By Dana Rubinstein
SoHo Properties has invested in Chelsea.
Sharif El-Gamal, chairman and CEO of the real estate investment group, has dropped $45.7 million on the property at 31 West 27th Street, which PropertyShark describes as a 12-story, 108,594-square-foot office building.
"We just bought it for the income," Mr. El-Gamal told The Observer. "It's got great long-term leases, and the financing was really attractive. We have five years at a very attractive interest rate, and it's probably the best B building in this submarket."
Steve Witkoff, CEO of the Witkoff Group, bought the building in 2006 for $31.5 million. He could not immediately be reached for comment.
Mr. Witkoff is also reportedly in discussions to sell a 51 percent stake in the Woolworth Building to the Italian Sorgente Group, which is apparently on something of a buying spree, having recently increased its majority stake in the Flatiron Building.
drubinstein@observer.com

U.S. says an investor in the Woolworth Building and others were part of a sham deal involving the country's largest pharmacy service for nursing homes.

The U.S. Department of Justice filed a complaint against a New York real estate investor and real estate attorney Wednesday, accusing them of accepting $50 million in kickbacks from a pharmaceutical vendor that served nursing home companies in which they are principals.
Rubin Schron, an owner of the Woolworth Building, and real estate attorney Leonard Grunstein, a partner at Troutman Sanders, participated in the scheme, the government alleges. The complaint says the two men were part of a trio who received a $50 million payment from Omnicare Inc., the nation's largest nursing home pharmacy, so it could continue to provide services to their nursing home companies, Mariner Health Care and Sava Senior Care.
The government alleges the trio attempted to disguise the $50 million from Omnicare as a payment to acquire a business unit from Mariner that in fact only had two employees and was worth far less than $50 million.
The lawsuit was revealed as the Justice Department announced Wednesday that Omnicare will pay the federal government and several states a total of $98 million to settle Medicare and Medicaid fraud charges.
The suit also dovetails with the news that Mr. Schron and other owners of the Woolworth Building, including prominent real estate investor Steve Witkoff, are considering selling a 51% stake in the building to the Sorgente Group, an Italian firm that also owns a stake in New York's Flat Iron Building.
Messers. Schron and Grunstein couldn't be reached for comment late Wednesday.

