A big fat Greek real estate sale

Would you do a property deal with Greece? For a country that hopes to escape bankruptcy by shifting billions of euros? worth of prime real estate, Athens?s sales pitch is far from reassuring.

Take its attempts with the old international airport at Elliniko in southern Athens.

The airport closed in 2001, leaving 170 acres of coastal land that successive governments have tried to turn into something that could make money. A decade on, plans to raise 7 billion euros ($10 billion) by partnering with Qatar to build a financial district along the lines of London?s Canary Wharf remain stuck on the drawing board.

The former airport is a poignant symbol of hope unrealized. An old Boeing 747-200 sits rusting among the weeds, abandoned airport equipment litters the parking lot, and once-busy terminals stand empty only a few hundred meters from the sparkling Aegean Sea, the wind howling through the broken doors and windows.

Elliniko Mayor Christos Kortzidis — famous for a 24-day hunger strike in 2007 that forced private clubs to give the public free access to beaches — has vowed to block any construction on the site and wants a massive public park built there instead.

?We will do everything we can to stop government plans,? the mayor told Reuters at his office, a small bust of Lenin on his desk. ?We will exhaust every legal means both here and abroad. This project has no future.?

One year after the European Union and the International Monetary Fund bailed Athens out to the tune of 110 billion euros, financial markets are asking not if, but when, Greece will go ahead with the default the bailout was supposed to prevent. Its debt is already rated junk by all three major agencies — below that of Turkey and Egypt — with further downgrades in sight. Greece insists a restructuring would be a major mistake. Pivotal to its effort to avert what Brussels officials prefer to call a rescheduling is an ambitious plan to raise 50 billion euros by 2015, the bulk of it from real estate. It wants to sell off or lease everything from the old airport to tourism properties and from government utilities to the decaying remnants of the 2004 Olympic Games.

Privatizations alone will not save Greece from bankruptcy: It will need to tighten its budget belt even more than it already has. But without them, Greece can forget about avoiding default. ?I think that without this, it will be very difficult to avoid a restructuring,? said Diego Iscaro of IHS Global Insight. ?If we want to look at the optimistic scenario, to avoid restructuring this will be a prerequisite, a must.? Some analysts say 50 billion euros is much too ambitious a target, and would consider even 20 billion good news. Even that would hardly make a dent. Citigroup said in an April report that even the rosiest scenario — under which Greece managed to raise the 5.5-7.5 billion euros it targets for 2012 — would still not fill a 27-billion-euro funding gap that Greece will need to fill in bond markets next year. And according to IMF estimates, 50 billion euros of privatization proceeds by 2015 would only reduce debt to 134 percent of GDP: a level many economists still consider too high.

Fellow members of the eurozone want Athens to begin the big sell-off as soon as possible and have demanded that the first 15 billion be raised by 2013. Greek think tanks and other experts estimate Greece is sitting on some 300 billion euros worth of state property — almost as much as the country?s entire debt.

?How could Greece ask its partners for cash and not take advantage of its own holdings?? asked one Western official in March, requesting anonymity so he could speak more freely about the matter. ?There was a lot of pressure on Athens to deliver a game plan.? So far, though, enacting that game plan has been slow. Like a homeowner who can?t afford the mortgage, Greece has, extremely reluctantly, agreed to part with some assets. But it?s still struggling to work out what it owns, let alone what exactly it?s going to offer or how it?s going to package it. And now the building?s other tenants — mayor Kortzidis and millions of other Greeks opposed to any sell-off — are rebelling and refusing to leave. Even if Athens could find takers, its plans risk being upset from within.

Don?t expect Europe to cut Athens any more slack. A Greek default would trigger further problems in Ireland, Portugal and even Spain, and hurt at least politically in Berlin, Paris and other capitals. Berlin hopes Greece?s privatization program will convince resentful voters in Germany that the Greeks are sharing the costs of the bailout.

?When you have so many people talking about the need for Greece to reschedule its debt, and so many people saying that a rescheduling is unnecessary, there?s only one thing you can conclude — that it?s going to happen at some point, it?s just difficult to say when,? said a eurozone source in Brussels who spoke anonymously because they are not authorized to talk publicly about Greece?s structural program.

Greece doesn?t have a lot of time. It promised its international lenders in February it would produce a comprehensive list of what it owns by June. Once it determined which state entity owned what property, it said, it would decide how to proceed.

With a month to go, those plans seem absurdly optimistic.

?Forget about trying to list everything. There isn?t time,? said one property expert who sits on one of the seven bank-led committees that have answered the government?s call for expressions of interest in identifying ?pieces of property that can be easily and quickly exploited.? The committees haven?t yet been assigned their tasks, let alone have any idea how they are supposed to work, he said.

In that, the plans are following a familiar path in Greece.

From the building boom that created modern Athens to the tourist developments that have turned sleepy Aegean islands into the country?s biggest moneymakers, property development has often been anarchic.

The tourist explosion of the 1960s turned sandy coastlines into prime suburbs, but also spurred an ugly rash of cheap developments that flouted both zoning rules and aesthetics. The absence of any land registry until a few years ago and a widespread and often blatant disregard for building restrictions have rendered some state-owned properties unsellable.

Add to this an overbearing bureaucracy as well as rampant corruption — lobbying group Transparency International says Greece?s building permit offices are the country?s most corrupt institutions along with tax authorities — and it?s little wonder that Greece?s property holdings are a mess. That?s long been a problem. When Pericles built the Parthenon in the 5th century BC, he was accused by political enemies of embezzling money from his unwilling allies ?to dress up Athens like a whore.? [Reuters]

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