National Bank of Greece to sell luxury resort, seeking to raise 50b euros from state assets

By Sharon Smyth - 2012-06-21T09:21:47Z

National Bank of Greece SA is preparing to sell an Athenian Riviera resort, visited by world leaders and movie stars for more than half a century, in a test of the country’s ability to sell assets amid concern that it will leave the euro.

The 3.3 million-square-foot (307,000 square-meter) Astir Palace complex has already drawn investors’ interest, according to Aristotelis Karytinos, general manager of real estate at the lender. The Athens-based bank and Greece’s privatization fund, which owns part of the property, will put out a public tender in coming months, he said.

“Astir is a trophy asset and we want to get the best from it,” Karytinos said in an interview in Athens.

Proceeds would help the publicly traded bank meet stricter capital rules and raise cash for Greece, which is behind on money-raising targets tied to 240 billion euros ($305 billion) of rescue packages in the past two years. The plan is to sell the complex of hotels and bungalows surrounded by private beaches in one package in conjunction with Greece’s Hellenic Republic Asset Development Fund to help maximize the price, according to Karytinos.

Bailout Funds

The Greek state is seeking to raise 50 billion euros from state assets, half of which are real estate, by 2020 to meet conditions of its bailout. It has brought in 1.8 billion euros.

The fund’s policy of leasing properties instead of selling them outright has deterred potential investors, according to Yannis Perrotis, managing director of CBRE Atria, the Greek member of CBRE Group Inc. (CBG)’s affiliate network.

The government’s asset-sale program is key to securing funds from the European Union and International Monetary Fund. The Hellenic Republic Asset Development Fund’s plans, which also include the sale of stakes in national utilities and mining companies, was delayed by months in the political limbo ahead of the country’s June 17 vote on a new government.

Plans to sell Astir Place, on the Vouliagmeni peninsula 25 kilometers (16 miles) from Venizelos International Airport, are progressing, according to the bank. That could mean the first outright sale of Greek real estate from the fund’s pool of70,000 properties.

‘Unique Assets’

“Assets that are the best in their class and unique, as Astir clearly is, are selling and holding value,” said Mike Braunholtz, a broker at U.K.-based Prestige Property Group, which markets luxury properties globally. “On the downside, the whole world has its eyes on the Greece and it would be considered a very risky environment to invest in until there is more clarity whether you’d be buying in euros, dollars or drachma.”

Following the June 17 elections, Greece’s New Democracy and Pasok parties, traditionally political rivals, and the Democratic Left struck a deal to form a coalition government that will seek relief from austerity measures tied to emergency loans. Greece, in its fifth year of recession, would face having to abandon the 17-nation euro and reintroduce the drachma should the flow of rescue funds cease.

Holger Schmieding, chief economist at Berenberg Bank in London, said the probability Greece remains in the euro by the end of 2012 is 75 percent.

Currency Speculation

Foreign funds with holdings in stronger currencies such as the dollar or the Swiss franc have positioned themselves for Greece’s return to the drachma, according to Ioannis Kaligiannakis, a senior appraiser at real estate consulting firm Colliers International in Athens. “They are already here,” Kaligiannakis said before the election results.

Astir Palace Hotel SA (ASTIR), the public company that owns the resort, has a market value of 166 million euros. By including the underlying land, partly owned by the Greek state, the sale may fetch multiples of that, according to Andreas Taprantzis, head of real estate for the state fund.

National Bank of Greece (TELL), the country’s biggest lender, reported a first-quarter loss of 537 million euros and a core tier one capital ratio of 6.4, below a 10 percent target required by September. It holds 85 percent of Astir Palace Hotel.

The bank also owns a 188,000 square-meter plot where two hotels and 58 bungalows are located. It leases another 112,000 square-meter parcel, site of the shuttered Aphrodite hotel, owned by the Greek state.

Selling the Astir Palace land may be a departure from Greece’s policy of not selling state-owned property outright, and so-called freehold sales could generate interest in Greek assets that had been passed over because they were only offered for lease, according to Perrotis of CBRE Atria.

‘Outright Sales’

“It seems that so far offering long-term leases hasn’t been effective and that the market has given its message to the Greek Republic’s fund,” Perrotis said in a June 6 interview in Athens. “Now the state is seeing that the interest expressed is for outright sales and the fund may have to adjust.”

Taprantzis said the sale of Astir Palace is an exception because the bank is in a position to force the fund to sell.

“We are in a prisoner’s dilemma,” Taprantzis said in a June 6 interview. “Only cooperation will drive the best outcome and if we don’t follow the banks’ lead, our property will be valueless.”

Starwood Hotels & Resorts Worldwide Inc. (HOT) operates the Westin Athens Astir Palace Beach Resort and the Arion Resort & Spa Astir Palace, which includes the bungalows. Among the resort’s restaurant is Matsuhisa Athens, a sushi eatery owned by Nobu Matsuhisa that overlooks the Aegean Sea.

Bilderberg Conferences

Since its opening in 1960, the resort’s guests have included Jackie Onassis, Nelson Mandela, Tony Blair, Jane Fonda and Frank Sinatra, according to the resort’s website. Astir Palace in 1993 and 2009 hosted the Bilderberg conference, an invitation-only gathering of European and American business and political leaders that’s held in a different location each year.

National Bank of Greece in December paid 43 million euros for a 40-year lease of the tourist port that connects the resort by sea to make the asset more attractive. It spent 70 million euros refurbishing the hotels before the 2004 Olympics, according to the bank’s annual reports.

Astir Palace Hotel has reported losses each year since 2003, according to company filings. It has net debt of 20.7 million euros,

“The focus is not on the historical performance of the listed company,” Karytinos said, declining to disclose the asking price for Astir Palace. “The true value is in the real estate and the traded company’s market capital is in no way reflective of the resort’s worth.”

Taprantzis also declined to give an estimate of the resort’s value.

‘Smart Money’

“All the smart money is on the hotels,” said Perrotis. “If Greece does leave the euro, there will be a huge surge in tourism because of the value for money for tourists with euros, dollars and any other currency.”

Greece attracted 16.4 million international tourists last year as industry revenue reached 10.5 billion euros, up 9.3 percent from a year earlier, according to a report by the Association of Greek Tourism Enterprises, also known as SETE. The industry represents about 17 percent of gross domestic product and employs 758,300 people, or 18 percent of the working population.

When asked whether prospective investors are holding back to see if they could buy Astir Palace for less if Greece were to return to the drachma, Karytinos said if they were it’s a gamble.

“Any discussion about scenarios regarding Greece outside the euro zone is speculation,” Karytinos said.

To contact the reporter on this story: Sharon Smyth in Madrid at ssmyth2@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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