OVER the past week a number of news reports concerning property in Cyprus have appeared in the local media about non-performing loans (NPLs), recent property deals and the bank of Cyprus.
The International Monetary Fund (IMF) has urged Cyprus to reduce its NPL ratios, which are the second highest in Europe.
In a statement following the conclusion of its Article IV consultation with Cyprus, the IMF Executive Board said that Cyprus is recovering strongly following the 2012–13 crisis. GDP grew by 4% (yoy) in the first half of 2018, driven by tourism, professional services and foreign investment in construction as well as continued strength in private consumption.
However, the IMF Executive Board warned that “Private and public debt remain large while NPL ratios are still among the highest in Europe. They encouraged the authorities to make further efforts to address these legacy problems and strengthen economic growth over the medium term.”
It said the “Directors emphasized the importance of further measures to facilitate a steady decline in NPLs on a durable basis”.
The IMF Directors highlighted the importance of further measures to facilitate a steady decline in NPLs on a durable basis calling for “steadfast implementation of the amended legislative framework on foreclosure, insolvency, sale of loans, and securitization, supplemented by a strengthening of the court system and removal of uncertainties related to title deeds,” and “the need to enhance the governance and supervisory framework for the recently-established asset management company.”
Property deals worth €450 million
Insider reported on Monday that investors from Russia, Israel, Lebanon, China and elsewhere have made investments in Cyprus real estate worth €450 million.
The ten most significant investments were:
- A coastal plot of land in Limassol was sold to a Russian investor for €80 million. A residential and commercial development, Trilogy, is planned on the site.
- A coastal plot of land in Pyrgos, Limassol was sold for some €40 million to a Lebanese investor who is also pressing ahead with a mixed used development.
- Another coastal plot in Limassol was sold for approximately €30 million to investors from Cyprus and China who will build Cyprus’ first Sofitel.
- The Kermia hotel in Ayia Napa was sold for €26.5 million to Atlantica. Significant investments were made in renovating and expanding it after the acquisition.
- Three hotels in the Paphos district (Cypria Maris, Laoura, Cyprian Bay) of a total value of €60 million were bought by the Israel-interest company Fatal which went ahead with renovations and rebranding.
- The Paphian Sun hotel in Paphos which was closed for an extensive period was bought by the Cypriot hotel company Atlantica for €15 million and is currently under renovation so that it can start operation in the summer of 2019.
- The former Holiday Inn hotel in Nicosia was recently bought by the Greek company Pangaia for €12.5 million which plans to renovate it.
- Tourist land in Sotira, in the Famagusta district, was sold for €12m to an Israel investor.
- A plot of land in Pegeia (Peyia) was acquired for €10 million by a Russian investor.
- A building on Nicosia’s Makarios Avenue was acquired for €10 million and demolished. The tallest building in the capital, the 360, is currently under construction on the site.
Other smaller deals include the acquisition by the Senior School of the former Bank of Cyprus sports centre, a coastal plot of land in Limassol, land in Phinikoudes, Larnaca and a €6 million villa in Limassol.
Insider also reported that the BoC’s Real Estate Management Unit (REMU) agreed to sell the former headquarters of the Anastasios Stephanides group near the Mall of Cyprus to Jumbo. It also sold the former Orphanides in Limassol, to Jumbo and Alpha Mega.
Bank of Cyprus
On Tuesday the Bank of Cyprus announced an after-tax loss of €37 million for the first nine months of 2018 compared with an after-tax loss of €553 million in the first nine months of last year. The bank posted a €17 million profit in the 3rd quarter compared with a loss of €97 million in the 2nd quarter.
In a statement BoC Group Chief Executive John Hourican said “Our results this quarter reflect continuing delivery against our core objective of balance sheet repair.”
This was accelerated through the agreement for the sale of non-performing loans in Project Helix.
Hourican said Helix was an important step forward in repairing the bank’s balance sheet and stabilising its capital position adding that “we expect execution in the first quarter of 2019, upon receipt of regulatory approval from the ECB.”
Debt to asset swaps
On Wednesday Phileleftheros reported that nine hotels and three golf courses have come into the possession of the Bank of Cyprus in debt to asset swaps, and the bank’s Real Estate Management Unit (REMU) is looking for buyers.
The total value of these debt to asset swaps was €302 million of which €37 million was the value of the hotels and the golf courses €265.
REMU has increased the real estate under management by 1,057 in the first nine months of 2018. In 2017, it had 1,951 properties with a book value of €1.64 billion. At the end of September 2018, the number of properties exchanged for debt was 3,008 with a value of €1.56 billion.
At the end of September 2018, the BoC’s balance sheet had 557 housing properties worth €163 million, 226 offices and other commercial properties worth €221 million, 56 manufacturing units worth €81 million, nine hotels (€37 million), 1,505 plots of land (€585 million), three golf courses (€265 million) and 61 buildings under construction (€78 million).
The paper added that the group completed the sale of properties of €154 million in the first nine months of 2018, generating profits of €32 million.