Greece Revives Privatizations With One Difference: More Time

The Acropolis Museum

The Acropolis museum in Athens, Greece.

Photographer: Angelos Tzortzinis/Bloomberg
  • Government could be given decades to sell property assets
  • Previous program raised only 3.1 billion euros in four years

For a lesson in why Greece’s attempts to sell billions of euros of assets have foundered, look no further than the New Acropolis Museum in central Athens.

Although a site was chosen in 1976, court challenges by residents, the discovery of archaeological ruins and political disputes meant it took 33 years to complete the building.

With real estate making up most of the country’s new 50 billion-euro ($56 billion) privatization fund, the government may also be given decades to sell the assets. The fund, part of the country’s third bailout, is again one of the pillars of Greece’s economic revival, as Prime Minister Alexis Tsipras seeks a new mandate in elections on Sept. 20.

“Greece’s privatization program includes huge amounts of undeveloped land, which makes it different from similar programs in other countries,” said Costas Mitropoulos, the first chief executive of the Hellenic Republic Asset Development Fund and now an executive director at PricewaterhouseCoopers.

The government’s previous attempt to raise 50 billion euros by divesting prize assets such as airports, seaports and beach-side real estate failed miserably. The program, which began in 2011, had raised just 3.1 billion euros by the end of 2014, according to the state privatization authority.

Coming up with a development plan and turning it into cash can take as long as 15 years, Mitropoulos said.

Illegal Buildings

The HRADF never came close to meeting its target in part because so many properties lacked clear title and the country has no centralized land register. When officials visited one plot of seaside land destined for sale, they discovered thousands of illegal buildings on the site.

The new privatization fund will run over the life of the 86 billion-euro loan that the country has been granted. The European Stability Mechanism, which is extending the loan, says the maximum weighted-average loan maturity is 32.5 years.

Greek officials will be able to use the additional time to resolve ownership issues. It may also allow the property market to recover from a slump that has wiped 36 percent off values since 2007, shielding the government from accusations that it’s conducting a fire sale. Even so, raising 50 billion euros will be a tall order, Mitropoulos said.

The asset sales that were completed in the past five years were the easiest in terms of the political and social challenges, the IMF said in a review of Greece’s debt sustainability in June. It estimated Greece would only be able to privatize about 500 million euros of assets annually over the next few years, adding about 9 billion euros to financing needs.

‘Extracting Value’

The legislation specifically refers to “extracting value” from the portfolio held by the Public Properties Company, which includes several Olympic Games venues, prime real estate on the Athens coastline and properties ranging from a cave to a museum built by a Bavarian princess on Corfu.

In the meantime, plans already in motion such as selling the country’s two biggest ports and a deal to lease regional airports to Fraport AG for 1.2 billion euros will proceed. That will mean 6.4 billion euros in proceeds between now and 2017 excluding any sale of bank shares.

To keep up the pressure over asset sales, euro area finance ministers agreed on Aug. 14 that the new fund will begin operating by the end of the year, three months earlier than planned.

Greece is currently under a caretaker administration led by Supreme Court President Vassiliki Thanou. Next month’s election will be the third time Greeks go to the polls this year after an election in January and a referendum in July on whether to accept more cost savings.

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