State and public property: a case study of investment advantages and development strategies1 - Agenzia delle Entrate
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*Cristina Coscia State and public property: a case
**Chiara Pano study of investment advantages and
development strategies1
Translation by Ilene Steingut
Keywords: Decommissioning, State Property, development, securitization, outsourcing, HBU.
Abstract The recent “Save Italy” Decree – which is still under scrutiny - placed significant emphasis
on the decommissioning of important state and public-owned assets. The legislation focuses on the
goals, procedures and partnerships necessary for implementing development policies and strategies that
integrate public finance needs with urban policy goals. It is clear that to put development policies into
action, it is necessary to ensure the profitability of the transformed or sold real estate in accordance with
all stakeholder needs. This last goal is an ambitious one; and it is a priority that can be attained only through
a series of targeted actions such as: simplifying administrative procedures and work flow decision-making;
reconfiguring evaluation/estimation/planning tools; implementing management procedures that take into
account the “time” variable of these operations and interventions. This paper explores the Cavallerizza
Reale (the Royal Riding Academy) complex in the City of Turin, a case study that lends itself to a critical
analysis of the evaluation/estimation/planning issues mentioned above.
Introduction
Italy has a considerable stock of real estate whose value is estimated at more than €1,700 billion,
equal to 137% of the nation’s GDP. This stock is even more significant when compared to other
countries. Among those adopting similar accounting practices, the average of the total assets stood
at 58% of GDP (...)2. If the Italian stock yielded only 2%, it would generate an annual income equal to
this year’s budget package3. These figures allow us to fully appreciate the importance of the efficient
and effective management of development projects4. In 2006, Angela Ferrari Zumbini referred to
policies for the use and sale of real estate assets emphasizing some strategic issues that will be
explored in this article.
The contents of the recent “Save Italy” Decree5 place further emphasis on strategies that integrate
public finance needs (seeking new sources of funding and additional resources above and beyond
standard budget availabilities) with urban policy goals. The plan for the decree’s implementation is
* Dipartimento di Architettura e Design (DAD) – Politecnico di Torino
** Freelancer
1 This paper can be attributed in equal parts to the two authors, but in particular, Cristina Coscia wrote the Introduction, Recent
Legislation and Significant Issues, The Contribution of Appraisal and Economic Valuation of Investments and Conclusions:
Emerging Issues and Critical Elements. Cristina Coscia and Chiara Pano wrote the case study chapter.
2 A peer group of States that use the full accrual accounting system and accounting policies of the private sector was adopted.
This peer group consists of: Australia, Canada, New Zealand. United Kingdom, United States and Sweden
3 The reference is to the year of the text’s publication, 2006.
4 Angela Ferrari Zumbini, Valutazione e valorizzazione dei beni pubblici in una prospettiva comparata, in: Aristide Police (a cura di),
I beni pubblici: tutela, valorizzazione e gestione”, Giuffrè, Milano, 2006, p. 637.
5 See Legislative Decree (DL) 2012/2011, converted into Law 214/2011.66 Cristina Coscia and Chiara Pano
still being studied6. According to analyses conducted by the Treasury Ministry, the (central) State
holds a property portfolio estimated at €72 billion (in addition to the €270 billion worth of property
belonging to local authorities and €35 billion belonging to the public hospitals and university
systems). Of this, €7 billion represents properties not directly utilized by the government. The central
government uses property valued at €58.4 billion (over 13,500 units) for its office space, and rents
buildings and land for an estimated €12.4 billion (7,200 units). Leases amount to approximately €1
billion per year (without considering another €2 billion for maintenance including renovation and
refurbishing work on these real estate properties).
These were some of the premises underlying the “Save Italy” Decree. Article 27 lays down rules for
limiting these costs, stating that any new leases, except those stipulated by Palazzo Chigi (the office
of the Prime Minister –trans) for national security reasons, must have prior authorization by the
Agenzia del Demanio (State Property Agency).
The Treasury also requested that the State Property Agency verify
the conditions in the cities in which the government leases offices.
PUBLIC-PUBLIC PARTNERSHIPS (PPP)
Monitoring these situations could identify abandoned or unused
A form of discussion, negotiation and formal state assets that could become available allowing the government to
agreement between public bodies on different terminate leases and move its offices to unused space adapted to the
levels for the COORDINATION of various new functions. Much state property is in fact already on the list of capital
economic and regional planning instruments. assets that will be transferred to municipalities as part of the country’s
The parties are obliged to work for the federalism policy. However, the Save Italy Decree has also set out a
COMMON GOOD and in the interests of the number of rules (pursuant to Article 27) that regulate the relationships
general population. The ultimate goal is not among central government, local authorities and the State Property
monetary profit, but rather to make a positive
Agency within a context of “institutional cooperation” (see Figure 1).
contribution in terms of social and economic
benefits for the community. Figure 1 - Focus: public-private partnership
(Source: Pano C. A., op. Cit.)
In order to implement development policies, it is clear that it is necessary to ensure profitability
of transformed or sold real estate assets in accordance with all stakeholder needs. This ambitious
goal is a priority that can be attained only through a series of targeted actions such as: simplifying
administrative procedures and decision-making work flow; reconfiguring evaluation/estimation/
planning tools; implementing management procedures that take into account the “time” variable
of these operations and interventions. Last but not least, in order to realize the full benefits of the
legislation, real estate development must become a parallel opportunity for rethinking urban and
regional planning. Only with such a vision can the privatization of public assets leverage funding for
projects that can trigger quality urban and regional development.
Recent legislation and significant issues
Leaving aside some regulatory passages7, the principal legislation is Legislative Decree (Dgls) 85/10.
