Residential development in Italy Challenges and opportunities in the market

Transcription

1 Residential development in Italy Challenges and opportunities in the market Do you have the necessary tools to assess the new normal and surf the wave? February 218 The better the question.the better the answer. The better theworldworks.

2 Introduction The Italian Residential Real Estate market is characterized by specific attributes. Each of them should be properly addressed and investigated in order to identify reasonable trends for the industry and potential implications from an investment perspective. We usually refer to the following topics: Ownership: accordingly to data from Agenzia delle Entrate (Rapporto Immobili 217, based on figures as at Dec ), 77.4% of Italian families live in a directly owned residential unit. In Italy the rental market in the residential sector is still small, even if there are some signs of recovery. While gross rental yields (return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs) are under pressure, the raising of rental market is the result of (i) demographic trends, (ii) economic challenges and (iii) lower home buying power. Demographic factors: Considerable changes in the population composition represent a decisive factor that will shape future residential market demand; in particular key trends include increase of average population age, number of births reduction, increase number of families, but with a reduced number of components, impact of immigration. GDP correlation and macro economic environment: Italian Gross Domestic Product growth in 217 was circa 1.6%, the strongest growth recorded since 21. Unemployment index is declining which indicates robust job creation. The economic outlook is positive. Financing house purchases: Based on the latest Report from Agenzia delle Entrate (Gli Immobili residenziali in Italia 217), the proportion of house purchases financed with a mortgage grew to circa 48% in 216 (average national data); major Italian banks are back in the lending market and this is providing a relative boost to the number of transaction. Supply reduction: while many residential development halted during the financial crisis and then in particular between 212 and 215, the increased number of transactions observed in last three years and the consequent reduction of the available supply, are creating the conditions for a new investment phase. The new paradigm focuses on sustainability, flexibility and features that are aligned to the demand s criteria observed in the market. In addition to the above mentioned features, the so called Digital Revolution has also started to impact also the real estate sector, primarily in the following aspects: (i) market intelligence and demand assessment, (ii) marketing and communication, (iii) design and project/construction management and (iv) agency services. A new development pipeline appears necessary to keep the momentum and to feed the new demand, and many investors, including the opportunistic ones, are back in the development asset cluster. This new era of growth in this complex industry provides multiple opportunities but also poses specific challenges. This is where EY can help investors and operators unearth hidden opportunities and overcoming the challenges. 1

3 Italy at a glance An overview of the current state of the Italian economy Based on the last projections by Banca d Italia (1) Italian Gross Domestic Product is expected to growth by 1.6% in 217, the strongest growth rate since 21. Growth rate is expected to be 1.4 per cent in 218, and 1.3 per cent in 219. These growth estimates are significantly favorable than the forecasting scenarios of the European Commission and the IMF, which have forecasted that GDP will witness a modest growth in the next two years. Compared with the previous macroeconomic projections from the Italian Central Bank, published in July edition of Economic Bulletin, the GDP growth is now higher (by.1 percentage points on average per year during ). The revision mainly reflects more favorable conditions pertaining to domestic and foreign demand and interest rate. These encouraging developments are partially offset by the negative impact of higher commodity prices and the appreciation of the exchange rate. Domestic demand is expected to be the main driver of economic activity; the contribution of net foreign demand, that is negative again this year, is expected to be negligible in By 219, the GDP is expected to have recovered from the decline as a result of the sovereign debt crisis that began in 211. However, it is still expected to be around 3 per cent below the level of 27. The unemployment rate is expected to fall gradually, from 11.7 per cent in 216 to 1.5 per cent in 22. The fall in unemployment rate is partially offset by (i) increased labor market participation in response to the steady improvement in employment prospects and (ii) the increase in retirement age. The employment rate is projected to increase by around 4 percentage points from 217 to 22. Investment, which began to expand at the end of 214, is expected to continue to do so at a relatively fast pace. That in productive facilities will grow at an average annual rate of 3 per cent, thanks to strengthening demand prospects, still very favorable financial conditions, and tax incentives. It is estimated that these measures contributed significantly to the acceleration of investment in 216, which was especially marked in the second half of the year. Inflation, as measured by the harmonized index of consumer prices, rose to 1.3 per cent in 217 (from -.1 per cent in 216), and is expected to fall to.9 per cent in 218, then turn upwards again to 1.6 per cent in 22. (1) Banca d Italia, Macroecomic projections for the economy, 15 December 217 GDP 8th largest world economy and 3rd in the EU Public Debt High, but under control Households High households saving rate and low private debt (63% gross debt-toincome ratio) Doing business Easier than perceived Export 2nd European exporting country 9th in the world SMEs A dynamic economic system, built on the agility and adaptability of SMEs Reforms Ambitious plan of reforms to give the country a boost Investments Private equity, M&A and Commercial Real Estate at an all-time high 2

