UNFORTUNATELY I was unable to attend a recent real estate conference in Nicosia that discussed the state of the Cyprus property market and the management of REOs and NPLs.
But I received a summary of the event and key findings from Liana Toumazou, RICS Country Manager for Cyprus and Hellas, which I have published together with the presentation material below:
The event brought together real estate professionals, banking executives and regulators to explore and discuss the state of the Cyprus real estate market as well as strategies for the management of REO and NPL portfolios.
Shifting fundamentals in Cyprus real estate market
Pavlos Loizou MRICS Chairman of RICS in Cyprus and Partner at Resolute Asset Management, highlighted that the new ability of financial institutions to create large real estate portfolios will attract overseas institutional investors seeking large portfolio purchases.
In light of the upcoming stress tests for financial institutions, the size of the NPL and REO problem in Cyprus will result in more scrutiny on real estate professionals.
Mr Loizou called for improved data analytics and the need for strict standards in preparing valuation reports.
Cyprus real estate market and expectations
Thomas Dimopoulos MRICS Lecturer at Neapolis University Paphos, expressed optimism that the market is picking up pace towards full recovery.
He identified Cyprus as one of the top performers in Europe and attributed this success to the various naturalization programmes introduced in recent years.
However, Mr Dimopoulos emphasized that a potential termination of such programmes in the future would be detrimental to the real estate market and would have repercussions on the banking sector as well.
Download: Cyprus Real Estate Market & Expectations
Valuations for owners of real estate assets
Jennifer Sharpe Manager Property Valuations at Philoktimatiki Public Ltd, outlined the requirements that real estate valuers must follow when producing valuation reports.
She emphasized the need to have complete information and limit assumptions, so as to ensure the accuracy of the valuation.
Regulations governing NPL management
Vassilios Vrachimis Partner at PricewaterhouseCoopers, discussed the changing regulation which will allow banks to foreclose assets more quickly and transparently, thus accelerating recovery.
He also noted that external monitoring will become increasingly intrusive and will cause banks to look at collaterals with much more scrutiny.
Download: Regulations Governing NPL Management
Asset management platforms for REO portfolios
Jon Hodnett Partner at Resolute Asset Management, outlined the advantages and the challenges banks face when managing large portfolios of real estate, which are one of the highest risk categories for banks.
He presented Resolute’s framework approach for converting non-performing exposures to cash recovery.
Mr Hodnett also demonstrated the REO management platform developed and used by Resolute to manage their clients’ portfolios.
NPL management at Bank of Cyprus
Anthi Exadaktylou (Bank of Cyprus) praised the success of the Bank of Cyprus to deleverage its non-performing exposures from €15bn in 2014 to €10.5bn today.
Consensual debt for asset swap was cited as the most preferred method for resolution because it delivers immediate relief both for the bank and the client.
Ms Exadaktylou assured the audience that the bank does not intend to foreclose on primary residencies. She invited struggling customers to reach out to their banker and find a reasonable, mutually beneficial solution.
Real Estate Owned (REO) is property owned by a bank that it has acquired with the mutual consent of its owner (e.g. debt for asset swaps) or without the owners mutual consent (enforcement).