Article 10 guarantees “the utmost functional development “ of assets subject to devolution. In
addition, the law establishes both the goal of transferring state-owned properties to local authorities,
and defines the two forms of development allowed for such operations. The first type is carried
out directly by the local authority (construction and reconversion projects). The second is indirect,
conducted through private sector involvement (sales, transfer of properties to real estate investment
6 See EIRE 2012: Focus Article 27: la sfida della valorizzazione per enti locali, professionisti e operatori. Procedures, Milan, June
7, 2012. See also:
7 Constitutional Law 3/2001 and Law 42/2009 were of crucial importance in the process moving towards state property federalism.State and public property: a case study of investment advantages anddevelopment strategies 67
funds, public-private partnerships and securitization, cf. Figure 2)8.
REAL ESTATE SECURITI Z ATION
Such operations regarding the Cavallerizza Reale case study9 had their
start in April 2004. The complex was to be converted into a mixed use
An operation that allows the transformation
development; one wing would be transformed for housing purposes
of REAL ESTATE properties, that cannot
and the remaining spaces were designated for public use.
be moved within financial markets, into
SECURITIES that can be traded efficiently Figure 2 - Focus: real estate securitization
(Source: Pano C. A., op. Cit.)
and that have well-defined characteristics in
terms of their financial profile, return and risk.
The redemption of these securities is
To date, however, this process has not been completed. But it does
guaranteed by cash flows deriving from the
highlight some general issues which are still critical and require some
underlying assets.
consideration with respect to the past, namely:
- the potential savings of €1 billion by reducing rentals from private
owners in cities, through targeted actions like the transfer of public
offices to decommissioned barracks and state-owned buildings or the reallocation of unused or
ministry offices from rented properties to other state-owned properties
- the reduction of per capita space for state employees from the current 50 square meters (estimated
mean value compared with the average value of 20-22 square meters for employees in the private
sector); the goal is to make significant stock available and to concentrate activities in a smaller
number of properties or in reduced space thus optimizing maintenance and operational costs
- the identification of nonessential real estate assets that could be put on the market. In this way, the
previous outdated approach - controversial sales and leaseback of state and public-owned property
- could be overturned. On the one hand, this operation, and others similar to it, guarantee immediate
liquidity and the optimization of current sources of public finance. On the other, in the long term they
do not consolidate balance sheet items and thus do not generate positive leverage.
This kind of reorganization could trigger a virtuous cycle passing from the reduction of current rental
expenditures to the identification of unrestricted resources for the reduction of public debt, without
having to divest strategic assets but only those that are considered no longer functional.
At the same time however, to create a more rapid cash flow through specifically-created funds, the already
planned sales of the real estate assets of local authorities is not disregarded. The heart of development
(see Figure 3) thus becomes the engine for the innovation inherent in such transactions by integrating:
• processes which, in the start-up phase, attract significant investment with real opportunities for
urban and regional redevelopment and reconversion;
• monitoring expenditure for state-owned property and verification and control of life cycle costs
of state-owned property, not only from an administrative point of view (for example, the control
over concessions, use contracts and allocation for government use) but also from a technical/
structural point of view regarding facility management and global services for the scheduled
maintenance of public assets through across-the-board supervision;
• operations aimed at providing more efficient public services by streamlining administrative
processes for the decommissioning and sale of public assets occupied by private entities;
• identification of new kinds of contracts between the parties, including Memoranda of
Understanding among public administrations
• collaboration with ANCI (National Association of Italian Municipalities) to create systems-oriented
development initiatives according to the 2006 Budget Law N. 80.
8 See De Mare G. e Nesticò. A., (2011), La centralità delle questioni estimative e valutative nell’attuazione del federalismo demaniale.
Riflessioni sulla valorizzazione del patrimonio immobiliare pubblico, in. “Rivista SIEV-Valori e valutazioni. Teorie ed esperienze”,
Roma, DEI, anno IV, n. 7, novembre 2011, pp. 21-38.
9 See § Un caso-studio: il complesso della Cavallerizza Reale a Torino.68 Cristina Coscia and Chiara Pano
Regarding the list (which is not exhaustive) of the subjects referred
D E V ELOP M ENT - G OALS
to which have given remarkable results but which still leave some
questions to be answered, the role of the economic/financial valuation
The “classic” concept of mise en valeur,
and assessment disciplines are of strategic importance. In the following
which does not leave aside the concepts of
section we will highlight how these fields can contribute to the
the rationalization of expenditure and the
maximization of profit, organized as follows: discussion.
• IDENTIFICATION of the asset, its
Figure 3 - Focus: development goals
POTENTIAL USES analyzed according to (Source: Pano C. A., op. Cit.)
territorial criterion and the interests of
public-private partnerships; The contribution of assessment
• Verification of the COMPATIBILITY of such and the economic valuation of investments
potential uses;
• Choice of the APPROPRIATE USE, verifying
In accordance with current legislation, the assessment/valuation
the utility to be incremented;
disciplines play a fundamental role in implementing development
• Development of MANAGEMENT ACTIONS
- especially in light of Anglo-Saxon approaches. They update both
for achieving the intended scope.
traditional procedures used for estimating property value as well as
other procedures for formulating estimations of the economic and
financial advantages of investments. The structure and workings of the Italian real estate market are
more backward than other more developed foreign markets, both with respect to common evaluation
practices that are still mostly based on market comparison approaches rather than on profitability/
financial criteria, as well as with respect to active asset management and performance indicators.
However, in recent years on the international scene there has been excessive financialization which
created an imbalance in the relationship between finance and the real economy, “too much derivative
and project financing with respect to original credit and debt. Too much leverage on too little capital.
[...] Between 2003 and 2007, the relationship between finance and global GDP grew from 9 to 1510.”
In fact, the model focused on the growth of leverage and trading meaning the “ability to force the
time between the purchase of an asset and its subsequent sale [...].11”
The consequences of this excess were felt in the financial crisis (which started as the subprime
mortgage crisis) that spread from the United States to the international markets in 2007 generating
today’s current crisis.
