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Yannis Orfanos - Prodexpo 2018 Presentation

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Partner, Asset Management, Arbitrage RE

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Yannis Orfanos - Prodexpo 2018 Presentation

  1. 1. The NPLs challenge An opportunity for real estate in Greece 1st November 2018 ©2018 Arbitrage Real Estate. All Rights Reserved Ioannis Orfanos, Partner
  2. 2. The NPLs challenge across Europe Bad debt divides Europe; Sth Europe stands out with its Irish friend ©2018 Arbitrage Real Estate. All Rights Reserved Source: European Central Bank, 2nd Quarter 2017. Picture taken from Bloomberg 2
  3. 3. The NPLs challenge and the Mediterranean Greece, Italy (and Cyprus) in more difficult situation ©2018 Arbitrage Real Estate. All Rights Reserved Non performing loans in EU – Size and cover Non performing exposures, % of bank capital Non-performing loans in Eurozone Ratio as a percentage of total loans Sources: EBA Risk Dashboard, March 2018, ECB consolidated banking data 2017 Q4, Bloomberg, Reuters Non-performing loans in Eurozone Amount in billion euros 3
  4. 4. The NPLs challenge in Greece An indicative breakdown of real estate (RE) collaterals ©2018 Arbitrage Real Estate. All Rights Reserved Source: Arbitrage RE, Note: Real estate collateral value per asset type based on the 3 corporate secured portfolios auctions in 2018 4 12% 34% 12% 19% 11% 9% 3% 100% Office Hospitality Retail Residential Logistics / Industrial Land Other Total ​RE collateral % value by asset type – indicative split based on 3 secured portfolios ​88% ​12%
  5. 5. Source: Arbitrage RE ©2018 Arbitrage Real Estate. All Rights Reserved  Depressed prices in almost every real estate asset class, including hotels and land with potential for commercial, hospitality or residential development  Unique opportunity to buy significantly under-priced real estate assets  Important to capture any upward valuations over the next 2-5 years in a recovery scenario. The opportunity  Upside will come from upgrading, retrofitting, (re)developing and/or holding the “star assets” for a period rather than exiting within a very short timeframe  Professional REO management will play a significant role to upgrade, reposition, develop and sell assets.  A tax efficient structure as a complimentary strategy to maximise net capital gains Need for proficient asset management  Non-performing loans remain a huge headache for the systemic banks with c.€100bn clogging their books. 60-70% collateralised by real estate.  And on the top of this, increased supply, mainly due to REOs (>€3.0bn) which will increase due auction repossessions.  Plus privatization of state-owned well-located non-performing real estate assets. NPLs and supply As one experienced pan-European player recently told us : “Investing in [acquiring] collateralised corporate NPLs in Greece is a risk worth taking!” The NPLs challenge in Greece The majority of corporate NPLs are, in essence, a real estate play 5
  6. 6. ©2018 Arbitrage Real Estate. All Rights Reserved The NPLs challenge in Greece Opportunity or threat? 6 Greek recovery Stagnation Counting lossesCounting the time to yield profits
  7. 7. Thank You An opportunity for real estate in Greece 1st November 2018 ©2018 Arbitrage Real Estate. All Rights Reserved Ioannis Orfanos, Partner

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