After Covid, a repositioning in the real estate market

01 Sep After Covid, a repositioning in the real estate market

Stefanos D. Vlastos, CEO, Hellenic Public Properties Company, has a vision for Greece’s prize assets of real estate

Could you give us an overview of key developments in the Greek real estate market in 2021?

On a global scale, the real estate industry went through a period of slowdown, which coincided with long term structural changes in the market. The restrictive measures heavily affected specific sectors of the economy such as the tourism sector and related services, the food and beverage industry, the entertainment sector, and retail, with major impact to the small and medium-sized businesses. At the same time, the pandemic accelerated the need for digital services, redirecting the interest of the investors to new sectors and other areas of high demand that are more resilient to external risks (data centers, logistics, premium offices and residential areas). In the course of the economic crisis in Greece, the real estate market unexpectedly demonstrated a strong resilience, attracting—despite the sharp downturn of the economy—the acute interest of investors from different countries. This effect was felt in different categories of assets, namely in tourism, residential and urban properties. The outbreak of the pandemic affected this upward trend, leading to a slight decline in prices due to the stalling economy. The impact on tourism, which in 2019 alone contributed (directly and indirectly) to 25% of Greece’s gross domestic product, slowed down the development of already planned projects as well as the announcement of new ones. Yet the successful management of the pandemic crisis by the Greek government and the gradual strengthening of the vaccination campaign mitigated its negative consequences, while the positive restart of Greek tourism, combined with the prospects created by the ambitious Greece 2.0 National Recovery and Resilience Plan, paves now the way for a significant rebound in the Greek economy.

Given these key developments, which are the new growth sectors in the Greek real estate market and Hellenic Public Properties Company’s (HPPC) response to the new reality?

Like in any other global crisis, during the pandemic we witnessed a major shift towards new sectors. In our case, and that of the real estate market in Greece, investment interest diverted to new sectors such as large-scale logistics, energy, infrastructure, medium and smaller storage facilities, telecommunications (5G antennas), and the primary sectors of the economy (e.g. advanced agribusiness and farming) in which HPPC is actively investing as part of its strategy to diversify its portfolio and meet the new trends of the market. In this context, we promote tenders for large agricultural areas suitable for the development of energy parks, while we lease land-plots throughout Greece for the development of wind parks, smart farming, hydroelectric and photovoltaic projects. We have good reasons to pursue a policy of diversification, given our high dependency in tourism-related assets, which make up 82% of our portfolio. As a result, amid the pandemic we had a significant impact in our returns, but, despite the difficulties, we stood firm against this significant blow by using the company’s reserves and by supporting our trustworthy tenants through flexible payments schemes. At the same time, we faced the pandemic not as a crisis but as an opportunity to accelerate within our company necessary changes related to our governance and operations. This included commercial policies and the need for internal and digital transformation for both the HPPC and its tourism facilities that operate as autonomous business units. In other words, the pandemic worked as a catalyst for change and made us understand the need to reposition ourselves in the real estate industry and to push forward with necessary changes within the company that will make it more resilient, competitive and innovative in the post-Covid-19 era.

What strategies do you have for attracting investments and what is the role of the HPPC in contributing to a vibrant real estate market?

Given our mandate as a direct subsidiary company of Hellenic Corporation of Assets and Participations (HCAP), we have a crucial role to play toward contributing to the pro-investment policy and reform agenda of the Greek government. Based on our knowledge and expertise in the field of real estate, we support not only the Greek government, but also other governmental organizations and bodies by implementing a clear and realistic strategy for attracting investments. A key element of this strategy is the utilization of our rich and diverse portfolio, based not on what we think to be the optimal solution for our assets, but what the actual market wants. In other words, the market drives our policies, and our main concern is how to offer attractive investment opportunities that will drive the Greek economy higher. At the same time, our strategy is to ensure investments that are both viable and sustainable. Thusly, we will foster a long-term and well-rooted development for the economy and local societies. For this reason, feasibility and sustainability are included as key criteria in our tenders, whilst our plan is to continue to attract investors with sound and realistic plans for our assets. In doing acting as the competent manager of real estate assets for the Greek state, our goal is to contribute towards a vibrant, healthy and green real estate market, convincing investors from various sectors to show confidence and trust in the potential of our real estate portfolio and the opportunities that the Greek economy can offer.