The need that arose, therefore, is linked to de-leveraging operations of a dual nature. The first regards
the reduction of the use of return on debt. The second is action that must be taken on the cultural
level insofar as the subprime crisis has shown that “the financial markets and the global economy do
not correspond even remotely to that ideal world of general equilibrium with complete information
sometimes theorized by economists.12” This condition triggered the distancing from and unravelling
of financial processes. The advantage introduced by financialization is undoubtedly connected to the
real estate management phase, which has been historically lacking in Italy. “[...] Faced with real estate
assets of enormous dimensions, the profitability produced by this capital is often insignificant and,
in the case of public assets, far too often, costs exceed the revenues generated by the real estate
capital.13”
The financialization of the real estate market and the consequent introduction of new financial
instruments were certainly key elements in the evolution from the construction industry to the
10 See Ajassa G.,(2009), Chi ricorda i subprime? La crisi, oltre i mutui, in “Economia dei Servizi”, anno IV, n. 2, p. 216.
11 Tronconi O. (2009), Prospettive evolutive del facility e del property management: verso il capital asset management allargato e
un’”industria” immobiliare, in “Economia dei Servizi”, anno IV, n. 2, p. 226.
12 Ajassa G., op. cit., p. 221 ff.
13 Ibid, p. 227.State and public property: a case study of investment advantages anddevelopment strategies 69 new real estate market , meaning the transition from a simple “do” approach to a more complex “manage” one14. Despite the fact that the current conditions of financial resources are such that liquidity becomes a critical component, it has become absolutely crucial not to overindulge in the use of the return on debt, securitization tout court and “creative” finance, because, as seen with the SCIP 1 and 215 (Società Cartolarizzazione Immobili Pubblici S.r.l. – a public company for real estate securitization, trans) operations, bridging the gap between finance and the economy is extremely difficult and impracticable16. According to a “modern” interpretation of the real estate sector, property is no longer (or only) an unchangeable good (as in the traditional interpretation), but it is an asset upon which to identify more consistent investment and development choices in terms of financial portfolio considerations as well as regional development ones. Focus must be on periodic cash flows rather than on gains relating to the revaluation of an asset. The production of cash flow is directly dependent on management practices, in other words on asset, property, building and facility management. The complexity of the large and ambitious Cavallerizza Reale case is clear. The real estate project began in 2003, when the ultimate goal was to develop an important historical, architectural and cultural complex. Such strategic development processes can influence spatial dynamics and trigger economic, social and cultural processes leading to greater benefits and a very positive sense of belonging to the city. State and local governments must, however, set the goal of implementing these processes without excessive enthusiasm for instant cash transactions (real estate transformed into liquidity) dictated by critical contingencies. In this case, it was pointed out several times that the city council wanted to deviate from past practices, in a view toward design methodologies that deliver social, economic and planning impacts and benefits for the overall urban context. However, notwithstanding the fact that an excellent initial course has been undertaken, it is evident that the final result17 refers to an outdated Italian methodology such as sale at auctions based more on the “traditional” identification of the value of a property’s conversion without taking into account specific development strategies (mise en valeur); in other words according to the Anglo- Saxon “highest and best use” (HBU) approach and real creation of value. A case study: the Cavallerizza Reale complex in Turin18 The Cavallerizza Reale complex in Turin is an historic compendium whose development project, following its decommissioning, is in a advanced stage of design and implementation. The project is being driven – at least on a theoretical level - by the Highest and Best Use (HBU) principle and is accompanied by a management plan. The project is also driven by the public interest and not only by the private sector seeking maximum profits. In addition, the decision-making process is “recent” and in progress. It began in 2003-200419. For 14 Tronconi O., op. cit., p. 227. 15 We refer, of course, to the securitization operation initially referring only to the property owned by the public social security institutions launched by Minister Tremonti in 2001. The financial technique of securization serves to anticipate expected future cash flows from the sale of the INPS , Inpdap, Inail, etc. housing through the creation of the SCIP, the Luxembourg company that constitutes the SPV, through the State and the banks, who front the capital and receive cash flows from the sale of the housing assets. 16 Moreover, the Italian experience of the SCIP showed that real estate is not easily sold (or undersold).It is for this reason that simple sales operations are not functional to the goal of preserving heritage and enhancing cities’ built and social contexts. 17 This refers to May 2012; in September a new Memorandum of Understanding was signed. See Conclusions. 18 The documents, information and data on the case study were derived in part from the thesis: Pano C. A., Valori e valutazioni. Approcci metodologici e strumenti. Rassegna critica sull’evoluzione della disciplina, Graduation thesis, rel. Prof.ssa Cristina Coscia, Politecnico di Torino, Department of Architecture and Design, Master Degree course in Architecture, AA 2010/2011. 19 2003: the State Property and Land Agency manage property and land. In 2004 the Cultural Heritage and Landscape Code entered into law. The design principles have been directed by the guidelines set out in cultural heritage legislation.
70 Cristina Coscia and Chiara Pano
this reason, the interpretation of the development process made use of the critical review of the
transformations and the diachronic reconstruction of proposals for action and initiatives by the State
Property Agency and the Agenzia del Territorio.
In fact, the Cavallerizza Reale complex is a public property that has been abandoned for years in a
state of advanced decay due to the local authority’s lack of interest in renovating it. Since World War
II, the municipal government “did not believe in reusing this complex as an opportunity to renew
the city. Instead the local government mishandled its identity with action plans that led to the total
disintegration of its original Baroque style.20”
Aside from the fact that it is an exemplar testimony to Savoy splendor and power and has been a
focal point for urban development in the city for over two centuries, the Cavallerizza Reale area has
enormous potential, both in terms of its architecture as well as its location in the heart of the Baroque
city, in the historic center. The Cavallerizza complex was a natural continuation and extension of
the system of the Piazza Castello administrative structures within an ambitious seventeenth-century
project for a Centro di Comando (Command Center).
