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Investing in Cyprus Real Estate get real!
Potential investors from around the world
+4
Expert views from Cyprus
+ MARINA KUZNECOVA, PAVLOS LOIZOU, FIONA MULLEN CROWDFUNDING The new trend in start-up funding
EU-US TRADE
Transatlantic Trade & Investment Partnership
INTERVIEWS
Philippos Raptopoulos Delia Velculescu Jens Wilhelmsen
Plus:
MONEY / BUSINESS ECONOMY TAX & LEGAL LIFESTYLE / OPINION
Issue 38 May 14- June 13, 2014
6 EDITORIAL 8 up front 14 FIVE MINUTES WITH…
get real! Investing in Cyprus Real Estate
20
After a prolonged period of falling sales and plummeting prices, the real estate sector is doing its best to rebound from the multiple blows it received from the global financial crisis. We sought out the views of four experts about what foreign investors – and, in particular, institutional investors – want when they decide to take a look at Cyprus with a view to growing their wealth. We have also compiled a list of 60 of the world’s biggest and most successful institutional investors that focus on real estate in Europe.
+ opinion Shocking Forecasting By Savvas Savouri 32 The Next Miracle? By Andreas Koupparis
39
Time to Teach Old Dogs a New Trick By Tasos Aristidou 41
26 special
30
supplement 49| Accounting, Audit & Tax
Advisory Firms in Cyprus.
46
66 70 26| On the Road to OECD Compliance Six months ago, the Global Forum’s assessment of Cyprus as a non-compliant jurisdiction regarding the availability of tax information sent shockwaves through the professional services sector. Things are being fixed, says EY Tax Partner Philippos Raptopoulos.
30| TTIPing the Trade Balance Peter Chase, Vice President for Europe at the EU-American Chamber of Commerce in Brussels on the Transatlantic Trade and Investment Partnership (TTIP).
38| Resilient People, Resilient Economy Fiona Mullen, Founder of Sapienta Economics Ltd, on the economy, NPLs, privatisation and more.
42| Will Russian ‘‘de-offshorisation’’ measures be the undoing of internationalbased structures? By Philippos Aristotelous and Stavros Supashis
46| Welcome to the Age of the Calculated Risk-Taker
74 78 82 84 96
{money} {business} {economy} {tax & legal} {lifestyle}
66| The Grand Illusion
Marios Loizides, Head of Wealth Management at Piraeus Bank, on what went awry in Cyprus’ economy in recent years.
Cyprus needs to seek a view of the bigger picture and to change its mentality, says Pavlos Loizou, Managing Partner of Leaf Research.
34| Time to Step on the Gas
62| Listening to the Voice of the Client
The island’s future lies with oil & gas, says the Chairman of the Norwegian Business Association in Cyprus, Jens Wilhelmsen.
Marina Kuznecova, Senior Financial Associate, Retail & Corporate Sales, Saxo Bank Cyprus on why Saxo has been so successful.
70| Funding the Dream
4 Gold the international investment, finance & professional services magazine of cyprus
Crowdfunding is the new trend in start-up funding and innovation culture
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EDITORIAL
Better Late Than Never
M
embers of the Troika delegation were back in Cyprus this month, using their particular brand of friendly persuasion to ensure that we stay on track as far as the financial assistance and adjustment programmes are concerned. It is to be hoped that, after insisting that Cyprus adheres strictly to all the guidelines set out in last year’s Memorandum of Understanding, they will give the Government its fourth positive evaluation and, realistically, there is no reason to believe that this will not happen. It is clear that, as was the case in Greece, Ireland and Portugal, austerity measures may be painful but they have proven to be absolutely necessary. Moreover, the bailout agreement forced the island’s political parties to accept measures which, today, everyone agrees should have been taken years ago and, regarding which, they ought to have put aside any supposed ideological differences in the name of the common good. If there is a theme running through this month’s magazine, it is that of correcting past mistakes, accepting responsibility and taking a fresh look at old situations with a view to improving matters. Pavlos Loizou, Managing Partner of Leaf Research (page 66) speaks about the “deep-rooted complacency” that characterised much of the economy, and in particular the real estate sector, when things were booming. Elsewhere, Marios Loizides, Head of Wealth Management at Piraeus Bank, notes that “a lot of people in Cyprus believed that the island was exempt from what was going on in the rest of the world” (page 46), while economist Fiona Mullen explains that “Cyprus was not productive enough – and it could be seen in big current account deficits and the fact that the country was falling in the global competitive rankings, etc.” (page 38). These are not people who are benefiting from hindsight but people who offered advice which was not heeded at the time. Hopefully, the Anastasiades government and the opposition parties are listening more closely these days. It would appear that they are taking action when it comes to restoring the island’s reputation as a reliable jurisdiction for foreign investment. Following the OECD Global Forum’s assessment of Cyprus as “non-compliant” in certain areas relating to tax information, it has moved quickly and, according to Philippos Raptopoulos, EY Tax Partner, “we are at last undertaking the correct measures” (page 26). However, there is still much to be done. Jens Wilhelmsen, the Founder and Managing Partner of Anchor Capital Management Ltd., which manages private equity funds that invest in particular in oil & gas field service companies, for example, believes that “Cyprus is the natural and logical hub for the distribution of logistics and oilfield services for the Eastern Mediterranean” but he notes that “to my mind, in spite of all the talk, this is something that the authorities and the business community haven’t really latched onto yet” (page 34). The three sectors that have traditionally fuelled the economy are tourism, professional services and real estate. Today, major efforts are being made by the private and public sectors alike to ensure that they continue to play their key role. Thanks to new markets, tourism appears to be holding up well and while it is still difficult to attract new business to the island, the broad professional services sector has managed to retain the majority of its foreign clientele. Real Estate has not been so fortunate but it is clear that it needs to restore its lost fortunes, and the major developers are now making great efforts to attract all-important foreign investment. This month’s cover story presents expert views on how realistic their prospects are. It is easy for us all to be wise after the event but the truth is that, if Cyprus is to recover, it is better that measures be taken – albeit under pressure – late than not at all. Fortunately, those in power appear to be finally getting the message.
