compared to 2015, the share has increased by more than 3 percentage points in all regions of the South, with the exception of Puglia. However, the share of NNT Mo on total NNT in Puglia along with Sardinia remains among the highest in the south. Friuli-Venezia Giulia is the Italian region with the highest share of transactions completed with a mortgage (57.5%) NNT Mo variation 2015 vs 2016 Veneto Aosta Valley Umbria Tuscany Sicily Sardinia Apulia Piedmont Molise Marche Lombardy Liguria Lazio Friuli V. Giulia E. Romagna Campania Calabria Basilicata Abruzzo 28.5% 28.7% 23.6% 29.2% 24.3% 28.2% 25.8% 31.0% 26.6% 27.2% 27.1% 31.8% 22.3% 23.2% 30.4% 28.7% 24.0% 19.1% 26.2% NNT Mo 2016 Var. % NNT Mo 2015/2016 Share NNT Mo per region Share total NNT 2016 Abruzzo 3, % 1.6% 38.9% Basilicata 1, % 0.5% 30.4% Calabria 2, % 1.1% 26.1% Campania 12, % 5.1% 41.1% Emilia Romagna 23, % 9.4% 53.0% Friuli V.G. 4, % 1.7% 57.5% Lazio 27, % 11.1% 51.3% Liguria 8, % 3.4% 43.7% Lombardy 59, % 24.1% 56.0% Marche 5, % 2.1% 46.7% Molise % 0.3% 31.5% Piedmont 22, % 8.9% 48.3% Apulia 12, % 5.2% 41.8% Sardinia 5, % 2.1% 44.8% Sicily 11, % 4.8% 35.9% Tuscany 17, % 7.2% 51.2% Umbria 3, % 1.3% 46.9% Aosta Valley % 0.2% 38.6% Veneto 24, % 9.9% 52.6% Total 246, % 100.0% 48.5% Source: PwC analysis on data provided by Italian IRS 18 Italian Real Estate Market Overview

19 Geographical distribution of the NNT Mo incidence over the Total NNT in 2016 Piemonte 48% Lombardia Veneto Emilia Romagna Friuli V 56% 53% 53% 57%. G. Toscana Marche Umbria Lazio Sardegna 51% 47% 47% 51% 45% 40%-55% (11) Liguria Valle D Aosta Abruzzo Puglia Campania 44% 39% 39% 42% 41% 30%-40% (5) Sicilia Molise Basilicata Calabria re Tr T e ntino A. A. 36% 31% 30% 26% n.a. 20%-30% (3) n.a. Source: PwC analysis on data provided by Italian IRS 19

20 NNT Mo Cities 5% 7% 12% 6% Rome Turin Bologna 6% 5% 24% Milan Palermo Florence 35% Incidence distribution of NTN Mo on Total NTN 2015 Florence Naples Genoa 52.3% Mortgages 2016 Main cities and Provinces As for the trend in the main cities of Italy, the residences purchased with a mortgage increased at 25.5% while the national average was 27.3%. Within the main cities, a well marked increase was recorded in Turin, Genoa and Bologna where growth exceeded 30%. NNT Mo 2016 Var. % NNT Mo 2015/2016 The municipalities within the rest of the provinces analysed show widespread growth, where the highest growth rate is registered in the provinces of Florence, Turin and Naples. Share NNT Mo Share on total NNT 2016 City Rome 16, % 34.9% 56.2% Milan 11, % 24.2% 53.9% Naples 2, % 5.9% 42.3% Turin 5, % 12.2% 48.6% Palermo 2, % 4.6% 46.0% Genoa 3, % 7.3% 52.3% Bologna 2, % 5.8% 51.5% Florence 2, % 5.1% 52.3% Total 47, % 100.0% 52.3% Bologna Genoa Palermo Turin Naples Milan 51.5% 52.3% 46.0% 48.6% 42.3% 53.9% Rest of province Rome 6, % 14.6% 51.2% Milan 18, % 38.8% 61.7% Naples 4, % 9.5% 46.0% Turin 8, % 17.1% 54.6% Palermo 1, % 2.5% 32.4% Genoa 1, % 2.7% 41.7% Bologna 3, % 7.9% 57.2% Florence 3, % 7.0% 59.2% Total 47, % 100.0% 54.6% Rome 56.2% Source: PwC analysis on data provided by Italian IRS 0% 30% 60% 20 Italian Real Estate Market Overview

21 In terms of capital distributed, Rome and Milan represent an important share of the total amount financed for the main cities, with about 2.8 billion in Rome, nearly 2 billion in Milan. NNT Mo variation 2015 vs % 31.6% 31.6% 27.2% 26.8% 21.0% 21.9% 14.3% Rome Milan Naples Turin Palermo Genoa Bologna Florence NNT Mo 2016 Rest of province 3% 2% 8% 7% 15% 17% 39% Rome Milan Naples 9% Turin Bologna Palermo Florence Genoa Source: PwC analysis on data provided by Italian IRS 21

22 Italian affordability index Lazio 6% Liguria 6% Tuscany 8.5% Campania 9.5% Sardinia 10.2% Aosta Valley 11.0% Lombardy 11.25% Italy 12.5% Marche 14.7% Veneto 14.8% E. Romagna 14.8% Apulia 15.1% Italian Affordability Index The affordability index is calculated based on the following variables: 1. Interest rate, which reflects the trend of available credit and monetary policy; 2. Housing prices, which express the situation of the housing market; 3. Disposable income, which expresses how developed a country is and its overall level of competitiveness. An Affordability Index >0% means that the average Italian household is able to purchase a home at the average price of the market. An Affordability Index <0% means that the average Italian household is not able to purchase a home at the average price of the market. The further away from zero conveys the level of ease or difficulty for an average Italian family to purchase a home. The recovery of disposable income, which started in 2014, gained momentum last year. At the end of 2016, the disposable income of the average Italian household was just over 42,300, which was a 1.4% increase compared to the previous year, but still not very far from the levels recorded 10 years before. Based on the variations in the first few months of 2017, the affordability index showed a slight decrease: during March, the index reached 12.9%, just 0.3% lower compared to December Piedmont Umbria Friuli V. G. Sicily 15.4% 15.6% 15.8% 16.0% Affordability index for Italian households Abruzzo 17.5% 4 Basilicata 18.0% 2 0 Calabria 18.5% H H H H H H H H H H H H H H H H H H H H H H H H H H H H Molise 19.5% Household income and housing prices (index base H1 2014=100) The affordability index is calculated as follows: ff e e Payment (interest, years, house price* LTV%)* Income ff e ff e e e e e e e ce e f yearly income that should be used to service a mortgage H H H H H H H H H H H H H H H H H H H H H H H H H H H H House price Disposable Income Campania 22 Italian Real Estate Market Overview Sardinia

23 Affordability index for Italian geographic region North West 20% The analysis of the affordability Index by geographic region shows that from the North-Western region, only Piedmont has today an affordability Index above the national average. On the other hand all the North-East is above the national average. In the center, only Marche and Umbria are above the national average. In the Southern regions, only Campania is beneath the national average. 15% 10% 5% 0% -5% -10% Liguria Lombardy Piedmont Aosta Valley Italy North East 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% E. Romagna Friuli V. G. Veneto Italy Center 20% 15% 10% 5% 0% -5% -10% Tuscany Marche Umbria Lazio Italy South 20% 15% 10% 5% 0% -5% Abruzzo Molise Campania Basilicata Italy 23

24 Key data 74% Percentage of households that can buy a house Q years and 139 days Number of annual salaries necessary to buy a house Trend of salaries The relationship between average housing prices and the income of the average Italian household provides the number of annual salaries needed to buy a house. Until 2010, the relative price of houses (expressed by the number of annual salaries necessary to buy a house) tended to grow, especially because of a reduction in household income. However, the beginning of the crisis restricted this increasing trend, which was then followed by a sharp decrease that continued until the end of 2016: in the fourth quarter of last year, an average Italian family needed 3 years and 139 days of its own income to buy a house, 16 days less than the previous year and 255 days less than the maximum point registered in the third quarter of In 2012, 47% of total Italian households were capable of acquiring a house, while in the second quarter of 2016, the percentage jumped up to 74%, 5 percentage points more than the data at the end of In this case, a new maximum historical point (over the period under examination) is established, with an increase of 12 percentage points over the first quarter of In summary, in 2016, the expansive policy of the ECB and the improvement of the economic conditions, with the consequent increase in Italian household income, have further improved the possibility for the average Italian household to acquire an average house, continuing the trend started in Percentage of households that can buy a house ,1 2004,2 2005,1 2005,2 2006,1 2006,2 2007,1 2007,2 2008,1 2008,2 2009,1 2009,2 2010,1 2010,2 2011,1 2011,2 2012,1 2012,2 2013,1 2013,2 2014,1 2014,2 2015,1 2015,2 2016,1 2016,2 Number of annual salaries necessary to buy a house 4,2 4,0 3,8 3,6 3,4 3,2 Source: PwC analysis on data provided by Italian IRS 24 Italian Real Estate Market Overview 3,

25 Key data 3.5 Number of annual salaries necessary to buy a house Italian average -0.4% Variation in housing prices at national level 11 Regions with a positive average annual growth of salaries Salaries vs Housing prices The regional variations in housing prices are observable, ranging from the highest in Liguria and Lazio (where average prices are about 200,000, 30-40% higher than the average of Italy) to the lowest in Molise and Calabria (where average prices are a little over 70,000, circa 50% below the average). As for the household disposable income by region, the analysis highlights the dual characteristics of Italy, with every Southern region recording an average disposable income significantly lower than the average of Italy, while almost all the Northern regions (including Tuscany and Marche) are above the average. Comparing the data between the disposable income with the housing prices confirms that the former is significantly less relevant: the standard deviation of the variation from the average of Italy is 14% for disposable income and 29% for housing prices. This shows that the affordability index is linked more with prices of the real estate market than household income. Analysing the connection between housing prices and average family income of each region shows that the average Italian requires a little less than 3.5 annual salaries to purchase a home, which varies by region: in Lazio, the average is higher at 5 annual salaries and in Molise it is lower at 2 annual salaries. Source: PwC analysis on data provided by Italian IRS Housing prices 2016 deviation (%) from the average of Italy by region Household disposable income 2016 deviation (%) from the average of Italy by region Liguria Marche Sicily Sardinia Piedmont Friuli VG Lombardy Molise Veneto Household disposable income growth average annual change (%) between ,5 0,4 0,3 0,2 0,1 0,0-0,1-0,2-0,3-0,4-0,5 Liguria Liguria Marche Marche Sicily Sicily Sardinia Sardinia Piedmont Piedmont Friuli VG Friuli VG Lombardy Lombardy Molise Molise Italy Veneto Veneto Apulia Apulia Apulia Abruzzo Abruzzo Abruzzo Lazio Lazio Lazio E. Romagna E. Romagna E. Romagna Tuscany Tuscany Tuscany Basilicata Basilicata Basilicata Calabria Calabria Calabria Campania Campania Campania Aosta Valley Aosta Valley Aosta Valley Umbria Umbria Umbria 25

26 26 Italian Real Estate Market Overview

27 Real estate market trends In 2016, the residential real estate market, after a long and sharp drop that started in 2007, grew by circa 19% compared to 2015, with this being the third continuous year of growth. The number of residential transactions completed by individuals reached approximately 529,000 in The number of transactions in 2016 continued the positive trend started in 2014 at an even stronger pace, highlighting a clear sign of recovery. In fact, the growth registered in 2014 was mainly influenced by lower registration costs that came into effect on 1 January 2014 for mortgages and cadastral documents, which are applicable to the transfer of real property (Article 10 of D.lgs 14 marzo 2011, n. 23) saw a growth of +6.5%. However, it is early to say if the considerable growth in 2016 represents the beginning of a new cycle or it is just a temporary situation. Historic number of residential transactions ( ) Cycle I Cycle II Cycle III First phase: Growth Peak: 869,000 transactions Cycle III Second phase: Crisis NNT Residential (000) Source: PwC analysis on data provided by Italian IRS 27

28 Key data 528,865 Residential NNT % Residential NNT 2016 vs ,946 Office NNT % Office NNT2016 vs ,586 Retail NNT % Retail NNT 2016 vs ,287 Industrial NNT % Industrial NNT 2016 vs 2015 Historical trend of the Italian real estate market ( ) Residential Stock Val. Ass. 29,230,658 29,730,243 30,588,991 31,229,051 31,804,801 32,271,134 32,689,812 33,204,511 33,579,054 33,740,601 33,818,772 33,808,141 33,882,180 Var. % 1.71% 2.89% 2.09% 1.84% 1.47% 1.30% 1.57% 1.13% 0.48% 0.23% -0.03% 0.22% NNT Val. Ass. 828, , , , , , , , , , , , ,865 Var. % 3.68% 1.26% -6.96% % % 0.40% -2.23% % -9.21% 3.57% 6.49% 18.94% MII Val. Ass. 2.83% 2.89% 2.84% 2.59% 2.15% 1.89% 1.87% 1.80% 1.32% 1.19% 1.23% 1.32% 1.56% Var. % 1.93% -1.58% -8.86% % % -0.89% -3.75% % -9.64% 3.33% 6.53% 18.68% Office Stock Val. Ass. 452, , , , , , , , , , , , ,429 Var. % 7.31% 5.40% 11.87% 0.12% 2.89% 2.74% 2.05% 1.10% 0.51% 1.84% 3.87% 0.02% NNt Val. Ass. 21,080 22,647 21,913 21,261 17,864 16,182 15,246 14,468 10,622 9,453 9,011 8,842 9,946 Var. % 7.43% -3.24% -2.97% % -9.42% -5.78% -5.10% % % -4.67% -1.88% 12.49% MII Val. Ass. 4.66% 4.67% 4.28% 3.72% 3.12% 2.75% 2.52% 2.34% 1.70% 1.51% 1.41% 1.33% 1.50% Var. % 0.11% -8.19% % % % -8.29% -7.01% % % -6.39% -5.53% 12.46% Retail Stock Val. Ass. 2,183,637 2,287,776 2,345,538 2,575,523 2,558,210 2,578,718 2,604,249 2,632,825 2,630,414 2,637,210 2,892,098 2,829,027 2,833,089 Var. % 4.77% 2.52% 9.81% -0.67% 0.80% 0.99% 1.10% -0.09% 0.26% 9.67% -2.18% 0.14% NTN Val. Ass. 54,456 55,182 52,816 50,271 44,146 36,892 35,423 34,408 25,931 23,980 25,340 26,234 30,586 Var. % 1.33% -4.29% -4.82% % % -3.98% -2.87% % -7.52% 5.67% 3.53% 16.59% IMI Val. Ass. 2.49% 2.41% 2.25% 1.95% 1.73% 1.43% 1.36% 1.31% 0.99% 0.91% 0.88% 0.93% 1.08% Var. % -3.28% -6.64% % % % -4.92% -3.92% % -7.76% -3.64% 5.84% 16.42% Industrial Stock Val. Ass. 439, , , , , , , , , , , , ,185 Var. % 12.56% 7.08% -3.64% 1.70% 0.90% 1.59% 6.58% 1.13% 1.54% 6.10% 20.13% 1.28% NTN Val. Ass. 16,060 17,397 17,436 16,830 15,276 12,282 11,847 12,477 10,020 9,246 9,562 9,243 11,287 Var. % 8.32% 0.22% -3.47% -9.23% % -3.54% 5.31% % -7.73% 3.42% -3.34% 22.11% IMI Val. Ass. 3.65% 3.51% 3.29% 3.30% 2.94% 2.34% 2.23% 2.20% 1.75% 1.59% 1.55% 1.24% 1.50% Var. % -3.76% -6.41% 0.18% % % -5.05% -1.19% % -9.12% -2.53% % 20.58% Source: PwC analysis on data provided by Italian IRS 28 Italian Real Estate Market Overview