The compendium covers an area of approximately 22,000 square meters, located between the via
Verdi (access at numbers 5, 7 and 9), via Rossini (access at number 9), the Accademia Militare square
(facing the rear of Teatro Regio) and the Giardini Reali Superiori (upper Royal Gardens)21. Its location
clearly manifests the area’s strategic importance. Indeed, appropriate redevelopment would bring
advantages by knitting together parts of the existing urban fabric. The area’s permeability by the
city’s streets is an important condition for the public authority since it can bring a piece of the city
back to its population in which the built area does not constitute a barrier, but can be crossed.
Currently, the compendium provides space for the local Military Administration for its technical
engineering and judicial services. Space is also allocated to the City of Turin for temporary exhibitions
and cultural activities such as one of the theaters for the Teatro Stabile di Torino. Some premises are
used for services22 (after-work clubs for employees of the Agenzia del Demanio), for use by the local
Carabinieri ecological corps, for storage or Military Administration parking areas and for housing23.
From decommissioning to development: the administrative process
Over the years, government departments and institutions have manifested new awareness of
development projects. Specifically there has been new understanding that the redevelopment of
the Cavallerizza Reale complex can become an opportunity for the large-scale redesign of a portion
of the city. The difficulties and constraints imposed by the structure and by its sometimes improper
present use led to a targeted approach to its substantial redesign and to listing of possible uses
“rather than a real plan to transform the city24.” In fact, the complex is functionally fragmented with
uses ranging from offices for the Demanio Militare (Military Property), to theatres for the Teatro
Stabile (in particular, The Royal Stables, the long wing, the short wing, the Guard Hall inaugurated in
20 Cantanna M., Verso un museo relazionale: allestimento del Museo civico di arte antica nella Cavallerizza Reale di Torino,
Master Degree Course, rel. Valeria Minucciani, Politecnico di Torino - Facoltà di Architettura, A.A. 2005-2006, p. 27.
21 See below, Figs. 4 and 6.
22 Office space for the Senior Citizens’ University was also present; this was later relocated.
23 City Council Resolution, City of Turin (proposed by GC July 17, 2007), October 1, 2007, Oggetto: Complesso immobiliare
denominato ex Cavallerizza Reale sito in Torino via Verdi 5/9. Approvazione schema di Atto di compravendita dal Ministero
dell’Economia e delle Finanze di detto compendio, codice meccanografico 2007-04800/008 (Subject: Building complex named ex
Cavallerizza Reale located in Turin, Via Verdi 5/9. Approval scheme for the sale by the Ministry of Economy and Finance of said
compendium, code 2007-04800/008.
24 Cantanna M., op. cit., p. 27.State and public property: a case study of investment advantages anddevelopment strategies 71
2001)25, housing, parking lots, storage and temporary exhibition space26.
The first decisive step was taken with the Memorandum of Understanding signed between the Ministry
of Economy and Finance, represented by the State Property Agency and the City of Turin on April 15,
2003. The agreement expressed the intention to renovate the entire complex by 2007. In detail, the
memorandum referred to “the former Royal Stables (Cavallerizza Reale), formerly Crown Heritage,
[...], via Verdi 5/9 and belonging to the Public Domain - Historical and Artistic Branch [...].27” According
to the document entitled “The Development of Public Assets: Memorandum of Understanding with
the City of Turin,28” “the operation will enable a significant increase in the value of the complex and
the regeneration of the entire area in which it is located, thanks to new mixed uses and functional
links to contiguous urban areas. The State Property Agency, in keeping with its institutional mandate,
has become the promoter of the initiative, with the added goal of improving the income prospects
of this important asset which has been limited thus far by its current uses. Turin is the main partner
in the development project. The city offered its maximum availability to ensure the overall success
of the initiative.” In concrete terms, on the one hand, the State Property Agency pledged to develop
all state-owned properties in the complex. On the other, the City of Turin committed to upgrading
the entire area, acquiring buildings or parts of buildings for its institutional needs. In particular, the
Chiablese Stable was set aside for the University of Turin for its institutional activities29.
The Memorandum provided for the constitution of a Mixed Urban Renewal Company with public and
private capital whose task was to manage development, in particular:
• the construction of a hotel in the wing facing the Military Court;
• the construction of two parking lots: the first in the Riding School, the second in the square in
front of the RAI Auditorium;
• A new 1200 square meter lecture hall for the University of Turin with a capacity of 600/700, to
be created in the Chiablese stables;
• exhibition space for the Museum of Ancient Art in the Benedetto Alfieri Stables, in the rotunda
and in the seventeenth century stables;
• The redevelopment of the entire area including housing.
• connection with the “cineborgo,” the Museum of Cinema-Cinema Massimo.
The hotel in Mollino square, the wing that overlooks the Military Tribunal, would be transformed into
short-term residences. The parking area on via Rossini in a small interior street in front of the Gobetti
Theatre would have a capacity of about eighty cars and could be reserved exclusively for residents.
A second three-storey parking lot was to be built on the corner between via Rossini and Corso San
Maurizio facing the Auditorium. The goal was obviously to free the courtyards from cars and to create
links between the Piazza Castello axis and via Rossini, ending at Mollino square, reopening the so-
called Salita delle carozze (Coach Hill) towards the Regio Parco (Royal Park). “The City will renovate
the Royal Stables, the Rotunda and Mosca stables. The stable will host prestigious exhibitions of
25 Godino I., Cavallerizza Reale, in:
26 Following the grant agreement of part of the ex Cavallerizza by the State Property Agency to the City of Turin signed on
December 20, 1996, the City began managing the former stables and other premises for non- residential purposes, including
over 5000 square meters of free space thus freeing the complex from inappropriate uses that demean its architectural heritage.
Among the cultural initiatives promoted by the city in the complex were: International Biennial Young European and Mediterranean
Artists (so-called BIG TORINO), launched in 1997, which revived the Cavalerizza as one of the city’s social spaces. The event was
repeated in 2000 and 2002, each time enriching it with new elements that combine the Piedmont tradition with international
experiences, from Cantanna M., op. cit., p. 64 ff.