By LOIS WEISS
Last Updated: 2:18 AM, November 4, 2009
Posted: 1:09 AM, November 4, 2009
Murray Hill Proper ties honcho Norman Sturner is quietly shopping around a trophy tower.
Sturner declined comment, but others confirmed that he's looking to sell.
There is virtually no product available, and the worldwide appetite for city stakes is turning frenetic.
"There is such an influx of capital from Europe, Canada, Far East and Middle East that we will see a premium paid on the perceived economic value of today -- taking into account the lack of liquidity and low rent rates," said Richard Baxter of Cushman & Wakefield's capital markets group, noting foreigners are benefiting from exchange rates.
HSBC's building at 452 Fifth Ave. is going for $400 a foot to Joseph Cayre and Israeli investors IDB Associates.
Additionally, Gilmore and Optibase, an Israeli tech company, will soon pay $560 a foot to buy 485 Lexington Avenue from SL Green Realty Corp.
The 49-percent passive interest in 299 Park Ave. being sold by UBS is going in the very high $500s a foot, likely to the Middle East-based Safra family, sources said. The Fisher family, which controls the building, still has time to match that bid.
"Everyone shows up wanting to buy trophies on the cheap and thinks they are going to steal the Empire State Building or the Chrysler Building," said Will Silverman of Studley's capital markets group.
Silverman says it helps to have specific investment criteria. The Italian Sorgente group, for instance, is going after pre-war landmarked and historical properties. Through a fund, Sorgente owned 27 percent of a 75 percent stake in the Chrysler Building that sold last year to an Abu Dhabi sovereign wealth fund.
This week, Sorgente bought another piece of the Flatiron Building, and claimed it is in talks for two or three other high- profile buildings, including the Woolworth Building.
A source familiar with their activities, however, said they may have met with the buildings' owners but not gone further.
Without a local partner, it's hard for foreigners to get dibs on properties. For the last few years, we've been in touch with the local rep for a Korean investor who can't get calls returned or due diligence information from office selling gatekeepers.
Last week we were asked for help finding a "trophy" for a wealthy Japanese family with a $500 million bank commitment. When we shared that e-mail at the RealShare conference last week, it elicited laughs. Panel member Sturner, however, raised his hand.
*
Although city leasing activity remains a bright spot, commercial mortgage loans continue their deterioration across the country.
In its worst scenarios, Realpoint projects September's 3.94 percent default rate on commercial mortgages could grow to 6.1 percent by December and expand to 7 to 8 percent in the first half of 2010.
Realpoint noted that currently performing loans with balloon payments may be unable to pay off the loans because of the lack of credit, and that retail and hotel loans continue to trend higher toward default rates.
As of the end of September there were 1,877 collateralized mortgage backed securitized [CMBS] loans representing $19.8 billion in delinquency across the country, with New York State accounting for 161 loans and $1.6 billion in value.
But Realpoint projects the total delinquent amounts will rise to between $40 billion and $50 billion by the end of this year should the $3 billion Peter Cooper Village/ Stuyvesant Town loan default along with the $4 bil lion Extended Stay Hotel loan.
*
Aini Assets paid $29.5 million in cash last week for the 12-story 63 W. 38th St. (aka 62 W. 39th St.).
A source says they will add six floors and turn it into a hotel with a rooftop club.
The father/son team of Marty and Eric Meyer of FirstService Williams marketed the deal.
mail : lois.weiss@nypost.com

NEW YORK CITY-Having already acquired a controlling interest in the Flatiron Building, the Sorgente Group reportedly has its eye on another Manhattan landmark: the Woolworth Building at 233 Broadway. Bloomberg reported Tuesday that the Italian-based real estate investment firm is in discussions to buy a 51% stake in the 57-story property, which at one time was the world's tallest building.
"We are in talks on two or three properties in New York, of which I can name only one: the Woolworth Building," Sorgente CEO Valter Mainetti told Bloomberg. The 96-year-old office property is currently owned by a partnership including the Witkoff Group, which purchased it in 1998 for $137.5 million from the Venator Group, formerly the Woolworth Corp. The Witkoff Group did not respond to GlobeSt.com inquiries by deadline.
Mainetti told Bloomberg that the building's lower floors could be kept as offices while the vacant upper floors could be turned into a hotel or apartments. The 935,000-square-foot office portion of 233 Broadway is currently 99% occupied, according to Bloomberg, with a tenant roster that includes New York University, the New York City Police Pension Fund and law firm Paul B. Weitz LLP. Sorgente, which has US operations based in Manhattan and also owns other properties here, reportedly plans to launch a US-based REIT by year's end to take advantage of acquisition opportunities.
Sorgente's possible buy of the Woolworth Building provides additional evidence that overseas investors have become active here again. Thus far in 2009, there have been the sale of AIG headquarters at 70 Pine St. and 72 Wall St., for a reported $140 million; to a partnership of locally-based Youngwoo and Korean-based Kumho; the acquisition of a 49.5% interest in 485 Lexington Ave. by Israeli-based Optibase and Gilmor USA LLC; and the $330-million sale-leaseback of HSBC's US headquarters at 452 Fifth Ave., where the buyers were two companies controlled by Tel Aviv-based IDB Group, with Midtown Equities as the local partner.
Additionally, more entrepreneurial foreign buyers have gotten into the act lately, as a Spanish investor paid $1,716 per square foot for 901 Broadway in an all-cash deal worth $24.6 million. Robert Knakal, chairman of Massey Knakal Realty Services, which represented seller Thor Equities, told GlobeSt.com in September that the trend is "very reminiscent of what the market was like in the mid-1980s. Between 1985 and 1987, we were constantly meeting with high net worth individuals from overseas. This is the same kind of influx."

