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Cross-border property deals freeze; Greece's REICs to play key role

According to a report from BNP Paribas Real Estate on the impact the pandemic is having on global real estate, it is estimated that for at least the next six months, ie for the second and third quarters, investment activity will enter hibernation mode.

The commercial real estate market will be reliant on domestic investment funds and real estate investment companies REICs (in the case of Greece) for business activity in the foreseeable future, on assets such as office buildings, shops, hotels, and logistics.

This is seen as having an impact on banks that have been picking up efforts to develop their real estate, in a bid to reduce the number of properties sitting on their balance sheets. There will also be a knock-on effect on managers of bad debt as these loans were acquired in the last two years by foreign funds, that had started to sell the assets in the market.

According to a report from BNP Paribas Real Estate on the impact the pandemic is having on global real estate, it is estimated that for at least the next six months, ie for the second and third quarters, investment activity will enter hibernation mode. The slowdown in transactions and large investments will be more pronounced in cross-border deals, ie acquisitions of real estate or portfolios by institutional investors from another country. Analysts at BNP Paribas Real Estate see a window of opportunity for a restart to business activity by institutional investors in the fourth quarter of the year, but that may not be enough to change broader conditions in the market.

The buying and selling of investment real estate are estimated to decline dramatically in 2020, especially in European markets. According to the report, sellers are holding onto properties (meaning that they pulled their assets off the market) in the hope that conditions will improve soon, while buyers are rushing to suspend deals or even cancel them. Some deals were being made in the weeks leading up to March but were not completed due to the quarantine imposed.

One such case in Greece concerns the sale of two properties belonging to UK investment fund Pradera, which had launched the sale of Village Park in Agios Ioannis Rentis and the Florida 1 Retail Park in Pylaia, Thessaloniki. In the first case, the buyer appears to be an investment company Bluehouse, which controls 50 percent of MacArthur Glen Athens and the discount retail center Fashion City Outlet in Larissa. On Florida 1 Retail Park, offers have been submitted REICs belonging to the Fourlis group, Trade Estates, and Grivalia Management on behalf ofEurobank, while sources say that Fourlis has the edge on the deal so far.

It is a deal worth 65-70 million euros for both properties, which had entered the final stage of evaluation and preparation by all parties involved but froze due to developments. However, according to people close to discussions, there is no issue of canceling the sale though more time will be needed to complete it.

On the other hand, according to BNP Paribas Real Estate, the prevailing scenario, at least in the short term, is that any transactions that proceed in 2020 will be driven by domestic real estate companies and funds, rather than foreign investors, who will need to reconsider their investment strategy and the countries in which they will give a high priority to in placing their funds.

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