27 Memorandum of Understanding between the Ministry of Economy and Finance and the City of Turin, April 15, 2003.
28 Explanation of the content of the protocol, synthesized here for publication:
29 The University of Turin proposed the construction of a new Lecture Hall inside the Chiablese Stables. The architectural project,
by architect. Augustine Magnaghi and Ing. Antonio De La Pierre, according to the initial timetable was to be completed by January
2011 to allow the opening of the new Hall in March 2011, on the occasion of the Festival of the 150th anniversary of the Unification
of Italy. However, to date the work has not yet begun. From www.unito.it.72 Cristina Coscia and Chiara Pano
ancient art, while the Palazzo Madama Museum will relocate a few collections in the the Mosca
stables - perhaps the gothic collection as well as archives, libraries, offices and teaching spaces.30”
“The State Property Agency has already taken on the burden of preparing the preliminary restoration
design. The City shall later convene a conference of all public authorities involved in issuing permits
and approvals31 (conferenza di servizi in Italian – trans).”
The conferenza di servizi was held from March 26 to July 14, 2004, after the Memorandum of
Understanding was signed with the State Property Agency. The conference sought to coordinate
the different planning constraints through the contemporaneous evaluation of the Cavalerizza
development project. The project was illustrated during the conference and an amendment to the
planning regulations was evaluated. On this occasion, the Landmarks Authority confirmed its prior
approval of the planning amendment, which was necessary for the development process, stating that
“the design choices concerning the organization and arrangement of interior spaces, and solutions
regarding the views of the same, will be submitted to verification by the Landmarks Superintendent
of the Regional Directorate for Cultural Heritage and Landscape.32”
Again in 2004, the State Property Agency awarded a commission to Studio Picco of Turin, in the
person of the architect Cristiano Picco, for a Feasibility Study, which was prepared in collaboration
with Cristina Ferrero (see Figure 4). Respecting the agreement between the city and the State
Property Agency, the professionals produced various hypotheses for integrating mixed uses, giving
the complex an urban character with the primary goal of opening up all of the previously inaccessible
public spaces. The study also sought to reconnect Piazza Castello with via Rossini leading to the
Museo del Cinema (Cinema Museum) and the Mole Antonelliana by creating a striking pedestrian
path. It also took into account new accessibility to the Gardens, which would grant access to Borgo
Vanchiglia from the bottom of the fort ramparts through the “Salita delle Carrozze.”
Figure 4 Feasibility Study by Studio Picco. Plan. In red, museum spaces. In yellow, University areas. In blue, commercial areas. In
turquoise, housing or hotel uses. The red line represents the pedestrian route at project completion. Not to scale.
(Source: www.cittagora.it.)
However, as always happens in projects of this scale and complexity, the expected schedule was not
respected. Indeed, the process broke down and “branched out” over the years.
In view of the project’s strategic nature for the city and its establishment of public functions and
initiatives, the City of Turin modified a decision expressed in the Memorandum of 2003. During 2005,
30 Li Veli G., Un albergo e due parcheggi così cambia la Cavallerizza. Entro l’anno la firma tra Comune e Demanio, in “La Repubblica”,
13 ottobre 2004.
31 Lupo M., Cavallerizza, la vita ricomincia nel 2007, in “La Stampa”, 23 aprile 2003.
32 City Council Resolution, City of Turin (proposed by GC February 23, 2010) November 4, 2010, Oggetto: Variante parziale n.
217 al P.R.G., ai sensi dell’articolo 17, comma 7 della L.U.R., concernente la riqualificazione del complesso della Cavallerizza Reale.
Adozione, n. ord. 145, codice meccanografico 2010 00969/009. (Subject: Partial amendment n. 217 to PRG, in accordance with
Article 17, paragraph 7 of the LUR on the redevelopment of the Cavallerizza Reale complex,Adoption, no. ord. 145, code 2010
00 969/009).State and public property: a case study of investment advantages anddevelopment strategies 73 the city asked to acquire the entire compendium. This represented a shift from a securitization logic to a more effective development policy - at least in its intent. Underlying the proposal was the need to redevelop the entire urban context in a unified and organic way without limiting the initiative only to the portion covered by previous arrangements with the University and the State Property Agency. Moreover, the great difficulties in implementing such a far-reaching project without actually owning the property had already emerged in previous studies for the compendium’s development. Considering its historic and artistic value and the landmark constraints placed on the property and in light of the provisions of Law 311 of 2004, Art. 1, Paragraph 450 (Finance Act 2005),acting through the State Property Agency, the Ministry of Economy and Finance gave its approval to the city’s request for transferring the property to its ownership. Therefore, on May 11, 2005, the Ministry asked the Piedmont Regional Directorate for Cultural Heritage and Landscape for its approval33 to cede the property to the City of Turin. The property was designated as a landmark34 under the provisions of Legislative Decree 42/2004. Approval was granted in view of the fact that the transfer would ensure the preservation and development of the important complex without compromising public use. Moreover, the approval established that the intended uses were not incompatible with the historical asset and would not pose a risk to its preservation. The requirements that owners would have to adhere to in restoration and redevelopment were also set out. The terms of this approval would also be applicable to future transfers of property to third parties by the city, provided that the constraints and requirements set out in the approval decision were met. To formalize the mutual obligations that would have to be agreed upon for final ownership transfer, the parties found it necessary to draw up a draft contract of sale that would refer to part of the content of the Memorandum signed on April 15, 2003, but that would integrate and modify it with new and more accurate and timely agreements. The contract was to be definitive only for the portions of the compendium not held by the military which were subject only to a preliminary purchase contract. The contract provided that the authorities pledge to the final transfer of the properties in the entire complex according to the following time schedule: 1. immediate purchase by the city of all portions currently free and occupied by the city, other agencies and the 39 resident families; 2. subsequent purchase of the portion occupied by the military in order to give the Administration time to reorganize its logistics. The Ministry of Defence was required to free the area within three years of signing of the deed for the property transfer to become effective. If the Ministry did not comply with this time frame, the city could either grant an extension or forgo the purchase of that portion, thereby acquiring the right to receive a compensation of € 3,843,909.00, corresponding to 15% of the area’s value due to the new economic potential obtained after plan amendment approval. The price for the entire complex was established by agreement with the State Property Agency at € 36,927,253.00 net of VAT35. The sum was divided as follows: € 3,331,941.00 for the city- occupied portion; € 10,840,579.00 for portions occupied by the state and other organizations and/ or institutions and households; € 22,754,733.00 for the portion occupied by the military. 33 Note N. 2005/8463/FTO, May 11, 2005. 34 Note N. 9603, August 1, 2005. 35 This amount - determined in discussion among the parties and with the support of the Department of Housing and City of Turin Polytechnic (Prof. Riccardo Roscelli), for the State Property Agency of the Department of Architecture and Planning at the Politecnico di Milano ( Prof. Sergio Matthia) and, finally, a third evaluator chosen by mutual agreement between the Parties - took into account the existing uses.