By Armorel Kenna, Flavia Rotondi and David M. Levitt
Nov. 3 (Bloomberg) -- The Woolworth Building, the neo- Gothic Manhattan skyscraper that was once the world's tallest building and a symbol of American capitalism, may soon gain Italian owners.
Sorgente Group is in talks with the owners to acquire a 51 percent stake, Chief Executive Officer Valter Mainetti said in an interview. Sorgente owns a stake in the Flatiron Building in New York City. A group including the Witkoff Group Inc. and investor Rubin Schron owns the Woolworth Building.
“We are in talks on two or three properties in New York, of which I can name only one: the Woolworth Building,” Mainetti said at Sorgente's headquarters in Rome yesterday.
Overseas investors are jumping into Manhattan's office market as prices fall and landlords struggle to refinance debt. The median price for New York office properties fell 62 percent in the first nine months of this year, according to brokerage Massey Knakal Retail Services. International buyers have accounted for more than half of the $2.27 billion in New York office deals this year, according to data from property research firm Real Capital Analytics.
“They did come to us, said Steven Witkoff, chairman and CEO of New York-based Witkoff Group. “I personally met with their representatives, and past that I have no comment.” Officials at Schron's office declined to comment.
‘Bottom of Cycle'
“There is a thought process going around the world right now that the U.S. is a tremendous countercyclical play, Dan Fasulo, managing director for Real Capital. “We're at the bottom of the cycle, the dollar is cheap, which amplifies foreigners' purchasing power. And many investors are looking for hard assets to stash their capital.”
Sorgente may buy as Lower Manhattan rents have fallen 23 percent from their peak in August last year, according to data from commercial property services firm Colliers ABR. The market's vacancy rate has risen to 10.8 percent since bottoming in December 2007 at 6.8 percent.
The Cass Gilbert-designed Woolworth Building, once called the “Cathedral of Commerce,” was the tallest skyscraper in the world when it was completed in 1913 with a height of 792 feet (241 meters).
The lower floors of the building could be kept as offices while the upper floors, which are empty, could be turned into a hotel or apartments, Mainetti said. Luigi Binda, Mainetti's grandfather, was a technician involved in building frameworks for New York skyscrapers including the Chrysler Building in the 1930s. Sorgente owned a stake in that tower until last year.
Almost Fully Leased
The Woolworth building's office space is 99 percent leased with rentable building area of more than 935,000 square feet, according to data from CoStar Group of Bethesda, Maryland. The biggest tenants are New York University, the New York City Police Pension Fund and the Paul B. Weitz LLP law firm.
Sorgente, whose funds own the Baglioni luxury hotel chain, owns at least a 51 percent stake in the Flatiron Building. The company may leave the Fifth Avenue property as offices or convert it into a hotel, Mainetti said. Three chains, including Starwood Hotels & Resorts Worldwide Inc., are interested in turning the building into a hotel, he said.
Sorgente expects to create a real estate investment trust in the U.S. by the end of the year to take advantage of a recovery in the commercial property market. Sorgente has completed the conversion of a building on SoHo's Greene Street into luxury apartments and retail space. The company may also buy a property on Tribeca's White Street, Mainetti said.
Condominium Plans
Witkoff bought the Woolworth Building in 1998 for $137.5 million from Venator Group, which is the name the retailer adopted after closing the 117-year-old Woolworth chain. In 2000, he announced a plan to convert the top 27 stories into condominium apartments, including a penthouse at the top of the tower. Witkoff postponed the plan after the Sept. 11 attacks. The 57-story building is north of the World Trade Center site.
The property, at 233 Broadway, had a value of $320 million as of March 2005, according to data compiled by Bloomberg. It's backed by a $250 million loan and the borrower is current on the payments, the data show. Those loans have been packaged into two commercial mortgage backed securities deals.
Israeli businessman Nochi Dankner last month agreed to buy HSBC Holdings Plc's New York headquarters on Fifth Avenue. In August, Israeli group Optibase Ltd. agreed to buy a 49.5 percent stake in SL Green Realty Corp.'s 485 Lexington Ave.
To contact the reporters on this story: Armorel Kenna in Milan at akenna@bloomberg.net, Flavia Rotondi in Rome at frotondi@bloomberg.net, David M. Levitt in New York at dlevitt@bloomberg.net