29 In 2016, the non- residential sector, which includes office, retail and industrial property types, has shown positive signs of transacted volume: +16.9% compared to This is the first year since 2006, which was the start of the decline in NNTs, that all non-residential property types grew simultaneously. Industrial has recorded the greatest increase in transaction activity in 2016 (+22.1% compared to 2015), followed by retail (+16.6%) and then office (+12.5%). Office, retail and industrial property types account for 11.1% of the total building stock and 8.9% of the total number of transactions. Residential 1,00 32, , , , ,547 78,171 10,631 74,039 33, ,456 2,423 (13,654) (154,206) (40,894) 14,400 27,112 84, ,865 Stock NNT MII 0,88 0,87 0,84 0,61 0,56 0,57 0,61 0, Finish Finish Office 589,408 16,152 12,421 6,793 3,206 11,568 24, ,0 664,429 16,182 Stock NNT MII Finish Finish (935) (778) (3,846) (1,170) (441) (169) 1,104 9,946 1,00 0,88 0,81 0,75 0,55 0,48 0,45 0,43 0, Retail 1,00 2, ,531 28,576 (2,411) 6, ,888 (63,071) 4,062 2, ,892 (1,468) (1,015) (8,477) (1,951) 1, ,352 30,586 Stock NNT MII 0,83 0,79 0,76 0,57 0,53 0,51 0,54 0, Finish Finish Industrial 524,099 8,321 35,040 6,428 8,812 35, ,441 9, ,185 12, (2,456) (774) 316 (319) 2,004 11,287 Stock NNT MII 1,00 0,80 0,76 0,75 0,59 0,54 0,53 0,42 0, Finish Finish Source: PwC analysis on data provided by Italian IRS 29

30 As for the real estate stock, the retail property type has the highest number of units among the non residential types (slightly over 2.7 million units). Number of transactions trend (NNT) ( ) 120% 110% Retail accounts for nearly 66% of the total non residential stock, followed by industrial with almost 18%, and then office with just over 16%. Retail still has the highest share of NNT at about 58,6% of total non residential transactions, followed by industrial and then office transactions at 22% and 19%, respectively. The relationship between NNT and stock is reflected by the values of MII, which are higher for office and industrial (both at 1.5%) than retail (1.08%). 100% 90% 80% 70% 60% 50% 40% e e Office e Trend of ratio between transaction and stock (MII) ( ) 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% e e Office e Source: PwC based on data from Agenzia delle Entrate 30 Italian Real Estate Market Overview

31 NNT , , ,684 2% 5% 2% 500, , , , , ,946 30,586 11,287 Residential Office Retail Industrial Total Residential Office Retail 91% Industrial Stock ,000,000 40,000,000 35,000,000 33,882,180 38,131,883 2% 7% 2% 30,000,000 25,000,000 20,000,000 15,000,000 10,000, , ,429 2,833, ,185 89% 0 Residential Office Retail Industrial Total Residential Office Retail Industrial Source: PwC analysis on data provided by Italian IRS 31

32 Var. % Res. Not Res. Q ,8% 2,4% Q ,9% 4,0% Q ,1% 10,2% Q ,0% 1,6% Q ,8% 12,9% NNT % change of the Italian real estate market ( ) Q ,0% 4,7% Q ,3% -33,6% Q ,1% -0,5% Q ,8% -8,2% Q ,6% -9,8% Q ,4% 34,2% Q ,6% -13,8% Q ,9% -7,3% Q ,9% -12,1% Q ,1% -11,1% Q ,4% -17,7% Q ,8% -24,0% Q ,3% -12,6% Q ,0% -17,8% Q ,1% -9,3% Q ,3% -0,7% Q ,5% -6,9% Q ,7% -9,8% Q ,1% -1,2% Q ,6% -6,6% Q ,6% -1,2% Q ,4% 13,3% Q ,6% -8,8% Q ,5% -16,3% Q ,2% -29,1% Q ,8% -28,4% Q ,5% -22,3% Q ,1% -8,2% Q ,2% -5,2% Q ,1% -9,2% Q ,0% -10,1% Q ,1% 0,2% Q ,0% -2,3% Q ,2% 5,0% Q ,1% 8,6% Q ,0% -5,8% Q ,2% 3,3% Q ,8% 4,7% Q ,4% -1,7% Q ,7% 10,4% Q ,0% 16,5% Q ,5% 25,2% Q ,2% 16,1% Q ,6% 10,8% Q ,8% 6,2% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Delta % NTN - Residential Source: PwC analysis on data provided by Italian IRS Delta % NTN - Non Residential 32 Italian Real Estate Market Overview

33 NNT The Italian real estate market continued to record growth over the last quarter of 2016 with total transactions increasing by 16,4% compared to the same period of the year before. The total number of transactions surpassed the 1 million mark, which hasn t occurred since Transactions recorded in 2016 reached 1,141,012, which is circa 177,00 NNT more than 2015 (+18.4%). 326,141 NNT Q % NNT Q vs NNT Q % Residential NNT Q vs. NNT Q NNT: Q Q Q Q Q Q Q Q Year 2015 Year 2016 Var. % Residential 95, , , , , , , , , , % Office 1,997 2,101 1,913 2,831 2,025 2,413 2,510 3,000 8,842 9, % Retail 5,918 6,725 5,826 7,765 6,776 7,598 7,188 9,024 26,234 30, % Industrial 1,979 2,250 2,059 2,954 2,121 2,897 2,565 3,704 9,242 11, % Appurtances 74,621 89,238 80, ,825 87, ,015 94, , , , % Other 28,411 33,322 30,179 38,188 30,828 38,687 35,719 44, , , % Total 208, , , , , , , , ,902 1,141, % NNT by property type: 2016 vs , , , , , , , ,000 0 Residential Year 2015 Year ,842 9, ,242 11,287 Office Retail Industrial Source: PwC analysis on data provided by Italian IRS 33

34 NNT In Q4 2016, the residential sector, with nearly 147,000 NNT, grew over 15% over Q4 2015, slowing down the growth rates compared to the previous quarters. Among the non residential sectors, office, which includes credit institutions, recorded a +6.0% increase during Q over the same period the year before, closing the year by more than a thousand units than in In the industrial sector, another strong increase was recorded in Q4 with +25.4%, which is the third quarter of consecutive growth at an elevated level. As for the entire year, industrial transactions increased by 22% which is the largest increase among the asset classes. In the end, the retail sector, after the peak registered in the third quarter of 2016, Q reached levels similar to the average of the year (+16.2% vs.+16.8%) % NNT 2016 vs NNT 2015 Q Q Q Q Q Q Q Q Year 2015 Year 2016 Residential 95, , , , , , , , , ,865 Office 1,997 2,101 1,913 2,831 2,025 2,413 2,510 3,000 8,842 9,946 Retail 5,918 6,725 5,826 7,765 6,776 7,598 7,188 9,024 26,234 30,586 Industrial 1,979 2,250 2,059 2,954 2,121 2,897 2,565 3,704 9,243 11,287 Appurtances 74,621 89,238 80, ,825 87, ,015 94, , , ,003 Other 28,411 33,322 30,179 38,188 30,828 38,687 35,719 44, , ,324 Total 208, , , , , , , , ,902 1,141,012 Var. % Q Var. % Q Var. % Q Var. % Q Var. % Q Var. % Q Var. % Q Var. % Q Var. %year Var. %year Residential -3.0% 8.2% 10.8% 9.4% 20.7% 23.0% 17.5% 15.2% 6.5% 18.9% Office -6.4% -3.7% 0.9% 0.9% 1.4% 14.8% 31.2% 6.0% -1.9% 12.5% Retail -5.2% 10.4% 7.3% -2.8% 14.5% 13.0% 23.4% 16.2% 1.9% 16.6% Industrial -7.1% -8.0% 2.2% -1.3% 7.2% 28.8% 24.6% 25.4% -3.5% 22.1% Appurtances -3.7% 6.1% 9.0% 5.6% 17.3% 23.3% 17.3% 18.4% 4.3% 19.2% Other -3.2% 4.9% 3.2% 0.5% 8.5% 16.1% 18.4% 15.5% 1.4% 14.8% Total -3.4% 6.8% 8.8% 6.2% 17.3% 21.9% 17.9% 16.4% 4.7% 18.4% % -9.2% -14.1% 7.1% 4.1% 4.2% -1.0% -3.0% -8.0% 23.0% 20.7% 17.5% 10.8% 15.2% 9.4% 8.2% % -8.2% 5.0% 0.2% -2.3% -9.2% -10.1% 8.6% 25.2% 16.4% 16.1% 4.7% 7.0% 3.3% -1.7% -5.8% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Delta % NNT - Residential Delta % NNT - Non Residential Source: PwC analysis on data provided by Italian IRS 34 Italian Real Estate Market Overview

35 Key Data +6.6% NNT North West H1 17 vs % NNT Islands H1 17 vs % NNT North East H1 17 vs % NNT Center H1 17 vs % NNT South H1 17 vs 16 City Milan 23,9% Rome 31,9% Turin 13,2% Genoa 7,1% Naples 7,5% Palermo 5,5% Bologna 5,6% Florence 5,3% NNT H Residential In H1 2017, there were 267,505 residential transactions, 15,042 more than the same period of 2016 (an increase of 6.0%). Although the growth in the number of residential transactions recorded in Q was below the levels seen in the previous quarter (+3.8% compared to 8.6%), the absolute number of transactions are reaching levels previously recorded before the drop in According to NNT historical trend, seasonally adjusted with fourquarter moving average, the housing market has been recovering almost uninterrupted since Although the Islands recorded the lowest number of residential transactions in H at 23,000, this territory has shown a strong increase at 5.9% over the same quarter in Source: PwC analysis on data provided by Italian IRS In the Northern territories, the increases were 6.4%, with circa 92,000 homes sold in the North-West and approximately 50,000 in the North- East. In the Center, the growth was close to 5.5% with more than 55,000 purchased homes, and finally in the South, transactions rose by 5.0%, exceeding 45,000 units. Distinguishing the residential market between province capitals and the rest of their provinces, during H1 2017, there was a different increase in transactions between the two areas with +5.3% in the province capitals and +6.3% in rest of their provinces. 35

36 Q Q Q Q Q Q H H Var. % Q Var. % Q Var. % H North West Province capitals 12,738 15,680 13,150 15,286 13,918 16,328 28,418 30, % 4.1% 6.4% Rest of province 25,480 32,844 27,934 34,724 27,934 34,276 58,324 62, % 4.4% 6.7% Total 38,218 48,524 41,084 50,010 41,852 50,604 86,742 92, % 4.3% 6.6% North East Province capitals 6,879 9,087 7,420 8,706 7,414 8,899 15,966 16, % -2.1% 2.2% Rest of province 13,804 17,867 16,320 19,082 15,245 19,018 31,671 34, % 6.4% 8.2% Total 20,683 26,954 23,740 27,788 22,659 27,917 47,637 50, % 3.6% 6.2% Center Province capitals 11,184 14,101 11,873 14,167 12,325 14,651 25,285 26, % 3.9% 6.7% Rest of province 12,373 15,216 13,319 15,547 13,100 15,723 27,589 28, % 3.3% 4.5% Total 23,557 29,317 25,192 29,714 25,425 30,373 52,874 55, % 3.6% 5.5% South Province capitals 5,367 6,253 5,090 6,042 5,504 6,503 11,620 12, % 4.0% 3.3% Rest of province 14,631 17,205 14,984 17,585 15,507 18,131 31,836 33, % 5.4% 5.7% Total 19,999 23,458 20,074 23,627 21,011 24,634 43,457 45, % 5.0% 5.0% Islands Province capitals 3,512 4,247 3,522 4,174 3,956 4,314 7,759 8, % 1.6% 6.6% Rest of province 6,346 7,647 6,924 7,980 7,073 7,687 13,993 14, % 0.5% 5.5% Total 9,858 11,894 10,446 12,154 11,029 12,001 21,752 23, % 0.9% 5.9% Italy Province capitals 39,681 49,368 41,055 48,375 43,116 50,695 89,049 93, % 2.7% 5.3% Rest of province 72,635 90,779 79,481 94,918 78,860 94, , , % 4.5% 6.3% Total 112, , , , , , , , % 3.8% 6.0% Source: PwC analysis on data provided by Italian IRS 36 Italian Real Estate Market Overview

