The ‘guaranteed’ investments scam
Notwithstanding our 38 years of operation in the real estate market in this country, we are still learning by the wrong-doings and warped mentality that we all seem to share. We received a negative reaction by some (and lots of well dones’) after what we wrote in the Greek press that the main cause of the prevailing economy situation is due to our mentality and the brainless politicians that we have. Whereas a small country such as ours, could have been a jewel and an example for the E.U., here we are, in the state that we are.
Thank God we are not as bad as Greece (no one can understand the Greek Government’s position) and Italy. A champion of “who cares” is Iceland (be it not an E.U. member) but some others seem to follow its path.
So, we have huge funds from the local provident funds in Cyprus, mainly from the semi-governmental authorities, who manage their own funds and with their own administration and decision making. Suddenly we discovered the con job at the Dromolaxia land project and various other investments in real estate by the Cyta provident fund, exceeding EUR 100 mln and in addition the Cyprus Electricity Authority fund investing huge amounts in shares that went wrong. Some fund officers went to prison for fraud, but then, the wrong-doings remain, and we were shockingly informed about their provident fund losses, we, the tax payers will again be called upon to pay for the losses. So, if the funds make a gain on an investment, it is to the benefit of that fund (and its members) and if not, say a loss, the rest of us must compensate for their loss!
Who on earth in this world could have come up with such an idea of security? Don’t you think that it is most reasonable that the public has every reason to push for the privatization of those funds/authorities, since we will get rid of their unacceptable practices?
So far, we (tax payers) must foot the bill for the Dromolaxia scam, plus another EUR 50 mln for other real estate investments) and the Electricity Authority provident fund having incurred a loss in their investments, got in exchange for their losses a prime building plot on Spyros Kyprianou avenue.
But then, do our politicians dare to raise such matters in public? Votes, dear readers are the main cause and who cares about the economy. Have you noticed any MP raising such matters? Considering that the semi-governmental sector has around 12,000 employees (not including their families in addition) it is one of the reasons. Is this not sickening, we ask you.
Well done to the funds that have invested in real estate (provided they were honestly and correctly managed) and there is a great opportunity for the same funds to invest in the real estate market now, especially now that loan packages are coming up for sale, at expected prices of around 50% less. If they can manage their investments correctly in the real estate market, it’s all for the best. We have even come to know that some funds are “playing” with exchange rates and foreign shares. Not a particularly bad idea under normal circumstances, especially for those who bought dollars and have now converted them to euros, but, having said that, is this the goal of provident funds which are supposed to be Grade A secured?
There are all sorts of attractive real estate investments in the region of EUR 5-10 mln regarding commercial buildings let to top grade tenants with a return (yield) of around ±5% p.a. Considering that deposits earn nowadays ±1% p.a. (less 30% tax) the above yield is quite attractive. In addition, certain locations seem to be on the up, whereas other types of investments including distribution centers (letting), showroom/garages of top quality are also up for sale with similar returns. The banks repossession sales are another source of increased real estate attraction, whereas regarding housing, these funds could buy in bulk and sell the units at reduced prices to their members (and not only), using their excess liquidity (funding of their members purchases for their own projects).
Whatever direction these funds decide to follow, what is unacceptable is the get-out guarantee that we offer them however.
The situation in the real estate market is still fluid at present but opportunities are gradually emerging, a circumstance which will appear on a more regular basis over the immediate future, whereas private/direct deals with distressed real estate companies is also advisable.