By Armorel Kenna, Flavia Rotondi and David M. Levitt Nov. 3 (Bloomberg) —
The Woolworth Building, the neo- Gothic Manhattan skyscraper that was once the world's tallest building and a symbol of American capitalism, may soon gain Italian owners. Sorgente Group is in talks with the owners to acquire a 51 percent stake, Chief Executive Officer Valter Mainetti said in an interview. Sorgente owns a stake in the Flatiron Building in New York City. A group including the Witkoff Group Inc. and investor Rubin Schron owns the Woolworth Building.

"We are in talks on two or three properties in New York, of which I can name only one: the Woolworth Building," Mainetti said at Sorgente's headquarters in Rome yesterday. Overseas investors are jumping into Manhattan's office market as prices fall and landlords struggle to refinance debt. The median price for New York office properties fell 62 percent in the first nine months of this year, according to brokerage Massey Knakal Retail Services. International buyers have accounted for more than half of the $2.27 billion in New York office deals this year, according to data from property research firm Real Capital Analytics.
"They did come to us," said Steven Witkoff , chairman and CEO of New York-based Witkoff Group. "I personally met with their representatives, and past that I have no comment." Officials at Schron's office declined to comment. 'Bottom of Cycle' "There is a thought process going around the world right now that the U.S. is a tremendous countercyclical play," said Dan Fasulo , managing director for Real Capital. "We're at the bottom of the cycle, the dollar is cheap, which amplifies foreigners' purchasing power. And many investors are looking for hard assets to stash their capital."

Sorgente may buy as Lower Manhattan rents have fallen 23 percent from their peak in August last year, according to data from commercial property services firm Colliers ABR. The market's vacancy rate has risen to 10.8 percent since bottoming in December 2007 at 6.8 percent. The Cass Gilbert-designed Woolworth Building, once called the "Cathedral of Commerce," was the tallest skyscraper in the world when it was completed in 1913 with a height of 792 feet (241 meters). The lower floors of the building could be kept as offices while the upper floors, which are empty, could be turned into a hotel or apartments, Mainetti said. Luigi Binda, Mainetti's grandfather, was a technician involved in building frameworks for New York skyscrapers including the Chrysler Building in the 1930s. Sorgente owned a stake in that tower until last year. Almost Fully Leased The Woolworth building's office space is 99 percent leased with rentable building area of more than 935,000 square feet, according to data from CoStar Group of Bethesda, Maryland. The biggest tenants are New York University, the New York City Police Pension Fund and the Paul B. Weitz LLP law firm. Sorgente, whose funds own the Baglioni luxury hotel chain, owns at least a 51 percent stake in the Flatiron Building. The company may leave the Fifth Avenue property as offices or convert it into a hotel, Mainetti said. Three chains, including Starwood Hotels & Resorts Worldwide Inc., are interested in turning the building into a hotel, he said. Sorgente expects to create a real estate investment trust in the U.S. by the end of the year to take advantage of a recovery in the commercial property market. Sorgente has completed the conversion of a building on SoHo's Greene Street into luxury apartments and retail space.

