Olympic Park tests Greek recovery talk after privatization flops
By Maria Petrakis
It’s almost a decade since crowds swarmed across the old Athens airport, which was transformed into one of the main venues for the 2004 Olympics. Now, stray dogs rather than athletes weave among the silent stadiums as a skeleton crew of security guards keeps watch.
Weather-beaten road signs point the occasional visitor to the baseball diamond and canoeing center, where weeds sprout through cracks. Dying and untended palm trees dot the landscape. Welcome to Elliniko, Europe’s largest unused tract of urban real estate, an area that’s twice the size of New York’s Central Park, and the epitome of all that’s wrong with Greece’s asset-sale program -- and where its greatest opportunity may lie.
As Greece puts out feelers to secure a third international rescue, the government plans next month to select a developer to rebuild Elliniko. Emerging from a six-year recession that deleted at least a fifth of the economy and left more than one in four adults jobless, the nation needs a success story. Europe’s most ambitious privatization program so far has pulled in less than 10 percent of the original target.
“Getting Elliniko off the ground would boost investor confidence by creating jobs and signaling the government’s resolve to move ahead with big-ticket privatizations,” said Miranda Xafa, a former board member for Greece at the International Monetary Fund who now runs a consulting firm in Athens. “It may well be the next big thing.”
Prime Minister Antonis Samaras is selling everything from land to ports and airports to underpin the 240 billion-euro ($324 billion) bailout from Greece’s European partners and the IMF. The sales have been beset by political opposition, a legal maze and investor doubts over the country’s place in the euro.
“Even if the state has to sell at a lower price than what they had in mind, at least you get the economic stimulus from an investment,” said Spyros Capralos, a former head of the stock exchange who previously was in charge of preparations for the Olympics. “We are not very friendly to investors.”
Samaras, 62, has charged the Hellenic Republic Asset Development Fund with changing that and raising 11 billion euros by 2016, revised down from the 50 billion euros by 2015 agreed under the nation’s first bailout in 2010.
The fund has closed 4 billion euros in deals and collected 2.6 billion euros, Andreas Taprantzis, executive director at the fund, said in an interview at Bloomberg’s New York headquarters in December. The biggest sale to date was a stake in gambling company OPAP SA for 712 million euros.
On the list for sale this year are stakes in the country’s two main ports, a water company, highways, railroad infrastructure, property abroad such as a hotel in Rome, and concessions to run a horse-race betting company.
Argentine billionaire Eduardo Eurnekian’s Corp America holding company is bidding for 21 Greek airports as the group looks to take advantage of discount prices after the crisis, Martin Eurnekian, head of the division and a nephew of Eduardo, said in an interview in Davos on January 22.
Investors from Russia, which is spending more than $40 billion to host the Winter Olympics in Sochi this month, have yet to arrive in the droves once suggested by the government. Russian rail monopoly RZD has teamed with Athens-based GEK Terna to bid for a stake in railway operator Trainose as well as for the rolling stock maintenance company ROSCO.
In the biggest blow so far to the privatization plan, Greece last year failed to secure any offers for the nation’s gas monopoly, contrary to expectations that Russia’s OAO Gazprom, the biggest natural-gas company, would bid.
The sale of Depa won’t be on the schedule this year while European authorities mull regulatory changes, Ioannis Emiris, the privatization fund’s chief executive officer, told Bloomberg in New York in December.
A successful outcome for Elliniko could create 35,000 new jobs and over 40,000 permanent positions with investments estimated at more than 5 billion euros over the next decade, boosting the tourism and construction industries, Taprantzis said in an e-mailed response to questions. The development could include casinos, hotels, offices and residential areas.
“The timing is important,” Taprantzis said. “It is a turning point for the Greek economy.”
Greece is seeking at the outset to sell a majority stake in Hellenikon SA, the operating company, a transaction that promises to be one of the bigger sales this year. Taprantzis said the proceeds “will reflect market conditions.” Citigroup Inc and Piraeus Bank SA are advising the fund on the sale.
The list of bidders for the former Olympic venue was whittled down to four from nine in September 2012, when the privatization fund’s board met after two national elections froze all progress on asset sales.
In January last year, three were cleared for the final phase: Elbit Cochin Island Ltd, an Israeli investor and developer of retail properties in eastern Europe and India, Athens-based Lamda Development SA, and London & Regional Properties, the master developer for a former US base in Panama, one of the world’s biggest development deals.
A spokesman for London & Regional declined to comment, citing confidentiality agreements. Elbit Imaging Ltd Chairman Shimon Yitzhaki didn’t respond to e-mails seeking comment.
Lamda CEO Odysseus Athanassiou told a conference in Athens on February 4 that the project could attract investment of as much as 7 billion euros and 1 million more tourists. He drew a comparison with the development of Marina Bay in Singapore, which he said created 30,000 jobs, boosted the economic growth rate by 0.8 percent and added 25 percent to tourism.
Elliniko would add 0.3 percent per year to gross domestic product, according to Taprantzis.
“Elliniko could be the project that shows that Greece is open again for business,” said Wolfango Piccoli, an analyst in London at Teneo Intelligence, which advises investors on political risk. “The fact remains that Greece’s underlying economic and structural problems persist. Elliniko is emblematic of the challenges investors face in Greece.”
After spending a then-record 8.5 billion euros to host the Olympics, 2004 marked a high point for Greece.
Financially, the economy was growing at 4 percent-plus following euro membership three years earlier and the Athens Stock Exchange was in the middle of a bull market, with the benchmark index rising 23 percent that year. Six weeks before the Olympics, the Greek national soccer team defied the odds and became European champions, triggering nationwide euphoria.
Spin forward a decade and it couldn’t be more different. The economy is expected to return to growth this year, though at a pace of 0.6 percent. Greek banks may need more capital, and European policymakers are set to consider fresh funding for the Greek state and extend payback time to ease a debt load that was 176 percent of GDP in 2013, European officials said this week.
The ASE stock index rallied 22 percent over the past 12 months, though is still down 46 percent from where it was at when the Olympics started and Elliniko hosted hockey and basketball matches.
The site, a 20-minute train ride from the city center, boasts a marina, access to the tram line which runs the length of the coast, a police station, churches, a power sub-station, ancient ruins. Four of the 480 buildings are protected: the east terminal of the old airport building, designed by the Finnish-American architect Eero Saarinen, who also did the TWA Terminal at JFK International Airport, and three army hangars dating from World War II, complete with bombed roofs.
There are oversized tubes for a gigantic water slalom, awarded to a group of local construction companies in 2007 and abandoned after failure to get licenses approved. Exhibitions are occasionally held in the old airport building.
“Not having a solid plan for post-Olympic use was terrible,” said Stratos Safioleas, a consultant who worked on bids and committees for Athens, London and now PyeongChang of South Korea. “Missing one opportunity after the other, until today, to capitalize on the Olympic legacy is criminal.”
Greece has delivered on the fiscal front, with the government set to report a surplus before interest payments a year ahead of schedule.
Yet the slow pace of overhauling the public administration and easing of regulations in the labor market has led to conflict with international lenders and undermined Samaras’s pitch to business that Greece has transformed its red tape into a “red carpet” for investors.
Yields on 10-year bonds are down to 7.94 percent from more than 30 percent in 2012, though they are still above the threshold where the country could start financing itself again from the market. Ireland, which emerged from its bailout program in December, has yields of 3.23 percent.
“Greece still has risks associated with tax, labor laws, operation and corruption and running these assets not to speak of the more general political risks,” said Andreas Koutras, an adviser at investment company SteppenWolf Capital and director of ITC Markets. “When all of these risks are discounted Greek assets become a lot less attractive.”
Elliniko would inject the state with a continuous revenue stream through investments, value-added tax payments estimated at 2 billion euros, property and transfer taxes and corporate income taxes, according to Lamda CEO Athanassiou.
“Elliniko is an extremely important project for Greece, a landmark privatization,” said Philip Dragoumis, a director at Athens-based Alcimos, which advises clients on distressed debt, real estate and private equity. “The delay in moving forward with this project has exceeded everyone’s expectations.” [Bloomberg]