4 Consumer Confidence in Italy averaged 13.7 between 1982 and 217 (2), reaching an all time high of in November 1988 and a record low of 82.4 in January 213. Based on Istat estimates, consumer confidence in Italy increased to in December 217 from an upwardly revised in November. All components improved: economic outlook (143. from in July), personal (16.9 from 11.6), current (112. from 16.3) and future expectations (121.3 from 18.4). Also, the balance concerning unemployment declined (11.1 in Dic 217) Billions Italian GDP Real (217 forecast) EY analysis on Bank of Italy and Istat data Macroeconomic scenario GDP Consumer Spending in Italy increased to circa 24 EUR Billion in the second quarter of 217. Consumer Spending in Italy averaged 223 EUR Billion from 1991 until 217, reaching an all time high of 249 EUR Billion in the second quarter of 27 and a record low of 173 EUR Billion in the third quarter of Household Saving Rate in Italy increased to 8.5 percent in the first quarter of 217 from 8 percent in the fourth quarter of 216. Personal Savings in Italy averaged 1.62 percent from 1999 until 217, reaching an all time high of 15.3 percent in the fourth quarter of 25 and a record low of 6.6 percent in the second quarter of 212. Monthly households spending is estimated by ISTAT circa 2,4 Euro in 216 (+2.2% vs 213) of which circa 6 Euro per months is the average spending for house (rents or equivalent). Some key characteristics of the Italian economy are the high households saving and low private debt. Households wealth in Italy was estimated by Banca d Italia in 215 (3) equal to circa 8,8 Eur Billion, of which 1,2 Eur Billion in cash and cash equivalents. Households net asset value (Euro Billion) Residential units 2,2 2,684 4,136 5,269 4,952 Other asset Tot Tangible asset Cash & cash equivalent 2,662 3,235 4,858 6,152 5, ,9 1,211 Household consumption var Bonds (incl. Gov Bonds) Government consumption var Gross Fixed Investments var Total Exports var Tota Imports var Employment rate var Unemployment rate EY analysis on Bank of Italy and Istat data (2) ISTAT, Consumer and business confidence, press release, 22 Dec 217 (3) Banca d Italia, La ricchezza delle famiglie Italiane, 215 Other asset 71 1,829 2,23 1,87 2,158 Tot Financial asset 1,784 3,2 3,817 3,59 3,897 Total asset 4,447 6,235 8,675 9,743 9,756 Residential mortgages Other loans Other liabilities Tot liabilities Net Asset Value 4,181 5,84 7,996 8,831 8,85 EY analysis on Banca d Italia data 3

5 Since 214, Italy has experienced gradual improvement in the labor market, with unemployment rate decreasing, return of modest inflation, GDP growth And the residential market took advantage of the positive macro economic trends, even if in volume terms, rather than in prices

6 Residential transactions Back on track after the longest phase of decline ever recorded The residential market, after a long and crippling crisis started in 28, seems to be on the path for recovery. In 216 the number of residential units sold, as recorder by Agenzia delle Entrate reached around 53, units (+18,9% versus the previous year with). Based on the first three quarters performance, we expect the total number of residential transaction in 217 to be in the range 55, and 555,, recording a growth of 5% compared to 216. The estimate for 217 reflects a considerable gap versus the top level ever recorded in Italy (year 24,circa 9, transactions), but the 217 recognized the third year in a row of continuous growth. The 217 figures are aligned to the long term average recorded in Italy since 1958, but is still far from a potential peak based on the linear trend line in the same historical period. A focus on some of the most important cities show different trends, compared to the national average. Owing to its size, Rome has reaffirmed its relevance in terms of overall number of residential transactions. Furthermore, Rome seems to be a more resilient market, with a deals flow that has always overbeat the national average. The performance in Milan was in line with the national average, between 2 and 212, but has been showing signs of relatively faster recovery since 213. Finally, while the transactions in Turin was aligned to the national average, Naples had the worst deal flow, with the number of residential transactions in 217 still below the number recorded in 2 and 5% less the peak of the market that was recorded in Residential transactions in Italy 1958/217 6 years average Residential transaction units EY analysis on Agenzia delle Entrate, Scenari Immobiliari, Nomisma data Residential transactions in Italy a comparison among main cities Roma Roma - resi transactions Italia index Roma index Napoli Napoli - resi transactions Italia index Napoli index EY analysis on Agenzia delle Entrate data Milano Miano - resi transactions Italia index Milano index Torino Torino - resi transactions Italia index Torino index