37 In H1 2017, the eight main Italian cities (by population), registered a growth in residential transactions of 6.9%, compared to the same period in 2016 with 49,638 traded units. Among the main cities, Palermo stands out the most with a 12.7% increase. Positive results were also recorded in Naples (8.9%), Milan (8.1%), Florence, where the market continues to grow at high rates (7.6%), and Genoa with just over 3,524 NNT and a growth of 7.1%. The main cities that are below the average are Rome, Turin, and Bologna. In addition, municipalities in the surrounding provinces of the main cities show, on an annual basis, widely positive results. For the full year 2016, compared to 2015, increases were between 6.5% in Palermo and 24.2% in Turin. Residential NNT H Main cities Q Q Q Q Q Q H H Var. % Q Var. % Q Var. % H Milan 4,804 6,150 5,090 5,915 5,447 6,395 10,954 11, % 4.1% 8.1% Rome 6,564 8,250 6,904 8,500 7,213 8,602 14,814 15, % 4.5% 6.8% Turin 2,847 3,406 2,732 3,350 2,978 3,595 6,253 6, % 5.7% 5.1% Genoa 1,468 1,823 1,579 1,752 1,683 1,841 3,291 3, % 1.3% 7.1% Naples 1,584 1,851 1,403 1,839 1,659 2,082 3,435 3, % 13.6% 8.9% Palermo 1,084 1,332 1,049 1,306 1,306 1,418 2,416 2, % 8.3% 12.7% Bologna 1,218 1,591 1,262 1,456 1,265 1,521 2,809 2, % -4.3% -0.8% Florence 1,063 1,384 1,105 1,235 1,237 1,396 2,447 2, % 0.9% 7.6% Residential NNT 2016 Provinces (excluding capitals) Q Q Q Q year 2016 Var. % Q Var. % Q Var. % Q Var. % Q Var. % Milan 6,528 8,665 6,943 8,928 31, % 22.7% 19.0% 21.5% 21.8% Rome 3,191 3,782 3,210 3,919 14, % 22.4% 19.3% 16.9% 20.3% Turin 3,117 4,155 3,531 4,531 15, % 26.2% 23.5% 25.1% 24.2% Genoa , % 29.8% 19.0% 9.0% 20.0% Naples 2,334 2,795 2,328 2,819 10, % 24.9% 24.7% 13.2% 19.8% Palermo ,024 3, % 5.3% 13.3% 4.7% 6.5% Bologna 1,414 1,881 1,549 1,956 6, % 29.3% 15.2% 15.9% 19.0% Florence 1,240 1,574 1,389 1,587 5, % 27.4% 31.4% 16.1% 24.1% Source: PwC analysis on data provided by Italian IRS 37

38 In H1 2017, circa 4.5 million residential sqm were sold in the 8 main cities of Italy (about 16% of the national total), an increase of 6.7% compared to H and similar to the observed growth for the entire country. The average size of residences sold is lower in Rome and Milan, below 90 sqm, while largest average surface area recorded is in Rome with over 100 sqm. The distribution of the transactions in the main cities by residence type shows that in H1 2017, transactions regarding residences between 50 and 115 sqm accounted for 66.4% of the total. In Milan, houses up to 50 sqm purchased in H were almost 19% of the total in Milan; Palermo, Florence and Naples showed the largest share of houses over 145 sqm among the other main cities. Residential NNT (#) by dimensional classes H Up to 50 sqm Between 50 and 85 sqm Between 85 and 115 sqm Between 115 and 145 sqm 145 sqm and above Total Rome 1,492 6,551 4,359 1,999 1,414 15,815 Milan 2,227 5,162 2,534 1, ,842 Turin 849 3,077 1, ,571 Naples 517 1,102 1, ,740 Genoa 206 1,403 1, ,524 Palermo ,724 Bologna 347 1, ,789 Florence ,634 Total 6,224 20,021 12,958 5,981 4,453 49,638 Residential NNT (%) by dimensional classes H Up to 50 sqm Between 50 and 85 sqm Between 85 and 115 sqm Between 115 and 145 sqm 145 sqm and above Total Rome 9.4% 41.4% 27.6% 12.6% 8.9% 100.0% Milan 18.8% 43.6% 21.4% 9.0% 7.2% 100.0% Turin 12.9% 46.8% 23.7% 9.2% 7.3% 100.0% Naples 13.8% 29.5% 28.4% 17.0% 11.3% 100.0% Genoa 5.8% 39.8% 33.6% 12.1% 8.6% 100.0% Palermo 10.9% 23.8% 27.0% 21.8% 16.4% 100.0% Bologna 12.4% 41.3% 27.3% 10.8% 8.2% 100.0% Florence 11.0% 35.2% 29.0% 13.3% 11.5% 100.0% Total 12.5% 40.3% 26.1% 12.0% 9.0% 100.0% Source: PwC analysis on data provided by Italian IRS 38 Italian Real Estate Market Overview

39 The analysis of the variation of prices and of the transactions in the residential Real estate market per semester since 2004 shows that since 2006 the transaction volume for the residential market has suffered a reduction, whereas the house prices kept growing, even if slowing down until During 2009, although the transaction volume alternated bad semesters to slightly acceptable ones, prices kept staying stationary. During the 1st half of 2012, due to a strong contraction of the purchases, the volume resulted reduced of one fourth compared to that of 2011 and as a consequence prices suffered a deep decrease. Trend variation for prices and number of transactions within the residential market Var. % NNT Var. % Prices Residential purchase prices trend (% variation quarterly house price trend) A negative period followed until 2015, when the trend switched to positive for what concerns the transactions, whereas kept being negative for the prices. In 2016 the positive trend of transactions went on and the prices registered a reduction in the negative trend. I-2011 II-2011 III-2011 IV-2011 I-2012 II-2012 III-2012 IV-2012 I-2013 II-2013 III-2013 IV-2013 I-2014 II-2014 III-2014 IV-2014 I-2015 II-2015 III-2015 IV-2015 I-2016 II-2016 III-2016 IV-2016 Total house New house Existing house Source: PwC analysis on data provided by Italian IRS and Italian National Statistical Institute (INSI) 39

40 Residential Estimated total purchases* and average purchase value per unit by region 2015 vs Region Estimated Total Purchases 2016 million Average Purchase per unit 2016 Share Purchase by Region (%) Var. % Purchases 2015/16 Delta ( ) Average Purchases 2015/16 Abruzzo 1, , % 13.30% -2,100 Basilicata , % 16.00% 2,500 Calabria , % 11.60% 500 Campania 5, , % 14.00% -2,000 Emilia-Romagna 7, , % 19.10% -5,100 Friuli- Venezia Giulia 1, , % 16.60% -2,800 Lazio 12, , % 7.70% -11,500 Liguria 4, , % 23.40% -700 Lombardy 20, , % 21.80% 600 Marche 1, , % 11.10% -10,800 Molise , % 12.20% 3,900 Piedmont 6, , % 20.50% -2,700 Apulia 3, , % 18.50% 1,800 Sardinia 1, , % 21.60% 4,500 Sicily 3, , % 11.60% -800 Tuscany 7, , % 17.80% -4,100 Umbria , % 14.20% -2,100 Aosta Valley , % 26.40% 2,500 Veneto 8, , % 22.00% -1,500 Italy 88, , % 17.40% -2, Region Estimated Total Purchases 2015 million Average Purchase per unit 2015 Share Purchase by Region (%) Var. % Purchases 2015/16 Delta ( ) Average Purchases 2014/15 Abruzzo 1, , % 7.20% 0 Basilicata , % 14.00% 3,200 Calabria , % 0.10% 100 Campania 4, , % 4.80% -1,300 Emilia-Romagna 6, , % 5.40% -2,300 Friuli- Venezia Giulia 1, , % 10.80% 100 Lazio 11, , % -2.10% -10,300 Liguria 3, , % 3.30% 800 Lombardy 16, , % 10.30% 2,100 Marche 1, , % 6.10% -800 Molise , % -2.70% 2,800 Piedmont 5, , % 1.60% -4,600 Apulia 3, , % 3.30% 0 Sardinia 1, , % 6.20% -2,600 Sicily 3, , % 4.10% -800 Tuscany 6, , % 8.30% -5,100 Umbria , % 3.30% -800 Aosta Valley , % 4.30% 9,200 Veneto 6, , % 10.90% -1,900 Italy 75, , % 5.40% -1,800 Source: PwC analysis on data provided by Italian IRS 40 Italian Real Estate Market Overview

41 Key 2016 average residential purchase value per unit by region and variation compared to , % 139, % n.a 183, % 165, % 166, % 146, % 1. Average purchase value per unit in Delta regarding the average purchase value per unit 217, % 217, % 148, % 132, % 101, % 225, % 113, % 116, % 161, % 157, % 100, % 84, % 105, % *Estimated by the Italian IRS (Agenzia delle Entrate): based on the estimated surface area and the average municipal price from the OMI database, total residential purchases in terms of monetary volume were estimated. The total and average surface area for residential units transacted were estimated based on the number of rooms on the cadastral survey (vani catastali) and the average room (vano) size in the respective municipality. 41

42 As reported in the survey Sondaggio congiunturale sul mercato delle abitazioni in Italia based on 1,300 real estate agencies and updated at Q2 2017, the average discount on sales prices applied to the initial vendor has risen to 12.5%, from 12.4% of Q The average time needed for negotiation, occurring from the put on sale date and the purchase date, has increased to 7.7 months. The share of purchases financed via mortgages is 78.9% (down from 80.6% of the previous survey), with a similar trend seen in the principal territories of Italy, except in the South and Islands, where the figure has stabilised at 75.1% (76.9% in urban areas). 12.5% Average discount on sales price 7.7 Average amount of months for negotiation until the sale date Negotiation, sale time and finance for residential units Q Relationship between purchase price and bid price Sale time and mortgages over 30% 20 to 30% Lower 10 to 20% 5 to 10% less then 5% Equal or higher Average discount Months occurring from the put up for sale to the purchase date Purchases (%) fi ce mortgage Amount of loans vs market value of properties Geographic distribution North West 3.2% 12.8% 36.0% 33.7% 8.2% 6.1% 12.4% % 74.3% Urban areas 1.6% 11.4% 37.1% 40.1% 4.9% 4.9% 12.1% % 72.8% not urban areas 4.7% 14.2% 34.9% 27.2% 11.6% 7.4% 12.8% % 75.7% North East 1.4% 4.0% 42.6% 35.9% 10.5% 5.6% 10.8% % 76.5% Urban areas 0.0% 0.5% 42.2% 37.3% 9.9% 10.2% 9.5% % 75.1% not urban areas 1.8% 5.1% 42.8% 35.5% 10.7% 4.1% 11.2% % 76.9% Center 6.3% 9.4% 48.2% 28.3% 1.7% 6.1% 13.9% % 73.1% Urban areas 3.2% 9.6% 50.4% 28.9% 2.1% 5.8% 13.3% % 70.0% not urban areas 9.1% 9.2% 46.3% 27.7% 1.4% 6.3% 14.5% % 75.8% South and Islands 2.5% 11.3% 43.6% 32.0% 6.0% 4.6% 12.8% % 74.4% Urban areas 1.1% 4.5% 33.8% 45.8% 6.7% 8.2% 10.2% % 73.3% not urban areas 3.1% 14.0% 47.6% 26.4% 5.7% 3.2% 13.9% % 74.9% Population resident urban areas (>250k inhabitants) noturban areas urban areas (>500k inhabitants) not metropolitan areas 1.8% 8.5% 41.5% 36.9% 4.9% 6.3% 11.9% % 72.4% 4.5% 10.3% 42.2% 29.7% 7.9% 5.4% 12.9% % 75.9% 2.4% 10.0% 41.1% 35.9% 4.4% 6.2% 12.3% % 71.9% 3.9% 9.4% 42.3% 31.1% 7.8% 5.5% 12.6% % 75.6% Total 3.4% 9.6% 41.9% 32.6% 6.7% 5.7% 12.5% % 74.5% Q % 12.8% 36.7% 30.5% 10.7% 6.0% 12.4% % 73.2% Q % 8.3% 38.2% 32.4% 12.0% 6.0% 11.6% % 75.5% Q % 15.0% 36.1% 27.2% 10.6% 6.8% 13.0% % 74.7% Q % 20.0% 42.1% 19.0% 10.4% 4.2% 14.5% % 73.1% Q % 16.2% 40.7% 24.6% 10.4% 3.6% 13.8% % 69.3% Source: PwC analysis on Bank of Italy data Sondaggio congiunturale sul mercato delle abitazioni in Italia 42 Italian Real Estate Market Overview

43 The graph reports the series of yearly percentage variations by quarter since 2004, within not residential segments. The recovery of the market is clearly shown starting from 2009, along with a continuing positive trend for all the not residential segments, even though it was suddenly interrupted in 2011; as a matter of fact, from the beginning of 2013, there is a noticeable slow down of the negative trend, only partially confirmed in In 2015 indeed, the non residential segment suffered a fall of the industrial asset class, throughout almost all the quarters of the year, except for the third one. For what concerns the office market, a slight positive trend was registered, resulting in a sharp growth in Q4; on the opposite, the retail markets have quickened particularly during the central quarters, then slackened later. During 2016, the not residential segment consistenly grew across all asset classes over year before, further confirming the market recovery. Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Office Retail Industrial Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Office -9,2% -10,6% -11,7% -12,4% -10,3% -6,9% -2,0% 0,3% -6,4% -3,8% 0,9% 0,9% 1,3% 14,7% 31,3% 5,9% 16,7% 2,9% Retail -8,6% -2,6% -8,1% -9,7% 4,7% -5,0% 9,0% 14,1% -5,2% 10,3% 7,4% -2,8% 14,3% 12,9% 23,3% 16,2% -8,3% -5,5% Industrial -5,9% -6,5% -9,4% -8,8% -0,7% 10,4% 1,6% 3,1% -7,1% -8,0% 2,2% -1,3% 7,0% 28,7% 24,5% 25,4% 9,8% 3,4% Source: PwC analysis on data provided by Italian IRS 43

44 The office sector, during H in terms of percentage, recorded the most significant growth in the non residential sector at +9.2%. The office sector registered 4,846 NNT, though less than the other two segments (retail and industrial). The retail sector recorded an 6.1% decrease in the number of transactions over the same period the year before. During H1 2017, the industrial sector (logistics and manufacturing) registered 5,325 NNT showing an increases of 6.1% over the same period of the previous year. There are significant differences in the macro territories for industrial growth, which ranges between -5.4% in the South and 11.1% in the Center. The North of Italy accounts for most of the transactions (almost 66% of total sales). NNT H Q Q Q Q Q Q H H Var. % Q Var. % Q Var. % H North 1,186 1,413 1,579 1,918 1,385 1,455 2,599 2, % 3.0% 9.3% Center , % 4.4% 19.3% South % 2.0% -0.9% 2,025 2,412 2,509 3,000 2,363 2,483 4,437 4, % 2.9% 9.2% NNT H Retail Q Q Q Q Q Q H H12017 Var. % Q Var. % Q Var. % H North 3,309 3,619 3,633 4,442 2,843 3,400 6,928 6, % -6.1% -9.9% Center 1,451 1,700 1,620 2,051 1,434 1,629 3,151 3, % -4.2% -2.8% South 2,016 2,279 1,935 2,531 1,938 2,147 4,295 4, % -5.8% -4.9% 6,776 7,598 7,188 9,024 6,216 7,177 14,374 13, % -5.5% -6.8% NNT H Industrial Q Q Q Q Q Q H H12017 Var. % Q Var. % Q Var. % H North 1,396 1,867 1,710 2,371 1,536 1,997 3,263 3, % 7.0% 8.3% Center % 16.5% 11.1% South % -17.0% -5.4% 2,121 2,897 2,565 3,705 2,329 2,996 5,018 5, % 3.4% 6.1% Source: PwC analysis on data provided by Italian IRS 44 Italian Real Estate Market Overview

