United Koolhaas of Benetton

Italian clothes maker Benetton signed a deal to restore a historic palace in Venice and turn it into a shopping center as the watery city taps the private sector to help fund costly projects.

The 16th-century Fondaco dei Tedeschi has been abandoned for years and its sale and restoration are estimated to be worth around $130 million although the details of the agreement were not immediately known.

The building, which was the headquarters for the city's German merchant community for centuries, also served as Venice's central post office in the 20th century. It is located on the Grand Canal near the famous Rialto Bridge. "Benetton's proposal is very good," Venice mayor Giorgio Orsoni said, adding that the project would help with "the revival of the historic centre".

Dutch architect Rem Koolhaas is overseeing the restoration and Benetton said the new centre would employ around 400 people and draw crowds of visitors. Orsoni drew controversy with the art world earlier this year by funding the restoration of the Bridge of Sighs by allowing advertisers including jewelry giant Bulgari to drape giant billboards over the bridge during its restoration.