7 Real Estate cycles in Italy Any chance to predict future trends? The phenomenon of cycles in the real estate market is the result of specific characteristics and features of the industry; among others, the relevant time to market (the large delay from the design of a real estate complex to the delivery in the market). From 1958 we can identify 5 cycles in the residential real estate Italian market; the fifth one has started in 214, when we recognized the inversion of tendencies in terms on number of transactions. The average length of the cycles in the Italian market is circa 13 years. All the cycles have similar common features and trends, particularly with regard to the correlation between house price index and transactions trends. The forth cycle ( ) lasted for 17 years. One of the reasons behind such an unusual duration, may be identified in lower number of transactions in the third cycle, due to the overall political and economical uncertainty during the 9 s. In such a cycle, additionally, it was characterized by a series of circumstances that can be considered, jointly, as unique: (i) introduction of Euro; (ii) long period of consistent GDP growth; (iii) low interest rates. As a result of such unique features, while the overall trend in terms of prices appears to be aligned to the historical data, the cycle was characterized by an unusual growth of transactions in the year , followed by a consistent reduction, with figures recorded in 213 aligned to the performance recognized in the mid 7 s. Real Estate cycles in Italy 1958/217 (and beyond) 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1,,5, /22? 14 years 9 years 12 years 17 years 13 years? 8 years 5 years 7 years 7 years 7 years? 4 y 8 years 22/21? 7. 1y 6. 2 y 1y y 3 y 3 y years 9 years 12 years 17 years 13 years National house price index (1927=1) EY analysis based on data from Agenzia delle Entrate, ISTAT, Banca d italia, Scenari Immobiliari, Nomisma Residential transaction units 6

8 It s generally accepted the a key factor that affects real estate values and properties demand is the overall health of economy. This is generally measured by indicators as the manufacturing activity, prices of goods, labor market, even if GDP is the most frequent parameter assumed as reference. The reason for this relationship is relatively straight forward: over the time, GDP growth should lead to improving occupier s demand and in turn higher rents and capital values, which drive property returns. The historical comparison of residential transactions trend and GDP variation, shows in Italy a certain correlation. The GDP growth expected in the period , based on Banca d Italia forecast, let the market being confident about the near future trend. Another key parameter that can affect the residential transactions trend is represented by the number and volume of financing house purchases. Even if Italy has always been a market with a relevant percentage of houses purchased without a mortgage loan, the percentage was down to circa 37% in 212 but in 216 was back to circa the 5%. And further to the increase in the number of financed deals, the market showed a significant increase in the overall amount of new loans % 6% 5% 4% 3% 2% 1% % Residential transactions and GDP correlation Financing house purchases 46% 45% 37% 38% 41% 46% 49% North_West North_East Centre South Island Italy Residential transactions (n) GDP variation (%) EY analysis on Agenzia delle Entrate and ISTAT data EY analysis on Agenzia delle Entrate data % 4% 2% % -2% -4% -6% -8% Values of mortgage residential transactions by region Million 1, 8, 6, 4, 2,, EY analysis on Agenzia delle Entrate data 7

9 While the comparison of the current situation with the historical cycles let us being confident about the future performance, some dramatic changes in the demographic composition of Italian households highlight some concerns

