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Cyprus real estate: New ideas for NPLs and management

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You can make a large single property easier to monetise by managing it through a fund, says Nicosia-based Resolute Asset Management – they didn’t invent the concept, but they’ve turned it into a successful brand. And the company has another strategic innovation for distressed assets, with special reference to non-performing loans.

Resolute Asset Management is dedicated to real estate and real estate loan solutions. It is a London-based international advisory firm with offices in 10 countries, including Nicosia.

“We’re the only internationally branded real-estate fund manager on the island,” Partner Alexis Thomas, who is also Country Head for Cyprus, told the Cyprus Mail in an interview.

“We are a company that provides advice and management services for real estate, primarily to financial institutions and financial sponsors. We’ve built the business around effectively advising these clients on distressed loans and real estate. We’re real estate experts at heart, managing assets that are either collateral against a loan that is not performing or repossessed assets that need to be managed and subsequently monetized.

The company has a subsidiary in Cyprus, Resolute Investment Management, which is a CySEC-authorised Alternative Investment Fund Manager.

Alkis Hajittofis is an Executive Director and Head of Portfolio Management at the Fund Manager, and is effectively leading the Cyprus company from that perspective.

“As Resolute Investment Management, we have a couple of strategies that really add value to investors in Cyprus: One is called the single asset fund which places a large prime property, (i.e. prime location, high quality building) into a fund.

The strategy revolves around buying and leasing it to a high-calibre, financially stable tenant who has an international brand, for example, no need to include names, but maybe a topflight consulting firm, or an international bank – a solid company known around the world.

Why put a single asset into a fund?

“There are a number of benefits of doing it through the fund,” Hajittofis explains. Not many people have 5-10-20 million to invest directly into a property. The fund allows you to gather individual qualified investors and to raise a large amount of capital.”

The role of the fund manager is critical in this kind of venture, Hajittofis points out.  “You have an expert fund manager who understands real estate and who will manage the day-to-day running of the business. That fund manager is independent, and this is very key. If three investors come together to buy a building, even if they are best friends or brothers, they could easily fall out and then the business suffers. The expert fund manager is there to serve every single investor, with none privileged. Whether you have 25 per cent or 75 per cent in a fund, the fund manager will serve the best interests of every single investor regardless of the size of his/her shareholding. “

The fund manager also handles the maintenance and administration, and prepares a long-term plan for the best return on investment. This takes the entire burden off the shoulders of investors.

“And, most important, investors can cash out on predefined redemption dates, as funds are required to have sufficient liquidity. It is difficult to achieve this level of flexibility and liquidity through direct ownership of a large building, Hajittofis says.”

Finally, the fund can be listed, and that not only makes it transparent, but it provides significant tax advantages. “You can list on many European exchanges, but  a great option is right here in Cyprus, on the Emerging Companies Market. Listed companies and funds owning Cyprus real estate carry an added that gains on their shares and units are not subject to Capital Gains Tax in Cyprus, he says.”

Certainly, for investors around the world, who are desperately searching for yield in a climate of low interest rates, this kind of product has a lot of appeal.

What about distressed assets?

“As a fund manager, we have another strategy for distressed assets like non-performing loans. We call it the multi-asset fund,” Hajittofis continues.

There are a lot of distressed opportunities in Cyprus: Abandoned buildings, unfinished buildings, properties that haven’t been maintained. Some are in ruins; others only need a lick of paint or a bit of work to bring them into the 21st century. Others are simply economically obsolete, and no longer fit the patterns of life today. Some of these are on very useful plots of land for other purposes,” he says. The aim of this fund is turning the properties around and selling them to local buyers; midrange families, properties that are affordable to locals, because that makes the investment sustainable.

Resolute Asset Management also has its own real estate agency, REInvest “By combining the services offered by Resolute Investment Management with those of Resolute Asset Management and REInvest, we can find attractive properties, underwrite them and if suitable acquire them at the right price, renovate and then sell them. This provides an end-to-end real estate solution for investors” he says.

 

 

 

 

 

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