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What is the general climate of real estate investment in your jurisdiction?
The investment climate has been severely affected by Greece’s prolonged financial crisis. Major investments in real estate are usually made by either institutional players or real estate investment corporations. The past eight to 10 months have seen a gradual recovery in the real estate market; however, there is still a broad supply of distressed properties that represent investment opportunities.
Who are the most common investors in real estate?
Corporations limited by shares and private capital companies are the legal forms typically used to hold small and medium-sized portfolios. Real estate investment corporations (REICs) are the primary regulated vehicle and must operate in the form of a corporation. The establishment of REICs requires the granting of an operating licence by the Hellenic Capital Markets Commission. REICs are subject to extensive supervision and mandatory listing within two years of their establishment.
Real estate investment structures that are not entities exist under Greek law, including real estate mutual funds (REMFs) – a type of undertaking for collective investment in transferable securities that invests primarily in real estate. REMFs are asset groups subject to regulation and must be managed by a regulated mutual fund management company.
Are there any restrictions on foreign investment in real estate?
Foreign investment in real estate is generally unrestricted (although there are restrictions of foreign ownership in border areas). However, capital controls imposed in 2015 and which are still in place may affect foreign investors in their ability to move profits that result from income properties or the sale of properties abroad.
What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?
Investment structures for real estate financing vary, depending mainly on the number of properties involved and whether the financing is in respect of plain assets or the businesses holding or operating the assets (ie, asset deals versus share deals).
In the case of asset deals, the purchaser typically raises financing through a combination of equity and bank debt, with bond loans being the preferred instrument. Such bond loans are available only to Greek corporations. Finance leasing is also popular, involving a regulated financing entity (ie, a financial lessor). The financial lessor acquires the property from the original owner and enters into a long-term lease with the interested investor, which is combined with an option to acquire at a pre-agreed residual value (typically nominal or even zero).
Acquisitions of larger portfolios typically follow a share deal format (ie, the acquisition of a controlling interest in the entities holding interests in the relevant properties). Depending on requirements, financing can be structured as:
- acquisition financing granted to a special-purpose entity designated as the purchaser and subsequently merged with the entity holding the properties to achieve debt push-down; and
- other types of corporate law instrument – including transformations (eg, mergers, de-mergers, hive-downs and spin-offs), share capital increases and the issuance and conversion of convertible bond loans as structural components – to help acquire control over the relevant parts of the businesses holding the assets.
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