A Real-Estate Renaissance in Florence - WSJ.com
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Updated June 14, 2013, 4:49 a.m. ET
A Real-Estate Renaissance in Florence Buyers and developers are scooping up centuries-old palazzos at depressed prices By RU TH B LOOMF IEL D
In the days when the Medicis ruled and Michelangelo, Leonardo da Vinci and Botticelli were creating their greatest works, anyone who was anyone owned a palazzo in the center of Florence. Every inch of these imposing townhouses was designed to impress, from giant arched front doors, to internal courtyards adorned with sculptures, to entertaining rooms with 20-foot ceilings decorated with lavish frescoes and paneling. Now, some six centuries later, the palazzos of northern Italy's most affluent city are still among the most soughtafter addresses—but the recession has seen their prices drop by 19% in five years, from $406 per square foot in 2008 to $330 per square foot last year. The Italian research institute Nomisma forecasts that downward trajectory will continue for at least two more years.
Knight Frank
Palazzo Tornabuoni: This 15th-century palazzo was once owned by the Medici family.
Sotheby's International Realty, for example, is selling an 8,600-square-foot apartment in an 18th-century palazzo in Lungarno Amerigo Vespucci, an elegant riverside district close to both the St. Regis Hotel and the American consulate. The duplex is in need of updating— its bathrooms and two kitchens are a little too 1970sretro for modern tastes—but its original features are beautiful, from the glazed entrance door to the vast cantilevered stone staircase and intricate mosaic floors. However, it has been on the market for four years, even after a price drop to $9.2 million from about $11.83 million.
Diletta Spinola, the agent selling the apartment, says the tepid response reflects an economic nervousness that is paralyzing the city's property market. Italian buyers, she says, have been shaken by months of political instability and are waiting to see how the country's new coalition government will operate. Enrico Letta was sworn in as prime minister in April at the head of a complex union of his Democratic party and Silvio Berlusconi's People of Freedom party. Knight Frank
A living room in the Palazzo Tornabuoni is shown. A developer bought the building in 2009 and converted it into 38 apartments.
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A Real-Estate Renaissance in Florence - WSJ.com
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Meanwhile, Americans and Europeans, the most active overseas buyers before the downturn, are delaying until they see how the euro-zone crisis plays out. But a glimmer of hope is rising in the east. Of Ms. Spinola's five most recent sales of palazzo apartments, three were to Russian and Chinese buyers. "We have these new buyers coming in where the old buyers have been staying away," she says. Another hopeful sign, she adds, is a recent flood of interest from French buyers fleeing the specter of tax increases in their own country. Bill Thomson, chairman of Knight Frank's Italian network of estate agents, explained that until around 2000, overseas buyers tended to be looking for farmhouses and villas in the surrounding countryside. But in the boom years their interest turned to Florence and its palazzos—and developers took note. It is rare for a single family to own a palazzo; they are huge buildings intended for a wealthy family plus extensive entourage. They have been developed into apartments since the 1960s. However, the standards of these early conversions, aimed at local buyers, weren't always high, said Mr. Thomson. Knight Frank LLP
A bathroom in Palazzo Tornabuoni. A 2,475square-foot apartment is available for $6.571 million, fully furnished.
Sotheby's International Realty
"But since foreign buyers began to look at Florence, it became clear that what they wanted was high-end, hassle -free living," he said. The most high-profile example of a top-end, turnkey development aimed at wealthy overseas buyers is Palazzo Tornabuoni, a 15th-century palazzo in the city center, once owned by the Medici family. In 2009, the palazzo was bought by Italian retail and development giant the Fingen Group in association with Washington, D.C.based Kitebrook Partners. It took four years to convert it into 38 apartments, and two buying options are being offered.
Piazza Della Signoria: An apartment with two bedrooms with attached bathrooms is for sale in the heart of Florence for $3.943 million. A view of the piazza, where there are stylish shop and cafes, is shown.