74 Cristina Coscia and Chiara Pano
The estimated value of the securitization operation
The method used to appraise publicly-owned buildings established by law is the market criterion
(see Figure 5), meaning the estimate of the most likely and potential sale value of the property. In the
Cavallerizza case, appraisers necessarily took into account its historical, architectural and cultural value36.
The ‘”Bill of sale and pre-sale of the property named “Ex Cavallerizza
M ARKET CRITERION Reale” between the Ministry of Economy and Finance and the City of
Turin” was signed on November 21, 2007, and divided the purchase
Standards set out in existing REGULATIONS into two phases, as agreed.
for the assessment of public property, Figure 5 - Focus: the market criterion
(Source: Pano C. A., op. Cit.)
without specifying limits and methodology.
The direction seems to be towards the The first phase, disciplined by Article 6, referred to the portion
assessment of the potential sale value, occupied by the city, authorities and households, estimated at a total of
€ 14,172,520.00, with payments as follows:
defined by classical real estate appraisal
€ 2,900,743.40 due on 31/1/2008;
criteria, essentially coinciding with the € 50,000.00 upon signing of the deed;
€ 2,900,743.40 on March 31, 2008;
VALUE OF TRANSFORMATION.
€ 2,900,743.40 on February 28,2008
€ 5,420,290.00 within six months of deed stipulation37.
The outstanding debt was repaid by the City of Turin on May 28, 2010, including payment of the
accrued interest38.
The second phase, however, was regulated by Articles 8 and 9 and covered the portion of the
compendium occupied by the military, having an estimated value of € 22,754,733.00 to be re-
evaluated according to the ISTAT consumer price index for families of workers and employees up to
a maximum period of 36 months39. Payment for this portion was made in two instalments: 50% upon
signing of a definitive agreement to transfer the portion occupied by the military, and 50% within six
months from the date of the signed contract. Pending completion of the purchase of the area, the
City of Turin implemented two actions:
1. initiation of a securitization program concerning property belonging to the city,
2. approval of Amendment 217 to the general city plan (PRG).
The City Council Resolution dated October 19, 200940 approved guidelines for real estate
securitization through the establishment of a limited liability securitization company. At the start,
the company was intended to be wholly owned by the city, with the exclusive scope of initiating
securitization of the proceeds of sales of city-owned properties, that is through the city’s acquisition
of a securitization company41 (SPV). Following this acquisition, the company changed its name to
36 City Council Resolution, City of Turin (proposed by GC July 17, 2007), op. cit.
37 City Council Resolution, City of Turin, November 13, 2007, Oggetto: Complesso immobiliare denominato ex Cavallerizza Reale
sito in via Verdi 5-9. Provvedimenti preliminari alla formalizzazione degli atti di acquisto, codice meccanografico 2007 07749/008.
(Subject: Building complex named ex Cavallerizza Reale in via Verdi 5-9. Measures prior to the formalization of the acts of
purchase, code 2007 07749/008).
38 Source: ipi.it, City Council Resolution, City of Turin (proposed by GC July 24, 2009), 19 October 2009, Oggetto: Programma
di cartolarizzazione immobiliare realizzato attraverso società unipersonale a responsabilità limitata - linee di 37: Fonte IPI.it:
integrazione linee programmatiche 2006-2011 ex articolo 31 Statuto, n. ord. 145, codice meccanografico 2009 04890/008.
(Subject: Scheme for real estate securitization through single-member limited liability companies – lines 37: IPI.it Source:
integration program guidelines 2006-2011 pursuant to Article 31 of the Statute, no. ord. 145, code 2009 04 890/008).
39 That deadline coincided with the relocation of the military.
40 City Council Resolution, City of Turin (proposed by GC July 24, 2009), op. cit.
41 Already included in the general article. 106 of Legislative Decree no. 01.09.1993 n. 385 (“Consolidated Law on Banking and
Credit”).State and public property: a case study of investment advantages anddevelopment strategies 75
C.C.T. srl (City of Turin Securitisation ltd).42
Later, on December 29, 2009, the City Council approved a resolution for the permanent transfer of
a First Portfolio of properties from the City to the CCT, while it was determined that the remaining
properties making up the so-called Second Portfolio were only subject to a preliminary contract of
sale. The transfer of this second group came about a year later in December of 2010. The Cavallerizza
complex (classified as property n. 11), excluding the Chiablese Stable insofar as this was on loan to
the University, was also included in the “Second Portfolio” (see Figure 6).
