The Royal Institution of Chartered Surveyors (RICS) hosted a conference on REO and NPL Management on March 8, bringing together real estate professionals, banking executives, and regulators to explore and discuss the state of the Cyprus real estate market as well as strategies for management of REO and NPL portfolios.
Pavlos Loizou MRICS, Chairman of RICS in Cyprus and a Partner at Resolute Asset Management, opened the event with a brief discussion of the shifting fundamentals of the Cyprus real estate market. He highlighted that the new ability of financial institutions to create large real estate portfolios will for the first time attract overseas institutional investors seeking large portfolio purchases. He also noted that in light of the upcoming stress tests for financial institutions, the size of the NPL and REO problem in Cyprus will result in more scrutiny on the real estate professionals. Mr Loizou called for improved data analytics and the need for strict standards in preparing valuation reports.
Thomas Dimopoulos MRICS (Neapolis University Paphos) expressed optimism that the market is picking up pace towards full recovery. He identified Cyprus as one of the top performers in Europe, given its size, and attributed this success to the various naturalization programs introduced in recent years. However, Mr Dimopoulos emphasized that a potential termination of such programs in future would be detrimental to the real estate market and would have repercussions on the banking sector as well.
Jennifer Petridou Sharpe MRICS (Philoktimatiki Public Ltd) outlined the requirements that real estate valuers must follow when producing valuation reports. She emphasized the need to have complete information and limit assumptions, so as to ensure the accuracy of the valuation.
Vassilios Vrachimis (PricewaterhouseCoopers) discussed the changing regulation, which will allow banks to foreclose assets more quickly and transparently, thus accelerating recovery. He also noted that external monitoring will become increasingly intrusive and will cause banks to look at collaterals with much more scrutiny.
Jon Hodnett (Resolute Asset Management) outlined the advantages and the challenges banks face when managing large portfolios of real estate, which are one of the highest risk categories for banks. He presented Resolute’s framework approach for converting non-performing exposures to cash recovery. Mr Hodnett also demonstrated the REO management platform developed and used by Resolute to manage their clients’ portfolios.
Finally, Anthi Exadaktylou (Bank of Cyprus) praised the success of Bank of Cyprus to deleverage its non-performing exposures from EUR 15 bn in 2014 to 10.5 bn today. Consensual debt for asset swap was cited as the most preferred method for resolution because it delivers immediate relief both for the bank and the client. Exadaktylou assured the audience that the bank does not intend to foreclose on primary residencies. She invited struggling customers to reach out to their banker and find a reasonable, mutually beneficial solution.
