As the Greek real estate market offers increasingly attractive opportunities to investors and developers from around the world, new players are establishing a presence in the county to take advantage of what many analysts expect to be a dynamic sector within the next decade. Eurohypo, the fifth largest private bank in Germany, with total assets in excess of 240 billion EURO, has recently started operations in Greece and is bullish on prospects for real estate development.
Eurohypo is a relatively new bank, established in August 2002, following the decision of Deutsche Bank, Commerzbank and Dresdner Bank (Allianz Group) to merge their mortgage bank subsidiaries. Today, Eurohypo is one of the largest lenders of real estate in Europe, and currently has representation in 16 European countries as well as an operation in the USA. In 2003 alone, it entered into new real estate loans of 14.3 billion EURO, bringing the total real estate loan portfolio to 105 billion EURO. It is also the leader in pan-European syndicated real estate loans.
The Greek branch is the latest addition to the Eurohypo network, formally established in July 2004.
According to Kenny Evangelou, Head of Eurohypo in Greece, the market for commercial property looks quite interesting in many respects.
Eurohypo decided to open a branch in Greece at the end of 2003, after undertaking an extensive review of the market and the opportunities that it offered. It was seen that the real estate market was beginning to mature, and that a number of large Greek as well as foreign institutional investors were in the process of undertaking projects or buying ready income-producing property. According to Kenny Evangelou, Head of Eurohypo in Greece, the market for commercial property looks quite interesting in many respects.
Eurohypo anticipates the market for large international quality shopping centers in Greece will develop gradually as consumers realize the benefits of such centers.
The bank also believes the office market has potential in the coming years as there will be a continuing need for newer and bigger office space, as companies look to consolidate their operations into single buildings and demand better technology. There is likely to be a trend of decentralization out of Athens, towards the Mesoghia Valley.
Also, there is a high level of demand for new warehousing facilities. Mr. Evangelou believes we are likely to see more professional investors and developers becoming involved in this market, rather than simply owner–occupiers as was the case in the past.
In addition, Greece is likely to see further development of entertainment complexes with uses such as multi-plex cinemas, bowling and cafes / restaurants. There is potential for several more in Athens, but also in other large towns.
Finally, says Mr. Evangelou, there may be some limited development of business hotels, for example, in the northern suburbs of Athens and in Thessaloniki.
Overall, he says, the outlook is quite positive, and we are likely to see a gradual modernization of the property stock over the coming years along international standards.
Eurohypo has extensive experience in financing shopping centers in Europe, having financed over 150 shopping centers in central and southern Europe. The bank is interested in financing a number of projects in the coming years and has extensive experience in setting up appropriate and complex financing structures for these types of projects.
Eurohypo is also interested in financing entertainment centers, particularly when there is a mix of other uses such as retail.
Large office buildings are also a staple part of Eurohypo’s business. The basic prerequisites are that the building is new or modern, built to a good quality, and located in a central or commercial location. While the quality of the tenant and the security of the cashflow is important, the most important factor is the quality of the building and its location.
Also of interest are logistics warehouses, which is a market that is likely to take off in the next few years in Greece. The same prerequisites apply as for office buildings, quality of the building and quality of the location.
City hotels are also of interest, and Eurohypo has financed a number of large well-known hotels in major European cities. The financing could be for the purchase of a hotel by an investor, or for the undertaking of the development or refurbishment of the hotel. A well-located city hotel will always benefit from relatively high occupancy and room rates.
Overall, Eurohypo’s main focus is on the upper end of the market for big properties and projects wherein its main experience lies, and therefore has a distinct competitive advantage.
Typically, the minimum loan amount that the bank would consider is about 20 million EURO. In some special cases, Eurohypo may consider smaller amounts, where there is the possibility of building a relationship with a particular client that will lead to future business. The bank's real interest lies in very big projects of 50 – 100 million EURO and more, although it is accepted that there are not very many potential transactions of this size in the Greek market at this time. Overall, Mr. Evangelou says Eyrohypo would be happy if it could finance one relatively big project per year, together with 4 or 5 smaller properties.