Building a Business by Building Buildings VII

PERCHED ATOP Monte Mario and overlooking a panorama of ancient ruins and Renaissance settings is the busiest of Rome’s new international hotels, the one flying the Hilton flag. Of the thousands of persons who use the four hundred rooms and suites in the Cavalieri Hilton each year, few are aware that the hotel is largely owned by the Catholic Church. Through the Societa Generate Immobiliare, the Vatican has a big interest in the hilltop hotel, which is operated by Hilton International. Said interest is, to be exact, a three-quarter ownership.

As the largest of Italy’s construction companies, the Vatican-owned Societa Generale Immobiliare has been in business for more than a century. S.G.I. has entered every facet of the building business—not only construction but also planning, investment, production of specialized building materials and equipment, and management.

From 1870, when S.G.I., Italy’s oldest construction company, moved its headquarters from Turin to Rome, until the end of World War II, S.G.I.’s interests and properties were concentrated in and around the Eternal City. Then the company branched out on a nationwide scale, growing into a diversified corporation which took on thousands of new employees. Now S.G.I. has moved onto the international scene. It has thrust itself into the business of constructing large-scale residential projects and selling them to private customers. And lately, this Vatican company has become involved in urban development, with the planning and building of entire metropolitan or suburban centers and communities.

S.G.I.’s investment in construction projects has jumped to over $45 million at this writing. Its gross assets, which were approximately $50 million in 1955, were about $170 million in 1967, while net earnings went from $2.4 million in 1955 to $6.2 million in 1967. Today S.G.I. holds a controlling or substantial interest in over fifty Italian companies. Four of these specialize in investment and property holdings; nineteen are real estate development institutions; nine deal with urban development projects; four engage in agricultural works; eight are industrial and manufacturing corporations; and the rest are technical and service companies.

Although Italy’s housing industry recently suffered a serious slump, S.G.I. was not badly hurt. Its earnings still rose 16 percent and its gross assets went up 20 percent. Moreover, the Vatican company’s investment in land increased 25 percent, due largely to the completion of a long-term plan that involved the formation of a satellite city near Milan.

Nevertheless, there was a slowdown in the sales of S.G.I.’s newly finished buildings. Against a background of reduced mortgage credit facilities, Vatican strategy called for a corresponding increase in S.G.I.’s bank borrowing (from a Vatican bank, to be sure). A satisfactory ratio between current assets and liabilities was restored following the successful issue of 6 percent convertible debentures for the equivalent of $26 million.

In 1966, in Rome alone, the Vatican’s construction society completed or nearly completed three apartment houses, seven garden villages, twelve luxury homes, a five-building apartment development, an office building with ground-floor stores and a cellar garage, two other office buildings (comprising 174 office units), and a twelve-villa garden development.

During the same year, in Milan, S.G.I. finished a three- building housing project that has sixty-two family dwellings, eighteen offices, seventeen stores, and an eighty-car garage. Plans have been drawn to add two more buildings to the project by replacing the old Vatican-owned structures on an adjoining site. Elsewhere in Milan, and also in 1966, S.G.I. completed a seven-building (196-apartment) housing complex and was in the process of putting up a shopping center. The shopping center’s site is the famed Piazza Loreto, the square where the bullet-riddled bodies of Mussolini and his girl friend were hanged upside down during the closing days of the war.

In Genoa, 1966, S.G.I. nearly finished a 150-apartment development along the Via Bobbio, opened and rented to capacity its plush Residence Park Riviera, and began construction of a new 92-apartment development. And plans were made by an affiliate of S.G.I. (the Eden di Nervi Company) to build a large motel just outside Genoa, in an area near the Vatican-owned Hotel Eden.

S.G.I., which recently moved from its cramped headquarters in downtown Rome to an eight-story glass building in the city’s outskirts, has also put into execution building projects of various sorts in other parts of Italy. In Florence, Naples, Palermo, and Catania many of its undertakings are handled by related companies. Few people know which of the related companies belong to S.G.I. and which are controlled by parental pursestrings. S.G.I. guards her fifty plus offspring like a mother hen, preferring to shield them from too much attention. This is done for a number of reasons, some having to do with taxation and others with regional strategy.

