A deal where the National Bank of Greece (NBG) will sell a majority stake in its fully owned real estate arm Pangaea to the private equity firm Invel Real Estate is raising eyebrows. According to Reuters, the sale is part of restructuring efforts by NBG aimed at boosting its capital base as required by the conditions imposed by the European Commission on Greek banks for their bailouts.

However given the highly favourable terms of the sale for the buyer, many are asking whom this deal really serves and whether under the guise of ‘restructuring,’ public assets are simply being transferred to private hands for next to nothing.

The National Bank of Greece is Greece’s biggest lender and one of the four remaining ‘systemic’ banks in Greece (along with Piraeus Bank, Alpha Bank and Eurobank). These were bailed-out following a broad restructuring of Greece’s banking sector, as directed by the country’s troika of lenders (the European Central Bank, the International Monetary Fund and the European Commission).
NBG was recapitalized in June 2013 with Greek and European taxpayers’ money as part of the bailout plan for Greece. Following the recap procedure that reached 9.65 bn euros, 89.2% of the bank is now held by the Hellenic Financial Stability Fund (HFSF). In total, the recapitalization of the Greek systemic banks raised approx. 30 bn euros.
The HFSF evaluated and ruled on the Pangaea deal in its capacity as the bank’s majority stakeholder. The Pangaea deal was also given the green light by DG Comp (EU’s Directorate General for Competition) and by the bank’s monitoring trustee, Grant Thornton, the accounting firm, that was appointed by the European Commission in January 2013 to sit on the bank’s board.

As ThePressProject has revealed, under the terms of the deal, investors will purchase 66% of Pangaea for over 600 million euros. However 450 million of this will actually come from a loan from the National Bank of Greece itself. In other words the seller will be financing over two thirds of the purchase through loans, with the buyers only paying 140 million of their own money in cash plus an equity contribution in the form of real estate.

Perhaps even more surprising is that the loan itself will have an interest rate of only 2.75%, a rate far lower than that currently available from NBG or any other Greek bank to Greek businesses struggling to survive the credit crunch.

This seems particularly odd given Pangaea’s portfolio, which includes many branches of the National Bank of Greece as well as prized public real estate recently purchased by Pangaea (with loans from NBG) as part of a government privatization scheme. Many of these holdings will continue to be leased by the state and the bank itself, meaning that in effect the initial investment has a guaranteed return of about 8.5%.

It is also noteworthy that this 600 million euro deal did not come as the result of an international tender but through direct negotiations between NBG and the investors involved in the Invel deal. Invel is a Dutch firm established in March 2013 with the aim of allowing investors to co-invest in opportunities in the European real estate market. One of the main investors in the Pangaea deal is BSG Real Estate, controlled by billionaire Israeli Beny Steinmentz. According to the Financial Times, Steinmetz, the controversial diamond mining entrepreneur and one of Israel’s richest men, launched the $2bn venture “to buy distressed European property, marking the latest effort by a wealthy investor to cash in on the funding difficulties facing the continent’s governments and companies”.

How HFSF members voted

Further questions have been raised by the role of the Hellenic Financial Stability Fund. The HFSF is now the major shareholder in the country’s four major banks following their recapitalization. It approved the deal but the board was divided, with the final vote being 4 in favour and 3 against. One of the board members, Andreas Beroutsos, resigned immediately after the decision. According to the HFSF this was due to ‘personal’ reasons. Together with Beroutsos voting against the deal were the two non-Greek members of the HFSF body. The representatives of the Ministry of Finance and the Bank of Greece voted in favour. 

The decision to approve the deal was taken by the General Council of the HFSF, a seven member decision making body. According to information obtained by ThePressProject, the other members of the HFSF voted as follows:
In favour of the deal were Mr. Christos Sclavounis, Chairman of the HFSF, Ms. Eftychia Michailidou, representative of the Ministry of Finance, Mr. Efthimios Gatzonas, appointed by the Bank of Greece, and John Zafiriou, Non Executive Member.
Voting against the deal were, Mr. Andreas Beroutsos, Mr. Pierre Mariani and Mr. Stephan Wilcke, both non Executive Members of the HFSF’s General Council.

The political connection

The deal is likely to be completed soon and is likely to send ripples through an already troubled political landscape given that both the head of Pangaea, Christos Protopappas, and the head of the NBG, Alexandros Tourkolias, have close ties with the political system. Mr Protopappas is a former PASOK minister and Mr Tourkolias a ‘personal friend’ of Prime Minister Antonis Samaras, according to the FT.