45 45

46 Market of residential rental trends Number of houses rented 2016 (%) Rental and leases trend % 23% 2% 57% ORD_T ORD_L AGE_S Leasing rents ( ) 2016 (%) 17% 24% 3% 56% AGE_C The table summarises the main national data for new residential lease contracts registered during 2016, divided by different types of contracts. On the whole, the houses rented during 2016 accounted for 5.6% of the potential available stock, which corresponds to an overall amount of rentals of 4.6 billion and 76 million sqm. The average surface of the rented houses is approximately 91.5 sqm, and the average yearly rent is equal to 60.7 per sqm, 0.3% higher than The composition of the residential market shows that 57% of rentals are ordinary long term agreements, in terms of both number of houses rented and total rents ( ). The segment of temporary ordinary agreements and the agreed upon one represent respectively about 17% and 23% of the market. Rents for students during 2016,came to just over 2% of the total. The average yearly rent per sqm decreased across all market segments, except ordinary - long term, with contracts for students recording the highest average rent (70.6 /sqm) and ordinary long term agreed upon agreements are the lowest (58.9 /sqm). ORD_T ORD_L AGE_S AGE_C Total 2016 Amount of units rented 142, ,744 20, , ,477 IML Rental market strength 1.0% 3.2% 0.1% 1.3% 5.6% Total surface rented (sqm) 12,2 44,1 1,9 17,7 75,9 Average unit surface rented (sqm) 86,2 92,6 94,1 92,4 91,5 Total amount of rents 2016 ( mln) 772,0 2,594,6 135,4 1,109,8 4,611,7 ORD_T ORD_L AGE_S AGE_C Average yearly rent 2016 ( /sqm) 63,0 58,9 70,6 62,8 60,7 Average yearly rent Var. % 2015/16-0.5% 0.5% -0.1% -0.1% 0.3% Market segments for rentals: ORD_T: ORDINARY TEMPORARY: not facilitated agreements, from 1 to 3 years; this segment belongs to the set of temporary and not facilitated agreements. ORD_L: ORDINARY LONG TERM: agreements not facilitated, whose duration is more than 3 years; this segment belongs to the rental market of long term leases. AGE_S: FACILITATED STUDENTS: facilitated agreements, whose duration is included between 1 and 3 years; this segments belongs to the market of facilitated leases for students. AGE_C: FACILITATED AGREED UPON: agreed upon contracts, facilitated and whose duration is higher than 3 years; this segments belongs to the set of agreements facilitated and agreed upon. Source: PwC analysis on data provided by Italian IRS 46 Italian Real Estate Market Overview

47 The temporary rental market in 2016 accounted for 142,000 houses, 1% of the potential stock for lease, for a total surface rented of 12.2 million sqm. The overall yearly rents accounted for almost 772 million and the yearly average rent per sqm is 63.3, 0.50% lower than Considering only the dwellings in the main cities, the annual average rent is 101 /sqm. The highest rents per sqm for temporary contracts are recorded in Rome, Milan and Florence, which are all above the overall average. Milan remains the most active market (IML by 2.2%), although it recorded a decrease of 9% in the average yearly rent price. Average rent per sqm also significantly decreased in Naples as well. Houses rented 2016 (#) IML Rental market strength Total surface rented (sqm) Average unit surface rented (sqm) Total yearly rented 2016 ( mln) Average yearly rent 2016 ( /sqm) Average yearly rent var, 2015/2016 (%) North West 50, % 3,920,365 77,1 278,8 71,1-0.80% North East 18, % 1,577,820 86,9 98,4 62,4-1.60% Center 36, % 3,217,014 89,0 237,4 73,8-0.80% South 24, % 2,358,973 96,3 103,4 43,8-0.10% Islands 12, % 1,178,612 94,7 54,0 45,8 0.50% Total 142, % 12,252,784 86,3 772,0 63,3-0.50% Rome 8, % 680,639 80,7 79,5 116,8 0.5% Milan 7, % 561,549 71,0 64,8 115,4-9.2% Naples 1, % 130,601 87,0 7,8 60,1-4.1% Turin 3, % 256,395 69,6 21,1 82,3 1.5% Palermo 1, % 160,937 94,9 8,5 52,6 2.4% Genoa 1, % 121,874 78,3 10,1 82,6-0.8% Bologna % 78,988 84,2 6,9 87,9 2.6% Florence 2, % 201,099 88,4 22,7 112,8 2.5% Total 27, % 2,192,082 78,3 221,4 101,0-2.1% Number of houses rented Average yearly rent 17% 9% 36% 6% 3% 6% 8% 30% Florence Bologna Genoa % Palermo Turin % 13% 5% 28% Naples 60.1 North West South North East Islands Center Rome Turin Bologna Milan Palermo Florence Naples Genoa Milan Rome Source: PwC analysis on data provided by Italian IRS 47

48 Ordinary long term market 2016 In 2016, the long-term ordinary market accounted for 475,000 units rented, with an IML equal to 3.2% and a total surface of 44 million sqm. The total annual rent amounted to almost 2.6 billion and the average annual rent per sqm is 58.9, up 0.5% compared to Considering only the dwellings in the main cities, the annual average rent per sqm is 106.3, up 2.2% compared to In addition, the long term ordinary market is particularly dynamic in Milan, with an IML of 8.6% and an average annual rent per sqm close to 139 /sqm, up 5.4% from the previous year and the highest among the main cities. For all the main cities collectively, the rent grew an average of 2.2% compared to 2015, but some cities showed a decrease. Houses rented 2016 (#) IML Rental market strength Total surface rented (sqm) Average unit surface rented (sqm) Total yearly rented 2016 ( mln) Average yearly rent 2016 ( /sqm) Average yearly rent var. 2015/2016 (%) North West 187, % 15,780,734 84, ,0 67,6 2.50% North East 83, % 7,851,482 94,4 435,5 55,5-0.30% Center 87, % 8,013,297 92,0 569,1 71,0-1.80% South 86, % 9,017, ,4 381,9 42,4-0.30% Islands 32, % 3,383, ,5 141,0 41,7 0.30% Total 475, % 44,046,504 92, ,6 58,9 0.50% Rome 22, % 1,832,363 83,0 211,9 115,6-2.1% Milan 31, % 2,239,177 70,8 310,7 138,8 5.4% Naples 10, % 844,613 84,0 59,8 70,8-0.1% Turin 10, % 726,832 71,8 56,2 77,4-1.4% Palermo 5, % 576,469 96,9 30,7 53,2 0.1% Genoa 2, % 194,506 80,9 12,7 65,2-0.5% Bologna 5, % 422,915 74,2 43,8 103,5 3.0% Florence 3, % 323,950 83,8 35,1 108,3 3.5% Total 91, % 7,160,825 78,0 760,9 106,3 2.2% Number of houses rented Average yearly rent 18% 7% 6% 6% 3% 4% 24% Florence Bologna % 11% Genoa Palermo % 18% 11% 34% Turin Naples North West South North East Islands Center North West South North East Islands Center Milan Rome Source: PwC analysis on data provided by Italian IRS Italian Real Estate Market Overview

49 The portion of agencies stating to have leased at least one property remained basically unchanged from the previous period (83.0% from 81.2%). In Q3 2017, the share of operators expecting rents to remain unchanged has fallen to 81.7% (from 84.1%), as a result of a slight increase in the percentage of those expecting an increase. Trend of Leases Q The average discount margin on rents compared to the initial request of the lessor has decreased to 3.6% (from 5.0% in the previous quarter). The difference between the agents opinions on the outlook of new job mandates (negative and positive) again increased (to -13.8% from -7.7%) as a result of less agents expecting the number of mandates to remain flat (from 65.0% to 57.6%). % of rents via agency Q2 Market Rents Q vs Q Expected rents Q3 vs Q Amount of mandates Q2 vs Q negative positive negative positive negative positive Average discount on rents Geographic distribution North West 83.7% 14.7% 79.0% 6.3% 4.5% 82.0% 13.5% 30.7% 56.5% 12.9% 3.6% urban areas 83.3% 10.4% 83.6% 6.1% 4.5% 83.3% 12.2% 27.2% 56.7% 16.1% 3.4% non-urban areas 84.1% 19.4% 74.1% 6.5% 4.6% 80.5% 14.9% 34.0% 56.2% 9.7% 3.8% North East 87.3% 8.5% 82.9% 8.6% 6.0% 81.8% 12.2% 27.7% 59.1% 13.3% 2.6% urban areas 86.4% 8.6% 73.8% 17.6% 5.3% 77.5% 17.2% 33.4% 49.3% 17.3% 2.0% non-urban areas 87.5% 8.4% 85.9% 5.7% 6.2% 83.1% 10.7% 26.0% 61.8% 12.1% 2.7% Center 80.3% 32.0% 61.1% 6.9% 12.8% 81.0% 6.2% 31.0% 59.3% 9.7% 4.1% urban areas 87.1% 37.2% 57.0% 5.8% 19.0% 74.8% 6.2% 24.2% 64.0% 11.8% 4.9% non-urban areas 74.1% 26.4% 65.5% 8.1% 6.2% 87.6% 6.2% 36.7% 55.4% 7.8% 3.1% South and Islands 79.8% 25.2% 68.5% 6.2% 6.2% 82.3% 11.5% 31.2% 55.3% 13.4% 4.5% urban areas 90.7% 24.8% 71.3% 3.9% 6.0% 85.0% 9.0% 28.5% 52.2% 19.3% 6.0% non-urban areas 75.2% 25.5% 67.1% 7.4% 6.3% 81.0% 12.7% 32.2% 56.5% 11.3% 3.7% Residential "urban areas (>250k inhabitants) " "non urban areas 85.7% 19.8% 72.9% 7.3% 9.1% 80.2% 10.7% 27.2% 57.5% 15.3% 4.0% 81.2% 18.5% 74.8% 6.7% 5.7% 82.9% 11.4% 32.1% 57.6% 10.3% 3.3% "metropolitan areas (>500k inhabitants) " 85.8% 22.5% 72.6% 4.9% 10.2% 79.6% 10.2% 26.3% 58.1% 15.6% 4.2% "non metropolitan areas 81.8% 17.3% 74.6% 8.0% 5.6% 82.8% 11.6% 31.8% 57.4% 10.8% 3.3% Total 83.0% 19.1% 74.0% 7.0% 7.2% 81.7% 11.1% 30.2% 57.6% 12.2% 3.6% Q % 20.5% 73.8% 5.7% 10.7% 84.1% 5.2% 25.2% 65.0% 9.8% 5.0% Q % 15.7% 81.1% 3.2% 8.2% 88.8% 3.0% 16.9% 73.9% 9.2% 5.2% Q % 19.7% 74.7% 5.6% 11.3% 86.1% 2.6% 23.8% 65.2% 10.9% 5.8% Q % 33.2% 62.9% 3.9% 17.3% 78.4% 4.3% 28.2% 60.5% 11.4% 6.9% Q % 31.2% 64.2% 4.6% 13.1% 83.4% 3.5% 23.3% 63.9% 12.8% 6.5% Source: PwC analysis on data provided by Bank of Italy Economic survey on the housing market in Italy 49

50 50 Italian Real Estate Market Overview

51 Investments in construction Key data -0.1% Investments in residential constructions 2017 vs % Investments in residential constructions 2017 vs % Investments in residential refurbishment 2017 vs Investments in constructions The Istat Index regarding building constructions, adjusted for calendar effects, underlines that there was a decrease of 1.2% during the first 4 months of 2017 compared to the same period the previous year. In 2016, investments in new residential houses were 19.7 billion, which was 1.8% lower than % During the same year, the investments for upgrading the housing stock have been estimated at billion. The investments in private non-residential buildings amounted to 33.4 billion (+0.8% compared to 2015), while those in public non-residential buildings amounted to 23.6 billion (-4.5% in real terms). 30% % 53% 70% Residential Non residential Non residential - Public Residential - New Buildings Residential - Refurbishment New houses Total houses Extraordinary maintenance Total investments (Mln ) 2016 Milion Euro * 2017* 2018* Var. % in quantities 122, % -1.0% -0.6% 0.2% 1.5% Residential 65, % -0.3% 0.2% -0.1% 1.0% Residential - New Buildings Residential - Refurbishment 19, % -2.1% -1.8% -1.5% 1.0% 46, % 0.5% 1.1% 0.5% 1.0% Non residential 56, % -1.8% -1.5% 0.6% 2.1% Non residential - Private Non residential - Public 33, % -4.3% 0.8% 0.9% 0.7% 23, % 1.9% -4.5% 0.2% 4.0% * Elaboration by NAB Source: PwC analysis based on NAB data 51

52 Year % Jan- Apr % Jan Feb Mar Apr May Jun Jul Ago Sept Oct Nov Dec Jan Feb Mar Apr Total investments (Mln ) -36,4% Residential -28,6% Residential - New buildings -63,4% Residential - Refurbishment 20,4% Non residential -43,5% Non residential - Private -38,3% Non residential - Public -49,4% Source: PwC analysis based on NAB data 52 Italian Real Estate Market Overview

