Greece’s Hellenic Republic Asset Development Fund has identified 40 uninhabited islands and islets that could be leased for as long as 50 years to reduce debt as pressure grows on the country to revive an asset-sales plan key to receiving international aid.
“We identified locations that have good terrain, are close to the mainland and have a well-developed infrastructure and, at the same time, pose no threat to national security,” Andreas Taprantzis, the fund’s executive director for real estate, said in a Sept 6. interview in Athens. “Current legislation doesn’t allow us to sell them outright and we don’t want to.”
The fund is charged with raising 50 billion euros ($64 billion) from state assets by 2020 to meet conditions tied to pledges of 240 billion euros in foreign aid. As international inspectors in Athens scrutinize the country’s fitness to receive the latest aid payment, Prime Minister Antonis Samaras has said commercial exploitation of some islands could generate the revenue lenders need to see to continue funding the country.
The shortlist includes islands ranging in size from 500,000 square meters (5.4 million square feet) to 3 million square meters, and which can be developed into high-end integrated tourist resorts under leases lasting 30 years to 50 years, Taprantzis said.
The fund announced an action plan to speed up the country’s privatization program yesterday. In its statement, the fund named the companies it’s chosen to proceed to the next phase of tenders in three real estate projects. The benchmark ASE Index was up 5.3 percent at 770.5 points at the close in Athens, the highest since March 23 and the day’s biggest gain among major European indexes.
The fund reviewed 562 of the estimated 6,000 islands and islets under Greek sovereignty. While some are already privately owned, such as Skorpios by the Onassis shipping heiress Athina Onassis, the state owns islands such as Fleves, which is near the coastal resort area of Vouliagmeni, and a cluster of three islands near Corfu. Taprantzis declined to identify any of the islands.
Legislation needs to be passed to allow development of public property by third parties and reduce the number of building, environmental and zoning permits needed before the plan can proceed, Taprantzis said.
Outright sales have been ruled out because the returns for the Greek state wouldn’t be higher than a leasehold arrangement, he said. Greece will attract more investment if an island is turned into a resort, he said.
Selling public land outright is a politically sensitive issue in Greece. In 1996, Greece and Turkey almost went to war over who owned the uninhabited Aegean islet of Imia, known as Kardak in Turkey. A proposal by Greece’s lenders last year to increase revenue from asset sales including property drew opposition from then-premier George Papandreou, who said he’d legislate to prohibit such sales.
The country has only raised about 1.8 billion euros from its asset sales program, sparking criticism among European officials that the government isn’t moving quickly enough to reduce debt. Months of negotiations over the country’s debt restructuring earlier this year, the largest ever, and two general elections that threatened Greece’s membership of the euro area also held back progress on sales.
Takis Athanasopoulos, the fund’s new chairman, said the goal of generating 19 billion euros from state asset sales by 2015 can be met as long as Greece’s business environment is “appropriate.”
The fund will be able to gauge demand for Greek real estate as it revives a tender to develop a golf course on the island of Rhodes, Taprantzis said.
The fund chose six companies, including London & Regional Group Holdings Ltd. and NCH Capital Inc., out of seven contenders to enter a second round of bidding for developing a strip of land on the island. A preferred bidder for the site measuring 1.85 million square meters, including an 18-hole golf course, is expected to be chosen by the end of February, the fund said yesterday.
“We are enthusiastic about the potential of this particular tender and what it reveals about market sentiment for Greek assets at this time,” Taprantzis said.
The fund also selected Qatari Diar Real Estate Investment Co., London & Regional, Elbit Cochin Island Ltd. and Lamda Development SA for the second phase of bidding to buy a majority stake in Hellenikon SA. Hellenikon will develop the site of the former Athens International Airport, which at 6.2 million square meters is more than three times the size of Monaco, according to the fund.