The company may also buy a property on Tribeca's White Street, Mainetti said. Condominium Plans Witkoff bought the Woolworth Building in 1998 for $137.5 million from Venator Group, which is the name the retailer adopted after closing the 117-year-old Woolworth chain. In 2000, he announced a plan to convert the top 27 stories into condominium apartments, including a penthouse at the top of the tower. Witkoff postponed the plan after the Sept. 11 attacks. The 57-story building is north of the World Trade Center site. The property, at 233 Broadway, had a value of $320 million as of March 2005, according to data compiled by Bloomberg. It's backed by a $250 million loan and the borrower is current on the payments, the data show. Those loans have been packaged into two commercial mortgage backed securities deals. Israeli businessman Nochi Dankner last month agreed to buy HSBC Holdings Plc's New York headquarters on Fifth Avenue. In August, Israeli group Optibase Ltd. agreed to buy a 49.5 percent stake in SL Green Realty Corp.'s 485 Lexington Ave.
To contact the reporters on this story: Armorel Kenna in Milan at akenna@bloomberg.net ; Flavia Rotondi in Rome at frotondi@bloomberg.net ; David M. Levitt in New York at dlevitt@bloomberg.net

Investing in Italy the Sorgente Way
Ever heard of Italian investment company Sorgente? No? Well, aside from producing excellent returns for its investors, and thus ensuring that many will end up with a pension at the end of their careers, Sorgente's investment strategy is helping protect the world's heritage.
One thing I love about Italy is the country's ability to preserve its cultural heritage. Although there is evidence, in the form of Palermo, for example, to suggest the contrary, anyone who has visited the likes of Rome, Florence, Venice, Siena and a myriad of other Italian towns and cities will have noted how their timeless centres are in fine condition, and at the same time, are places which live and breath. This is the one of the most glorious aspects of the Living Museum, and long may it continue.
Indeed, as many will know, Italy has a seemingly unlimited supply of architectural masterpieces. Many of these buildings cum artworks are put to good use which ensures they will continue to contribute to Italy's fascination, and preserve Italy's reputation as a primary destination for those in search of substantial doses of European culture.
Recently, innovative Italian property investment company, Sorgente, which owns the Flatiron building in New York incidentally, has been doing its bit in terms of preserving of Italy's finest buildings. In Rome, no less.

Sorgente's Latest Trophy - the Galleria Colonna in Rome
Now known as the Galleria Alberto Sordi, a name which was adopted after this atmospheric Art Nouveau shopping arcade in Rome reopened after rennovation works in 2003, this elegant covered shopping centre is situated in the very heart of Rome. Indeed, Piazza Collona, onto which the Galleria Alberto Sordi fronts, is also where Palazzo Chigi, an Italian government centre of operations, is to be found.
Headed by real estate expert, Valter Mainetti, Sorgente bought this historic shopping arcade as part of its so-called trophy property investment fund, which is a real estate investment vehicle that aims to acquire prestige property around the world. Although some may think to the contrary, such real estate can produce very healthy returns for investors, provided that they are managed efficiently. Efficient management is another of Sorgente's specialities too, so you can be certain that if the company buys architectural classics, they will remain so. And yes, just to remind you, this is an Italian company we are talking about.
Other prime properties which Sorgente has acquired include New York's historic landmark and cultural icon the Flatiron building, and Sorgente recently sold a majority share in another New York icon, the Chrysler Building.

Risky investment Strategy?
As is to be expected, the running costs associated with buildings, such as the Galleria Colonna shopping arcade, which double as works of art, can be phenomenally high. Indeed, most investors would shy away from such risky investments. Most investors is not the category into which Sorgente falls though, luckily for Italy, and for the rest of the world.
Exploiting a combination of market knowledge and technical expertise, not to mention a love of beautiful buildings, Sorgente is able to take on seemingly high risk investments, exploit their obvious benefits, and make them produce a profit. At the same time, of course, this innovative Italian investment company is helping conserve Italy for both its residents, and for the world. Ever thought of an outwardly dull investment company saving portions of the world's artistic heritage? Probably not, not until now, that is.
The Chairman of Enasarco, an Italian pension fund which participated in the acquisition of this landmark Galleria Colonna shopping arcade, Brunetto Boco, stated that the completion of the Galleria Colonna deal represented "Another important step in the cultivation of our (Italy's) architectural heritage. We are particularly proud to have been involved in this investment, which enabled the Sorgente Fund to acquire a historic building against foreign competition."
As you can see, Sorgente is helping to keep the best of Italy, Italian. It is also saving Italian taxpayers an enormous amount of money, in that public funds are not needed to maintain Italy's architectural heritage.
Unlike many companies, Sorgente is not afraid to think long term. One could think of it as being a white-knight investor.

