March 20 (Bloomberg) -- Risanamento SpA, the Italian real- estate developer led by Luigi Zunino, said it’s no longer in talks with Dubai’s state-owned Limitless LLC about the sale of a Milan project for 475 million euros ($644 million).

“There are no longer negotiations for the asset sale,” after a December preliminary agreement to sell the development, in Sesto San Giovanni, expired, Milan-based Risanamento said in a statement late yesterday. It didn’t give a reason. A phone call by Bloomberg to Limitless in Dubai, where most businesses are closed today, went unanswered.

Risanamento slumped as much as 23 percent in Milan trading. The company, created in 2002 through a merger, is tapping 75 million euros in credit lines after amassing 2.6 billion euros in debt from buying offices and homes from Paris to Manhattan. The developer said Feb. 23 that it had used 44.1 million euros of the credit lines arranged in December with banks including Intesa Sanpaolo SpA and UniCredit SpA.

“This seems like an attempt, on Risanamento’s side, to try and get a better price because of the company’s need for an injection of cash,” said Luca Dondi, an analyst at Bologna, Italy-based Nomisma. “Limitless is likely to offer less if they know the company needs to sell.”

The developer continues to seek local authority approval for the development, which was a condition for the sale to Limitless, according to the statement.

Risanamento also said there are no “significant” events or other information that could have influenced the company’s shares, which have risen almost 32 percent in the past two days.

Net Debt

The shares traded at 11.7 cents, or 19 percent lower, as of 1:49 p.m., giving Risanamento a market value of 32 million euros.

Italy’s shrinking economy, record-low business confidence and job cuts by companies such as Telecom Italia SpA, the country’s largest phone company, caused the residential property market to stagnate in 2008. This year, prices may fall 7 percent, according to Dondi.

Risanamento’s net debt amounted to 2.64 billion euros at the end of September, compared with about 96 million euros in cash. Under the December accord with lenders, part of a moratorium that covers 65 percent of the debt of Risanamento’s Italian units, the developer cannot pay dividends, raise more debt or carry out extraordinary transactions without the lenders’ approval.

The developer is also seeking a buyer for Santa Giulia, a 2 billion-euro project that’s about 20-minute drive from downtown Milan that promised luxury apartments designed by Norman Foster, boutiques such as Dolce & Gabbana and a green area as large as London’s Hyde Park. Three years after construction began, the site is still mostly abandoned grounds with ditches and unpaved roads.

To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net

Last Updated: March 20, 2009 08:52 EDT