Hines Seeks $380 Million to Revamp Storied Venice Hotels

Two Venice grand hotels at the site of the city’s 82-year-old film festival are part of a renovation plan led by U.S. investor Hines, which plans to raise 300 million euros ($380 million) for the project.

Hines Italia SGR, a venture between the Houston-based company and Italian investor Manfredi Catella, plans to redevelop and manage the Hotel Excelsior and Grand Hotel Des Bains on Venice Lido for the privately held Real Venice 1 fund, Catella, the company’s managing director, said in an interview. As part of the plan, the company will renovate a disused state-owned hospital next to the hotels for Italy’s sovereign wealth fund.

The project shows how private companies can work with the state to generate income from the real estate it owns, according to Catella. Prime Minister Matteo Renzi is targeting disposals of about 500 million euros a year to help trim the country’s 2.2 trillion euros of debt.

“The Lido is a good example of a location that includes several run-down public and private assets that require a broader vision and a public-private joint venture that can produce a compelling re-launch plan,” Catella said.

The Lido beach project has the advantage of a storied past and its location in one of Italy’s most popular tourist destinations. Thomas Mann set his 1912 novella “Death in Venice” at the Hotel des Bains and Luchino Visconti’s 1971 movie of the book was filmed there.

Famous Guests

The Excelsior hosted luminaries from actor Errol Flynn to Winston Churchill, according to its website, and the first film festival in 1932 was staged on its terrace.

Hines Italia is in the process of identifying both investment partners and operators for the project, according to Catella. Investors would become stakeholders in the development, receiving a share of its earnings.

The joint venture Italia took over management of the Venice 1 fund with a plan to regenerate the area, according to a Feb. 21 statement. The company is working with Chris Choa of Aecom and Italian architects Vittorio Gregotti and Claudio Rebeschini to study how to refurbish the properties and prepare a plan that will be presented to investors by the end of 2014, Catella said.

Selling vacant properties in Italy’s slumping commercial property market will be a challenge for the government because the assets often require “intense” management from local partners and significant investment from potential buyers to improve them, Catella said. The state hospital on the Lido will be developed as a residential and tourist property, according to Hines Italia.

Divestment Targets

Italy owns as much as 420 billion euros of real estate, according to a September 2011 study cited on the treasury’s website. Agenzia del Demanio, the country’s public property agency, manages about 56 billion euros of assets. Renzi’s disposal targets continue the policy of his predecessor, Enrico Letta.

Before selling occupied assets, the government should first carry out a detailed review of the space it needs for public administration so it can establish solid long-term sale-and-leaseback agreements that investors target, Catella said.

Italian commercial property transactions dropped 7.3 percent in 2013 compared to the prior year, according to data compiled by the Economy Ministry. The data excludes real estate used for industry and services.

Last month, the government passed several decrees under the title “Unlock Italy” to foster investment. It includes steps to transform the real estate investment trust industry to mirror changes made by Spain that encouraged investors including Blackstone LP, Goldman Sachs Group Inc. and Cerberus Capital Management LP, to purchase property assets in the country.

‘Positive Rules’

The decrees will facilitate the real estate listed market, pushing Italy to move toward a more investor-friendly country with standards in line with other main markets in the EU,’’ Catella said.

Hines Italia has advised more than 1 billion euros of property deals in the last 12 months, Catella said. In July, the company acted as an adviser to the Qatar Investment Authority on its purchase of Credit Suisse Group AG’s Milan headquarters for an undisclosed amount. It also bought Aviva Plc’s Milan headquarters from BlackRock Inc.’s Europe Property Fund III.

(An earlier version of this story was corrected because Catella’s nationality was misstated.)

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE