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Thursday, February 27, 2014

The Future of Elleniko

I just read in the Ekathimeri that there is likely going to be only one bidder for Elleniko --- the Lamda Development Group. Not being familiar with this group, I looked up their website.

Frankly, everything in this website looks very impressive and professional. Off the bat, a very suitable investor for a unique development project like Elleniko. Except, I then read that Lamda is a member of the Latsis Group. I am not familiar with the Latsis Group but I take it it is controlled by one of the Greek oligarchs.

Why is it that this creates a bit of a taste in my mouth? Why is it that I immediately start thinking about Greek cronies? About possible intransparencies? About possible back-scratching?

If the German Quandt-family (BMW) were to make a bid for a large development project, no one would have any second thoughts about it. It is too bad that Greece is in a situation where one immediately has second thoughts when well-known families engage with the state in large projects!

20 comments:

  1. You're right on target....Latsis, Melissanidis, Marinakis, Alafouzos Bobolas, Psicharis and the list goes on....No point on arguing over a (supposed) Surplus when radically thngs do not change...

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  2. How you can have such a close association with Greece, and be unaware of the Latsis family I do not know. Think old (post war) London Greek shipping tycoons. Think 40% shares in Euro Bank and 30% in Hellenic Petroleum. Think ex. owners of Greek shipyards and owners of Latsis Shipping and Lambda. But do NOT think bad about it, it's all above board, it is cleared with his old friend the President of the European Commission J. M. Barroso. The two buddies caused quite a stir in the press in 2005, when Barroso spend his holidays at the Latsis yacht Alexander. Some envious people even hinted that the Greek state aid of EUR 10,3 MIO (approved by the European Commission the same year), to Latsis Shipping, had something to do with it.
    "Let him be shamed who thinks evil of it".
    Lennard

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    1. I am obviously 'aware' of the Greek oligarchs but my knowledge is limited to what Wikipedia et.al. would write about them and what my Greek friends tell me about them. What I don't know are the soft facts: What business philosophy? Decent or crooks? Etc.

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  3. Something a bit irrelevant with today article, but you mention a lot in previous articles:Switzerland.
    Correct if i m wrong- it's a place i admire- which act as broker in services, in large industries- multinational companies and for very rich people.
    Taxation system is simple and not confusing.The confederation is known for outstanding educational, public and private services in various areas with high quality standards.
    We accepting healthy statistical findings but how those became reality?
    The great success depends on two significant factors:
    1 The protection which Germany's -elites- supplying, to protect the number 2 factor: privacy in financial issues for Switzerland.
    But when people and mainly elites in Switzerland vote in favor for immigration quotas they making a mistake,by accepting funds with not so typical quotas, but for immigrands say clearly NO!
    Cuprus is near to nothing compared to Switzerland.
    We need RULES for all in europe and RULES especially for elites.

    Latsis Group would make an offer to buy Ellinikon? They are promising 7 b € investments!
    About the future of Elliniko i would see it under a different perspective in relevance to Germany. To give it as an exchange for debt forgiveness together with an agreement for 45% taxation for greek depositors in Switzerland -or in other places after Switzerland- in every asset for those who cannot prove their deposits.
    German public would understand that transaction, i think. Its fair.

    MS

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    1. Don't worry about the Germans. They generally do understand the sense of economic transactions. I think you should worry about Greeks. I cannot fathom what would happen if Greece announced that they would do a deal involving Elleniko with the Germans. I think every populist would be on the street claiming that, once again, Germany is stealing Greek property.

      Regarding your 45% tax proposal. Switzerland is not part of the EU. Within the EU, a tax withholding system has been put into place a few years back. Austria, for example, withholds 25%, I believe, on the sum of interest earned by German residents on their deposits in Austrian banks. And then they split the amount: 75% goes to the country of origin (Germany) and 25% to Austria. The whole thing remains anonymous. All EU countries are required to do that, I believe.

      The trouble with all these instruments is that money moves faster than regulations can be implemented. My understanding is that a large portion of foreign money in Switzerland has already been moved to places like Singapore because of all the tax issues which have come up in recent years in Switzerland. And I would bet that the Greeks were the first ones to move their funds...

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    2. I think that if this agreement would ever happened we would have general elections.The real question would be:
      We only demand debt forgiveness around 40-60% without giving something? The government would say simply we quarantee 40 b € in salaries and a more acceptable debt sustainability taking into consideration all european taxpayers.
      What the other political parties propose? Saying no to a plan like that we say no to debt forgiveness?
      We give something.

      It should be a master plan not only for elliniko but for creating an environment for investments, a more detailed plan.

      About 45% is the tax (in Greece i think) for money that not declared to the tax authorities.
      Switzerland is not part of the EU so legal agreements should change and after the immigration quota decision!
      The whole thing should remain anonymous.The tax will imposed only one time.
      Germany and only Germany can impose (to Swiss Confedaration) such solution in case of Greece !

      (Only in Greek)

      http://www.hradf.com/uploads/files/Annex-B-The-Site-GREEK-Amended-final-LIGHT.pdf

      http://www.organismosathinas.gr/External%20files/Deltia%20tipou/15%20xronia%20Elliniko.pdf

      Norman Foster was an architect i think.

      MS

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  4. Someone had posted interesting comments about Elleniko (like the architects involved, etc.) but I seem to have deleted them by accident. Perhaps a re-post?

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    1. Here it is. It was posted on my twitter account:

      Μυροβόλος ‏@myrovolos Feb 27
      @kleingut One of the best architectural practices in the world is involved: http://www.fosterandpartners.com/ (Dozens of Greeks work there in London.)

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  5. Just an update (?)...http://www.shippingherald.com/Admin/ArticleDetail/ArticleDetailsFinanceEconomy/tabid/104/ArticleID/14573/Latsis-bids-for-Elliniko-old-airport-plot.aspx

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  6. Dear Klaus,
    I share your concern about the oligarchs, even though i have no actual proof of any wrong doing.
    These are the winners of a game of twisted rules that was played in my country over the past decades. By a sort of a Darwinian selection argument, in order to survive you had to resort to corrupt practices.

    These days, because a lot of my copatriots cannot easily get a regular job they resort to starting up their own businesses. It is therefore important that we make the rules of the game more fair so that the winners of this wave of natural selection are the ones we would like to read in the news headlines of the future.

    PM

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  7. You can find plenty on the internet about Lamda and the Latsis Group, business and gossip. Read it all, it is as much a part of Greek folklore as is Onassis, and the gossip is entertaining. Lamda is a developer, they will normally work in consortium with partners who have the appropriate skills for that specific project (Hoch-Tief etc.). Lamdas fields of expertise in the project will normally be the ability to assist with finance and conduct business in Greece. Many international companies find it easier to operate in Greece if they have Greek partners who know the laws and rules (IKEA-Carrefour etc.).
    Lennard

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  8. http://www.shippingherald.com/Admin/ArticleDetail/ArticleDetailsFinanceEconomy/tabid/104/ArticleID/14597/Three-Greeks-make-Forbes-2014-Rich-List.aspx

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  9. So rumors are out that Lamda will get Ellenico for EURM 400 or 67 EUR per square meter, plus a lot of promises about what they will invest. Even more promises about public use and parks, that is stealing and lying.@ Lennard, don't use all the smart business words, you know why foreign companies have Greek partners, why do you think McDonald move out, no Greek partner. Why do you think 3 bidders did not bid on the Elleniko project, no Greek partner? The contract conditions were too tough and no Greek partner to fix them politicaly. You have said before to Klaus that SEZ's should not get political risk insurance, what do you think this is? With the Greek taxpayers money.
    The Pirate

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  10. @ The Pirate
    I do not know if the Elleniko case is a steal deal, time will show. I have noticed that Goody's have branches on all Greek motorway rest areas and McDonald do not, I do not think it is because McDonald do not have the same business acumen as Goody's. I have worked in countries where foreign companies co-operated with local ones at large projects. The roles of the local companies were anything from providing protection (criminal or political) to offering good advice on local rules, laws, markets and customs. The former representing a parasitic role and the later actually adding value to the projects. Do I know what the roles of the local partners of the companies we have named are? No. Do I know if some Greek companies practice the parasitic role? You bet. I fully understand your anger, however direct it against the right parties. If Greek middlemen deliver protection from Greek politicians, at the account of Greek taxpayers, do not blame the foreign investors.
    I have not excluded political risk coverage. I have said that the party who constitute the risk should carry it, that can be done in various ways. The Greek nation could accept a lower price for the investment or take out insurance with the investors as beneficiaries.
    Lennard

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  11. @Lenard, the investor is also cheating, he is not better than Greeks, buying the Greek property too cheap, and making the profit.