John Vickers, Chief Editor
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Effy Pafitis, Chloe Panayides Contributors to this issue
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up front
T
Qatar Airways Launches Cyprus Route
he much-anticipated Qatar Airways Doha-Larnaca service with direct flights between the two cities started in April. The carrier now flies four times a week to Larnaca – which is its first route to Cyprus – while the Government has expressed the hope that the number of flights will increase over time. Flights will be operated by
an Airbus A320 on Tuesdays, Thursdays, Saturdays and Sundays, all departing from Larnaca at 14:10 and Doha at 08:10. During a three-day official visit to Qatar by President Nicos Anastasiades in March, the Government signed an aviation agreement with the Gulf state, which provides the right for Qatar Airways to land in Cyprus and continue to other European destinations
(excluding Greece in order to protect the interests of Cyprus Airways). Other features of the agreement relate to unlimited rights of cargo flights by Qatar Airways to Cyprus, and conversely for Cyprus Airways, as well as a code-share agreement between the two carriers, allowing Cyprus Airways to fly to previously unreachable destinations through Qatar Airways.
Paphos Ranked 6th in Value
For Money Survey
P
aphos has been named as one of the best value hotspots for holidaymakers in 2014 in the UK Post Office annual survey. The Post Office barometer shows that the coastal resort has climbed to sixth place on the chart, as a top value for money resort. The results come as good news for the industry, as Cyprus has long been viewed as an expensive tourist destination with value for money rarely coming top of the island’s attraction list, especially among Britons. According to the Post Office, Paphos has registered the biggest fall in prices – 21% – among the 20 European resorts surveyed. Although Bulgaria’s Sunny Beach is cheapest overall, overtaking the Costas and the Algarve, Paphos has seen a huge drop in the price of ten tourist staples or ‘basket of goods’ compared for each destination. The ‘basket’ includes lunch and evening meals, drinks, sun cream, insect repellent and a daily newspaper, among other items. The total in Paphos came
BoC Sells Ukrainian
Business
B
ank of Cyprus recently completed the sale of its Ukrainian business, comprising (i) its holding of 99.77%
to £62 sterling (€75.30), taking it to sixth place in the table from tenth last year. A cup of coffee in Paphos now costs £1.83 compared to £2.12 in France and Corfu but still a euro more expensive than Bulgaria, the Algarve and Majorca. Paphos had the cheapest water from all destinations at 25 pence a bottle, and the cheapest insect repellent at £1.32. It wasn’t the most expensive in any category. Other resorts in Europe rated as good value are Crete, Istria and Corfu – all three appear in the top 10 destinations. The most expensive baskets of goods were to be found in several Italian resorts totalling over £100 in each.
in its subsidiary bank in Ukraine, PJSC Bank of Cyprus, (ii) the funding provided by the Bank to PJSC Bank of Cyprus, and (iii) its loans with Ukrainian exposures, to Alfa Group. Regarding its Ukrainian business, BoC announced that the sale consideration has been revised to €202.5 million (10% discount from €225 million), where an amount of €102.5 million has been received and an amount of €100 million will be deferred up to 31 March 2015. PSJC
8 Gold the international investment, finance & professional services magazine of cyprus
Bank of Cyprus was acquired by the Bank of Cyprus Group in 2008. It operates a network of 42 branches, focusing both on individuals and businesses in Ukraine. As at 31 December 2013, it had total assets and equity of around €234 million and €55 million respectively. The sale falls under the Group’s strategy of focusing on core businesses and markets and disposing operations that are considered as non-core and is being achieved ahead of the Restructuring Plan.
