Greece is back on foreign investors’ radar screens. The positive change in sentiment is largely due to the attractions of the hotel sector, panellists agreed at the PropertyEU Southern Europe, SEE & Greece Investment Briefing, which was held in London this week.

tassos kotzanastassis

Tassos Kotzanastassis

‘Hospitality is the darling of the market,’ said Tassos Kotzanastassis (pictured), founder and managing director, 8G Capital Partners. ‘Everyone wants a slice of that pie.’

Demand for these assets is such that ‘investors have to stand in a long queue,’ said Bill Hancock, managing partner, Resolute Asset Management. ‘In the last twelve months there has been a real surge in investors’ appetite for Greece. They are there on the ground looking for opportunities, but there is a lot of competition.’

There have been some big transactions recently. ‘Not just private equity investors but also core investors, surprising developments like M&G teaming up with a local REIT,’ said Kotzanastassis. ‘The three largest REITs in Greece are now controlled by foreign investors.’

The hotels sector is seen as a sure bet because it relies on foreign demand, not on the domestic economy which is still shaky.  

Domestic demand is still subdued and consumer confidence has not recovered, so investments in retail are riskier, Kotzanastassis said: ‘In any case, the high street has lost out to shopping centres, possibly for ever. I do not see the high street ever bouncing back in Greece.’

Residential is also a high-risk strategy, said Kotzanastassis, because ‘the demographics in Greece are horrendous. There has been such an exodus of people that the demand is not there. There are some bright spots, but I would advise caution.’

As for the office and industrial sectors, they have been ‘starved of cash and investment for many years, but they are not viable development projects yet. The rental and capital values are below replacement cost.’

The crucial factor is that sentiment towards Greece is changing, said Hancock. ‘It is difficult to point to specific data, it is more anecdotal evidence so far, but things are definitely moving in the right direction. There is a stronger dynamic in the institutional space and interesting tenants are moving into offices in Athens and Nicosia.’

But with clouds hanging over some sectors, it is not surprising that investors stick to hotels, while other, braver investors are also looking at the NPL space.

In Q2 2017, the level of NPLs stood at €101 bn, 60-70% of which collateralised against property. The Greek banking system set itself an ambitious target to reduce the level by €40 bn by the end of 2019, but that is not realistic, said Kotzanastassis.

‘There will be a trickle rather than a flood of NPL sales,’ he said. ‘Investors must look at ther quality of the portfolios and realise that the collateral is granular, low-value, non-institutional stock. There are opportunities to be found, but only if you have the appetite for granular assets.’

In the near future there could be opportunities opening up in the NPL sector in Cyprus as well, said Kotzanastassis, because the Bank of Cyprus is demanding that the programme of disposals be expedited.

Cyprus is also seeing a lot of interest from foreign investors, largely focused on hotels because of tourism and on the residential sector because of the successful ‘golden visa’ system which grants residence permits and passports to big investors.