10 Demographic changes and implications from a real estate market perspective Some thoughts around characteristics and composition of households Three main factors are shaping demographic trends, with relevant implication also from an economic perspective: (i) increasing population age; (ii) low birth rate; (iii) immigration. Such phenomena are driving the mutation in composition of households, with a sustained growth and decrease in the household size. A long term comparison of households number and residential transactions trends (net of the yearly fluctuations) shows a correlation in the period However, starting 22, the accelerated increase in the total number of households in Italy has not contributed to the growth in the residential transaction market. In particular, despite the accelerated growth of the total number of households recorded starting from 22/23, the residential transaction market has strongly dropped and for the first time ever, such decline led to levels below the long term trend represented by households variation. Further analysis around the composition of Italian households suggest a way of reading of such phenomenon. During the 6s and 7s the growth of families was driven by the increase of households with two or more components. It easy to assess that a growth with such characteristics can have a direct and immediate implication in terms of demand for residential units and lead to a relatively sustainable supply growth. However, starting from the 9 s, the incremental growth of families with two or more components started to drop down. In particular,in the last five years we have observed a reduction of such a cluster, with the relevant growth of the so called singles. Furthermore, in many areas in Italy, the growth of the total number of households was driven by immigration. We expect that such trends will continue in the future, and main implication from a real estate market perspective can be drafted. First of all, without a real growth of families with two or more components, the traditional residential demand will probably fall down. Such reduction will impact the sustainability of a positive change in stock and, actually, the increase of the vacancy rate is already clear in the market (as already occurred starting from 21, with a more evident trend from 212, in conjunction with the observed reduction of the number of traditional families). On the other hand, it appear also clear that the market is still not able to supply the potential demand with EY analysis on Agenzia delle Entrate and ISTAT data products aligned to the wider demand coming from increasing clusters: (i) senior people; (ii) young single; (iii) immigrants. In this scenario, what is also at risk is a key component of the household net asset value: their house. That is because the residential stock as is, in the future may not being aligned to the market requirements (i.e. in terms of size, type of tenure, flexibility), with a potential reduction of capital values. Only prime locations would probably guarantee a safeguard. Recent estimates from Istat confirm the trend; in the third quarter of 217, prices of new dwellings increased by.3% compared to the previous quarter and by.6% with respect to the third quarter of 216 (up from +.3% observed in the second quarter); prices of existing dwellings decreased by.7% compared to the previous quarter and by 1.3% with respect to the same quarter of the previous year. Residential transactions and Households growth correlation ( ) Households (1961=1) Residential transactions (1961=1) Transactions, households and vacancy rate years '62-71 years '72-81 years '82-91 years '92-21 years years % 25% 2% 15% 1% Households with more than 2 people - growth (decline) Residential transactions Vacancy rate 5% % 9

11 Changes in the composition of Italian families are linked to other two demographic trends: (i) aging of the population and (ii) immigration. Italy is one of the countries in Europe (and world wide) with the higher average age and the higher share of people in the age in excess of 65 years. Reasons behind such situations are usually related to the Italian average life expectation (one of the highest worldwide) and to the low birth rate. Taking into account the variability associated with demographic events, the population estimates by 265 from ISTAT (4) ranges from a minimum of 46.1 million to a maximum of 61.5 million. The chance of a population increase scenario by 265 is 7%. According to the ISTAT population forecasts Year North - West North - East Center South Island Italy Population - 14 years (%) ,5 13,7 13,3 14,2 13,7 13, ,2 12,3 12,1 12,5 12,4 12,3 Population years (%) ,2 63,5 63,9 65,9 65,7 64, ,3 62,5 62,9 64,2 63,4 63. Population over 65 years (%) ,3 22,8 22,9 19,9 2, ,4 25,2 24,9 23,3 24,2 24,7 Average Age (years) ,5 45,2 45,3 43,1 43,8 44, , ,7 46,2 46,7 Italians and immigration ( ) 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % EY analysis on ISTAT data Foreign citizens Italian citizens Foreign citizens var median scenario, the resident population expected for Italy is estimated to be equal to 58.6 million in 245 and 53.7 million in 265. The decrease compared to 216 (6.7 million) would be 2.1 million of residents in 245 and 7 million in 265. International migration is expected to change level and composition of the future population. In the period 2 216, the Italian population was stable thanks to the immigration and in the future the trend will be more and more evident. But, starting from 211, it has been observed a certain reduction in the immigration inflow, due to (i) financial turmoil and (ii) political and economic uncertainty. In any case, while the net migration is expected to be positive, being on average more than 15, units (4) ISTAT, The demographic future of the country, April annually (133, last observed in 215), although characterised by a strong uncertainty, it probably will contribute to the demographic stability only in major cities, industrial districts and, generally speaking, in locations with a dynamic labor market. Furthermore, based on the last available data (215), only 25% of households there al least one member is foreign are buying their house, compared to a national average close to 8%. As a result of this phenomenon, it will therefore be reasonable to create territorial imbalances, with prime cities, especially in the Northern Italy, that will strengthen their position and will more and more attract talents and young people. The implication from a residential market perspective could be relevant, with a raising housing demand from households that will consider to rent rather than to buy. 1