53 Key data mld Investments in constructions in % Investments in constructions 2016 vs mld Forecast NAB investments in constructions in % Forecast NAB investments in constructions 2017 vs 2016 Forecasting construction investments for buildings For 2017, investments in the construction sector for buildings (net of the ownership transfer costs) are forecasted at billion at the national level, which is a 0.2% increase in real terms (+1.3% in current values) compared to In 2018, there could be a recovery for the construction sector; according to forecasts prepared by NAB, construction investments could increase by 1.5% in real terms. Because of government incentives that have been extended, additional investments of 1.64 billion are expected of which 450 million in the housing sector (new and renovations), 50 million in the private non residential sector and 1.14 billion in the sector of public works. In this context, forecasts include an increase of 4.0% with respect to 2017 for public works investments, an increase of 1.0% for extraordinary maintenance works on residential stock, and an increase of 0.7% for private non residential building investments. Investments in new residential houses are expected to grow, thanks to the first positive sign recorded in 2016 in building permits relating to new homes (+4.5% compared to the previous year). For this sector, a 1.0% increase in real terms is forecasted during To help the construction sector recover, an extension of the measure to deduct 50% of IVA to purchase energy class A or B houses (introduced by Legge di Stabilità 2016 and expiring on 31 December) would be fundamental. Construction investments for buildings: change in quantity with respect to the previous year Construction investments for buildings (Mln ) * 2018* * 2017* 2018* Current values Buildings 154, , , , , , , , ,718 Houses 78,379 75,166 72,888 70,617 67,955 65,444 65,864 66,524 67,928 - new houses (*) 37,863 32,945 29,710 26,087 22,539 19,992 19,716 19,634 20,048 - exceptional maintenance (*) 40,517 42,222 43,179 44,530 45,416 45,452 46,148 46,889 47,879 Non-residential 76,414 80,170 72,032 63,426 59,016 58,140 56,965 57,944 59,790 - private (*) 42,705 48,470 43,564 37,671 34,748 33,274 33,352 34,022 34,637 - public (*) 33,708 31,699 28,467 25,755 24,268 24,866 23,614 23,922 25,152 Source: PwC analysis on data from NAB (*) Elaboration by NAB 53

54 For nine years now, founding for new investments in real estate sector is decreasing. In the first quarter of 2017 the flow of new mortgages for residential investments are slightly increasing: +0.3 with respect to the previous year. This positive sign it s not enough for changing the negative trend. The reduction in residential mortgages has been particularly strong: in billion euro have been granted while just 8 billion euro have been provided in 2016, that means a decrease of 74%. In the first quarter of 2017 the founding in non-residential sector has registered a slight decrease by -0.2% after a strong drop in 2016 of -14.5%. These negative results were registered after an unexpected increase of more than 60% in Flows of new founding provided for real estate sector in Italy ( mln) Q 2017 Residential 31,427 29,802 24,407 23,458 19,418 16,090 11,212 9,141 8,172 8,169 1,740 Non-Residential 21,091 18,708 16,543 14,668 11,729 7,130 5,584 5,960 9,972 8,528 2,126 Var. % compared to the same period in the previous year Residential Non-Residential Var. % Flows of new financing for residential investments in Italy (Var. % Q vs Q3 2016) Flows of new financing for non residential investments in Italy (Var. % Q vs Q3 2016) Molise 91 Umbria Aosta Valley Tuscany Basilicata Campania Trentino A. A. Sardinia Sicily Lombardy Italy Veneto Friuli V. G. Liguria Piedmont Abruzzo Lazio Apulia Calabria Marche E. Romagna Molise Umbria -12 Aosta Valley Tuscany 6.8 Basilicata Campania Trentino A. A. Italy Sardinia Sicily Lombardy Veneto Friuli V. G. -72 Liguria 20.1 Piedmont Abruzzo 23 Lazio 93.2 Apulia 0.3 Calabria Marche E. Romagna Source: PwC analysis based on NAB data 54 Italian Real Estate Market Overview

55 There were 53,791 building permits authorized in 2014 for new residential buildings and for extension works, which was 11.8% lower compared to This represents the ninth consecutive year in a row with a decline. If comparing 2014 with 2005 when 305,706 permits were recorded, there was an 82.4% decrease (-79.8% in volume terms). NAB forecasts 47,500 permissions in 2015, which is 11.7% lower than Overall, from 2005 to 2015, the decrease of building permits is forecasted at 84.5%. The estimation takes into account the available Istat data regarding the requirements for the construction of new residential buildings, which represents circa 90% of total permissions (new constructions and extension works). Residential buildings (new constructions and extensions) Construction permits Number 400, , , , , * Number Year New Buildings Extension Works Total ,602 27, , ,455 28, , ,271 26, , ,783 23, , ,587 18, , ,409 9, , ,391 8, , ,058 8,759 90, ,408 7,592 61, ,788 7,003 53,791 Var. % compared to previous year Year New Buildings Extension Works Total Var. % Source: PwC analysis based on NAB data 55

56 Residential buildings (new buildings and extension works) Construction permits Volume and Number (n.i = 100) Extensions New Building Total Extensions New Building Total Source: PwC analysis based on NAB data 56 Italian Real Estate Market Overview

57 In 2015, the number of forecasted residential building permits is one of the lowest levels that has ever been reached. Actually, it is the lowest amount since the Second World War, when, in 1936, 58,668 residential building permits were authorized. In 2014, the decrease in building permits (-11.8%) continues to be more intense for new residential buildings (-12.4%) compared to a decrease of -7.8% for extension works. This drastic decrease recorded between 2005 and 2014 at national level (-82,4%) involves all regions of Italy with a decline of -83.4% in the Center and North-West, -83.3% in the North- East (-85.5% if we consider that the decrease in this area started one year before the national average), and -77% in the South and Islands. Particularly in 2014, the decrease was more intense than the average in North-West (-14,3% with respect to 2013) and in North-East (-12,6%), compared to South (-11%) and Center (-7,9%). Residential buildings (new buildings and extension works) Construction permits Regions Cumulated var. % 2014 compared to the peak Piedmont 11,958 13,215 16,348 17,466 17,733 17,381 3, Aosta Valley Lombardy 44,224 41,320 61,909 64,251 62,455 61,888 10, Trentino Alto Adige 5,740 5,236 8,769 9,169 7,322 6,274 3, Veneto 24,017 27,993 40,713 38,562 34,952 31,028 6, Friuli Venezia Giulia 4,841 5,796 8,057 7,865 7,169 6,511 1, Liguria 2,056 1,693 3,364 3,677 3,067 2, Emilia-Romagna 19,224 22,592 33,508 34,434 29,045 25,893 3, Tuscany 10,500 10,044 14,423 17,529 14,143 13,294 1, Umbria 3,416 3,132 3,635 5,344 5,671 5, Marche 5,477 5,890 8,720 8,807 8,104 8,823 1, Lazio 11,315 15,446 24,022 23,230 25,500 23,243 6, Abruzzo 5,534 4,362 7,302 7,872 7,555 8,785 1, Molise 1, ,309 1,828 1,164 1, Campania 7,475 8,650 12,968 12,262 11,256 13,130 4, Apulia 12,052 11,569 16,428 17,835 15,511 16,280 3, Basilicata 2,193 1,562 1,730 1,578 2,708 1, Calabria 8,314 5,872 7,742 8,514 9,033 8,706 1, Sicily 15,656 10,927 13,646 14,050 14,053 14,469 3, Sardinia 10,740 7,147 11,270 10,805 12,706 9,794 1, Italy 206, , , , , ,702 53, North-West 58,757 56,539 82,256 86,022 83,999 82,120 14, North-East 53,822 61,617 91,047 90,030 78,488 69,706 13, Center 30,708 34,512 50,800 54,910 53,418 50,583 9, South and Islands 63,325 50,947 72,395 74,744 73,986 74,293 17, Source: PwC analysis based on NAB data 57

58 Residential construction permits: focus on regions 2014 (number) Var. % compared to the previous year Var. % 2014/ Italy 53, North-West 14, North-East 13, Center 9, South and Islands 17, New Buildings Regions Piedmont 9,544 11,673 14,555 15,600 15,442 15,252 2,875 Aosta Valley Lombardy 39,722 37,276 55,308 57,985 55,234 55,484 9,375 Trentino Alto Adige 4,650 4,446 7,236 7,883 6,230 5,127 2,350 Veneto 20,857 25,676 37,755 35,432 31,680 28,347 4,845 Friuli Venezia Giulia 4,248 5,266 7,378 7,136 6,505 5, Liguria 1,767 1,503 2,820 3,108 2,553 1, Emilia-Romagna 17,517 21,049 31,616 32,680 27,423 24,382 2,898 Tuscany 9,196 9,315 13,314 16,293 13,051 12,398 1,152 Umbria 2,960 2,782 3,198 4,865 5,223 4, Marche 5,022 5,528 8,200 8,239 7,420 8,239 1,030 Lazio 10,318 14,724 22,803 22,284 24,317 22,153 5,526 Abruzzo 4,744 3,732 6,290 6,861 6,614 7,684 1,191 Molise 1, ,234 1,640 1,034 1, Campania 6,458 7,771 11,324 10,779 9,747 11,487 3,104 Apulia 10,112 10,180 14,564 16,003 13,882 14,671 3,036 Basilicata 1,829 1,389 1,534 1,399 2,521 1, Calabria 7,033 5,235 6,874 7,631 7,967 7,729 1,566 Sicily 14,045 9,861 12,156 12,829 12,769 12,842 3,527 Sardinia 8,604 5,960 9,665 9,362 11,135 8,581 1,347 Italy 180, , , , , ,271 46,788 North-West 51,540 50,732 73,244 77,286 73,937 72,979 13,019 North-East 47,272 56,437 83,985 83,131 71,838 63,846 11,074 Center 27,496 32,349 47,515 51,681 50,011 47,641 8,207 South and Islands 53,975 44,906 63,641 66,504 65,669 65,805 14,488 Source: PwC analysis based on NAB data 58 Italian Real Estate Market Overview

59 Extension Regions Piedmont 2,414 1,542 1,793 1,866 2,291 2, Aosta Valley Lombardy 4,502 4,044 6,601 6,266 7,221 6, Trentino Alto Adige 1, ,533 1,286 1,092 1, Veneto 3,160 2,317 2,958 3,130 3,272 2,681 1,159 Friuli Venezia Giulia Liguria Emilia-Romagna 1,707 1,543 1,892 1,754 1,622 1, Tuscany 1, ,109 1,236 1, Umbria Marche Lazio , ,183 1, Abruzzo ,012 1, , Molise Campania 1, ,644 1,483 1,509 1,643 1,197 Apulia 1,940 1,389 1,864 1,832 1,629 1, Basilicata Calabria 1, , Sicily 1,611 1,066 1,490 1,221 1,284 1, Sardinia 2,136 1,187 1,605 1,443 1,571 1, Italy 26,329 19,191 28,113 27,104 28,436 26,431 7,003 North-West 7,217 5,807 9,012 8,736 10,062 9,141 1,246 North-East 6,550 5,180 7,062 6,899 6,650 5,860 2,116 Center 3,212 2,163 3,285 3,229 3,407 2, South and Islands 9,350 6,041 8,754 8,240 8,317 8,488 2,739 Source: PwC analysis based on NAB data 59

60 60 Italian Real Estate Market Overview

61 Real estate leasing Key data 3.8 billion Real Estate leasing % % leasing Existing estates > 2.5 mln 10.7%% leasing Existing estates > 0.5 and <= 2.5 mln 6.7% Growth of leasing volumes in 2014 Real Estate leasing performances A tax regulation issued in 2014 redrew the best practices of Real Estate leasing; as a result of this new regulatory framework, the total leasing volumes of the year grew by 40%. In 2016, the total amount of leasing stabilised at a level of 3.8 billion. In 2016 the trend has been confirmed in line with 2015, with an increase of 6.7% in the number of contracts, that means units. The monthly dynamic of these values is similar to the one registered in 2015, underlying higher values in June, July and December. The value of existing estates is higher than the value of in progress estates, except in February. The difference between the two sectors is lower compared to the one in 2015, both in absolute terms and in percentage. Leasing financing stocks e trends in non residential sectors The analysis of different leasing classes by amount reveals a slight decrease for existing estates valued > 2.5 million (-8.1%). On the contrary, projects in progress valued < 0.5 million as well as those between 0.5 and 2.5 million respectively increased by 1.1% and 1.3%. Also to be build estate valued > 2.5 million increased (+5.2%). Real Estate leasing (existing and in progress properties) by total amount 27% 14% 24% In 2016, to in progress estates leasing brushed up against 40% of the sector. 11% 2% 23% Existing estates <= 0,5 mil. Existing estates > 0,5 and <= 2,5 mil. Existing estates > 2,5 mil. In progress estates <= 0,5 mil. In progress estates > 0,5 and <= 2,5 mil. In progress estates > 2,5 mil Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 In progress estates Existing estates Total estates Source: PwC analysis on data provided by OMI Agenzia delle Entrate 61

62 Key data The dynamics of leasing, divided by destination of the financed estate, underlines the stability of volumes in the industrial sector. Leasing trends by asset class (% variation 2016 vs. 2015) 120% The industrial sector registered the best dynamic in the contracts number (+19.8%). Other positive trends are registered in office and tourist sectors (both +2.9%). 20% 19.8% 2.8% 2.9% There was an important increase in industrial sector both with respect to 2015 and compared to the other destinations % -29.0% +19.8% Growth in number of contracts in industrial sector -80% Industrial Retail Office Residential Public Administration Percentage of lease agreements by asset class (value) Percentage of lease agreements by asset class (number of contracts) 0.2% 10.0% 3.6% 0.7% 4.7% 3.6% 10.7% 15.8% 49.8% 47.7% 25.7% 27.8% Industrial Retail Office Residential Industrial Retail Office Residential c e e e c e e e Source: PwC analysis on data provided by OMI Agenzia delle Entrate 62 Italian Real Estate Market Overview

63 Investment trends in the real estate market Key data - H Investments in H reached a level of 5.7 billion, 58% more compared to the same period in Foreign capital still represents the greater portion of investments on the total with 80% of investments have cross-border origins, mainly from North America and France. The share of domestic capital is almost 1 billion invested in the Italian real estate market. Investments by sector H % 17% 35% Italian investments in 2016 In the Italian market operators with different risk profiles are present and they are interested in different investment typologies, which mainly include office, retail, industrial, and hotels. Milan and Rome are the primary markets, representing 53% of total transaction volumes. Thanks to some major transactions, investments in Rome increased by 53% compared to 2015, but still only reached 55% of the volumes invested in Milan. 7% 7% 12% 5% 44% The high level of competition for the main products has generated a reduction of prime yields in most markets. The logistic and office sectors remain stable compared to the previous quarter. Office Prime Roma Office Prime Milano High Street Prime Shopping Center Prime Prime Logistic Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 4,00% 4,00% 4,00% 4,00% 4,00% 4,00% 3,50% 3,50% 3,75% 4,00% 4,00% 4,00% 3,15% 3,15% 3,25% 3,50% 3,50% 3,50% 4,90% 4,90% 5,00% 5,00% 5,00% 5,00% 6,00% 6,00% 6,25% 6,25% 6,40% 6,50% Source: PwC analysis on CBRE data 21% 13% 25% Office c e O e e Office e e O e Source: PwC analysis on CBRE data 63

