Dromeus Capital, an emerging markets investment specialist, is to invest EUR200 million in Greek Commercial Real Estate assets. Prices for commercial real estate assets have fallen sharply since their peak before the Greek financial crisis and yields are amongst the highest in Europe.
The fund is the second Greek-focused fund launched by Dromeus; the first, Dromeus Greek Advantage, has returned an annualised 15.17 per cent since its launch in October 2012.
Dromeus says the fund will focus on the acquisition of undervalued office properties in prime locations in central Athens and that the current market conditions are creating ideal opportunities for buyers, with prices for prime office space having dropped over 40 per cent since their pre-crisis peak. In addition, yields have increased by over 225bp to 8.5 per cent since the financial crisis and are now significantly higher than other peripheral European cities, including Sofia and Bucharest, while prime office rents in Athens are EUR200 sq. metre/year – some of the lowest in Europe, behind Belgrade and Lisbon. In comparison, London West-End rents are EUR1,500sq metre, per year.
Dromeus also believes that distressed sellers in the market are being forced to offload assets offering excellent value for buyers. Capital controls in place from the ECB have forced many Greek banks to reduce their non-performing exposures and this forced selling is creating one-off opportunities for investors. Distressed corporates with limited access to funding meanwhile, are still selling non-core assets such as real estate, often at depressed prices, while under its third bailout programme, the Greek government is required to collect EUR50 billion in long run privatisation proceeds and as a result, many state-owned properties are on sale.
Dromeus says a shortage of vacant prime office space in Athens will provide protection for both rents and capital values should the market fall. This shortage is likely to continue given the extremely low levels of construction activity in Athens over the last decade and a lack of available bank financing – no new prime offices have been built in the last 8 to10 years.
The fund is aiming to acquire 30-40 properties at a range of EUR2 million-EUR10 million.
Achilles Risvas, Co-Founder and CEO of Dromeus, says: “The Greek economy is showing signs of recovery and Greek real estate has a highly asymmetric risk-return proposition.
“For the first time since 2003, Greece has a balanced current account and the economy has moved out of a deflationary period. Whilst reforms have been progressing slowly they are having an impact. The stronger economic fundamentals are also being supported by tailwinds from tourism sector which has beaten expectations in recent years.
“Greek banks are holding a wealth of repossessed assets and are being forced to sell at the wrong time, for the wrong reasons and at an advantageous price for buyers.
“A lack of credit and the imposition of capital controls for banks has led to activity in the real estate market plummeting. However, as the Greek economy improves, activity should increase which should drive up prices again.
“We are no strangers to the Greek market and have been successfully investing in the country since 2012. Our team on the ground and extensive local network of banks, insolvency practitioners and real estate agents gives us a competitive advantage. We will look to add value through active management of assets, including renovations and renegotiations of lettings in order to deliver target returns.”
