The market of property investment companies involved in leasing and selling commercial real estate is new to Greece, but has a 40-year-old history abroad. Piraeus Real Estate Investment Property SA (Piraeus AEEAP) is the first in this industry to be listed on the Athens Stock Exchange, with its initial public offering scheduled for June 2-7. The company’s vice president and CEO, Heracles Hortarias, spoke to Kathimerini about this Piraeus Bank subsidiary and this new developing market. What is the objective of property investment companies (AEEAPs), where do they invest and what happens abroad? AEEAPs mainly invest and manage (lease and sell) commercial properties (e.g. stores and offices) purchased in full or bare ownership in Greece or in other European Economic Area countries. Although this is a new institution for Greece, it constitutes an alternative investment product for investors abroad wishing to spread their portfolio. In the US the corresponding institution of Real Estate Investment Trusts has developed in the last 40 years and more than 190 such companies are listed on the US stock market. What is the tax status of AEEAPs? The taxing obligation of AEEAPs is just 0.3 percent of the average of their investments per year, plus their resources in current prices, as published in their six-month investment tables. There is no further tax obligation for the company or its shareholders, apart from the income tax deduction at the collection of interest by the company. The transfer of properties to an AEEAP is exempt from any tax, according to law. What is more, AEEAPs do not owe any Large Real Estate Tax (FMAP) for properties not used by the company. AEEAPs do not account for amortization on the property they invest in, strengthening their after-tax profits this way. How is AEEAP real estate evaluated? According to Greek law on AEEAPs, these companies’ investments are evaluated every six months by the Chartered Surveyors Corps (SOE). During a company’s property purchase SOE is required to evaluate the property. The money paid for its purchase cannot exceed SOE’s evaluation, while in the sale process the amount paid cannot be below the evaluation. This secures transparency in property transactions. What is the main difference between AEEAPs and real estate companies? Real estate companies are involved in managing properties, provide services to all property owners and undertake works such as property construction or refit, while AEEAPs buy properties which they then sell or lease. Today there is a great number of real estate companies, listed or not, which make up a significant and competitive market in the real estate sector, but this refers to constructing and developing properties and includes development risks. What is the profile of Piraeus AEEAP? Are there any other such companies active in Greece? Piraeus AEEAP is fully harmonized with the legal framework for AEEAPs in Greece, as it is active in acquiring commercial properties, their leasing and management as well as their sale. The company combines the characteristics of a fixed-income real estate company and an investment firm, with a specific operation framework and character in the context defined by law. The company belongs to the Piraeus Group, with Piraeus Real Estate controlling 58.5 percent of its shares and Piraeus Bank having the remaining 41.5 percent. Its combined properties are evaluated at 77 million euros. For the selection of new properties we use such criteria as the annual leasing returns, solvency of the leasers, geographical location, quality of construction, etc. For the sale of its properties the company considers both the profits it will obtain and the creation of new disposable capital to be invested in properties with greater and safer yield. There are another three companies active in this market, which are obliged by law to be listed on the stock market up to two years from their establishment. They are the EFG Eurobank subsidiary, the Public Power Corporation (PPC) subsidiary and the Hellenic Public Real Estate Corporation (KED) that has some differences from the rest as its object is the management of all properties owned by the state. What were the company’s financial results? Last year its total turnover reached 8.59 million euros and its gross profit (before amortization) 7.64 million euros. About 74 percent of gross profits come from long-term property leasing, and 26 percent is from property transactions. Piraeus Bank and BP Hellas SA comprised 85 percent of property leasers in 2004, with an average remaining lease duration over six years. What is the company’s dividend policy? Are new shareholders entitled to a dividend? The governing board of Piraeus AEEAP has proposed the distribution of dividends equaling 95 percent of after-tax profits for 2004, coming to 0.135 euros per share. A dividend will also be paid for shares resulting from the current share capital increase. What is the company’s equity capital? What funds will it raise on the stock market and what will it do with them? We expect to raise 26 million euros, with 25 percent of the company’s equity capital being passed on to private and institutional investors. The funds raised will be used to expand our property portfolio. The company has 37.4 million shares, each with a nominal value of 0.45 euros.