Long Term Innovator Sorgente
Actually, in using the word 'innovative', one conjures up the image of some recently founded start-up, a company which operates in the high tech field, possibly. Sorgente, on the other hand, is an Italian company which has been innovating in the field of investment for more than 200 years, for that is how long the company has been a player in the market.
At first sight, Sorgente's investment strategy may seem a little on the ambitious side. However, if you dig a little deeper, you will understand that this company is very effective at putting its 200 years of history in property investment to exceptionally efficient use.
Sorgente's activites are not solely limited to Italy. Indeed, as mentioned previously, Sorgente owns property in the United States of America including such cultural landmarks as the distinctive Flatiron building in New York.
While investment companies in general do not have the best of names at present, what with the credit crunch having been brought about primarily by overly ambitious and badly thought out high risk investment products, Sorgente is weathering the economic storm very well. So why is this Italian company doing so well?

The Valter Mainetti Factor
One of the main reasons why Sorgente's performance is exceptional is the management skills of Valter Mainetti, Sorgente's managing director. Sorgente's Trophy Investment fund is a product of his foresight. And, let's face it, any company which can go about spending in today's economic climate must be run exceptionally well. Sorgente must know a thing or two about risk management too, I would say.
Considered both a pioneer and an ambassador for Italy's real estate industry, Valter Mainetti, is a shrewd Italian quietly acquiring some of the world's finest buildings. Supporting Mainetti, of course, is a team of experienced property professionals, and a network of banks and other sophisticated firms.
Pioneering Mr Mainetti was also one of the first investment specialists to have introduced the concept of real estate investment funds to the Italian market. Indeed, one could say that Mainetti, who has worked outside of Italy, is highly adept at taking the best of solid Italian investment strategy and mixing it to good effect with the creative thinking common to the USA and UK investment markets.
Mainetti really does appear to have real estate in his blood. In fact, his family were involved in the construction of high rise buildings in 1920s New York. I was also interested to learn that late Italian politican, and former prime minister of Italy, Aldo Moro supervised Valter Mainetti's degree thesis.
The trophy hunting investment strategy of Sorgente SGR, is very much in keeping with the Mainetti family's long standing interest in culture, and in addition to operating one of Italy's most successful investment funds, the Sorgente group supports conservation efforts, and encourages the development and appreciation of various other forms of artistic creativity, through direct investment, support for research projects, and the funding of restoration.
Cultured Investment Funds
Even the names of Sorgente's investment funds, Michelangelo, Caravaggio, Donatello, Baglioni, symbolise the company's interest in culture. Mainetti somehow also manages to find time to devote to promoting all that is best in Italy, as is evidenced by the Sorgente Group Foundation. More on this another time.
In short, Sorgente amounts to a pretty much untold Italian success story. A fable which could, perhaps, be used to teach others a thing or two about sustainability and corporate social responsibility, and not just in Italy. Impressive stuff. An example which shows that with the right mentality, capitalism has a lot going for it.
If only the rest of Italy were to be managed with the same level of insight.
I wonder if Sorgente is looking into this investment opportunity: The Admirable Admiral's Villa in Taormina Hope so.

Italy's Toti Group is in final talks with fund manager Sorgente SGR for the sale of the Colonna retail gallery in Rome for a price of around EUR 180-200 mln, Italian newspapers have reported. The company has reportedly emerged as the preferred bidder for the prime shopping centre in Rome ahead of the sovereign wealth fund Libyan Arab Foreign Investment Company (Lafico).
Sorgente SGR plans to transfer the mall to a newly-created real estate fund that will be largely owned by Italian pension fund Enasarco.
The Colonna commercial gallery is located in the centre of Rome opposite to Palazzo Chigi. The scheme, also known as Galleria Alberto Sordi, was redeveloped by the group in 2003 after the company acquired it from Beni Stabili.

