Vatican to lose £100m of charitable funds in London property sale

The Vatican will incur a loss of £100m in donations intended for the needy when it completes the pending sale of a luxurious London office building now at the centre of an international criminal investigation.

The Vatican is in the final stages of selling 60 Sloane Avenue, a building in the Knightsbridge district of London, for about £200m to private equity group Bain Capital, according to several people familiar with the process. Bain Capital and Savills, which is managing the sale, both declined to comment.

Senior Holy See officials invested a total of €350m of donations in the London building between 2014 and 2018, the Vatican has said, meaning that the sale is expected to confirm a loss of about £100m for the Catholic Church.

The Vatican prosecutors say the money invested in the building and other investments was derived from Peter’s Pence, an annual donation given by Catholics around the world which, according to the Vatican, is intended “for the many different needs of the universal church and for the relief of those most in need”.

The London building, at one point intended to be converted into luxury flats, is at the heart of a scandal that has forced the Vatican to overhaul completely the way it manages its finances.

Late last year Pope Francis stripped the Vatican’s powerful central administration office of an investment portfolio worth hundreds of millions of euros made up of donations from Catholics.

The soured bet on a booming London property market has left some commercial agents and investors nonplussed.

“I couldn’t quite understand how they [the Vatican] had lost money on it,” said one agent with decades of experience in the London office market.

Vatican prosecutors earlier this year charged Raffaele Mincione, a former Italian banker, with various crimes including fraud and embezzlement.

Mincione’s companies acquired the London building in 2012 for £129m. Two years later a unit of the Vatican managing charitable donations bought a stake in the property via an investment fund founded by Mincione at a far higher valuation. The Vatican acquired the rest of the building in 2018.

Vatican prosecutors say Mincione’s companies made a large profit from investing in the Knightsbridge building.

He has denied any wrongdoing, saying that the increase in the property’s value was justified by audited and independent third-party consultants. He has also said the Vatican was always advised by its own investment banks.

Vatican criminal proceedings against Mincione and others, including a cardinal, were paused last month and charges against the accused lifted after the Vatican judge requested that the prosecutors provide additional evidence to the defence lawyers.

Lawyers acting for Mincione have said the lifting of the charges means the case against him in the Vatican court is legally and, in effect, “null”.

The Vatican has said it disagrees on the status of the proceedings. Another hearing is expected to take place at the end of this month.

Mincione has had €48m of his assets frozen in Switzerland at the request of the Vatican’s prosecutors as part of the criminal investigation. He is pursuing a separate civil claim against the Holy See in the English High Court seeking “declaratory relief”, a ruling which would judge that he acted properly.

Mincione has said that he was never aware that the money that was being invested on behalf of the Vatican was derived from charitable funds, and that Vatican officials were responsible for the loss because in 2018 they prematurely pulled out of the investment, and allowed planning permission for the construction of luxury flats to lapse. Vatican prosecutors allege that the loss was a result of a complex fraud.

The English court is expected to rule on whether the case against the Vatican can be brought by Mincione’s companies before the end of this month.