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The Selling of Greece Set to Begin – Islands First

After much prodding from international lenders to push the pace of privatization to raise critical cash, Greece’s Hellenic Republic Asset Development Fund (HRADF) has produced a list of 40 uninhabited islands and islets that could be leased for as long as 50 years and will start to sell or lease other state-owned entities.
HRADF this week forged ahead with a string of other asset sales after five months of inactivity caused by two elections that put many government operations on hold. HRADF shortlisted four companies, including Qatari Diar Real Estate as well as British-based London and Regional Properties for a landmark, multi-billion euro project to develop the former Athens airport of Hellenikon, it said in a statement.
The fund also said it was in the final stretch to seek binding bids for a 90-year lease of a shopping mall that formerly served as the broadcasting center for the Athens 2004 Olympics (IBC) Reuters reported. Possible suitors also were called to submit non-binding bids for a stake in natural gas operator DEPA.
The islands could be the first to go. “We identified locations that have good terrain, are close to the mainland and have a well-developed infrastructure and, at the same time, pose no threat to national security,” Andreas Taprantzis, the fund’s Executive Director for Real Estate, said in an interview in Athens with Bloomberg news agency. “Current legislation doesn’t allow us to sell them outright and we don’t want to,” he said.
Greece denied reports in an Israeli newspaper, however, that the Israeli Navy wanted to lease an island to have a base from which it could conduct military exercises, although Greek media reported there had been discussions. Prime Minister Antonis Samaras told the French newspaper LeMonde that the idea of leasing islands has gotten attention from Israel.
The daily newspaper Haaretz said that Israeli Defense Minister Ehud Barak asked his officials to analyze the prospect of an uninhabited Greek island to be used for military and maritime exercises. The Israeli armed forces were said to have rejected the idea as too costly. Barak’s office said, “The Israeli Defense Minister asked for the issue to be examined and the estimate was there was no need (for purchasing or a long-term leasing of the Greek island.) “Consequently, the issue is invalid and no longer stands.”
While some islands are already privately owned, such as Skorpios by the Onassis shipping heiress Athina Onassis, the state owns islands such as Fleves, which is near the coastal resort area of Vouliagmeni, and a cluster of three islands near Corfu. The fund is charged with raising 50 billion euros ($64 billion) from state assets by 2020 to meet conditions tied to pledges of $325 billion in foreign aid from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB.) Troika inspectors were in Athens to review the country’s books again and a plan to make another $14.6 billion in cuts, although the envoys have reportedly rejected half the measures.
Under pressure to raise revenues and impose more austerity to insure lifeline loans will keep coming, Samaras has said commercial exploitation of some islands could generate the money but said it was contingent upon preserving national security. The list includes islands ranging in size from 500,000 square meters (5.4 million square feet) to 3-million square meters, and which can be developed into high-end integrated tourist resorts under leases lasting 30 years to 50 years, Taprantzis said.
Bloomberg said that the fund reviewed 562 of the estimated 6,000 islands and islets under Greek sovereignty. Legislation needs to be passed to allow development of public property by third parties and reduce the number of building, environmental and zoning permits needed before the plan can proceed, Taprantzis said. Outright sales have been ruled out because the returns for the Greek state wouldn’t be higher than a leasehold arrangement, he said. Greece will attract more investment if an island is turned into a resort, he said.
Selling public land outright is a politically sensitive issue in Greece. In 1996, Greece and Turkey almost went to war over who owned the uninhabited Aegean islet of Imia, known as Kardak in Turkey. A proposal by Greece’s lenders last year to increase revenue from asset sales including property drew opposition from then-premier George Papandreou, who said he’d legislate to prohibit such sales. The country has only raised about 1.8 billion euros from its asset sales program, sparking criticism among European officials that the government isn’t moving quickly enough to reduce debt.
Takis Athanasopoulos, the fund’s new Chairman, said the goal of generating 19 billion euros from state asset sales by 2015 can be met as long as Greece’s business environment is “appropriate.” There are already plans by a British group to develop a strip of land on Rhodes into a luxury site including an 18-hole golf course.
HRADF management believes the 19-billion-euro target is feasible but revenues this year are not likely to go beyond 300 million euros, a source at the fund told Reuters, reiterating a view aired publicly by its previous chief executive Costas Mitropoulos who resigned earlier this year. “I would assume this (300 million euros) would be feasible,” the official said. “It’s a bit early to say. We haven’t had the opportunity to look in detail at all the assets.”
A leasing deal for IBC will probably close this year, possibly followed by a license sale for the state-run Hellenic Lotteries. But the first big privatization, that of DEPA, will have to wait until early 2013. “In a conservative view, this would be expected to be finalized early 2013,” the official said.
Also in early 2013, the Fund expects to have picked winning bids for two smaller real estate projects on the resort islands of Corfu and Rhodes, the official said. Hellenikon was a complex deal that needed several months to go ahead, he added. A government source told Reuters earlier this month that the country might seek a quick, impressive sale, possibly of the state’s last remaining stake in OPAP, one of Europe’s biggest gambling companies.
Athanasopoulos and CEO Yannis Emiris told Parliament last week they had to make sure that regulatory and competition issues had been settled before any asset was put up for sale or concession. Before proceeding with any deals, Greece must also modify or abolish about 70 rules and laws impeding the entry of private investors into the companies. The government started moving on that front last week by scrapping a law obliging the state to keep a minimum stake in a string of public companies, such as OPAP or the country’s top energy companies Public Power Corp (PPC) and refiner Hellenic Petroleum.

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