“I was in Barcelona attending the 2024 edition of the Global ABS Conference, which is the most important event for the structured finance market. What I perceived it is a general interest in real estate securitization transactions, from logistics to offices, from hotels to housing” tells Emanuela Campari Bernacchi, equity partner and head of structured finance department at PedersoliGattai, a reference name in legal advisory on Italian finance-related issues.
What Campari refers to are securitization transactions under article 7.2 of Law 130 of 30 April 1999(the so-called Italian Securitisation Law). Real estate securitizations are made possible by a relatively recent amendment (effective since May 2019) to that Law, allowing the securitization of proceeds deriving from real estate assets and registered movable assets.
The key point of the new legal framework lies in the fact that Italian special purpose vehicles (“7.2 SPVs”) are now legally permitted to acquire and manage real estate and registered movable assets (and any rights relating thereto) together with the receivables arising from such portfolios of assets. The subscription price of the Notes issued by the 7.2 SPV will be used to fund the purchase price of the assets within the real estate securitization. Thus, in line with the general principle of the Italian Securitisation Law, the assets of the SPV are automatically segregated by operation of law for the benefit of, inter alia, the noteholders.
“As opposite to a normal real estate financing, thanks to the assets’ segregation by operation of law there is no need to register a mortgage on the relevant assets, due to the fact that the noteholders have direct recourse on the assets which are segregated for their own benefit” adds Campari. Of course, no need to register a mortgage means saving time and money
But this is not the only positive effect. The recourse to a 7.2 structure allows foreign entities (not being a bank or an Italian financial institution) to finance the acquisition by the 7.2 SPVs simply by subscribing the relevant notes. And note issuances may prove more flexible than bank loans, particularly as regards maturities, an important plus in a period when Italian banks are increasingly reluctant to stay exposed to real estate development projects for long. Many of them, indeed, need to be refinanced after five-to-six years, often by specialized private debt funds, so real estate securitizations are now seen as an effective alternative funding channel.
No wonder that in the past few weeks the recourse to 7.2 SPVs by real estate developers accelerated significantly. At the end of May, for instance, Redbrick Investment Group, an independent manager of Italian real estate assets, founded in 2011 by Nicola De MartinoandAlexio Pasquazzo, acquired a 5.000 sqm apartment building in Milan funding the project via a 7.2 SPV (see story on BeBeez.it). And only few days sooner, Phinance Partners, an Italian independent structured finance boutique, hammered a new article 7.2-ruled asset backed note issuance program to fund the purchase of real estate assets and related credit, both performing and distressed, up to 50 million euro (see story on BeBeez.it).
No wonder that in the past few weeks the recourse to 7.2 SPVs by real estate developers accelerated significantly. At the end of May, for instance, Redbrick Investment Group, an independent manager of Italian real estate assets, founded in 2011 by Nicola De MartinoandAlexio Pasquazzo, acquired a 5.000 sqm apartment building in Milan funding the project via a 7.2 SPV (see story on BeBeez.it). And only few days sooner, Phinance Partners, an Italian independent structured finance boutique, hammered a new article 7.2-ruled asset backed note issuance program to fund the purchase of real estate assets and related credit, both performing and distressed, up to 50 million euro (see story on BeBeez.it).