Figura 6 Buildings registry, basement and ground floor. Not to scale. (Source: www.yard.it.) C.C.T. and the City of Turin signed an
agreement to manage the transferred property, pending the sale of the assets to “ third
parties, so the City of Turin became the Property Manager.42”
The City of Turin, therefore agreed to:
• manage the property and carry out its ordinary and extraordinary maintenance in order to
maintain the property’s conditions;
• manage all contracts relating to the property;
• manage relationships with users and counterparties of the real estate contracts;
• perform other activities relating to property management as required by law, including evictions
of illegal occupants;
• protect the interests of CCT in relation to securitization.
• manage all procedures in the name and on behalf of the
SER V ICES OUTSOURCIN G
Company Servicer for valorization.
Commissioning NO-CORE services (those
Concerning this last point, the public administration did make
use of the procedure provided for by law for outsourcing not necessarily manageable by the authority
services (see Figure 7). In other words they selected a
itself) from THIRD PARTY companies or
specialist in the sales and marketing of the First and Second
Portfolio properties. organizations, whose services are controlled
in terms of quality and quantity, thus allowing
authorities greater FLEXIBILITY and opportunities
Figure 7 - Focus: process of service outsourcing to concentrate on their “core” activities.
Source: Pano C. A., op. Cit)
42 City Council Resolution, City of Turin (proposed by GC July 24, 2009), op. cit.76 Cristina Coscia and Chiara Pano
In February 2010, in name and on behalf of the CCT company, the city published a tender to award this service.
ThetenderwaswonbytheTemporaryAssociationofIPIBrokeragesrl(Parentcompany)andYardsrl(Principal).
In summary, the City of Turin was responsible for property management, while the temporary association
was responsible for managing sales.
The call for bids on the properties in the “Second Portfolio CCT” was published by the City of Turin
on March 30, 201143 for a base amount of € 37,980,356.00 (the share regarding the Cavallerizza
amounted to €11,474,000.00). The deadline for bids was set on May 5, 2011, but due to the lack of
offers received, a new call was published on July 12, 2011 with a deadline of September 27, 2011.
At least two critical issues emerged immediately upon the sale. Given economic and market
conditions, the first issue concerned the substantial difficulty in attracting investors, including the
considerable capital required for purchase and subsequent management. The second was tied to
a bureaucratic dispute with a tenant44. In fact, despite their being “unavailable,” the City Council
resolution from October 19 of that same year established the securitization of a number of city-
owned properties including the Cavallerizza itself45.
While the complex represented a resource with great potential value, it was still an enormous
investment. So it presented considerable difficulty even for the private sector. In fact no bids
were made, supporting the idea that sale at auction would “stifle” efforts to carry out a significant
development project.
Plan Amendement 217
The amendment to the city plan for the Cavallerizza complex was adopted on November 4, 2010, and
definitively approved on January 31, 201146. The amendment provides for the modification of the
Planning Regulations, in particular Regulation Sheet n. 29, concerning the Area to be Transformed in
the Historical Center referred to as the “Cavallerizza Complex” (Area of Study).”
The Plan intends to redevelop the entire complex with the location of museum, exhibition, cultural,
academic, residential, hospitality, tertiary functions and facilities of public interest. Such functions
can be integrated with services for people and businesses.
Residential uses cannot be located on the ground floor of buildings and cannot exceed 50% of
the overall gross floor area, subject to different assessments during the evaluation of the Unitary
Redevelopment Project by the City Council. This project has not yet been completed but is included
in the indications for the area’s development.
43 Following the contract signed with the temporary association, approved by City Council Resolution, City of Turin, March 8,
2011, Oggetto: Cartolarizzazione immobiliare. Contratto di gestione delle e contratto di gestione degli immobili Secondo Portafoglio
immobiliare. Approvazione, codice meccanografico 2011 01246/131 (Subject: Securitization of real estate. Contract management
and contract management of properties According to real estate portfolio. Approval code 2011 01246/131).
44 The number of households in the compendium was 39. They would have had to leave their homes so that the redevelopment
project could begin. This relocation is only partially complete: currently, there are 25 families still living there. An ordinance
by the Administrative Court of 23 May 2009 states that the City Council, to defend themselves during proceedings against a
condominium that was opposed to an eviction notice, claimed that “the Cavallerizza Reale is one of the unavailable goods in
the city.” The same local authority determined this, showing the judges a note dated March 24, 2009. Yet in the City Council
Resolution of 19 October of the same year, the securitization of a number of properties owned by the city was established,
including the Cavallerizza itself.
45 Martinenghi S., Cavallerizza all’asta, ma non si può vendere, in “La Repubblica”, 20 aprile 2010.
46 City Council Resolution, City of Turin (proposed by GC February 23, 2010), op. cit. This work is the result of studies and
projects which the city has undertaken in recent years: “In view of the historical and artistic value and the current state of
conservation of the compendium of the Royal Riding School, the City of Turin deemed necessary and of vital interest public favour
the regeneration and functional recovery with the neighboring urban realities through the substantial confirmation of the current
requirements of PRG and integration with new uses of mixed public and private, to another already present in the surrounding
historic fabric, as well as in line with the guidelines laid down for the context at issue in the current Regional Territorial Plan of
1997, the PTR adopted by the Regional Council in 2008, and the Regional Landscape Plan (PPR) in 2009. “State and public property: a case study of investment advantages anddevelopment strategies 77
Figure 8 City of Turin urban plan:
selection. Not to scale.
Original scale 1:5000.