June 4 (Bloomberg) -- Sorgente Group, the Italian investment company that controls Manhattan's Flatiron building, plans to set up a real estate investment trust in the U.S. to take advantage of a recovery that may start as soon as 2010.
"We believe in the U.S. market so we want to set up the trust this year to help fund real-estate purchases," Chief Executive Officer Valter Mainetti said by telephone from Rome, where the closely held company is based. "We're very liquid and there are many opportunities out there."
Sorgente, whose funds own the Baglioni luxury hotel chain, increased its stake in the Flatiron building to about 51 percent in January. The company is converting a building in Greene Street, Soho, into luxury apartments and retail space and may buy a property in Tribeca and turn it into apartments at a cost of about 50 million euros ($71 million). Mainetti, 61, is in New York this week to look at the 19th century building.
"We feel pretty confident that the market will start picking up in the first quarter of 2010," Veronica Mainetti, managing director of Sorgente in the U.S., said in a separate interview from New York. "We're trying to create a brand, finding historic buildings, creating interiors with a modern Italian design," said Mainetti, who is Valter Mainetti's 28- year-old daughter.
Sorgente said in February that it may buy properties in London. So far, the company has been "too busy" with projects in the U.S. to make any U.K. acquisitions, the CEO said.
The Baglioni hotel chain is "holding up," despite the global financial crisis, Valter Mainetti said. "There are many hotels for sale in cities including Rome, Venice, Paris and New York," he said.
"We've got a long-term vision," the CEO said of the global recession. "This moment will pass."
By creating REITs, companies are able to pay less tax in return for distributing most of their profit to investors in dividends. The investment trusts also help property companies gain access to capital.
To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net.
Last Updated: June 4, 2009 06:52 EDT

Rome-based international fund manager Sorgente SGR closed 2008 with growth of 2.5% in total funds managed due to the overall stability of the Michelangelo and Caravaggio Funds, a rise in value at its Baglioni Fund and a positive start for its new Donatello Fund. Through management know-how Sorgente SGR said it has been able to ensure full protection of its invested assets, focusing activities on products with high prestige for architectural and functional qualities, situated in central locations. The group noted that these results were achieved during general stagnancy in the market and confirm the high quality of investment choices made.

Shares in the listed Michelangelo fund fell 1.26% to end the year at €186,835. This was caused by a tax liability incurred after the sale of the Chrysler Building. With turnover of €421m and a performance of 86.83% since start-up, the compound average annual return a high 9.25%. Aside from the Chrysler salel, notable activities in 2008 included preparations for raising its stake in New York's Flatiron Building. Sorgente's Caravaggio Fund showed a slight 0.9% change in share value to €3,312 and has a performance since start up of over 32% and a compound average annual return of 5.85%. Activities involved the finalising of bureaucratic procedures for renovation of a property in Via del Tritone in Rome which will be finished in 2010. No investments or disinvestments of properties or shareholdings were made in 2008. The Baglioni Fund continued to gain in value in 2008 with a growth in yield of 7.99%. Since start up total activities were valued at €96m, and its compound average annual return has been 11.13%. During the first six months, Baglioni purchased an important property complex in Punta Ala near Castiglione della Pescaia. This investment represented another step in the creation of a portfolio of properties to be used for hotel purposes.

In 2008, the group's Donatello Fund began operations for all authorised compartments achieving an overall value of €241m for its activities for the year. Since its inception and over a difficult year for the economic and financial system, the fund, reserved for institutional investors, has pursued a careful policy in the selection of opportunities to invest in, seeking diversification in retail, offices and distribution.

