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Greek $50 Billion Target for Property Sales Sends Bankers on Paper Chase

Greece has promised to raise 35 billion euros ($50 billion) from state property by 2015. 1Photographer: Louisa Gouliamaki/AFP/Getty Images Close

Greece has promised to raise 35 billion euros ($50 billion) from state property by... Read More

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Greece has promised to raise 35 billion euros ($50 billion) from state property by 2015. 1Photographer: Louisa Gouliamaki/AFP/Getty Images

A wooden sculpture of a man’s head locked in a vise sits behind Aristotelis Karytinos, general manager of real estate at National Bank of Greece SA and a government adviser on making money from state assets.

“That’s how we’re all feeling lately,” Karytinos said of the figurine perched on a cabinet in the central Athens office, his desk covered in documents he must sift through.

Greece has promised to raise 35 billion euros ($50 billion) from state property by 2015 as part of plans to win more international aid and avoid defaulting on its debt. Like with other bailout conditions, from selling stakes in companies to tax collection, there are complications and delays.

A group of nine domestic banks advising the government must study each property individually to ensure that they are not in litigation or lack permits, topographical studies or restrictions governing their use, Karytinos said.

Greece is the only country in Europe without a centralized registry of deeds. About 40 percent of registered state properties are disputed and an additional 25 percent have “questionable” legal status, George Papaconstantinou, the Greek finance minister until he was replaced on June 17, told lawmakers earlier this year.

“It’s a herculean task,” Diego Iscaro, an economist at research company IHS Global Insight in London, said by telephone yesterday. “There are deep-rooted structural problems related to the assets up for privatization and they can’t be addressed in just a year or two.”

Confidence Vote

Greek Prime Minister George Papandreou won a confidence vote in parliament in the early hours of yesterday that may improve his prospects of pushing through 78 billion euros of budget cuts. The austerity measures are designed to secure a further 12 billion euros of financial aid to avoid a default.

Karytinos and his colleagues now will redouble efforts to urge the Greek government to enforce a fast-track system to ensure that the real estate assets can make it to market.

“We have a very tight schedule and our major challenge is to find the tools to make sure the process is carried out swiftly and efficiently,” Karytinos, 55, said in an interview at his office on June 7. “Or else it may take a long time to get the property ready.”

There are already delays.

Red Tape

The government passed laws in November to speed up raising money from state property and in December said it aimed to appoint a general secretary for real estate. Nobody has yet been named to the position, the Hellenic Real Estate Corp., the state’s property management arm, said yesterday.

“Absolutely no red tape has been cut,” said Yannis Perrotis, managing director of Athens-based CB Richard Ellis Atria, an affiliate of the world’s largest commercial property broker.

In April, the Finance Ministry said it would present investors with the first of four portfolios of real estate this month. That’s now been postponed until December. On June 9, the government handed the group of advising bankers a list of 99 properties comprising 115 million square meters (1.23 billion square feet) to prepare for the market.

Officials at the Finance Ministry said yesterday they weren’t available for comment. Papandreou named Evangelos Venizelos as finance minister last week.

Lease, Not Sale

Faced with daily protests in Athens against budget cuts and the sale of state assets, the government hasn’t yet decided what to do with the real estate, according to Karytinos. Among options being considered are leases of up to 99 years, sale and lease-back deals or packaging assets into publicly traded securities for investors to buy stakes in.

The government hasn’t disclosed the locations of all the properties, which include offices and Hellenikon SA, the former airport in Athens.

“The chances of success and the amount that could be raised from the privatizations would be higher if the sales were outright instead of as leases,” said Miltos Kambourides, managing partner at Dolphin Capital Partners, which is developing seven luxury resorts in Greece for 2 billion euros.

Dolphin, registered in the British Virgin Islands and whose shares trade in London, won’t purchase any land from the state if it’s through leasing, he said.

Greece is Europe’s wealthiest country based on state real estate assets as a proportion of economic output, European Central Bank President Jean-Claude Trichet said on June 6.

“If fully understood by observers and investors and market participants, it might make a difference -- provided, of course, that this privatization appears to be credible and processed in a professional manner,” Trichet said.

Selling Stakes

The government exercised an option to sell a 10 percent stake in phone company Hellenic Telecommunications Organization SA to Deutsche Telekom AG (DTE), which already owned a stake, for 400 million euros and will sell as much as 34 percent of Hellenic Postbank and 75 percent of its ports business before the end of the year, the Finance Ministry said on May 24.

It’s a case of too little too late, according to Giada Giani, an economist at Citigroup Inc. (C) in London, who said that company stake sales should have started a year ago under the terms of the bailout.

“They’re going too slowly and sales won’t be carried out within the stipulated timeframe,” Giani said.

According to Perrotis at CB Richard Ellis Atria, the amount of property and land is too large for the banks to handle alone.

The government may need even more time to raise cash from real estate, said Ben May, an economist at Capital Economics Ltd. in London. “It would be a lot easier to sell stakes in well-defined companies than to raise money from real estate that isn’t quite so straightforward,” he said.

Occupied Assets

The Hellenic Public Real Estate Corp. has about 71,000 properties on its database alone, according to a 2010 study by the Andreas Papandreou Institute of Strategic Development Studies, a political research center in Athens named after Greece’s former premier and the incumbent’s father.

The report showed that only 10,000, or 13.5 percent, of state-owned properties on the database are available for use. About 40 percent are occupied and 12 percent are leased out under concessions, the study found.

Professional Help

“The government needs to get two or three professional property advisers on board to ensure this is done rapidly and in a transparent way,” Perrotis said in an interview in Athens. “So far that hasn’t happened.”

The number of vacant commercial premises in downtown Athens has reached 23 percent, up from 17 percent in August, according to the most recent survey by National Confederation of Commerce conducted between Feb. 25 and March 7.

The oversupply has led to tenants such as banks, large retailers and even the government to push for rent reductions of as much as 20 percent, according to Ioannis Kaligiannakis, a senior appraiser at Colliers International in Athens.

Back in his office at National Bank of Greece, the country’s largest commercial bank, Karytinos was waiting for the Finance Ministry to give him the list of real estate on June 9 so he could get to work. Around the corner in Syntagma Square, protesters chanted and held up banners outside parliament.

“The government understands that it needs results and it needs them as quickly as possible,” Karytinos said. “In the end, the market will decide how to invest in the properties.”

To contact the reporters on this story: Sharon Smyth in Madrid at ssmyth2@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net.

To contact the editors responsible for this story: Andrew Blackman at ablackman@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net.

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