Closed-end real estate funds in Italy are a lively market, with good prospects and a rapidly evolving trend. This is what ECapital Partners claims after having analyzed the so-called 'paper bricks' in detail in research, with a special focus on their performance.
In fact, from fund to fund, the prospects change based on profitability, cash flows and stock market price.
From ECapital Partners' analysis of Funds from operations (i.e. cash flows) by share, it emerges that some products generate generous cash flows and therefore allow the distribution of more interesting dividends. It is precisely on this front that the evaluation of funds according to ECapital Partners is based. In fact, an increasingly common opinion is that the Net asset value (Nav) is a static indicator, because it photographs the fund only twice a year without taking into account the management and development strategy of the real estate portfolio that guide acquisitions and disposals.
According to the analysis, Alpha was the product with the highest dividend yield during 2004 (13.5%). In addition to Alpha, those with the highest number of cash flows were Immobilium 2001, Nextra Sviluppo Immobiliare, Polis, Securfondo and Valore Immobiliare global. All have a higher than average dividend yield (7.21% for the products analyzed). Immobilium 2001 is an exception because it has not yet distributed dividends.
To understand the potential of a fund it is also necessary to examine the 'base value' (hypothetical value of the share based on cash flows, the net financial position and the purchase value of the properties) in relation to the price on the stock market and to a future valuation range of the share which, in the analysis, ECapital Partners calculated based on a capitalization rate of the rents between 6% and 7.5 percent. Based on this evaluation, the research shows that the funds that can be defined as 'good deals' are Investietico, Alpha, Unicredito Immobiliare Uno, Valore Immobiliare Globale and Nextra Sviluppo Immobiliare, all with a market price below the estimated theoretical value. Other funds, however, appear expensive to purchase on the market, in the case of Securfondo, Piramide Globale, Polis and others, which nevertheless present good growth potential for the future.
source: Real Estate Observatory
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