64 Italian investments H H Total investments ( mln) 4,213 4,383 1,744 5,130 5,221 8,100 9,100 5,732 Product Office 45% 35% 43% 29% 27% 40% 44% 35% Retail 37% 55% 27% 44% 45% 18% 25% 21% Industrial 4% 4% 1% 4% 8% 2% 7% 13% Tourist 7% 3% 17% 10% 11% 8% 7% 13% Mixed 3% 1% 4% 12% 0% 6% 12% Others 4% 3% 9% 1% 9% 26% 6% 17% Investors Italian Investors 73% 83% 74% 30% 22% 27% 40% 20% Foreign Investors 27% 17% 26% 70% 78% 73% 60% 80% Typology RE Italian funds 29% 41% 38% 13% 15% 14% 17% Foreign open funds and German funds 7% 8% 4% 20% 38% 17% 26% Public RE funds and REITs 15% 9% 1% 10% 10% 19% 32% Assurance companies and pension funds 9% 2% 2% 8% 6% 4% 6% Private investors 11% 14% 15% 5% 1% 5% 2% Corporates 7% 10% 27% 12% 14% 5% 8% Others* 23% 17% 14% 32% 15% 36% 10% *Banks, public sector and so vereign funds included The office asset class continues to attract investors and represents 44% of the transaction volume in 2016, 23% more than 2015, while the largest gain was recorded in the logistics sector (+270%). The shortage of core products in Italy moves investors towards peripheral locations in primary markets and city centers of secondary markets, and also increases demand for value-added operations. Source: PwC analysis on data provided by BNP PARIBAS REAL ESTATE 64 Italian Real Estate Market Overview

65 Transaction and deal analysis The table reported herein shows recent top transactions in terms of value for each asset class. Key data 1,190 mln Value office 397 mln Value retail 623 mln Value shopping center 149 mln Value and logistics 627 mln Value hotel Office Retail Shoppig center Industrial and logistics Hotel Price ( million) Seller Purchaser Location Six-asset Portfolio, Various locations 300 Prelios SGR Ardian Real Estate Milan, Rome, Bari 1, Piazza Tommaso Edison, Milan 220 Ream SGR Hines SGR, Ream SGR Milan 91, Via Monte Rosa, Milan 220 Torre SGR AXA IM Real Assets Milan 6A, 8A, 10A, Via Nino Bonnet, Milan 140 n.a. Coima Res, Sovereign fund Milan Alliaz three-asset Portfolio, Milan 120 Allianz Kryalos SGR Milan 2, Via Cantù, Milan 110 c Hines SGR Milan 33, Via Moscova, Milan 80 Ubi Banca JP Morgan, Savillis Investment Management SGR 15, Via Montenapoleone, Milan 120 Fondo Ipi Milan Six-asset Portfolio, Various locations 120 Beni Stabili CBRE Global Investment Partners 59, Corso Buenos Aires, Milan 90 Sansedoni S.p.A. Meyer Bergman Milan 33-37, Corso Buenos Aires, Milan 55 Società Porta Rossa Meyer Bergman Milan 15-17, Via Torino, Milan 52 Private individuals Hines SGR Milan High-street retail Portfolio, Various locations 50 La Feltrinelli Coima SGR 58, Via Sparano da Bari, Bari 30 De Napoli Bel Real Estate Bari Le Befane Shopping Cneter, Rimini 244 Credit Suisse Asset Management Da Vinci Shopping Center, Fiumicino 208 Aig Lincoln Union Investment M&G Real Estate, Gwm Group, Pimco 22, Via Macello, Pompei 128 Sator SGR ECE Projektmanagement Naples Milan Bologna, Padua, Vicenza, Cuneo, Pisa, Novara, La Spezia, Treviso Milan, Florence, Rome, Pisa, Modena Rimini Fiumicino fie e e fe 62 Schroder Italy SIM S.p.A. CBRE Global Investment Partners Molfetta Le Vele Shopping Center, Desenzano del Garda 57 Garda SGR KKR, Coima SGR Desenzano del Garda Nuovo Borgo Shopping Center, Asti 52 Warburg HiH Invest Real Estate GmbH Barings Real Estate Asset Portfolio, Various locations 50 Castello SGR Blackstone, Kryalos SGR Industrial asset, Rolo 40 n.a. Kryalos SGR Rolo 13, Strada Provinciale, Gorgonzola 24 Polis Fondi SGR AXA IM Real Assets, Columbus Real Estate Industrial asset, Carisio 23 BNP Paribas Reim SGR Institutional investor Carisio Asti Cherasco, Cornaredo, Liscate, S. Giuliano Milanese, Massalengo, Veronella Gorgonzola Località Interporto, Bentivoglio 12 n.a. Prologis Bentivoglio Hotel Excelsior, Rome 222 n.a. Katara Hospitality Rome Hotel Excelsior and St. Regis, Florence 190 Starwood Hotels & Resorts Nozul H&R Boscolo Exedra, Milan 102 n.a. Marseglia Family Milan Aldrovandi Villa Borghese, Rome 62 Fratelli Ossani Dogus Group Rome Hotel Nhow, Milan 51 Kryalos SGR Cattolica Assicurazione Milan Florence Source: PwC analysis 65

66 Key data Almost 5.7 billion has been invested in H1 2017, +55% compared to the same period of the previous year. The investment volume registered during the last quarter is 122% higher than the average of all quarters for the last four years. The domestic component of the capital invested continues to grow, accounting for 1.1 billion during H1 2017, which is 500 million more than the same quarter the previous year (+81%). However, the main source for real estate investments in Italy is still represented by foreign capital. Investments in the industrial and logistic sectors have grown by 291% compared to 2016, while the office sector has increased by 25% of the total half year volume, remaining the favourite asset class. 4.5 bln Foreign investments in Italy H Investments in Italy from 2006 to H ( mln) H vs H % 4,000 3,000 2,000 1,000 0 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Investments in Italy yearly aggregated trend ( mln) 12,000 10,000 8,000 6,000 Investments in Italy ( mln) H H Var. Y-o-Y Rome 806 1,000 24% Milan 1,500 1,800 20% Other markets 1,400 2, % ITALY 3,706 5,732 55% Foreign Capital 3,072 4,586 67% Domestic Capital 634 1,146 81% Foreign capital share (%) on total 83% 80% 4,000 2, H Source: PwC analysis on data provided by CBRE 66 Italian Real Estate Market Overview

67 New stock of shopping centers (GLA > 10,000 sqm) and projects in progress 1,200 1, Retail investments by typology H % 43% Retail Industry H Supply In the first quarter of the year two projects have been completed for a total GLA of 62,000 sqm. The projects are Torino Outlet Village (Settimo Torinese) and the shopping center Adigeo (Verona). A positive trend was confirmed through six projects reached completion in the second quarter for a total GLA of 115,700 sqm. Three of these were new openings, the shopping center Brinpark (Brindisi), Parco Fiore (Treviso) and a new family destination outlet DeltaPo (Rovigo), for a GLA of 59,700 sqm, and three were extension, Orio Center (Bergamo), ESP (Ravenna), and the Veneto Designer Outlet (Veneto) for a GLA of 56,000 sqm. In 2017, the total new retail stock is estimated at circa 310,000 sqm, maintaining the same volumes of The pipeline for measures circa 570,000 sqm of GLA, of which 30% are currently under development. Retail projects in the pipeline are primarily in the North and they involve malls (59%), followed by leisure and lifestyle centers (18%), retail parks (17%), shopping centers with mixed use (3%) and outlets (3%). Thanks to the increase of tourism and the new initiatives, Milan has become the main location for retailers to enter the Italian market with the aim of opening new flagship stores, followed by Rome. In 2016 and 2017, new brands and concepts have entered the market, i.e. Primark, Lego, Metrocity, Oakley, Moleskine Cafè, Chloè, 3INA, Manuel Ritz, American Vintage, Thule, Wagamama and Under Armour. During the first half of 2017, new international and Italian brands have opened, such as Thom Browne s first European flagship store in Milan. In addition, Starbucks and Apple are expected to enter the Italian market in 2017 with stores in the Milan. The prime rents for shops in the shopping centers and on high streets have remained stable. Shopping Center FOC 3% 6% Retail Park High street Volumes of existing and under construction new stock retail (GLA > 10,000 sqm) in Italy H Evolution of Prime High Street rents in Milan and Rome 300 1,200, , , Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Completions Under contruction Milano - Prime High Street rents ( /mq/a) - Q = 100 Roma - Prime High Street rents ( /mq/a) - Q = 100 Source: PwC analysis on data provided by CBRE 67

68 Investment trend ( mln) Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q Retail sector 2017 Investments In 2016, more than 2.6 billion were invested in the retail sector, up 80% compared with 2015, and representing circa 25% of total investments in Italy. Furthermore, circa 1.1 billion of the total retail investments were deployed in the last quarter of the year. In H1 2017, retail investments growth accelerated compared to the same period of the previous year, from 745 million in first half of 2016 to 1.2 billion (+61%). There continues to be strong interest in high street retail, which accounted for 48% of the retail volume for the half with 569 million, followed by shopping centers, which accounted for 43% with 513 million of investments. One of the most significant deals for high street segment was the acquisition of two portfolios with shops in secondary markets for a total value of around 200 million. During the first quarter Fondo Estense Grande Distribuzione was sold by BNP Paribas Real Estate Investment Management, including the Mongolfiera mall and the Galleria Japigia mall in Bari, for a value of around 60 million. In the second quarter was sold the H&M flagship store in Piazza Duomo to Cbre GI. High street continues to be on the radar of a growing number of core and core plus investors who are no longer looking at just Milan and Rome, but are beginning to study other secondary cities with rich catchment areas that also benefit from good tourism flows. Foreign capital is dominant in the retail asset class and represents more than 69% of total investments in the half (mainly UK and USA), even if the Italian investors show a slight increase, especially in the high street. Prime yields remains stable in all sectors of the retail market, after suffering a slight contraction in the first quarter. The lack of product is starting to put a brake on any further expansion of retail investments. The outlook for the sector in the second part of the year remains positive. 1.2 bln Investments in H bln Total investments in % High street prime net yield Q Q Q Q Q Q Q Q Q High Street Prime (%) High Street Secondary (%) Shopping Center Prime (%) SC Good Secondary (%) Retail Park Prime (%) Source: PwC analysis on data provided by CBRE 31% Percentage of domestic capital over total investments in H Italian Real Estate Market Overview

69 Key data Industrial and logistic sector mln Investments in H % Prime Net Yield in H ,750 sqm Take up H Take up trend (sqm) H The level of take up in of 2016 has exceeded 1.38 million sqm: this is the first time in years such a result in logistics was achieved in Italy. The positive trend continued even in the first six months of 2017, with a take-up at almost a million sqm, which is up by 32% on the amount reported in the same period the previous year. Lombardia and Emilia Romagna were pillars within the sector, representing 76% of the total take up in the first quarter. In Lombardia, the take up of logistics parks is taking off extremely quickly due to three pre-let agreements signed (56,000 sqm for Arcese Trasporti in Basiano, 27,000 sqm for Banzai at the AKNO Business Park 2 in Trucazzano, and 30,000 at Pozzuolo Martesana which Prologis is building for Brivio&Viganò). In the second quarter there were 20 transactions for the lease of logistics warehouses and developments with pre-let agreements; 5 for the sale and construction of owneroccupier properties. In the first half of PLs* retailers and courier services were the most dynamic users, while the demand by e-commerce operators is decreasing. The volume invested in 2016 reached 630 million. Institutional investors continue to confirm their interest in logistics with the total volume in the first six months of 2017 registered at 762 million, a record amount for this sector. CIC acted as the main player of the H having bought from Blackstone a logistics portfolio of 20 properties in Italy. Other players active in the market were Kryalos Sgr with the purchase of a logistics portfolio of six buildings with a surface area of 140,000 sqm. Tristan Capital Partners continues to be active in the Italian market purchasing from AXA two logistics buildings in Anagni and Pavia for a total value of 20 million. Recent investments in prime locations favoured the further fall in yields observed in Q by 25 bps, down to 6.00%. The market sentiment is positive, and the activity and volume of investments is expected to keep growing during the year *3PL (Third Party Logistics Service Providers) Integrated logistic H ,000 1,500 Total Q1 Q2 Q3 Q4 Source: PwC analysis on data provided by CBRE Q Q Q Q Q Q Q Q Vacancy Rate (%) 5 5,3 5, ,3 6,3 6,3 Take up (.000 sqm) 609,9 385,8 358,9 271, Prime rent Milan ( /mq/y) Secondary rent Italy ( /mq/year) Prime rent Rome ( /mq/y) Prime Net Yield (%) Logistic Investment ( mln)

70 Real estate funds Asset allocation H Europe 13% 6% Retail 15% 21% Residential 15% 7% Asset composition H % North West Italy Office Other 14% 43% 46% 20% 12.9% North East 33.6% Center of Italy Industrial 8.1% South and Islands Real estate funds Real Estate funds in Italy represent about 3% of the Italian asset management market. The funds examined by Bank of Italy have an assets amounting of 64.5 billion. During 2016 the weight of the first 5 Sgr, which amounted to 31.1 billion, has slightly decreased (from 50.9% to 48.2% ) Operative funds Operative SGR The funds examined by Assogestioni point out 43% of the assets are located in Northwest of Italy, while 33.6% in the Center; Northeast with 12.9%, South of Italy with the Islands and the assets located abroad follow respectively accounting for 8.1% and 2.4%. Offices are the most common among the asset classes, constituting by themselves 42.7% of the entire asset stock, followed afar by residence 19.5% and retail 14.3%. SGR Value ( bln) Dea Capital 7.84 Investire 7.07 Generali 5.67 BNP Paribas 5.56 Coima 5.50 Fabrica Immobiliare 3.70 Prelios 3.56 Sorgente Italia 2.48 Castello 1.98 Savills % 2% 3% 11% 15% 14% 21% 43% 21% 7% 43% 3% 14% Office Retail Logistic Residential Nursing home care (RSA) Tourism/accomodation Industrial Other Source: PwC analysis on data provided by Assogestioni 70 Italian Real Estate Market Overview

71 Number of SGR and of operative funds Operative SGR Operative funds Retail funds Reserved funds Evoluzione dell'asset Under Management delle SGR attive ( bln) Var. % 2007/2016 Total % - Top 5 SGR % - Top 10 SGR % Share on total (Top 5 SGR) 54.7% 53.1% 51.5% 50.4% 50.6% 51.0% 47.9% 52.2% 50.9% 48.2% -11.9% Share on total (Top 10 SGR) 67.3% 67.7% 65.9% 66.5% 66.5% 67.2% 64.5% 72.6% 72.1% 69.9% 3.8% Source: PwC analysis on data provided by Bank of Italy 71

