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Europe’s largest city improvement project for sale

But real estate analysts warn that Luigi Zunino may struggle to get the price he is asking as the Italian property market is suffering like many others from the global economic downturn.

Developers Risanamento S.p.A., the company Zunino created in 2002, is facing loan repayments on €2.6 million of debt it acquired buying offices and residential property in Europe and the US.

'When prices started to peak, developers were like crack users and would use all the money that banks were throwing at them,' said James Rehlaender, managing director of European Investors. 'Risanamento has taken on far too much leverage,' he added.

Work on Santa Giulia, a 20 minute drive from the centre of Milan, began three years ago. Described as Europe's largest city improvement project, it is to include 600 luxury apartments, designer shops like Dolce & Gabbana, a fitness village, multiplex cinema, hotels, a church, exhibition centre and a green area as large as London's Hyde Park.

Italy's shrinking economy, record low business confidence and job cuts by companies such as Telecom Italia SpA, the country's largest phone company, caused the residential property market to stagnate in 2008. This year property prices may fall 7% according to Luca Dondi, an analyst at Nomisma, a Bologna based research company.

Zunino bought the Santa Giulia site, covering 12.9 million square feet, for about €550 million in 2000. He planned to spend €1.4 billion to erect a 'city within a city' by 2011.

Milan based Risanamento has so far completed two office properties. The construction of the 600 apartments designed by Foster has now been delayed. The developer has also suspended work on the multiplex cinema as well as supermarkets and other outlets. A third Sky Italia office building is scheduled for the fourth quarter of 2009.

Risanamento could run out of cash within four months, according to Edoardo Mosca, an independent analyst in Biella. Nomisma's Dondi said the company's financial situation 'would be hard to sustain in the medium term', and securing new loans would be difficult in the current climate.

A spokesperson for Risanamento declined to comment. Zunino who runs Risanamento as chairman and chief executive officer and owns about 73% of the business, was also not available.

Foster & Partners referred all enquiries to Risanamento and a spokeswoman for Dolce & Gabbana confirmed that the opening of their store was delayed.

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