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Hellinikon: Pandemic changes conditions, 2021 another lost year

Hellinikon is the largest urban regeneration project in Europe and has always been considered an extremely difficult and complex project that would require time and persistent efforts. The complexity of the project has been underestimated by the government, with several New Democracy officials having said in 2019 that it was a matter of weeks before it would start. In the end, it took more than a year for some preliminary work to be done, while construction work has yet to begin.

The final stretch leading to the start of construction of Hellinikon is proving to be endless and the project looks likely to suffer from more setbacks, with a start expected at the end of this year, at best, otherwise in 2022.

At the same time, however, apart from the legal and procedural issues being slowly settled, questions have arisen about the financing and planning of the large investment, based on the new and unfavorable conditions created by the pandemic.

For the time being, time has frozen on Hellinikon due to the effects of the pandemic, a development that probably suits the main players of the project, hoping that visibility on it will soon be restored.

Hellinikon is the largest urban regeneration project in Europe and has always been considered an extremely difficult and complex project that would require time and persistent efforts.

The complexity of the project has been underestimated by the government, with several New Democracy officials having said in 2019 that it was a matter of weeks before it would start. In the end, it took more than a year for some preliminary work to be done, while construction work has yet to begin.

Endless hurdles

No matter how good the government’s intentions have been, about 1.5 years have been lost from the tender for the casino. The process took much longer than expected due to objections raised by Hard Rock.

At the moment, difficult negotiations are currently underway on three contracts:

1. The contract of the GEK Terna - Mohegan consortium with the Greek state for the casino,

2. The contract of the GEK Terna - Mohegan consortium with Lamda Development,

3. The contract of Lamda Development with the Greek state.

This is an extremely difficult negotiations process, with each side trying to secure the possible deal on their behalf, and another difficulty being the fact that the above three contracts will have to be completed at the same time, as they are interrelated.

Negotiations are continuing intensively and may be completed in February, but many do not rule out that more time will be needed. Even if the contracts were signed tomorrow, many more steps are needed: contracts would have to be approved by the Court of Auditors, in a process estimated to take about a month after which they need to be ratified by Parliament to become state law. It will then take time for studies to be finalized, so that the next step can be taken: the issuance of a building permit allowing for construction work to start.

All the above is estimated to be completed, if all goes well, by the end of 2021 - beginning of 2022. Thus, this project could begin at the end of 2021, as long as there are no new appeals to the Council of State. Most likely, however, there will be appeals, postponing the start of the project until the first months of 2022.

The role of the casino

The Lamda Development-state contract, which will include the transfer of shares, on which Lamda will pay a first installment of 300 million euros to the state, presupposes the completion of the casino contract.

Without the casino, which will be the main source of income for Helliniko's investment, nothing can move forward.

In comments to Business Daily, banking officials have raised concerns about whether Hellinikon remains a priority for Mohegan. There are doubts about whether Mohegan will stick with the project given the new conditions.

Sources close to the project say that Mohegan's interest remains intact, that investing in Hellinikon is a strategic choice for the US company and that it has the funds to do so.

Original plans in doubt

Banks seem to be having second thoughts about the viability of the investment and want to spread the risks involved.

There are two main reservations about whether the original plan is viable:

• Figures for the casino are based on a forecast to attract 5 to 10 million visitors annually. This estimate may have seemed ambitious before the pandemic, but it was not unrealistic. Today, however, given the severe global decline in tourism flows, which all analysts foresee will take a long time to recover, but also given the estimates for a long-term decline in casino activity, serious doubts arise as to whether it can remain viable in the post-pandemic era.

• In relation to the housing in Hellinikon, the design provides that 10,800 apartments with an average area of 110 sq.m. will be built. Today's conditions, however, have cast doubt on whether so many homes can actually be absorbed by the market in the medium term and at prices that will provide Lamda with the revenue it has calculated. The project may need to be reconsidered, with the prospect of reducing the number of homes to 7,500 or even 5,000.

Lamda Development and Eurobank - Piraeus Bank had reached an agreement in principle in January 2020, on the basic financing terms of 879 million euros (which together with VAT reaches 1.182 billion euros). However, there is a long list of conditions needed to activate the agreement and disburse the funds.

The high debt level, combined with the fact that the financing risk has increased significantly with the pandemic, seems to lead many to conclude that it would be appropriate to expand the group of banks involved in the project, helping spread the balance of risk.

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