72 72 Italian Real Estate Market Overview

73 Milan 03 73

74 Residential market NNT data ,978 NNT % NNT 2016 vs ,304 Real Estate stock Municipality of Milan % NNT 2016 vs 2015 Trend of transactions (NNT) /2016 Over the period , the historical trend of NNT (Number of Normalized Transactions) of residential estates in Milan has presented an average value of 19,803 transactions; the trend has been characterised by a general recover over the last four years, with a growth rate of % in 2016 in comparison with NNT H by geographic region 2% 12% 5% 3% 14% 12% 6% 5% 24% 16% Centre Inner city Semi centre East side Semi centre North side Semi centre West side Semi centre South side Periphery East side Periphery North side Periphery West side Periphery South side 30,000 25,000 20,000 15, % 101% 101% 87% 76% 71% 75% 77% 59% 61% 64% 72% 88% 10,000 5, ,966 25,130 25,127 21,843 18,977 17,665 18,843 19,182 14,645 15,140 15,900 18,035 21, NNT NNT Trend Source: PwC analysis on data provided by Italian IRS 74 Italian Real Estate Market Overview

75 Trend of Real Estate stock 2004/2016 The Real estate stock in Milan has growth on average by 0.51% per year over the period Also, as regards the MII (Market intensity Index), it results equal 2.76%, which entails a slightly negative trend in 2016 compared to , % 106% 106% 106% 106% 106% 790, % 104% 104% 780, % 770, % 101% 760, % 750, , , , , , , , , , , , , , , , , , , Stock Stock Trend NNT 2016 by dimensional class % % % % 8.5% 0 Studio apartment Small Small medium Medium Large Dimensional classes: Studio apartment: up to 45 sqm (2.5 cadastral units); Small: between 45 and 60 sqm (2.5 4 cadastral units); Small medium: between 60 and 90 sqm (4 5.5 cadastral units); Medium: between 90 and 120 sqm (5.5 7 cadastral units); Large: 120 sqm and above (more than 7 cadastral units). Source: PwC analysis on data provided by Italian IRS 75

76 Province of Milan NNT data ,046 NNT % NNT 2016 vs ,131,833 Real Estate stock Province of Milan % NNT 2016 vs 2015 Trend of transactions (NNT) /2016 Over the period , the historical trend of NNT (Number of Normalized Transactions) of residential in the Province of Milan has presented an average value of 55,428 transactions; the trend has been characterised by a general recover over the last four years, with a growth rate of 31.76% in 2016 in comparison with NNT H by geographic region 9% 8% 6% 16% 10% 51% Abbiatense Magentino Alto Milanese North part of Milan East part of Milan Milan City South of Milan 80, % 108% 110% 100% 70,000 87% 77% 60,000 75% 77% 77% 50,000 63% 58% 55% 57% 40,000 30,000 20,000 10, ,996 74,838 75,959 68,966 60,072 51,713 53,088 52,997 40,261 37,920 39,164 43,542 53, NNT NNT Trend Source: PwC analysis on data provided by Italian IRS 76 Italian Real Estate Market Overview

77 Trend of Real estate stock 2004/2016 The Real estate stock in the Province of Milan has growth on average by 1.04% per year over the period , while the growth in the last four periods remains stable (+0.37%). 2,300,000 2,100,000 1,900,000 1,700,000 1,500,000 1,300,000 1,100, , , % 113% 113% 113% 113% 110% 111% 109% 108% 105% 106% 102% 100% 1,882,657 1,922,725 1,971,123 2,003,944 2,035,354 2,057,703 2,078,498 2,097,997 2,112,002 2,123,934 2,130,931 2,130,931 2,131, Stock Stock Trend NNT 2016 by dimensional class % 31.6% % % 8.9% 0 Studio apartment Small Small medium Medium Large Dimensional classes: Studio apartment: up to 45 sqm (2.5 cadastral units); Small: between 45 and 60 sqm (2.5 4 cadastral units); Small medium: between 60 and 90 sqm (4 5.5 cadastral units); Medium: between 90 and 120 sqm (5.5 7 cadastral units); Large: 120 sqm and above (more than 7 cadastral units). Source: PwC analysis on data provided by Italian IRS 77

78 Investment trends in the real estate market Investment trends The market of investments in Milan remains lively, with transaction accounting for 1,596 million in 2016, even if diminishing by 28% in comparison with However, when the 900 million transaction of Porta Nuova is not considered, the investment market over performs the results of 2015 by 21%. The most relevant investors are open-end German funds, international property companies and sovereign funds. Offices account to 78% of transactions. The foremost deal for this sector has been closed by AXA, having acquired the estate in Via Monte Rosa 91 for 220 million. For what concerns the retail sector, the only relevant transaction was the closing for the building in Via Monte Napoleone 15, acquired by Max Mara Group for circa 15 million; this is the result of an increasing interest for highstreet retail properties expressed by national and international investors. Institutional real estate investments by investor class % 22% 5% 22% 12% 17% 23% 14% 16% 12% 8% 11% 35% 5% 1% 2% 16% 15% 44% 9% 18% 10% 8% 4% 36% 3% 8% 31% 27% 40 11% 10% 4% 7% 28% 27% 2% 7% 67% 19% 20 47% 31% 40% 45% 32% 14% 35% 0 21% 12% 4% Q Real estate Italian funds Open-end funds (German and foreign) Real estate companies and REITs Assurance companies and Pension funds Private companies and investors Others* *Others: Banks, public sector and sovereign funds Source: PwC analysis on data provided by BNP Paribas REAL ESTATE 78 Italian Real Estate Market Overview

79 Office market Trend of prime rents ( /sqm/y) Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Offices: Overview The office supply in 2016 in Milan accounts for nearly 3.2 million sqm distributed over 4,717 properties, both entire buildings and individual units. The properties offered for sale account 1,234 residential units for a total amount of 469,000 sqm (also assessed as individual units or as entire buildings). In the city of Milan, the relevancy of properties available for lease is preponderant: 3,483 residential units for a total amount of 2.7 million sqm. Overall, the lease supply amounts to 29% of the entire surface equal to a 8.3% share of the entire stock in terms of units. Office (buildings and single units) 4,717 Assets 3,167,862 sqm Offices: Supply (1/3) The properties offered for sale account for 5% of the estimated surface for office destination use and 2.9% of surveyed real estate units in stock for office destination. It is relevant to underline that the trading market is still more focused on medium and small-medium surfaces (average of circa 380 sqm per property unit offered for sale) while for lease on average are available larger surfaces (average of circa 775 sqm per property unit offered for lease). Investments by asset class Milan Q % 2% 1% 6% 5% Source: PwC analysis on data provided by CBRE Sale 1,234 Assets 468,632 sqm Lease 3,483 Assets 2,699,180 sqm 81% Big size Portfolios 367 Units mln sqm Announcements 3,116 Units mln sqm Office e c e e O e Source: PwC analysis on data provided by BNP PARIBAS REAL ESTATE The comparison between the data of the last year and those in 2016 shows a decrease in total supplied surface in the city of Milan (sale and lease) equal to -6%; the reduction (-10.5%) is even more bigger in the number of property units offered on the market. Source: PwC analysis on data provided by Cresme Ricerche S.p.A. 79

80 Key data -6.0% Surface supply 2016 vs % Number of units supplied on the market 2016 vs % Surface supply for rent 2016 vs % Surface supply for rent vs Office stock in Milan 29% Vacancy rate 2016 Offices: Supply (1/3) The office market supply, although still high, has been slightly reduced compared to last year; the supply appears coherent in comparison to the general volume of transactions and in comparison to the area estimated to be involved in sales. 1,234 property units available for sale, represent 2.9% of total office stock in Milan. In terms on surface, nearly 469,000 sqm offered for sale represent circa 5.0% of the area of office space existing in Milan. The values are in line with the existing stock, also taking into account the properties that remains unattended while waiting for an appropriate sale. Data from Agenzia delle Entrate show there were 595 sales of offices in 2013 (185,000 sqm) in Milan (lowest peak of the city market), 629 in 2014 (195,000 sqm), 850 in 2015 (350,000 sqm). Agenzia delle Entrate has estimated around 1,000 sales during 2016, equal to 380,000 sqm. The office market shows a misalignment, confirmed by the excess of rent supply surface: currently of the total supply of 2.7 million sqm only 1.7 million sqm (63.1%) are for rent and 1 million sqm are among large real estate portfolios. The vacancy rate for offices currently stands at 29%; despite this data, in the large real estate portfolios, are already planned 654,000 sqm of office surface (the increase compared to 2015 is 1 million sqm). The comparison between last year results show a decrease of surfaces that will affect the market in the next few years and the purchase of unsold properties. Actual and potential supply - Milan Actual Announcements - Lease mln sqm Big size Portfolios - Lease mln msqm 3,168 mln sqm Announcements - Sale mln sqm Big size Portfolios - Sale mln sqm Potential Building permits e c c e fic mln sqm of which sqm out of P.A mln sqm out of P.A. Further potential supply Other assets not available Big size Portfolios mln sqm of which mln sqm already choosen (17.5%) Source: PwC analysis on data provided by Cresme Ricerche S.p.A. 80 Italian Real Estate Market Overview

81 Surface supply for rent Offices: Supply (1/3) 21.7% Percentage of surface supply for rent in the semi-central zone of Milan 14.9% Percentage of surface supply for rent in CBD In Milan the office market supply for lease in 2016 present strong concentration in the semi-central area (590,000 sqm equal to 21.7% of the total supply - in 2015 it was 24.9%), in the northern suburbs (about 470,000 sqm equal to 17.6% of the total supply in 2015 it was 15.8%) and in the southern suburbs (about 370,000 sqm equal to 13.6% of the total supply in 2015 it was 16.0%). The CBD (Central Business District), as well as the southern periphery and the semi center, showed a faster absorption of surface for lease (400,000 sqm in 2016), decreasing from 15.6% to 14.9% between 2015 and Despite the limited surface in the area, the CBD accounts for a sizeable portion of the total supply for lease in Milan. The comparison between 2015 and 2016 shows a -10% decrease in the total sqm for lease in the city of Milan. Significant drops were recorded in the southern periphery (decrease of -18.3% or -82,000 sqm) and in the CBD (decrease of -8.6% or -38,000 sqm). The office market supply for sale has a similar distribution as the supply for lease. The semi center supply is 140,0000 sqm (29.7% of the total supply in 2015 it was 25.9%), in the northern periphery is 77,000 sqm (equal to 16.3% - in 2015 it was 16.2%) and in the southern periphery is above 61,000 (equal to 13.1% - in 2015 it was 13.6%). In the CBD 56,000 sqm of office space are for sale (12.0%) and in center outside CBD 58,000 sqm (12.5%) are for sale. The comparison between the data of 2015 and 2016 shows a decrease in total sqm for sale (-15.6% of the total supply in Milan), with drops recorded in the western periphery (-38.3% or -23,000 sqm), in the eastern periphery (-26.5% or -14,000 sqm), in the southern periphery (-18.9% or -14,000 sqm), in the center outside CBD (-15.0% or -10,000 sqm) and in the northern periphery (-14.8% or 13,000 sqm). The CBD and semi center both registered a higher stability with a drop of -8.8% (CBD with less 5,000 sqm than in 2015) and -3.0% (semi center with less 4,000 sqm than in 2015) respectively. Zone Delta surface 2016 vs 2015 (mq) Delta % surface 2016 vs 2015 CBD -38, Center outside the CBD 32, Semi center -116, Periphery North side 29, Periphery East side 30, Periphery South side -82, Periphery West side -18, Total Milan -163, Source: PwC analysis on data provided by Cresme Ricerche S.p.A. 81

82 New projects and refurbishments by area ('000 sqm) Hinterland Periphery 74 Semi Center CBD ,000 1,500 New projects New projects 61% Renovations 9% 30% Semi center Periphery Hinterland Offices: Supply (2/3) In the upcoming years the urban features of the city of Milan will be affected by a large number of projects. In recent years, companies, in order to have at disposal modern spaces and to maximize their uses, have started to transfer their offices in outlying areas of the city, in order to obtain substantial economic savings. Including renovations and new projects, 2,390,000 sqm are currently under construction or still in planning in Milan. In a context where companies are more and more decentralizing, the central area (CBD) records only six renovation projects for a total of 24,000 sqm. The CBD has no projects involving new constructions because it is characterized by historic buildings often under preservation and as well as lack of building spaces. Looking at the new projects for office destination use, there is the possibility to develop 2,031,000 sqm. In the upcoming years, divided as follows: 9% in Mid-Center, 30% in Periphery and the largest share, 61% in the Hinterland of Milan. In fact, the Hinterland has significant advantages in terms of rent and offers the possibility to create new developments for companies deciding to move in less central structures but attractive likewise. Within the Semi Center Zone, the North western side is the area where we can find a great number of major development projects; among them, stands out the City Life project, consisting of the redevelopment of the Fiera Campionaria of Milan. During 2015, the Hisozaki Tower was concluded, and this resulted in the subsequent getting hold of the property by Allianz Italy; he works for the Hadid Tower, future headquarters of Generali, started right after. Finally in 2017, 30,000 not-yet-rented sqm of the Libeskind Tower are expected to be delivered on the market. In the Semi Center area it is also worth mentioning the redevelopment project of Porta Volta that covers an area of about 9,000 sqm and includes the construction of the new headquarters of the Giangiacomo Feltrinelli Foundation between Viale Montello and Porta Volta. Source: PwC analysis on data provided by BNP Paribas REAL ESTATE 82 Italian Real Estate Market Overview

83 The Subway Offices: Supply (2/3) The closeness to public transport has always been key in assessing the value of an estate. As regards the Periphery, the most dynamic area is represented by South East Milan, where a number of development projects, such as Symbiosis-Ortles for the realisation of mixed-destination buildings with a prevalence of offices, are still under construction. In North East Milan, the EverEst- Giardini di Lambrate project remains the most noteworthy and aims at requalifying the old headquarters of Laminati-Colombo. Finally, with regard to the Hinterland, the great majority of Real Estate projects will be developed North East Milan, with expected volumes of 843,000 sqm of offices. The Ex-Falk area will be hosting circa 150,000 sqm, mainly devoted to offices; the projects is expected to be delivered within December Both accomplished and in progress works are redrawing the mobility of Milan and strengthening the existing network. The Line M5 connects CityLife with Porta Garibaldi FS, while the Line M4, still to be completed, is going to became strategic to connect Linate airport and the city center. Finally the Line M1 has to be further developed northbound towards Monza from Sesto 1 Maggio FS. Source: PwC analysis on data provided by BNP Paribas REAL ESTATE Source: ATM S.p.A. 83

