* Concerns over ambitious project’s lease laid to rest by official
By Kyriacos Kiliaris
Larnaca International may soon find that it will have nothing to envy from the world’s leading aviation hubs as plans to turn Cyprus’ main airport into an “Airport City” get underway with plans for hotels, shopping malls and trade centres.
Hermes Airports, operator of the two commercial airports at Larnaca and Paphos, has recruited property consultants Danos Group and their partners BNP Paribas Real Estate to embark on roadshows and attract local and foreign investors to develop the areas of the new and old airport which are not utilised for aeronautical purposes.
Apart from being the gateways for every country, airports also serve as centres for development and investment in infrastructure, services and all kinds of commercial activity. With this in mind the Danos-BNP PRE alliance are consulting Hermes Airports on the commercial exploitation and development of an area of 390,000 sq. metres divided into eight parcels. The call for tenders include the construction of airport hotels, malls, shopping and exhibition centres, and a free trade zone.
Costas Kouleris, the project leader, told the Financial Mirror that Danos Real Estate, as the exclusive partner of BNP Paribas Real Estate (BNPPRE) for south-eastern Europe, has taken on the task of communicating the project to potential investors at home and abroad.
Kouleris said that the two sides are confident that their efforts will soon bear fruit and they will have announcements to make regarding the further commercial development of the airport.
“We had the opportunity to present our project at the International Real Estate Exhibition ‘MIPIM’ in Cannes and the ‘Passenger Terminal EXPO’ exhibition and conference in Stockholm. At both events investors exhibited a vivid interest,” the project leader explained.
Regarding the sustainability of accommodation at such an ambitious project just five minutes from the busy tourist town of Larnaca and an entire coastline of hotels, Kouleris said airport hotels and related services are essential to an airport’s functionality.
“Passengers take airport hotel services for granted and they ask for them, especially passengers on business related trips. A hotel within the grounds of Larnaca airport would be able to cater to the needs of its passengers, just a few minutes from the terminal, but can also support the ever-growing demand in the tourist industry, just as other hotels in the broader area,” said Kouleris.
Kouleris said plans include the construction of an aviation academy facilitating studies for aviation-related professions combining academic and vocational training.
Asked whether the 14.2% increase in passengers in 2017 from 2016 to 10.2 million has played a role in drawing up these plans, the project leader said that passenger traffic is an important indicator when attracting investors. The operator expects 10.7 million passengers in 2018.
Interest grows stronger
“Clearly the interest grows stronger as passenger traffic increases year in year out, creating various opportunities for investment,” explained Kouleris.
He added that the state, along with Hermes Airports, have recently decided to invite interested bidders to create a dedicated cargo hub, which will add value to the whole project. “Businesses can even display their products at an airport mall”.
While, Danos and Hermes appear confident that the project will get underway transforming Larnaca into an airport city, concerns remain as ambitious plans to develop the airport have fallen through in the past, including talk of the Marriott hotels chain showing interest, while plans to build a solar park to make the grounds more sustainable in energy issues was also abandoned due to the economic crisis and the drop in tourist arrivals a few years back.
Just six years ago, in 2012, the media had been buzzing with news of a big investor from China with big plans and money to develop the area of the old airport.
At the time, a total of EUR 600 mln were supposed to be pumped into a project which included the development of an airport mall and other related services in order to promote Chinese goods to Europe, the Middle East and Africa. However, after much ado about nothing, the investor abandoned his plans and left the island shooting at Cyprus’ bureaucracy. Rumours suggested that the investor found that he did not have the financial backing to go ahead with plans.
CIPA left out
Christodoulos Angastiniotis, the then-president of the Cyprus Investment Promotion Agency (CIPA), commenting at the time that “we are not moving with the necessary pace when it comes to evaluating and informing possible investors”. The head of CIPA had also complained that the agency was not called to participate in the procedures of evaluating the proposal, as the competent institution on the matter.
At the time, Angastiniotis had said that the investor gave the Ministry of Transport a deposit guarantee of EUR 200 mln along with a letter from the Chinese state Construction Company confirming that they would cover 70% of the project’s costs.
The Chinese investor’s tender was submitted to Hermes Airports as the operator of the airport for the following 19 years, with the state stepping in as the Chinese investor wanted to have the right to use the property for the next 50 years.
The fact that the government had to step in six years ago as the contract with Hermes Airports did not cover the 50-year period requested by the investor, raises more concerns regarding the latest venture.
Concerns which were articulated by Antonis Loizou, director of Antonis Loizou & Associates. The veteran property consultant said that the government has to clarify the status of the lease awarded to Hermes to operate the Larnaca airport.
“With just 13 years remaining on Hermes’ contract (ends 2031) questions are raised whether this may hinder plans to develop the area currently leased to the company,” said Loizou.
Addressing the above concerns, Costas Kouleris said that the government and Hermes Airports seem to have an understanding on the matter, and serious investors will be given the right to exploit the area which interests them for more than 15 years.
“Both sides wish to see the development of the airport to go ahead. They both feel that this will benefit the country to a great extent, by creating jobs and new business opportunities for local and foreign capital,” explained Kouleris, adding that the formula which will be applied will be valid for all investors.
The Hermes Airports consortium, including Bouygues Batiment, the French Egis Projects, Cyprus Trading Corp., Hellenic Mining, Vantage Airport Group, Aer Rianta, Iacovou Brothers, Charilaos Apostolides and
Aeroport Nice Cote d' Azur Chamber of Commerce, won the 25 year build-operate-transfer concession in May 2006 and invested EUR 600 mln for both airports.