Eleven apartments are being sold under a form of fractional ownership in which buyers purchase shares in a club, allowing them to use an apartment for at least five weeks a year. This model has proved hugely popular: In three years, 73 club memberships out of 88 offered have been sold to buyers of more than 20 different nationalities, with Americans and Britons leading the way. Membership costs about $585,000 for use of a onebedroom apartment (plus an annual service fee of about $21,000 to $25,000), and $867,385 for use of a twobedroom home (plus annual service charge of $38,112).
Sotheby's International Realty
The remaining apartments are being sold outright. Since they were launched in 2011, five of the 27 offered have sold, to buyers from the U.S., Italy, Belgium, Russia and the U.K. Prices of the remaining 22 units range from $1.117 million for a 527-square-foot studio to $3.877
An apartment with two bedrooms with attached bathrooms in the building is for sale in the heart
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A Real-Estate Renaissance in Florence - WSJ.com
of Florence for $3.943 million. The apartment is about 1,141 square feet and has intricately carved wood ceilings, painted doors and terracotta floors.
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million for a 1,367-square-foot apartment with two bedrooms. At the top end, a 2,475-square-foot apartment, also fully furnished and with two en suite bedrooms, is priced at $6.571 million. The space has 20-foot ceilings and includes original 19th-century frescoes and marble floors. Owners pay annual fees of between $19,713 and $52,569, depending on the size of the property.
Sotheby's International Realty
Lungarno Amerigo Vespucci: Listed in this 18thcentury palazzo is an 8,600-square-foot apartment for $9.2 million. But the unit has been on the market for four years because of dated interiors. The listing agent, Diletta Spinola, says the tepid response can also be attributed to an economic nervousness in the Italian economy.
While sales have been sluggish, Claire Hazle, a senior negotiator at Knight Frank, notes that the second-home market tends to operate on a slower track than the market for primary residences. "This is a very niche product with a very small group of purchasers, which means it takes time," she says. In cash terms, these apartments are expensive—by square foot, they cost well over twice the asking price of Ms. Spinola's riverside duplex ($2,654 per square foot
compared with $1,068 per square foot). However, Tornabuoni has an unusual selling point: The development is affiliated with the Four Seasons Hotel, where members can avail themselves of the pool, spa and gardens. And a concierge service is provided by the hotel, which includes a ready-made social life. Events from cocktail parties to opera are staged almost daily. Outings like classic-car rallies and truffle hunting are also arranged. Knight Frank
Palazzo Bardi: The living room of a two-bedroom apartment that is currently listed at about $3.304 million. The listing agent, Claire Hazle of Knight Frank, says sales in the second-home market and niche properties are slower than those for primary residences.
These extras are popular enough that one of Ms. Hazle's clients, an American artist, is currently selling her topfloor palazzo apartment, also in the city center, and moving to Tornabuoni.
The long-term outlook of Northern Italy's real-estate market remains unclear. In November, Nomisma forecast the Florentine market would fall 6.1% this year and 4.1% in 2014. However, data from another research institute, Scenari Immobiliari, show a glimmer of hope. It has found that foreign investment in Italian vacation properties is rising as Germans, Britons and Russians take advantage of the low prices. Second-home sales to overseas buyers rose by 14% last year, with non-Italians spending $2.76 billion. This increase could kick-start price rises in prime Florentine property, such as Piazza della Signoria, best known as an entrance to the Uffizi Gallery. It's an area in the very heart of the city, filled with statues, chic cafes and hordes of noisy tourists. Despite the cacophony, a two-bedroom property with attached bathrooms—about 1,141 square feet—is on the market at $3.943 million with Sotheby's . Its ultracentral location is part of the reason for this high price. But it is those historic trappings of a classic Florentine palazzo—think intricately carved wood ceilings, painted doors and mellow terracotta floors—that are seducing buyers back to the market. A version of this article appeared June 14, 2013, on page M4 in the U.S. edition of The Wall Street Journal, with the headline: A Real-Estate Renaissance in Florence.
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A Real-Estate Renaissance in Florence - WSJ.com
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