84 Take up trend (sqm) Office market: Supply (3/3) H , , , ,000 Number of sqm in construction in June % Growth take up Q vs. Q In June 2017, there were over 226,000 sqm of office space under construction, slightly down on the previous quarter, but with total completions in the second quarter of 55,426 sqm. Of these, 54% refer to projects of a speculative nature. Refurbishments are increasing in prime location, which help to raise the quality of grade A properties on offer. The most noteworthy projects are sited in the area of CityLife: among them stand out the Libeskind Tower and the Porta Nuova BD, where a new skyscraper will be hosting the headquarter of an important assurance company, thus completing the skyline of the city. The take-up in H has been equal to 208,651 sqm, up by 27% compared to the same half of Projects under development and already accomplished (sqm) 0 150, , ,000 Source: PwC analysis on dasta provided by CBRE During the second quarter of 2017 take-up office space in Milan was 98,385 sqm, lower than the record figure of the first quarter but was 24% higher than the average of the last 10 years. Prime rent for office is slightly growing, in H mounted to 530 /sqm. The main features driving the tenants choices during the last months are the quality of Real Estate properties, the implementation of smart working policies and the research of the best locations; the year has been also featured by relevant rental agreements signed with primary IT, industrial and financial tenants. 84 Italian Real Estate Market Overview

85 Key data - Q In H1 2017, the value of investments in offices in Milan reached the level of 908 million, down by 17% in comparison with the same half of The lack of quality product remains a central issue even for the Milan market but there continues to be investor interest for value-add assets in central locations. The most recent deal of this kind involved the property in Via Cantù bought by Hines for around 100 million Euro. This building will be converted into a trophy asset that will have a mixed use, part office and part retail. Foreign capital in H represents 65.7% of the total investments. Prime and secondary net yields, which were still contracting in the first quarter, stood at 3.5% and 5.25% respectively. 12.1% Vacancy rate 908 mln Investments in H Office market: Investments trend ( mln) 3,000 2,500 2,000 1,500 1, Foreign Key data H Investors H (%) Domestic Prime Net Yeld % Q H H Var. H vs H Vacancy rate (%) 12,1 12,1 12 1% Take - up (,000 sqm) 98, ,1 27% New stock (,000 sqm) ,8 224% Prime rent ( /sqm/y) % Weighted Average Rent ( /sqm/y) % Prime net yield (%) 3,50 3,50 4,00-13% Secondary net yield (%) 5,25 5,25 5,75-9% Office e e % 4% 30% 66% Domestic Foreign Nd Source: PwC analysis on dasta provided by CBRE 85

86 Key data 346 /sqm/y Average Prime Rent Q /sqm/y Average Prime Rent CBD Q % Average prime net yield Q Office market: Overview In H1 2017, the main deal in the first quarter was the acquisition of the Project All Stars by Blackstone, a portfolio compromising 3 buildings worth a total of approximately 120 million Euro. In the first quarter other two operations involved an important company specializing in e-commerce which leased almost 18,000 sqm and an Italian luxury brand that has moved its HQ to Porta Nuova in a surface area of around 8,500 sqm. In the second quarter were registered two important transactions, for a total value of 280 million Euro. These were the acquisition of Palazzo V, by Kryalos Sgr on behalf of a foreign investor and the acquisition of the CreVal portfolio, including 17 bank premises, by Beni Stabili SIIQ. Offices: Rents From the analysis of rental agreements emerges that the average prime rent for Q is 346 /sqm/y, which is increasing compared to the previous quarters. The analysis shows that all the categories considered show a slight increase. Rent /sqm/y Growth % Milan Average Rent 1 year 5 years (CAGR) CBD % 0.00% Center % n/a Semi center % 3.10% Periphery % 1.80% Hinterland % n/a Average 346 Office market: Yields In Q considering the market rents, the Prime net yields have slightly decreased compared to the last quarter; the Prime Yield in the center of Milan is about 4.00% and rises to 5.50% in the periphery. e Office e Milan Q Q Q CBD 3.50% 3.50% 4.25% Center 4.00% 4.25% 5.00% Semi center 5.25% 5.25% 6.00% Periphery 5.50% 5.50% 6.25% Hinterland 5.50% 5.50% 6.50% Average 4.75% The Porta Nuova area confirms its ranking s one of the most attractive areas for occupiers. The high demand for the few prime products available on the market is creating competition between tenants, bringing a decrease in offered incentives. Prime rents rise in the CBD, in Q It has reached 530 /sqm/year. Source: PwC analysis on data provided by CBRE ce e efie 86 Italian Real Estate Market Overview

87 87

88 88 Italian Real Estate Market Overview

89 Rome 04 89

90 Residential market NNT data ,253 NNT % NNT 2016 vs 2013 Trend of transactions (NNT) Over the period , the historical trend of NNT (Number of Normalized Transactions) of residential estate in Rome has presented an average value of transactions. As reported in the chart, the lowest result was scored in 2013, followed by a general recover over the last two years with a growth rate of 27,01% in ,457,523 Real Estate stock Municipality of Rome % NNT 2016 vs ,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, % 105% 96% 87% 82% 83% 75% 73% 75% 64% 67% 68% 59% 40,279 42,350 38,865 35,079 30,202 29,434 33,168 33,633 25,693 23,819 27,132 27,356 30, NNT NNT Trend NNT H by geographic region % 5.13% 5.27% 3.96% 1.77% 3.56% 5.25% 5.85% 8.12% 5.78% 8.53% 3.32% 3.41% 3.83% 6.37% 7.46% 4.20% 8.53% 1.17% 2.63% 0.78% 1.10% 0 Inner city SC Appia - Tuscolana SC Aurelia - Gianicolese SC Ostiense - Navigatori SC Parioli - Flaminio SC Prati - Trionfale SC Salaria - Trieste - Nomentana Appia - Tuscolana Asse Colombo - Ostiense - Litorale Aurelia Casilina - Prenestina Cassia - Flaminia Cintura EUR EUR - Laurentina Portuense Salaria Tiburtina Fuori GRA East Fuori GRA North Fuori GRA West Fuori GRA South Fuori GRA North West Source: PwC analysis on data provided by Italian IRS 90 Italian Real Estate Market Overview

91 Trend of Real Estate stock 2004/2016 The Real estate stock in Rome has growth on average by 1.2% per year over the period Also, as regards the MII (Market intensity Index), a positive trend has been observable since ,500,000 1,450,000 1,400,000 1,350,000 1,300,000 1,250,000 1,200, % 100% 1,270,909 1,291, % 112% 112% 114% 114% 114% 115% 110% 109% 108% 104% 1,324,593 1,370,109 1,388,101 1,401,059 1,413,091 1,426,282 1,426,282 1,446,387 1,446,388 1,452,279 1,457, Stock Stock Trend NNT 2016 by dimensional class % 28.4% 20 22% % 9.3% 0 Studio apartment Small Small medium Medium Large Dimensional classes: Studio apartment: up to 45 sqm (2.5 cadastral units); Small: between 45 and 60 sqm (2.5 4 cadastral units); Small medium: between 60 and 90 sqm (4 5.5 cadastral units); Medium: between 90 and 120 sqm (5.5 7 cadastral units); Large: 120 sqm and above (more than 7 cadastral units). Source: PwC analysis on data provided by Italian IRS 91

92 Province of Rome NNT data ,364 NNT % NNT 2016 vs ,199,062 Real Estate stock Province of Rome 2016 Trend of transactions (NNT) Over the period , the historical trend of NNT (Number of Normalized Transactions) of residential estates in the Province of Rome has presented an average value of 50,034 transactions; the trend has been characterised by a general recover over the last four years, with a growth rate of 27.63% in 2016 in comparison to % NNT 2016 vs ,000 70,000 60,000 50,000 40, % 105% 100% 90% 75% 72% 79% 80% 59% 54% 59% 60% 68% 30,000 20,000 10, ,945 68,384 64,701 58,349 48,814 46,889 51,485 51,824 38,382 34,761 38,466 39,083 44, NNT NNT Trend NNT H by geographic region 1% 1% 2% 2% 68% 3% 3% 7% 7% 6% 0% Area Braccianese Area Fiume Aniene Asse Casilina Asse Flaminia Asse Salaria Asse Tiburtina Castelli Romani Northern coast Southern coast Monti della Tolfa Rome city Source: PwC analysis on data provided by Italian IRS 92 Italian Real Estate Market Overview

93 Trend of Real Estate stock 2004/2016 The Real estate stock in the Province of Rome has grown on average by 1.3% per year over the period , while the growth in the last four periods remains stable (+0.05%). 2,400,000 2,200,000 2,000,000 1,800, % 102% 105% 109% 111% 112% 114% 115% 116% 117% 118% 116% 117% 1,600,000 1,400,000 1,200,000 1,880,039 1,915,483 1,981,236 2,046,373 2,081,806 2,110,298 2,135,489 2,165,679 2,187,052 2,202,985 2,212,974 2,190,204 2,199, Stock Stock Trend NNT 2016 by dimensional class % 27.5% 20 22,3% % 9% 0 Studio apartment Small Small medium Medium Large Dimensional classes: Studio apartment: up to 45 sqm (2.5 cadastral units); Small: between 45 and 60 sqm (2.5 4 cadastral units); Small medium: between 60 and 90 sqm (4 5.5 cadastral units); Medium: between 90 and 120 sqm (5.5 7 cadastral units); Large: 120 sqm and above (more than 7 cadastral units). Source: PwC analysis on data provided by Italian IRS 93

94 Investment trends in the Real estate market In H the market of investments in Rome accounted for 706 million, with a level of volumes 69% higher than the same semester in Important transactions such as the disposal of the Great Beauty portfolio ( 220 million) as well as the deal involving the Coin located in Via Cola di Rienzo ( 85 million), contributed to this satisfying result. This latter, specifically, was the first closing by the Bank of Montreal RE branch in Italy. As shown in the chart, 64% of the investments were promoted by Real estate funds, especially German but also foreign, followed by private investors (25.5%), real estate companies and REITs (10.5%). The analysis has highlighted emerging interests from the investors in development projects, aiming at converting vacant offices (mostly located in the CBD area) into hotels and retail spaces. Istitutional real estate investments by investor class 100% 2% 16% 15% 18% 24% 26% 80% 60% 13% 21% 1% 19% 15% 10% 19% 26% 66% 47% 44% 50% 11% 40% 19% 10% 10% 19% 5% 5% 6% 1% 2% 26% 16% 3% 5% 11% 4% 10% 64% 20% 32% 32% 28% 38% 30% 7% 5% 27% 0% 14% 25% 6% Q Real estate Italian funds Open-end funds (German and foreign) Real estate companies and REITs Assurance companies and Pension funds Private companies and investors Others* *Others: Banks, public sector and sovereign funds Source: PwC analysis on data provided by BNP PARIBAS REAL ESTATE 94 Italian Real Estate Market Overview

95 Rome office Key data - H In H1 2017, investments in offices in Rome were equal to 821 million, increasing compared to the same period of 2016 (+96%). Foreign capital once again accounted for most of the capital invested, 92% of that of the first half of the year. The city of Rome which is historical dominated by domestic investors, is gradually becoming attractive even for foreign players, particularly for trophy assets and assets to be repositioned as trophy assets. Take Up (.000 sqm) H Office market: Investments trend ( mln) 1, H Foreign Domestic Nd Prime Net Yeld % Key Data Q H H Var. H vs H Vacancy rate (%) % Take - up (,000 sqm) 18,2 71,6 66,8 7% Stock (,000 sqm) % Prime rent CBD ( /sqm/y) % Prime rent EUR ( /sqm/y) % Prime net yield (%) % Office e e 650, % Offices: Supply In the first quarter of 2017, was recorded a pre-let of 15,600 sqm for the new HQ of a primary Hi- Teck multinational in the Fiumicino Corridor Area; In the second quarter the sale of a the second tranche of buildings by a Rome building contractor accounted for around 80% of the total absorption in the quarter. The pipeline of developments is stable, with 143,000 sqm under construction/being refurbished and with expected delivery dates between 2017 and 2018; while one completions of 6,616 were reported in the second quarter. Interest towards the capital is high and expectations for the coming months are positive; prime net yields remain stable at 4.00%. Accomplished and in progress projects (sqm) 120, ,000 80,000 60,000 40,000 20, Existing In progress Source: PwC analysis on data provided by CBRE 95

96 Key data 308 /sqm/y Average full capacity Prime Rent Q /sqm/y Prime Rent CBD Q % Average net prime rent Q Offices: Overview Take-up in H was 71,646 sqm, up by (+7%) compared to the previous semester. The number of units absorbed in the first six months of the year was 60, which was higher than the semi-annual average of the last five years, around 36 units. Take-up in 2016 was circa 150,300 sqm, confirming the positive trend compared to previous year (+43% on 2015 and +73% on 2014). Source: PwC analysis on data provided by CBRE Offices: Returns The volume of space absorbed in the first half of 2017 is higher by 7% compared to the same period of Prime rents were stable in the CBD and in the EUR area at 400 and 340 / sqm/y respectively. Considering the market rents, the Prime net yields are substantially aligned; the Prime Yield in the center of Rome is about 5.00% and rises to 8.00% in the periphery. e Office e Roma Q Q Q CBD 4.00% 4.00% 4.50% Center 5.00% 5.00% 5.00% Semi center 6.50% 6.50% 6.50% EUR 5.25% 5.25% 5.75% Periphery 8.00% 8.00% 8.00% AVERAGE 5.75% Offices: Rents From the analysis of rental agreements emerges that the average prime rent for Q is 308 /sqm/y, which is slightly higher to the value registered during the previous quarters (312 /sqm/y). The slight variation is due to a decrease of the values recorded in the Center area (350 /sqm/y from 370 /sqm/y). Rent /sqm/y Growth % Rome Average Rent 1 year 5 years (CAGR) CBD 400, % -3.20% Center 350, % n/a Semi center 300, % -2.50% EUR 340, % 0.90% Periphery 150, % -1.30% AVERAGE 308 ce e efie 96 Italian Real Estate Market Overview

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