More than 1,500 properties, which have been recovered by banks from auctions, are being prepared to be marketed to interested investors, both domestic and foreign.
These are properties that have outstanding legal issues, such as not having been inspected by city planning officials and obtained relevant certificates, but attempts are being made to sell them through special purpose vehicles (SPVs), to which they are transferred.
This is a process seen abroad by banks aiming to accelerate steps to improve their balance sheets and avoid the very high cost of holding and settling the growing amount of real estate on their books.
According to sources, at least two banks have set up such SPVs where the properties will be transferred to after the banks picked them up either through the auction process or through agreements/compromises with borrowers. This way, the large bureaucracy that accompanies the transfer of real estate in Greece is bypassed that increases dramatically the management costs for banks.
On the other hand, it is clear that the price the banks will receive will be lower, as the investor takes on the relevant risk and dedicates the required time to sort out the legal issues needed before putting them back on the market.
Market officials say that although there is strong investment interest from funds in buying real estate through the relevant process (but also through the purchase of bad loan portfolios), several steps and consents are required, until it is transformed into action.
Therefore, there is a perception that in the second half of 2020, some selective moves will be made, such as the above with 1,500 properties, but the main volume of sales will be transferred to 2021, when it is estimated that conditions will have improved allowing for higher yields.
Deals so far
To date, most of the loan packages sold with real estate collateral were at prices in the range of 30-40 percent of the book value. Today, these percentages are quite difficult to achieve.
A few weeks ago, Alpha Bank reached an agreement to sell its Neptune portfolio of secured non-performing business loans, with a gross book value of 1.1 billion euros, to secure real estate. The best bid was submitted by Poseidon Financial Investor DAC, which is financed by investment funds managed by companies affiliated with Fortress Investment Group LLC. This portfolio was also sought after by Bain Capital. The price was 264 million euros, or about 24 percent of the total value. However, it could reach as high as 30 percent, or 330 million euros, if certain recovery targets are met.
This portfolio consists of about 4,000 properties, of which about 30 percent are commercial (offices, shops), 20 percent are industrial buildings, several plots and hotels, as well as warehouses. Nearly a third of the properties are located in the area of Attica.
National Bank also completed the sale of the loan package under the name Project IKON. The buyer was Bain Capital, which acquired a package of 2,800 business loans, with a book value of 1.6 billion euros in terms of outstanding capital, while the value of the real estate is estimated at 600 million euros. In total, about 6,400 properties had been pledged as collateral for these loans. The price of this transaction was at 21 percent of the value of the outstanding capital, ie approximately 336 million euros.