GIG: Can you tell us a little about your exposure in Greece right now?
Iannazzo: Our focus has been on investing in real estate assets with high-quality cash flow and attractive yields. Värde has significant exposure in Greece through our majority stake in Trastor, a real estate investment company with over €200 million of Commercial Real Estate (CRE) assets, and a substantial stake in Lamda Malls, the owner of Golden Hall and Mediterranean Cosmos shopping centres in Athens and Thessaloniki.
These are both very high-quality partners and platforms.
GIG: Why did you invest in Greece?
Iannazzo: When we began looking at the Greek market in 2014, the economy had contracted more than many had ever experienced for a developed market outside of wartime. Property prices and rents had collapsed from their peak, unemployment was over 25%, and there was significant political turmoil.
Experience investing in the more liquid parts of the market, including Greek government bonds and bank securities, informed our view that a full-blown ‘Grexit’ was unlikely. We saw an opportunity to invest in the country’s long-term recovery, and ultimately became interested in Trastor when Piraeus Bank was looking to sell part of its interest.
Using the Trastor platform, we had the chance to buy prime assets in a city of nearly 5 million people alongside a high-quality partner, and at an attractive price, which helps mitigate downside risk. These are important ingredients for investing in a country in the early stages of economic recovery.
Since then, we have successfully grown our footprint in the country.
GIG: Has it met your expectations?
Iannazzo: Yes, I would say it has played out as we expected. We take a long-term approach to investing, thoughtfully establishing our right to play in markets. Greece has a lot to offer and you are starting to see an influx of investors.
We believe that having been here for longer will be an advantage.
GIG: Are you considering further investments in Greece? Any particular sector? Why?
Iannazzo: We continue to look for attractive opportunities in Greece and think office and hospitality could be interesting sectors.
High-quality office space in large cities such as Athens is scarce – this is a theme in Europe. We think increasing demand in this market, coupled with the ability to purchase property at compelling prices – when rents are likely to grow – creates a compelling dynamic for investors.
Similar to the dynamics in Italy, where Värde owns hotel assets, Greece has a strong market for tourism, yet there is a shortage of institutional hospitality management and an under-penetration of global brands.
GIG: What is your outlook on the country’s economy?
Iannazzo: With the Greek banks now beginning to address significant NPL problems, they will be in a better position to lend and support the country’s economic recovery. This also has the benefit of moving real estate assets off banks’ balance sheets, to be purchased by companies like Trastor and ultimately renovated or leased. That’s good for everyone.
So, while Greece’s economic recovery is still in its initial stage, the country’s GDP growth, increased political stability, falling unemployment, and improved credit markets (more in line with other Southern European countries) are all contributing to a more positive outlook.