12 Some further thoughts about Milan In last decade Milan has strengthened its position as a major economic and financial hub in the country and as one of the more dynamic and innovative metropolitan area in Europe. However, population growth was stable, with an overall increase of circa 37, people (25 215), meaning a + 2,8%. Also in Milan, there was a change in demographic shape of the city. While Italian population declined in the same period by circa 55, units (-4,8%), the number of foreign citizens increased by circa 5.7% (+92, units). The variation in the composition of households reflects also such changes. The total number of households increased by circa 47, units (+7.5%), households with 2 ore more components felt down of circa.9%, meaning a reduction of circa 3,3 units. To be recognized the strong increase of singles (+5, units), in particular in the age between 35 and 64 years., Implications in the residential market are evident. In 216 circa the 9% of the total residential transactions comprised small or medium size apartments (less than 3 rooms), compared to a national average of circa 65%. In addition, in the city there is a still important stock of large apartments with more than 4 rooms (circa 2% of the entire stock), but the demand trend let us being skeptical about the market appeal of such type of product in the future, with main implications about capital values. Young singles, immigrants, seniors, seems to be also in Milan the market drivers also in the residential market and the existing and future supply should be able to address requirements of such customers. Residential demand and supply in Milan (216) Italian population 26 Population in Milan Foreign population Households in Milan by members and more Single families by age in Milan ,6% 3,5% 8,2% 4,9% 42,1% 22,8% 38,4% 22,5% 41,% 4,5% 34,1% 33,9% 9,1% 24,5% 13,3% 24,8% 1,2% 8,8% 6,% 14,% SINGLE ROOM HOUSES TWO ROOMS HOUSES Milano - Demand Milano - Supply THREE ROOMS HOUSES FOUR ROOMS HOUSES FIVE ROOMS HOUSES Italy - Demand Italy - Supply Age Age Age Age more than 8 EY analysis on Agenzia delle Entrate and ISTAT data 11

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14 Stock evolution Demand and supply trends Italians and immigration ( ) Residential transactions New supply Transactions, households and vacancy rate 3, 25, 2, 15, 1, 5,, EY analysis on Agenzia delle Entrate and ISTAT data New product demand (estimate) New Supply Between 1982 and late 9 s, residential transactions and new available supply trend were aligned. Then, the accelerated transaction growth, more clear starting from 1996, had as a result the increase of the development activity. But, as often occur in the real estate sector, due to the relevant time to market, the new product arrived late in the market. Furthermore, due to the financial turmoil, the scarce availability of financing and the overall market uncertainty, the number of new product dropped to the circa 41, units, the lowest level ever recorded in Italy since the end of the World War II. Based on our analysis, between 2 and 29, the unsold units can be estimated in circa 4, units; from 21, the increased number of transactions lead to a moderate take up of the unsold units; it s our view that currently the unsold units stock has been reduced to circa 1, units, and, in some locations, the demand is overbeating the supply, with signs of prices growth. 12