To illustrate: S.G.I. does not own Rome’s Cavalieri Hilton directly. The three-quarter owner is a front company called Italo Americana Nuovi Alberghi (I.A.N.A.), which answers only to S.G.I. Similarly, the Societa Italiana Arredamenti Metallici (S.I.A.M.) is owned by the Vatican but administered indirectly by S.G.I. S.I.A.M., which runs a large plant for the production of steel furniture, was the company that supplied the steel furnishings for the Italian luxury liners the Raffaello and the Michelangelo.

S.G.I.’s other companies include the Compagnia Italiana degli Alberghi dei Cavalieri (C.I.D.A.L.C.), which operates hotels in Pisa and Milan; Bellrock Italiana and S.A.R.F.E.C, which produce specialized building materials; and the Manifattura Ceramica Pozzi, which manufactures petrochemicals, plastic products, and plumbing fixtures.

Italy has no regulations or laws against private holding companies, and S.G.I. controls several.

One of the largest is the Societa Generale per Lavori e Pubbliche Utilita (S.O.G.E.N.E.), a construction company with extensive experience in public works. In recent years the Vatican-owned S.O.G.E.N.E. has built a 328 foot-high dam at Mulargia in Sardinia, a 430,000-squarefoot, reinforced concrete flood-water diversion for the Arno River at Pisa, a 125-foot dam at Gramolazzo near Lucca, a hydroelectric power plant near Terni, a 54-mile consortium aqueduct for the cities of Ascoli and Fermo, a 29,950-foot tunnel for the pipes of the projected Frida Aqueduct, hundreds of miles of embankments for Italy’s main superhighway, the tunnel for the Gran San Bernardo highway connecting Italy to Switzerland, concrete emplacements for much of Milan’s new subway, the 4.5mile- long highway between Chiasso and San Gottardo, and a number of bridges and viaducts in various parts of the country.

Demonstrating a know-how that makes it far more than an ordinary general contractor, S.O.G.E.N.E. has even produced entire factories under private contract. The impressive new Colgate-Palmolive plant at Anzio, which covers 430,000 square feet of land and has over seventeen million cubic feet of interior space, was designed and put up by S.O.G.E.N.E. technicians and engineers— that is, by experts who drew their pay from Vatican coffers. This same team of experts also built the $565-million Italsider iron and steel complex; the largest such complex in all Europe, this one, in Taranto, sprawls over 3.9 million square feet of land. A telecommunications plant at San Siro was set up by S.O.G.E.N.E., which handled the entire project. In Sardinia the same Vatican contractors set up not long ago a 64,000-kilowatt thermoelectric power plant (near Cagliari) and a 480,000kilowatt plant (at Sulcis). Working for Italy’s nationalized electric industry (E.N.E.L.), busy S.O.G.E.N.E. teams installed a 200,000-kilowatt thermoelectric power structure at Civitavecchia and a 300,000-kilowatt plant near Perugia.

On opening day, all of S.O.G.E.N.E.’s projects are given the customary blessing by an attending cardinal, and often there is a special good luck message from the Pope himself. The sign of the Cross was made many times in 1966, when S.O.G.E.N.E. completed public and private works that totaled $27.6 million. Although this figure is 25 percent less than that for the preceding year, a decrease attributed to Italy’s economic dip, the outlook for S.O.G.E.N.E. is good, for a number of public projects have already been contracted for and Italy’s economic situation shows every sign of improving.

Most of S.G.I.’s enterprises outside of Italy have been undertaken by still another subsidiary company, Ediltecno, S.p.A. Fully owned by S.G.I., it was liquidated in 1967. Ediltecno, which was organized in 1961 to service projects abroad, was a technical, consulting, and engineering management company with branch offices in Washington and Paris and a representative in New York City. There is also a Canadian company known as Ediltecno (Canada) Limited, located in Montreal, and a Latin American affiliate called Ediltecno de Mexico, S.A., based in Mexico City.

