Only 40 coastal plots left for sale in Cyprus

— Shipping companies looking for “shell” vehicles to enter stock market

 

A surge in property investments, mainly by foreign buyers, has pushed land prices to record highs, with one investment banker saying that prime coastal plots are becoming scarce.

“There are only 40 plots of commercial seaside land available for sale,” said Constantinos Loizides, adding that Cypriots sat at home and watched as foreign companies and investors kept on buying properties that kept on pushing land values up.

Apart from investments in property, investors, mostly from Greece, are also looking to buy up Cypriot public companies with minimal traded volumes to act as vehicles for their own listing purposes.

“Greek shipping companies are on the lookout to buy shell companies, which they will later transform into shipping companies and secure a quick stock market listing as it is very difficult to enter the shipping sector on the Greek bourse,” Loizides said.

The former chief executive of Hellenic Bank and chairman of Cyprus Airways has set up Aepias, a regional investment banking firm with a twin base in Athens and Greece, advising Greek investors on takeovers in Greece, Cyprus and the Balkans.

Loizides said he was not worried of takeovers from Greece, despite the increasing trend of the last three years of foreign companies buying up Cypriot companies.

“October 2006 saw the introduction of the joint trading platform for the Cyprus and Athens stock exchanges, he said.

“In the last six months foreign ownership on the Cyprus Stock Exchange (CSE) has more than tripled, with the original figure of 9% regarded as slightly misleading as the island’s two main banks, Bank of Cyprus and Marfin Popular Bank, are also quoted on the Athens bourse with many shareholders there not registered on the Cyprus share register.”

Based on this estimate, Loizides said that the proportion of foreign ownership of CSE-listed companies should be double that figure, or about 18%.

But in Athens this trend is more pronounced with close to 50% representing foreign ownership while multinational companies have set up their own operations there while many were established in Greece a long time ago, such as Siemens which has had a presence in Greece for nearly 100 years.

The recent trend has shown that many Cypriot public companies in the banking, dairies, food, insurance, super markets sectors are being bought up and taken out of the CSE, such as Chris Cash and Carry (by Carrefour Marinopoulos), Lanitis Bros (by 3E Hellenic Bottling Co.), Aristo Developers, Christis Dairies (by Vivartia, formerly Delta Group).

Cypriot companies are rapidly being gobbled up by Greek and other investors, Loizides said, attributing this surge to many reasons.

“First there is volume – finally many clients are being told that “now you can buy in Cyprus” in euros, which is easier than 7-8 months ago.

Tax is very low and attractive, there is reasonable inflation, a reasonably up-market society and Cyprus is regarded as part of regional development plans of Greek companies expanding to the Middle East or the Balkans.

On the other hand Cypriots are becoming more familiar with overseas investments but do not have the necessary liquidity to buy themselves despite there being a record CYP 14 bln (EUR 24 bln) in deposits and a further 2 bln (EUR 3,4 bln) in fixed-income accounts in Cyprus banks.

“Many have had traumatic experiences in the past and now think it is too late to invest themselves,” Loizides said at a luncheon organized by the Rotary Club of Nicosia-Aspelia.

“We shouldn’t care too much with all these changes. Change acts as a motivator for management to be more efficient, to be alert and to push to be more responsible,” he said, giving the example of Bank of Cyprus, saying that the bank’s “greatest defence was its excellent performance.”

However, Loizides warned that “with the good also comes the bad.”

“We cannot afford asset stripping in Cyprus,” he said, but gave the example of one company which was taken over by a Greek multinational and it was later discovered that the value of the land of the production plant was three times that of the company and its operations.

Loizides concluded that local agencies, a common phenomenon in Cyprus, are fast becoming an endangered species as they are being overtaken by principal companies, due mainly to the globalization plans of their principals that are setting up wholly owned companies in various markets.