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  12. @Anonymous
    I'm not sure we can agree on this but let's try.
    If the investor signs the deal, well knowing that he will pay bribes to avoid fulfilling the conditions, then he is as crooked as the middleman and the politician. However, I think it is a very low goal to aim at, being as good as the next crook. Further, there are rotten and good investors. This project originally had 9 potential investors who acquired the tender material and studied it, 8 of them refrained from bidding. If they refrained because of murky and vaque conditions (as suggested by The Pirate), then it speeks volumes about average investor morals. I venture that you will not find the same high morals in Greek politicians and middlemen.
    I do not know enough about real estate to judge if the price is low. There is the aspect of political risk I have mentioned. There can also be some very expensive obligations in the contract. For an airport build around 1935 there is bound to be massive contamination of fuel and other hydrocarbons. I assume that the landing strips will also have to be removed, to clear these environmental hurdles will be costly, price? No idea.
    If your problem is profits, as such, we cannot agree, if you are opposed to profit you are a part of the political risk and as such one of the reasons that investors do not invest in Greece. In the world we live in it is legitimate to endeavor to get a proifit on your investments. Should you want another world I can suggest the People Republic of Korea.
    Lennard

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  13. Follow this case for the next 15 years, it has all the elements required to make it the funniest thriller in modern Greek history. Like many other projects it will ad 1.5% to Greek GDP and give jobs to 50000 people. I assume the Greek government will start distributing the revenues and jobs shortly before the comming elections. And Greeks will buy into it, they still wait for the next Messiah to save them.
    Lennard

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  14. ANOTHER FIRST FOR GREECE IN EUROPE, THE FIRST SPECIAL ECONOMIC ZONE, (no offence Klaus, I know this is not what you recommended).
    So, the plot is developing (pardon the pun), the Hellenikon went to the highest (only) bidder for EUR 915 MIO. The deal was celebrated and signed numerous times, since then the media has been very quiet about it. On TAIPEDS project list the case is registrered as completed, with no further info. Once in a while some info seeps through in the press. It has been quoted several times that it is an exclusive option for a lease, the option run out at the end of 2015. The Lamda consortium will not start paying the lease until/if they take up the option. The 915 MIO lease will be paid over a decade. That of cause creates a unique opportunity for The Consortium to seek consessions from the government. Several newspapers have cited That:
    "The Consortium shall be exempt from any tax, duty or fee, including income tax in respect of any income derived from its business, of transfer tax for any reason, (or) capital accumulation tax".
    A few media sources have reported that:
    "The government shall bring/keep the property in compliance with all national and EU laws and rules in regard to the environment".
    To Vima have calculated that the government will have to spend at least EUR 2,6 BIO on administrative and infrastructure cost, in order to deliver the site to The Consortium. This may be the above mentioned environmental costs. It may be the cost for developing roads, rails, sewage systems and electrical power to the area, or maybe also in the area.
    Media is citing that it is a precondition that The Consortium is granted a license for a casino. I assume that the casino will be covered by the tax clause as well.
    The management of TAIPED has (been) retired with full immunity.
    Lennard
    PS. My excuses to the The Pirate, it was in fact a steal deal as later developements have shown. Meanwhile I have had time to review another (in)famous deal, The Athens Mall (check Wikepedia), that is scary stuff. In any civilized country a developer with that track record would have been banned from future dealings with the state.

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    1. I have looked up the Wikipedia piece on the Athens Mall. Seems to confirm all the warnings you are making!

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  15. I promised I would follow this deal but very little seeps through to the media and public. It has been in and out of courts a few times, it has been signed a few times more. The obligation to make 40% of it to public green areas has been reduced to 30%. The latest rumours are however crucial. They have it that the Lamda consortium is not obliged to develop it as one project anymore; they can parcel it out and sell the sirloin cuts. That lead me to believe that if/when the option is taken up, we shall see a good bank/bad bank scenario. The 30% dedicated to public green areas will be owned by an empty company that cannot fulfill the obligations; this area will be the runways, aprons and workshops with high cost for developing them. The 70% sirloin cuts at the Athens Riviera will have as owners, various offshore companies. The state (taxpayers) will then take over the 30% and paint it green, nice touch.
    Lennard

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