In the past seven years S.G.I. has acquired a controlling interest—nearly 70 percent of the common stock and 50 percent of the preferred—in Watergate Improvements, Inc., of Washington, D.C. Through it, the Vatican is playing a major part in the completion of a large officeand- apartment complex on the edge of the Potomac. The first stage of the project was finished in 1965 with the completion of Watergate East, a thirteen-story cooperative apartment building with 238 apartments, 60,000 square feet of commercial space, and five acres of parking on four underground levels. During the project’s second stage, completed in 1967, a thirteen-story apartment hotel with three underground levels, 221 suites, 10,000 square feet of commercial space, and a 40,000-square-foot indoor garage was built, as was an eleven-story office building with 180,000 square feet of office space. Work on the third stage began in 1967, and by 1969 a building of 144 apartments near Washington’s Rock Creek Parkway is expected to be finished. Then the fourth and last stage of the project (the plans of which have not yet been made known) will begin. Altogether, the luxury project in the Foggy Bottom section of the U.S. capital is expected to cost in the vicinity of $65 million.

In Canada, S.G.I. is active through subsidiary companies. For instance, it is the largest single stockholder, owning 85 percent of the shares, in Montreal’s Redbrooke Estates Limited. Redbrooke recently completed, in one of the most fashionable sections of Montreal, a thirty-three-story apartment building with three underground levels. Including 224 apartment units and 100,000 square feet of indoor parking, the structure (known as Port-Royal) has been taken over by a newly formed Vatican company called Immobiliare-Canada Limited. The company has a capital (in Canadian dollars) of $456,900 and share obligations of $14.4 million, of which S.G.I. holds 93 percent. Immobiliare-Canada owns the forty-seven-story Montreal office building, the Stock Exchange Tower, that houses the Canadian and Montreal stock exchanges. The building cost approximately forty- seven million Canadian dollars and was designed with the cooperation of Rome’s Pier Luigi Nervi, the cement wizard. Over 600 feet high, it is believed to be the tallest reinforced concrete building in the world. Another Vatican- controlled company in Canada is the Sogesan Construction Company Limited, which has been putting up one-family houses southwest of metropolitan Montreal. In the community known as Greendale, Sogesan has so far built and sold over three hundred houses and is still building and selling.

In Mexico, the Lomas Verdes S.A. de C.V. construction company is building a suburban city on some thirteen hundred acres of scenic land outside Mexico City, near Tlalnepantla; the city will ultimately house about a hundred thousand persons. S.G.I. owns about 30 percent of the Mexican company’s stock and is providing the technical consultants and the project manager. A four-lane, tree-lined superhighway, La Superavenida, connecting the new city to the main superhighway and thus to the center of Mexico City, has already been completed by Lomas Verdes. Another Vatican-affiliated company, Immobiliaria Corinto S.A. (in which S.G.I. holds one-third interest) is engaged in building five sixteen-story apartment houses in Mexico City’s fashionable Paseo de Las Palmas sector.

In France during 1967, the Vatican’s S.I.C.E. company (Societe Immobiliere Champs-Elysees), a French company with its head office in Paris, completed work on an elegant marble-faced office building on Paris’ Avenue des Champs-Elysees. The nine-story structure, with four underground levels, provides 110,000 square feet of office space and 87,000 square feet of indoor parking.

With Vatican-owned construction companies building everywhere, there have inevitably been some hints of scandal. Not the least interesting of these stories, which are almost invariably suppressed by the Italian press, was that of the sale to the Italian government of church-owned real estate for the 1960 Olympic installations.

In 1958, shortly before Italy took on the responsibility of hosting the Olympics in Rome, the Vatican owned more than 102 million square feet of property within Rome’s city limits. These holdings made it the biggest landowner, apart from the government, in all Italy. They were accumulated by the Vatican through quiet purchase, inheritances, donations, and foreclosures over a long period of time.

The National Italian Olympic Committee purchased large stretches of land from the Holy See for an unspecified sum and erected some fifteen stadiums at a cost of almost $29 million. To connect the sport structures located in the northern part of the city with those in the southern sector, Rome built the Olympic Highway. The throughway followed a circuitous route because it was placed on land that the city of Rome had purchased from front companies owned by the Societa Generale Immobiliare.

Although the deals for this land had been made long before any mention of public bids, they might have passed unnoticed had it not been for the fact that the speedway began to sprout major cracks and crevices shortly after the Olympic athletes returned to their homelands. Societa Generale Immobiliare, which had participated in the building of the road through several front companies, at that point offered to resurface the holes under a series of new contracts from the municipal government; the offer was accepted, for sums that were never disclosed, and the potholes and splits in the Olympic Highway were finally covered up. So was the scandal—almost.

Download a PDF file of this article.

Please follow and like us: