Cyprus property values updated

Editorial
-
14

PRIVATELY owned land in Cyprus is worth some €200 billion, Interior Minister Socratis Hasikos said on Wednesday, announcing the completion of the process of updating immovable property values as part of the island’s bailout agreement.

“It appears we have private property worth a total of €200 billion,” Hasikos told reporters after a cabinet meeting. “This does not include Turkish Cypriot properties and state land.”

As part of the bailout, Cyprus had to update real estate values by mid 2014.

Until 2013, property owners were taxed based on 1980s values with many paying peanuts and others nothing at all.

Completion of the process paved the way for the Finance Ministry and the Inland Revenue department to set new, lower, Immovable Property Tax (IPT) rates.

“We have said that the tax will be lower than last year,” Hasikos said.

This was due to the fact that the updating process has added some 300,000 properties to the mix.

“This is a job that should have been done every five years; in the Republic of Cyprus it took us some 30 years to update the values and that is why people reacted,” the minister said. “It is one thing to tax a field, another to tax a (residential or commercial) plot of land, and yet another to tax the building on the plot. All this did not exist so there could not be fair taxation.”

A bill approved by cabinet on Wednesday also includes provisions concerning objections and fees to be paid when submitting an appeal.

Swiss Franc loans breakthrough

Nigel Howarth
-
46
Swiss Franc loans breakthrough

ALTHOUGH numerous reports about an out of court settlement reached between a bank in Cyprus and a group alleging they were mis-sold Swiss Franc loans to purchase property on the island have appeared in the British and Cyprus press, no details of the settlement have been reported.

Since the articles were published we’ve been deluged with requests for further information. Although we have been led to believe the settlement was agreed by a consortium of law firms based in London, we have been unable to obtain any further information.

However, another UK-based group representing almost 500 home purchasers in the same predicament has provided an insight into the agreement they have reached with a major banking institution in Cyprus.

Hill & Blythe Associates

Two of the founding members of the Swiss Franc Mortgage Campaign are continuing to represent clients seeking a solution to financial difficulties arising from Swiss Franc loans.

The campaign was started more than three years ago by a handful of British property buyers who were advised to purchase their properties with the aid of Swiss Franc loans. They were not warned at the time of the pitfalls in borrowing in a foreign currency; specifically the risk of currency exchange rate fluctuation in times of economic uncertainty.

Most of them also provided Powers of Attorneys to their lawyers or agents that were certified against the Cyprus legislative provisions. Their lawyers/agents acting on such Power of Attorney signed all necessary documents for the execution of the loan without being warned of the risk involved in Swiss Franc loans.

As the strength of the Swiss Franc rapidly grew buyers saw their monthly loan repayments increase substantially some to a point where they could no longer keep up with payments. This has put people under immense financial strain and sadly, in some cases, people have lost their Cypriot dream homes with the added fear of their debts being pursued and enforced in the United Kingdom.

Whereas the original group started with a handful of members it has now grown into the hundreds most, but not all, are British citizens. The group is run by Lyn Clifford Hill, a former Senior Civil Servant and Chris Blythe, a Chartered Accountant. Both Lyn and Chris bought property in Cyprus in 2006.

There are a number of groups seeking to take action in relation to the financial harm resulting from Swiss Franc loans; some are seeking to cancel all agreements based on a number of grounds including the above mentioned breach in the Power of Attorney procedures.

The Hill & Blythe group has distinguished itself from most other groups in that their aims and objectives are not to hand in their keys and ‘walk away’ from their obligations. They love Cyprus, the lifestyle, the people and want to keep their properties and pay off their loans.

The group has therefore been seeking compensation for the economic losses of the past and looking for safety and security for the future. In particular they want to continue their lives without the stress and constant uncertainty of how much they need to pay on their loans.

If at all possible they also want to avoid the substantial legal costs associated with litigation and, of course, the risks and uncertainty of what would result from such action. In this regard the group has recently achieved a major breakthrough. It has reached an amicable solution and formulated an agreement with a major banking institution in Cyprus.

In recognition of the continuing global economic crisis and the negative impact this has had on individual buyers, the institution has agreed to offer a range of solutions such as discounting a significant amount of the current CHF loan balance and refinancing through a new loan in either Sterling or Euros. Alternatively, in return for full settlement of the loan, an increased discount is being offered.

The group has also secured important legal protection for the future in the form bank waivers.

Hundreds of settlement offers have already been accepted and settlement agreements have been signed and others are now being rapidly processed.

Looking to the future Hill & Blythe Associates is in a strong position of being able to assist others who have the same financial difficulties. Their fee structure is straightforward and easy to understand. Unlike some other groups:

  • There are no disbursement costs.
  • No ‘success fee’ where a percentage of the final compensation award is taken.

Instead Hill & Blythe Associates charge a simple and affordable flat fee for their work which can be paid by instalments.

Limassol marina open for business

Nigel Howarth
-
8

Limassol marinaWHILE four of the five big marina projects in Cyprus have been stalled by legal battles and bureaucracy, the Limassol marina was officially opened yesterday.

During his address, President Anastasiades said that the new state-of-the-art project would place Cyprus on the map, especially for tourism, and that the marina would employ 800 people directly and indirectly and contribute millions to the state and the economy.

The Limassol Marina is considered to be among the most important and luxurious marinas in the wider Mediterranean region and the Middle East. It has been described as the “Monte Carlo of Cyprus” and is comparable to Marina Grande in Capri and the Dubai Marina.

According to the French architect, Xavier Bohl, the marina plan was based on the Marina of Monte Carlo in Monaco model and Port Grimaud in St Tropez.

The marina has a berthing capacity of 650 for vessels ranging from 8 to 115 metres in length along with 74 villas and 162 apartments, together with parking for 750 vehicles.

In addition there are 12 restaurants including Pyxida Fish Tavern, Wagamama, TGI Friday’s, Pizza Hut, KFC, Derlicious, Caffé Nero, Hobo Mediterraneo and Marina Cool Bar, Breeze Group’s Crystal Marina Lounge, one of Carob Mill’s restaurants, Calma Café.

A yacht club, shopping facilities, spa and fitness facilities are expected to open during the course of this month and next.

Estimated to have cost around €300 million, the marina, is being managed under a BOT (Build-Operate-Transfer) agreement. Limassol Marina Ltd (LML), the joint venture company which owns the project, will manage the marina for 53 years and will retain profit rights for a further 37 years.

The new marina welcomed its first residents last year and its facilities are now open to both residents and tourists.
[youtube=https://www.youtube.com/watch?v=JWDU45I8–I&w=470&rel=0;&showinfo=0]

No more escape for tax cheats

Elias Hazou
-
18

Tax cheatTHE House last night passed a number of laws whose enactment was a condition for the release of the fifth bailout tranche for Cyprus, including two bills empowering the taxman to seize debtors’ bank accounts and assets.

Authorities will now be able to seize tax debtors’ bank accounts, confiscate their movable assets and prevent the transfer or sale of their immovable property until the dues are paid.

Following amendments introduced by lawmakers, a person’s movable property will be confiscated or held for tax arrears of €5,000 and over, instead of the lower €2,000 threshold stipulated in the original government bill.

For tax arrears of €3,000 or more, authorities will be able to seize bank accounts and to block the alienation of immovable property; the government bill had set the threshold at €2,000.

Under another amendment, the amount to be left untouched in a debtor’s bank account – after funds have been taken to repay taxes owed – was raised from €1,000 to €2,000.

The measures are aimed at improving the state’s tax collection. A total of €526m is due to the Inland Revenue Department (IRD), of which €165m owed by just 127 persons or business entities. The €526m is the amount established as being receivable.

AKEL MP Stavros Evagorou said that in reality the taxes due come to €1bn, of which €850m is from a small number of persons, whom he claimed are the same people owing the largest amounts to banks.

DIKO chairman and MP Nicholas Papadopoulos said the legislation would help the crackdown on tax evasion, but issued a warning to tax authorities that, should they go overboard, parliament would enact new laws restricting their powers.

He also noted that whereas the state can now sequester people’s bank funds and assets, citizens owed money by the state could not do the same.

Also passed was a government bill mandating self-taxation by corporations and self-employed persons, as well as legislation specifying the deadline by which the IRD must complete tax returns to wage earners.

Parliament also approved a bill making the non-payment of taxes a criminal offence. It makes company directors personally and criminally liable for failure to pay taxes or for providing false data.

Another item was a change in the composition of the Resolution Authority for financial institutions. The governor of the Central Bank of Cyprus (CBC) and two of the CBC’s executive board members will comprise the new Resolution Authority, tasked with implementing relevant legislation, making decisions and issuing decrees or directives. To date, the Resolution Authority was comprised of the CBC governor, the finance minister and the head of the Securities and Exchange Commission.

A bill establishing Guaranteed Minimum Income has been submitted to parliament; it goes to committee early next week and is slated to be put to a vote on Thursday, as will a bill providing for the establishment of an agency in charge of settling out-of-court financial disputes. These two items must be passed by the end of the month.

Cyprus tax cheats

Bank of Cyprus results analysis

Editorial
-
2

Bank-of-Cyprus-HQBANK of Cyprus published its Group Financial Results for the quarter ended 31 March 2014 a short while ago and the local and international media were quick to hail the results.

With the help of Exito Capital International, we looked a little deeper and despite reporting a positive result of €31 million, we still found some concerns which make us believe it is far too early to suggest that the biggest Cypriot bank has turned the corner for good.

Key facts

  • The Bank of Cyprus reported €944 million outflow in customers deposits from €14.9 billion to €14 billion which is a decrease of 6% within 3 months.
  • The Bank is still heavily dependent on emergency funding from central banks which still stands at €10.9 billion and without this funding the bank would basically be illiquid (and thus potentially insolvent).
  • Its loan book is very much concentrated in Cyprus which represents about 86% of the overall loan portfolio – approximately 65% of the Cyprus loan portfolio relates to construction, real estate and private individuals (of which 65% relates to housing). Thus, one can conclude that the Bank’s outlook is very closely linked to Cyprus’ real estate sector and the macroeconomic growth.
  • The portion of overdue and impaired loans has further increased from 53.2% as of year end 2013 to 53.8% as of the first quarter of 2014 and only 44% of the impaired loans are provisioned for. In the first quarter of 2014, the bank only set aside €184 million in new provisioning (whereas in 2013 the average quarterly provisioning was €320 million) which is just 2% of the total value of impaired loans and overdue loans. Furthermore, €6 billion of loans have been rescheduled of which €1.27 billion have already been classified as impaired up from €1.18 billion as of year end 2013.
  • The liquidity ratio (the ratio of liquid assets to total deposits and other liabilities falling due in the next twelve months) has fallen from 12.28% at the end of 2013 to 12.14% as at the end of the first quarter of 2014.
  • The sale of its Ukrainian subsidiary will result in an accounting loss of €100 million in the second quarter.

Outlook

The Bank of Cyprus is the largest banking institution in Cyprus and given its very high credit exposure to the Cypriot businesses and households, the Bank’s future financial performance is interlinked with the Cypriot economy, real estate market and is highly correlated with the trajectory of economic activity in Cyprus.

The Troika also noted that while the recession in 2014 is expected to be somewhat less severe than anticipated, the outlook remains challenging. The contraction of output for 2014 has been revised down to 4.2% from 4.8%, given the better-than-expected outturn for 2013 and other recent indicators pointing to gains in confidence.

Unemployment remains very high, and large non-performing loans are constraining the ability of banks to supply credit to the economy. As a result, the recovery is now expected to be more subdued than previously forecast, with moderate growth projected at 0.4% in 2015 and gradually improving thereafter, as domestic demand is weighed down by the need to reduce very high levels of indebtedness.

Borrowers are expected to continue facing challenges, while property prices may fall even further (Exito Capital, 2014).

The ability of Bank of Cyprus to continue as a going concern is dependent on:

  1. The successful implementation of the Group’s Restructuring Plan and the realisation of the macroeconomic scenario which formed the basis of its preparation.
  2. The period over which the restrictive measures and capital controls are in place.
  3. The continuing reliance on and availability of the Central Bank liquidity facilities.
  4. The actual outcome of litigation and claims mainly relating to the bail-in of deposits and the absorption of losses by the holders of equity and debt instruments of the Bank.

Summary

Though there are signs that things are slowly stabilising at BOC and hence chances of survival have increased, it is obvious that the bank (speaking in medical terms as per Ben Rosenberger – Exito Capital) is still in intensive care and on life support. Without the emergency funding from the ECB the bank would literally be illiquid with potentially severe consequences.

The outlook is challenging and linked to a lot of uncertainties. The recovery – if successful – will certainly take several years. As Ben Rosenberger (Exito Capital) stated, media suggestions that the bank may be floated on the London stock exchange in the near term is in our view totally unfounded. It would be suggesting that a patient who is just recovering from a cardiac arrest can participate in the next London marathon.

Exito Capital International

Larnaca project sold to Russian investors

Nigel Howarth
-
8
Larnaca project sold to Russian investors

larnaca projectTHE LEFKARITIS family has sold the Kimon Phinikoudes project in Larnaca, which has an estimated value of €10 million, to Russian investors for an undisclosed sum.

Meetings between the parties concluded last Friday (13th June) with an agreement being signed to purchase the 5,504sqm. plot of land on which the project is to be built plus its original plans.

The plans for the Larnaca beachfront project provide for the construction of a mixed development comprising shops, offices, residential apartments and a luxury boutique hotel.

The original construction cost of the 70 metre high 20 floor project had been estimated to be in the region of €100 million. But its final cost will be determined by its final design and the timeframe for its construction.

The Lefkaritis family has been in talks with prospective investors for several months. However, until this deal was concluded last Friday, it was unclear whether the Kimon Phinikoudes project would be sold in its entirety or whether strategic investors would participate in its implementation and use.

1...399400401...696Page 400 of 696