Hellenic Telecom Cancels REIT Plans, Citing Market

Hellenic Telecommunications Organization SA, one of Greece’s largest landowners, canceled plans to sell shares in a real estate investment trust, saying market conditions weren’t favorable.

OTE Properties REIC will be dissolved and liquidated, the Athens-based former phone monopoly said in an e-mailed statement today. Plans to extract value from the company’s “significant” real estate holdings will continue through the company’s OTE Estate unit, it said.

The “lack of liquidity and oversupply of commercial real estate is not favorable for the development of real estate investment companies,” Hellenic Telecom said.

Greek businesses are cutting costs, including renegotiating rents, as demand falls amid government wage-cuts and tax increases. The government’s austerity measures are aimed at reducing a budget shortfall that surged to 15.4 percent of gross domestic product in 2009, sparking the region’s debt crisis and prompting a 110 billion-euro ($150 billion) bailout package.

The largest Greek REIT, Eurobank Properties REIC SA, fell 28 percent last year, and reported on Jan. 31 that profit slumped to 8 million euros in 2010, compared with 39.6 million euros a year earlier.

Most small Greek businesses expect revenue to fall further in the first half of 2011, according to a poll of 1,200 businesses by Athens-based Marc SA, released today. The economy contracted an estimated 4.2 percent last year and will shrink again this year by about 3 percent.

Property Valuation

Hellenic Telecom’s property assets were valued at around 1.6 billion euros about three years ago, based on the latest available figures, according to Vassilis Raptis, an analyst at Proton Bank SA. Assets that could have been bundled into the fund include retail premises around Greece, including the capital of Athens, and warehouses.

REICs, as real estate investment trusts are known in Greece, were developed to tap demand from international investors who wanted to avoid investing directly in Greek real estate because of a complex tax and legislative framework. The government has said it’s considering a similar plan to raise funds from its own property assets.

Hellenic received permission to create a REIC in June 2008 and would have been obliged to conduct an initial public offering by October 7. National Bank of Greece SA, the country’s biggest bank, also plans an REIC.

To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen@bloomberg.net

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