(Source: www.comune.torino.it)
Legend
Identification of groups of buildings Quality of parts of buildings Implementation
Subdivision
Prestigious buildings Uniform facades,
important facades Complex buildings
Buildings of significant interest
Facades characterizing
19th century buildings the urban context
Areas subject to specific regulations
Buildings in the via Roma complex Entryways connected to
courtyards and private gardens Perimeter of study area
Buildings dating from
Private courtyards and gardens of Porte Palatine area
between the two world wars
particular architectural quality
Recent construction xxxxxxxxxx
Private courtyards and gardens
characterized by a coherent
architectural design
Minor residual urban fabrics
xxxxxxxx78 Cristina Coscia and Chiara Pano
The amendment also calls for (see Fig 9):
• recovery of pedestrian links of the vietta Roma alleyway with via Rossini and the Royal Gardens
and the realization of pedestrian connections through the courtyards between Mollino square
and via Rossini;
• prohibition of the elimination of the public use of urban areas within the Cavallerizza complex;
• redevelopment of the Royal Gardens to allow continuous crossing between Piazza Castello and
the Porte Palatine area;
• possible construction of underground public and private parking lots both inside (replacing the
original paving) and outside the complex;
• Possible construction of a new volume, subject to approval by the Landmarks Authority, built on
the footprint of the original wing of the complex between via Verdi and Teatro Regio (piazzetta
Accademia Militare), with one storey above ground, a maximum height of 5 meters and gross
floor area of 500 square meters47.
Figure 9 Timeline of events from 2001 until May 2012 (Source: Pano C. A., op. Cit.)
CAVALLERIZZA REALE
Approval New
Request for Municipal
of plan municipal
sale by tender
amendment auction
municipality procedure
217 tender
Real estate Debt Deadline
Memorandum Municipal
Teatro Site securitization extinction for relocation
of Sale auction
Stabile analysis by by of ministry
Understanding tender
municipality municipality functions
October February November March June
April May November MaY
2001 2004 December 2010 January May September May 2012
2003 2005 2007 2010
2009 2010/11 2011 2011
signed by Finance By Finance Ministry assignement New auction for
SCIP2
Ministry/ State to City of Turin, of selling the securitization
Theater proceeds:
Property Agency dividing complex into of portfolio of properties in the
66,5%
City of Turin 2 parts service portfolio
Feasibility study
drafted Approval of municipality’s Auction for
Regarding the securitization
Approvals securitization program
portion 1 of properties
conference Transfer of portfolio to CCT
organized deserted
47 City Council Resolution, City of Turin (proposed by GC February 23, 2010), op. cit.State and public property: a case study of investment advantages anddevelopment strategies 79
Conclusions: emerging issues and critical elements
To date, the development project has not been fully implemented. If on the one hand, the
city was committed to implementing a program of real estate securitization (since October
2009) and to approving Amendment 217 to the General City Plan (November 2010), the military
did not arrange for the relocation of its offices and warehouses from the Cavallerizza. The city,
therefore, could exercise the compensation clause in the preliminary sales contract, according
to which if the military did not respect the deadline of November 21, 2010 for its relocation,
the city could be compensated with €3,843,909.00 for failure to acquire the property.
However, pursuing a firm line dictated by the desire to develop the Cavallerizza complex in a unitary
fashion, the city decided to wait until the transfer was completed. Projects for the location of general
and cultural functions (exhibitions, museums, universities, residential, hospitality, tertiary) and their
relative typologies provided by the amendment can be organized in minimum plan units, according
to a Unitary Redevelopment Project48 within a perimeter that also includes, in addition to the
Cavallerizza buildings, part of the Royal Gardens bounded by ramparts. In addition, the road system
within the complex providing connections and reciprocity between the portions of the Cavallerizza
complex and the Military Academy cannot be subtracted from public use. This decision stemmed
from the fact that for some time the city had “the goal of restoring and developing the built fabric and
the urban block network belonging to this historical and prestigious complex and the accompanying
eighteenth century outbuildings of the Complesso del Real Palazzo in Turin49.”
In this context, the city’s intention, backed by Article 11 of the 2007 draft contract, was to reiterate
the contract only with respect to the conclusion of the final deed and with regard to different possible
payment schedules.
In the agreement, that was to be formalized by May 20, 2012 (within 18 months from the expiration
of the Nov. 21, 2010 contract) “the Parties shall evaluate the opportunity, given the critical situation
in the housing and financial market since 2008 and that continues to this day, to “freeze” the Istat
revaluation that has already accrued and accruing both on the purchase amount as well as on the
amount for urban development indicated in the contract50.”
The city, therefore, considered evaluating the possibility of “exchanging the Military Academy with
city-owned assets currently used as barracks or for the state police and/or making the payment
through the renovation of state-owned property required for the logistical needs of the Ministry of
Defense such as the Dabormida Barracks located in corso Unione Sovietica 100, headquarters of
the Army’s Logistic Inspectorate, which could accommodate the staff relocated from the Cavallerizza
complex51.” Today, progress has been made with the signing of the Protocol of Agreement between
the City of Turin and the State Property Agency for a five-year program of property exchanges52.
The City of Turin can acquire state-owned properties of municipal interest and, simultaneously, the
State Property Agency can acquire city-owned property of interest to the state. Transaction costs
are estimated at € 30 million and rationalization of public expenditure on rents and renovation work
on unused property, including the Cavallerizza, should result.
Therefore, the development strategy has been reinforced through forward-thinking methodologies
that can deliver impacts and benefits for the city in social, economic and planning terms.
48 To be established through a City Council Resolution.
49 City Council Resolution,City of Turin (proposed by GC March 1, 2011), 14 March 2011, Subject: Portions of the building
complex named former Cavallerizza Reale located in Turin Via Verdi 5/9 subject of preliminary purchase contract by the
Ministry of Economy and Finance. Extension term financial relations with the state. Operational guidelines, no. ord. 58, code
2011 01 034/131.
50 Ibid.
51 Ibid.
52 See:80 Cristina Coscia and Chiara Pano
Both prior to this Memorandum of Understanding and still today, the in-depth analyses of the
Cavalerizza complex redevelopment program and the characteristics and potential of its regional
context are weak and have not been put into proper focus by the city. In addition, thinking about
the optimal use of the complex and the identification of different forms of public-public and public-
private partnerships - once the “compatibility” of potential scenarios has been verified through
appropriate planning and property management tools - are also fragile.
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Webography
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www.edilcantiere.it/news/demanio
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