Normally the cash-rich Italian real estate giant Sorgente Group follows a simple investment strategy: It buys and patiently holds and manages iconic skyscrapers in major cities around the world, including the Flatiron Building, which it acquired in January.
"Our plans have a life of over 20 years," said Veronica Mainetti, daughter of Sorgente CEO Valter Mainetti and head of its New York-based U.S. office. "We're not going to start with the conversion of Flatiron today — maybe 10 years from now."
Meanwhile, the company will rent the Flatiron to existing tenants and watch the recession come and (it hopes) go.

But Sorgente's new venture in New York City, a luxury for-sale condominium development company operating within a severely stepped-up timeframe — not 20 years but 18 months — is being forced to respond to here- and-now market conditions.
With condominium sales nearly frozen and prices down some 20 percent and falling in Manhattan, Sorgente remains committed to historic properties, for their preciousness, but has radically downscaled the company's usual investment strategy.

Its first condominium, due for completion this summer, is 34 Greene Street, a combination of two five-story cast-iron landmarks built in 1873 containing just seven floor-through loft apartments, starting at $3.8 million.
Starting small poses less of a challenge to selling in today's market.

"We only have seven units to sell," said Jason Karadus, Prudential Douglas Elliman vice president and sales director for the project, "and the majority of the inventory right now in Soho is glass new construction," such as the Jean Nouvel-designed 40 Mercer, which is visible from the windows at the rear of 34 Greene.
"Even if we are in an unstable market," added Mainetti, "we believe there could be a buyer for these kinds of spaces" — large, modern, Italian-design lofts in a landmark building in the heart of Soho.

"Historic buildings preserve their value more than other buildings when the market is going down," said Mainetti.
Sorgente bought the two buildings from David Slavin's Red Brick Properties for $14.8 million in 2007. "The problem was the two tenants who were still in the building," said Mainetti. "[Red Brick] didn't want to deal with that." Sorgente did.
The next challenge was working with the Landmarks Preservation Commission to obtain permits for the removal of the fire escapes, a six-month process that entailed proving, said Mainetti, "that the fire escapes were not born with the building in 1873, but probably put up in the 1950s, and were doing nothing but obscuring the façade."

Sorgente inherited the plans for the conversion, most of which were already approved by the Buildings Department, in the purchase from Red Brick. But then Mainetti, an interior designer, worked with the original architect, Thomas McKay, for half a year to customize the building.
Some changes were made after the property was gutted. The original plans called for two 2,000-square-foot floor-through loft apartments per floor, said Mainetti, but when she saw the vast expanse of the floors with the walls removed, she couldn't resist turning the whole top floor into a 5,000-square-foot penthouse, to which a glass-enclosed 900-square-foot rooftop pavilion will be added. The addition will be obscured from public view to satisfy the Landmarks Commission and surrounded by a wraparound terrace. The unit will be listed for $12.5 million.
The lofts feature 12- to 14-foot ceilings, wide plank solid white oak floors, fireplaces, master baths with cast iron soaking tubs, travertine floors and walls, and kitchens by Schiffini, the high-end Italian kitchen designer.
Each unit has direct keyed access from the elevator, which opens on two sides. The lobby contains volcanic cobblestone and Osso travertine walls meant to evoke the feeling of an Italian village piazza.
Mainetti said she has been approached by several European design companies who wanted to buy the building's large retail storefront on the ground floor, but Sorgente prefers to keep the space for rental. It is in talks with a few Italian showrooms, which are ubiquitous on Greene Street.
Meanwhile, the euro-rich company is shopping for deals in New York City. "With everything slowing down," said Mainetti, "we know there is a lot of opportunity in the next six months. It's a good time for investors, a buyer's market. We believe that by the beginning of 2010 things will start getting better. And we have the capital to go through a struggling market."
But for residential development, said Mainetti, "We'll stay with boutique buildings. We want to concentrate on restoring historic properties — in Soho and Tribeca. There are no huge buildings here."