Bank of Cyprus to set up, spin off real estate fund

Bank of Cyrus to set up real estate fund

Bank of Cyprus will set up a real estate fund and list it on the local stock exchange, it said Tuesday.

The bank will pass onto the fund commercial assets it owns as part of efforts to improve the health of its balance sheet, weighed down by more than 9 billion euros of bad loans. This figure has come down by nearly 2 billion euros since the start of the year but still poses a major challenge for the bank and a return to sustainable growth for the Cyprus economy.

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The fund, that still needs to clear regulatory hurdles, will be valued at about 190 million euros and “is the first of its kind in Cyprus”, said chief executive John Hourican

The move will help the bank get rid of the thousands of real estate assets in its possession as it moves ahead with debt for assets swaps. At the end of September, the bank held 125 properties in Greece and 1,397 Cyprus.

Real estate assets that will be moved into the fund will be located throughout Cyprus, offering gross average rental yield returns of over 6% per annum on a 5 to 10 year horizon. The fund will distribute, in the form of cash dividends, at least 80% of all distributable net proceeds on an annual basis, Bank of Cyprus added.