Frustrated in efforts to sell off major state enterprises, Greece is turning toward trying to get rid of other properties that can fetch anywhere from 310,000-3.4 million euros in a bid to bring in cash in smaller batches – and is taking after e-Bay in trying to auction them off.
Beset by bureaucratic delays, ineptitude, the firing of two managers for ethical reasons and lack of interest, the country’s privatization program is so far behind schedule that international lenders have scaled back estimates of bringing in 50 million euros ($65 billion) to only 15 billion ($19.74 billion) but has raised only ab a third of even that after three years.
One of the properties on the block is a dilapidated mansion on Smolenski Street in Athens and the story goes that the ghost of the previous owner deters prospective buyers by moaning: “The house is mine.”
“It’s literally haunting the Greek budget,” Andreas Taprantzis, executive director for real estate at the Hellenic Republic Asset Development Fund, told Bloomberg in an interview. It “generates zero income, not even taxes,” he said.
Greece is surviving on $325 billion in two bailouts from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) but officials from the lenders said they are going to finally force Greece to stop dragging its feet on privatization and want Greece to sell more than 70,000 properties ranging from a luxury beach resort on the Athenian coast to a disused car repair shop and other real estate.
For about 1,000 small buildings, offices and homes owned by the state, online auctions have been picked as the best way to quickly and transparently move them off Greece’s books, Taprantzis said, calling it an “E-Bay for Greek real estate.”
The process is “smart and efficient,” Lefteris Farmakis, an analyst at Nomura International in London told Bloomberg. “But it’s not going to be easy to generate serious revenue, given the illiquid nature of real estate investments and the legal obstacles they face in Greece.”
The fund has sold three properties via e-auctions since they started in July, raising 7.4 million euros ($9.74 million) and has a slate of seven properties due for the e-block this month.
The government is targeting annual sales of 35 million euros to 50 million euros from the online auctions, according to Tapranztis, who was appointed in July 2011.
The IMF said in June the government should consider bringing in foreign managers to run the asset-sales fund, known as HRADF, should the program run further behind schedule.
“If the comprehensive review of the privatization program scheduled for the fall of 2013 suggests that delays are continuing — in particular that political interference continues to hamper the process — more far-reaching governance changes to the HRADF must be considered,” it said.
For the real estate, the IMF said in a separate report a month later, alternative methods, such as asset securitization, are being assessed to boost revenue beyond what’s currently foreseen in the privatization plan. Taprantzis, 47, said the fund is seeking financial advisers for the securitization and expects to name a winner this month with a view to having a first transaction in the second quarter of 2014, he said.
The online auctions will be used for assets valued at less than 5 or 6 million euros, Tsaprantzis said. Anything valued at more than that would probably require an international tender. The fund plans to sell another cluster of assets the state owns outside Greece after selling buildings such as a townhouse in Holland Park, one of London’s wealthiest neighborhoods.
That may include a Roman hotel bequeathed to the Greek state by a Greek living in Italy, valued at about 14 million euros. A hotel in Athens is also due to be auctioned.
The vast majority of assets to be auctioned online have come to the Greek state’s possession through foreclosures, bequests or donations or after their owners died without heirs.
“Many people end up with no heirs and eventually the state inherits the property,” Taprantzis said by telephone. “The state is family for all citizens, including the ones with no heirs but with a fortune.”
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