Can you offer some insights into the development plan of HPPC’s portfolio, strategy and prospects?  

Our strategy is goal and result-oriented and our focus is on creating a tangible impact for the Greek economy and local communities. In this regard, our priority is to contribute to projects and investments of national importance, such as the successful conclusion of the tender of Skaramangas, the largest shipyard of the country. Another would be the upcoming launch of an international tender for the transformation of the former Olympic complex of Tae Kwon Do into the Athens riviera’s hub of recreation, culture, entertainment and exhibitions. In addition, our pipeline of flagship projects includes landmark assets, the majority of which have for decades remained unexploited. Over the previous months, we have been in close cooperation with the relevant ministries and municipalities to revive a number of abandoned assets across Greece. As well, over the coming months we aim to place back on the market a number of prime properties that could garner significant interest from potential investors. This plan includes the transformation of the Goudi Olympic Complex in Athens into a major metropolitan park that will have offices along with cultural and sports areas. There is the adaption of the Ex-Governor’s Hall in Thessaloniki through cultural, entertainment and food and beverage uses. We also oversee a large land plot of Gournes in Heraklion, Crete, located in one of the most privileged areas in the wider Mediterranean region, as well as our former Xenia hotels, spread across the country. At the same time, we announced a tender for a large plot in Northern Greece (Imeros, Rodopis) as part of our strategy to place significant emphasis on the optimal use of our assets in the periphery of the country. Then we are preparing a RFI for Kaiafas Lake in the Peloponnese in order to listen to the voice of the investors on how they envision the development of one of the most emblematic assets of our portfolio.

As mentioned earlier, investing in green assets and energy projects across Greece lies at the heart of our development plan. It is extremely important to mention that HPPC has embarked upon the revision of several existing agreements with the goal to render them beneficial according to the new trends of the market. For example, as part of this strategy, we managed to ensure a $7.6 million investment plan for the emblematic marina of Gouvia in Corfu, a key point of entry in Greece, with the simultaneous extension of the lease contract. Through similar agreements, we are able to attract significant investment capital and create mutual benefits for the Greek state and our lessees. Last, but certainly not least, the HPPC is actively restoring and modernizing its tourism and cultural facilities, namely its ski resorts, cultural and historical sites, camping facilities, organized beaches and thermal springs. It is doing this with its own resources or with EU funding. By investing on our own to our public assets, by attracting sustainable investments and creating growth for the economy, HPPC acts today as an engine of strong impact for local communities and the country as a whole.

The HPPC successfully concluded a long-awaited tender for the sale of the largest shipyard in the country. What were the challenges in this project and what are the new prospects?

The case of Skaramangas shipyards was a priority for the Greek government and a project of national importance for the development of the Greek economy. The HPPC was the owner of one of the two assets of Skaramangas. We worked hard in cooperation with the Ministry of Finance in order to organize a tender that meets the needs of the market and, at the same time, ensures the highest possible return for the Greek state. The preparation and implementation of this tender was a major challenge for us which we carried out with a sense of responsibility toward the Greek taxpayer, one based on the goals of transparency, equality and sustainability. We remained committed to our objective and fully respected the timeframe we had set while managing to attract the interest of serious investors, achieve a higher price than the asking price, and, most importantly, sent a clear message to the global investment community that Greece is a reliable country that offers great prospects and opportunities. Once again, we proved that we are capable of attracting investors from different types of sectors. We now expect that the success of this project will trigger the implementation of major investments that will have a multiplier effect for the Greek economy.

Do you have a final message for the readers of Newsweek magazine?

After ten years of crisis, Greeks can feel more optimistic today than ever before. We were hit by the pandemic, but the Greek government managed to minimize the impact, support the economy, and pursue significant reforms. The Greek economy expanded 16.2 percent in the second quarter of 2021, Greek tourism performed better than expected, and the Greek government recently revised its forecast for 2021 up to 5.9 percent. If we also consider the prospects created by the Greece 2.0 plan—a valuable roadmap for the future—one easily understands that Greece is getting back to its feet with dynamism and aplomb. Foreign investors now see in Greece not as the scapegoat of the past, but as a long-term partner for added-value investments. In this endeavor of national importance, we are strongly convinced that the real estate sector and the optimal use of the state’s assets will play a pivotal role.