15 Residential values According to preliminary estimates from ISTAT, the third quarter of 217 witnessed a slight decline in the House Price Index (national average). Such a decline is driven by the further price reduction for existing dwellings, while new product shows a different trend, with a.3% increase compared to the previous quarter and by.6% with respect to the third quarter of 216 (up from +.3% observed in the second quarter). After a strong reduction observed between Q4 211 and Q1 215, house prices in Italy remain more or less stable, even if the slight decline observed in 217 is actually something unexpected. The observation of prices evolution in some of the Italian major cities highlights different tendencies. Milan has maintained a certain stability in the period Rome highlighted signs of recovery in 211 and 212, but in 215 and 216 a price reduction was clear. Turin continued to growth until 212, but witnessed an erosion in price post 212. Naples showed a continuous and significant price decline. Naples Rome Milan Residential prices in Italy (21=1) ISTAT (5) All New dwellings Existing dwellings Average residential price variation (6) Residential prices (26=1) (6) Roma Milano Torino 15,% 12,14% 13 1,% 7,3% 7,69% 12 5,% 3,98% 11 1,87%,23% 1,% 9-5,% -3,75% -4,12% 8-6,6% -1,% 7-12,33% -15,% 6 Var 26- Var 27- Var 28- Var 29- Var 21- Var 211- Var 212- Var 213- Var 214- Var (%) 28 (%) 29 (%) 21 (%) 211 (%) 212 (%) 213 (%) 214 (%) 215 (%) 216 (%) Napoli T1-21 T2-21 T3-21 T4-21 T1-211 T2-211 T3-211 T4-211 T1-212 T2-212 T3-212 T4-212 T1-213 T2-213 T3-213 T4-213 T1-214 T2-214 T3-214 T4-214 T1-215 T2-215 T3-215 T4-215 T1-216 T2-216 T3-216 T4-216 T1-217 T2-217 T ,% 12,1% 13 12,% 12 1,% 8,% 11 6,% 1 4,% 2,99% 2,% 1,36%,88% 1,26% 9,% 8-2,% -,94% 7-4,% -3,88% -4,8% -6,% -4,38% -4,77% 6 Var 26- Var 27- Var 28- Var 29- Var 21- Var 211- Var 212- Var 213- Var 214- Var (%) 28 (%) 29 (%) 21 (%) 211 (%) 212 (%) 213 (%) 214 (%) 215 (%) 216 (%) 1,% 13 7,51% 8,% 12 6,% 4,7% 4,% 3,2% 11 2,%,5%,88% 1,63% 1,%,% 9-2,% -1,49% -1,98% 8-4,% -6,% 7-8,% -6,8% 6 Var 26- Var 27- Var 28- Var 29- Var 21- Var 211- Var 212- Var 213- Var 214- Var (%) 28 (%) 29 (%) 21 (%) 211 (%) 212 (%) 213 (%) 214 (%) 215 (%) 216 (%) Turin (5) ISTAT, House Price Index - IPAB (6) EY analysis based on OMI Agenzia delle Entrate, Osservatori Territoriali 13

16 Many evidences in the market allow us to being confident about the sustainability of a new investment phase in the residential real estate market. But market and society has experienced dramatic changes in last 7 years. Do you have the necessary tools to assess the new normal and surf the wave?

17 Take away and EY tools Our approach for a successful investment journey in the residential development in Italy Many evidences in the market allow us to being confident about the sustainability of a new investment phase in the residential real estate market. However, it is evident that the customer base has changed. And it is going to change further in the near future. A successful investment journey in the residential development in Italy needs the capacity to give answers to specific questions. In example, some of such questions may be as follow. Is it clear to me who is my customer base? Does the potential customers in the catchment area of my development project is more interested in buying rather than in renting residential properties? How can I better understand main product features, to be sure to match market and customers expectations? In which part of the real estate cycle do we stand now and where we expect to be when the product is finalized and delivered to the market? If the customers are more interested in ranting, which kind of financing structure may be efficient to protect my returns? Am I able to collect the debt at the best conditions in the market? Am I able to reach the different debt providers further to banks? How can I increase take up and sell price of my project, compared to the development pipeline and competition in my catchment area? Are the marketing strategies and tools I have planned efficient? At EY, we have developed integrated solutions and tools to help developers and investors in the assessment of their pipeline and for a successful investment journey in the residential development market. Market analysis Catchment area assessment; demographic trends, consumptions and spending analysis; development pipeline and competition; demand analysis; price trends Project Market testing Social Media analytics Focus groups Development concepts and guidelines Capital & Debt Advisory Structuring, fund raising and debt arrangement PMO Project Management, Project Monitoring, Business Plan Hard costs and other costs assessment Revenues timing Cash flows and Marketing & Communication Strategic assessment, digital tools, marketing strategy and implementation 15

