Due diligence on investment opportunities is carried out by CDPI Sgr, based on the adopted procedure.
Every decision related to FIA investment transactions is made by CDPI Sgr on the basis of a structured preliminary investigation which, once the compliance of the initiative with the purposes of FIA of increasing social housing units and the expected returns of the Fund is verified, focuses in particular on the following areas:
- integration of the initiatives with local housing policies
- governance requirements for local funds
- validity of the property and social management proposals of the initiatives
- economic-financial, social, urban and environmental sustainability of the projects
To assist proponents in planning initiatives and preparing related documentation, the criteria followed by CDPI Sgr to verify compliance of received proposals with FIA investment policies are indicated below.
The investment criteria concern the local fund, the property transaction and the promoter.
Criteria concerning purpose, returns and governance of local property funds
- Compliance of the local fund investment strategy with FIA investment objectives. The verification is based on the local fund regulations and, in particular, on the strategies, type and purposes of the investments.
- Divestiture duration and mode after expiration of the participation held by FIA in the target fund.
- Target fund's expected minimum returns equal to 3% plus inflation. The business plan supplied by the proponent is verified by CDPI Sgr through its own business plan model.
- Presence of governance rules of the local fund such as to allow CDPI Sgr to monitor its activity through an adequate representation in the target fund bodies.
- Consistency of the diversification and risk mitigation modes of the local fund with the risk management procedures of CDPI Sgr. The verification is based on the risk mapping and on the risk management system used by the Sgr of the local fund. For risk evaluation, the diversification and multiplicity of project modes provided for in the project will be evaluated.
Criteria concerning property transactions
- Economic-financial sustainability. The verification is based on the business plan, investment plans, annual divestiture and enhancement, expected and/or historic cash flows of the local fund, sustainability of stress-tests and pessimistic scenarios. Furthermore, the management fee levels and their compliance with the social orientation of the initiatives will be evaluated.
- Significance of the project scope in relation to the MIT investment related to the FIA. The project is only acceptable if it involves the construction of a higher number of social housing units than a public project of the same value would, in relation to the investment percentage share attributable to the state through the Ministry of Infrastructure and Transport, have produced if implemented directly through the payment of a contribution equal to 30% of the construction or redevelopment cost of the housing units, pursuant to Art. 5, paragraph 2, of the National Housing Plan annexed to the Prime Ministerial Decree of 16 July 2009. A further significant factor could be identified in the coexistence/integration of different types of projects from a residential point of view (i.e. concessionary, facilitated, free-market housing) and from a final use point of view (i.e. services and other activities).
- Effectiveness of the project target strategy in respect to the local housing needs. The verification is based on the analysis of the property market and local housing needs.
- Construction of sustainable projects from an economic, social, environmental and energy point of view. The verification concerns: (i) the project location and the urban and social characteristics of the project area, also in relation to infrastructure, urban developments and services (ii) target use mix (iii) housing types (iv) construction quality and the energy and environmental performance of the units (v) urban and social integration of the new projects Preference will be given during evaluation to projects that do not take up new land (e.g. not redevelopment plans for agricultural land) and with higher safety, energy and environmental sustainability, all other conditions being equal.
- Consistency and integration of the project with local public policies and possible involvement of several local communities, evidenced by coordination with regional and municipal programmes and financing for social housing, urban regeneration or transformation programmes, construction of local infrastructure as well as public property asset enhancement plans. The verification is based on the analysis of any agreement or understanding with local public or private agencies and of town planning tools, implementation plans, building permits and related administrative procedures.
- Possible issuance of public (i.e. European, national and municipal funds) and private grants, provided that, with equal and proven technical-economic and administrative feasibility conditions of the projects, projects mainly characterised by private investments will be preferred.
- Adoption of protections and guarantees against the construction risks and delays in construction risks of the property projects. The verification is based on the risk mapping and on the analysis of the provided protections.
Criteria concerning the promoter
- Experience in the social housing field of the subjects entrusted with the management of the investments, as well as integrity and professionalism of the applicants and of the local Sgrs. The verification is based on the track records of the promoters and Sgrs in all stages of the initiative: development, construction, management and divestiture.
Taken as a whole, the selection activity of the investment opportunities carried out by CDPI Sgr aims at creating an adequate territorial diversification of the investments, in order to guarantee a better diffusion of the same on the national territory.
Criteria for FIA participation
CDPI Sgr can manage the participation of the FIA in different initiatives incrementally, for a maximum of 80%, according to the following factors:
- Significance of the investment share in social housing.
- Significance of the long-term lease social housing component.
- Existence of residential uses related to social housing, such as, in particular, student halls, but also temporary residences, assisted healthcare facilities, schools, meeting spaces, etc.
- Reuse of existing properties, regeneration of disused areas and use of urban areas.
- Promotion of the initiative by public bodies.
- Location of the project in southern regions of Italy.
- Capability of the initiative to integrate into larger urban regeneration contexts and to generate further project opportunities on the territory, compliant with local housing policies.
Furthermore, an increase of FIA participation shall be accompanied by increasing protections and rights connected to the fund and by a more accurate assessment of conflicts of interest.