18 Market assessment and key business plan inputs Catchment area assessment Competition and price assessment Competition 1 Roma, xxx Classification # Rooms sqm Price ( ) Four rooms flat Three rooms flat Three rooms flat Three rooms flat Two rooms flat Roma, yyy Classification # Rooms sqm Price ( ) Two rooms flat Two rooms flat Two rooms flat Two rooms flat Two rooms flat Roma, zzz Classification # Rooms sqm Price ( ) Three rooms flat Three rooms flat Three rooms flat Three rooms flat Two rooms flat Value assessment 15, 1, 95, 9, 85, Market values , Catchment data 5 min 1 min 15 min Municipality Province Region Italy Population (cumulative) Families (cumulative) Family members 2,1 2,1 2,1 2,11 2,2 2,24 2,35 Income index Consumption index Source: Urbistat Population trend Affordable value Actual data Forecast Affordabe values 2,6-3,3 #Deals / Stock (%) 3,% 2,5% 2,% 1,5% 1,%,5%,% 6,1% 3,5% 6,2% 4,9% SINGLE ROOM HOUSES Transaction market Capital city: Roma Province: Roma Region: Lazio Italy 31,6% 22,8% 3,7% 22,5% TWO ROOMS HOUSES 43,9% 4,5% 37,2% 33,9% THREE ROOMS HOUSES 15,% 24,5% 16,7% 24,8% 3,4% 8,8% 9,2% 14,% FOUR ROOMS FIVE ROOMS HOUSES HOUSES Roma - Demand Italy - Demand Roma - Supply Italy - Supply Take up Key business drivers Transaction Per Year : 5-7 The analysis of catchment area, population trends, transaction market and developmemt pipeline provides input for the business plan exercise 16

19 Marketing & communication - focus The main goal achieved was to outline an innovative and disruptive approach for the real estate market. Thanks to the partnership with One Shot Lab, we have build up a new integrated model focused on a 3- phases go to market strategy, together with a omnichannel communication strategy based on a strong brand positioning supported by a concept. This model concentrates its efficiency in circa 68 days activity divided in 3 steps: Product teaser, Product reveal and Price reveal. The integration of the lead generation action in the process has successfully contributed to maximize the impact on our two targets: stakeholders and prospects. CONCEPT CONCEPT & STRATEGY COMPANY IDENTITY & ARCHITECTURE POSITIONING COMMUNICATION MATERIALS ADVERTISING CAMPAIGN STAKEHOLDERS TARGET PROSPECTS ON FIELD ACTIVITIES WEBSITE & DIGITAL, LEAD GENERATION LAUNCH EVENTS Hereunder the representation of the model synergy with the important results achieved in terms of sales, and in the next pages our best-selling case histories. DRIVE TO INFO POINT (NURTURING) SALES OPENING (LAUNCH EVENT) In collaborazione con 17

20 Our Results EuroMilano & UpTown case history 6x3m poster (road posting) 7x1cm Poster Phase 1-68gg Product Teaser 22 March March POSITIONING E BRANDING 31 March Info Point setting up Newspaper ADV (Half page) Eventi on field Tract 1 and 1page site Door to door April Metro Poster Fase 2-45 gg Product Reveal 7-9 April ADV on Trovocasa ADV on Corriere 27 April on-field events Tract 2 & 1page site Door to door 28 April 3 May Building site setting up ADV on Trovocasa The itinerary below shows the most effective communication actions, starting from a strong brand positioning, and deliverables we have been producing along the 3-phases strategy to achieve impressive results: 81% of apartments sold in just six months of activity (41% were obtained only in the 3 days launch event) on-field Event at Centro Commerciale Portello 16 May Half page ADV on Corriere Phase3-3gg Price Reveal 18 May 31 May Tract 3 & 1page site Door to door VIP Event Launch Event % of sold apartments during the 3 days launch event (9-11 June) 41% +4% RESULTS: from 12 June until today. The % refers on a total of 14 apartments, not built yet June Setting up Materials Priority Card In collaborazione con 18

21 Our Results Giusti Garden case history Tract 1 & 1page Site Door To Door Half page ADV on Corriere della Sera Phase1 Product Teaser 1 October 25 October POSITIONING E BRANDING ADV Banner on Immobiliari.it Building site setting up Infopoint opening 1 November Phase2 Product Reveal Double page ADV on Pregio - Corriere della Sera AVANT PREMIÈRE Invitation 2 November Tract 2 & 1page site Door to door Half page ADV on Corriere della Sera 24 November This is a particular case because strategy and actions have been condensed in 45 days activity. Nevertheless the results are impressive: 62% of apartments sold in just 3 days event. AVANT PREMIÈRE Card 27 November 3 November Phase3 Price Reveal 1-3 December Half page ADV on Corriere della Sera AVANT PREMIÈRE Setting up RESULTS: AVANT PREMIÈRE (Launch Event) 62% % of sold apartments during the 3 days launch event (1-2-3 December) In collaborazione con 19

22 Contacts Marco Daviddi Partner Lead Advisory Services Leader and Real Estate Leader Italy Rita Neri Partner MED Marketing and Digital Communication Leader Italy EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. 218 Ernst & Young LLP. All Rights Reserved.