Saxo Bank Honoured at Sell-Side Technology Awards 2014
S
axo Bank has been named Best Outsourcing Provider in the SellSide Technology Awards. The awards are designed to recognise leading technology providers through an auditable methodology and input from eight judges consisting of sell-side CIOs and consultants and Waters magazine’s senior staff members. Matteo Cassina, Executive Vice President at Saxo Bank said: “Saxo Bank continues to be the partner of choice for financial institutions looking to replace or upgrade their trading technology. Our success rests in our ability to offer a range of solutions to support our clients’ trading needs. “Underpinned by innovation, this offering, combined with our revenue sharing model, allows clients to upgrade their trading systems at no upfront cost. As technology becomes even more important to the banks’ profitability, we expect demand for our white label services to continue to grow.” Winners of the Sell-side Technology Awards were announced at an award ceremony in New York.
European Award for Harneys Cyprus
H
arneys Cyprus has won an award for its role in the High Yield Deal of the Year category of IFLR’s 2014 European Awards. The firm was involved in Emma Delta Finance’s noteworthy high yield offering in 2013. Harneys represented Jefferies International Limited and Jefferies LLC, which acted as the sole manager and placement agent respectively in regards to the offering by Emma Delta Finance plc of its €250,000,000 8.50% First-Lien Senior Secured Notes due 2017 and €150,000,000 12.00% Second-Lien Senior Secured Notes due 2017. The Harneys Cyprus team was led by partners Nancy Erotocritou and Pavlos Aristodemou. Associates Demetris Nicolaou,Styliani Constantinou and Alexia Shakou also provided assistance.
up front
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up front
Microsoft-Nokia Merger Completed
F
ollowing Microsoft’s acquisition of Finnish Nokia, first announced in September 2013, the official completion of the merger took place on April 25. “Today we welcome the Nokia Devices and Services business to our family. The mobile capabilities and assets they bring will advance our transformation,” said Microsoft CEO Satya Nadella. “Together with our partners, we remain focused on delivering innovation more rapidly in our mobile-first, cloud-first world.” Reporting to Nadella is former Nokia President and CEO Stephen Elop, who will serve as executive vice president of the Microsoft Devices Group, overseeing an expanded devices business that includes Lumia smartphones and tablets, Nokia mobile phones, Xbox hard-
ware, Surface, Perceptive Pixel (PPI) products and accessories. Windows Phone is the fastestgrowing ecosystem in the smartphone market, and its portfolio of award-winning devices continues to expand. The Nokia acquisition will help Microsoft accelerate innovation and market adoption for Windows Phone, introducing further customers to the Microsoft services via Nokia mobile phones. Furthermore, with the Nokia mobile phone business, Microsoft will target the affordable mobile devices market, a $50 billion annual opportunity, delivering the first mobile experience to the next billion people while introducing Microsoft services to new customers around the world. Founded in 1975, Microsoft is the worldwide leader in software, services and solutions that help people and businesses realise their full potential. Microsoft Cyprus is based in Nicosia.
Real Silver Anniversary for Windsor Brokers
Cyta Introduces Samsung Galaxy S5
T
he Cyprus Telecommunications Authority (Cyta) has introduced the new Samsung Galaxy S5 smartphone through its Cytamobile-Vodafone mobile service. The new Samsung is available free with the RED4 package until the end of May or with other packages costing €73 a month. The RED4 deal offers free insurance for 12 months and more MB of mobile Internet. Furthermore, it offers free video goals service and highlights from the Cyprus football championship, Champions League and UEFA Europa League, a multiSIM service for up to five devices on the same account and cheaper mobile Internet when travelling to other Vodafone networks.
2014
has been quite a year for Cyprus-based investment and trading firm Windsor Brokers. Beginning the year with its 25th anniversary, the company has also launched a new website dedicated to its milestone, which is set to feature unique offers and promotions. The first promotion of the year, the Silver Offer, launched on May 1, will see Windsor Brokers award 25 silver bars of 1kg each to 25 traders. Clients of Windsor Brokers will be able to earn tickets to the monthly draw each time they open an account, trade or deposit funds into their accounts.The more tickets clients earn the more chances they will have to win a bar of silver at the end of the trading month. For more information on the offer, visit www.windsorbrokers.com/en/content/free-silver
10 Gold the international investment, finance & professional services magazine of cyprus
Andrey and Julia Dashin Launch Charitable Foundation
A
ndrey and Julia Dashin officially launched their new charitable foundation on 5 May. The objective of Andrey and Julia Dashin’s Foundation, is to offer support to Cypriot society, by giving the opportunity to individuals and organisations in need to apply for financial aid. Speaking about the inspiration behind the set-up of the foundation, Andrey Dashin noted: “I believe that we all love this island regardless of our birthplace. We all see our own future and the future of our children tightly bound to Cyprus. But unfortunately, not all of us understand that we also have responsibilities towards it. We have responsibilities and should take appropriate action for the future of the island, for the future and prosperity of our society, and the overall future of our home.” Dashin is the founder of ForexTime Ltd (FXTM), and Chairman of the Board of Directors and shareholder of the Alpari brand. His wife and wellknown TV personality, Julia Dashina, noted: “In my previous line of business I was described in print as being ‘beautiful’, ‘trendy’ or ‘fashionable’. But today, in the context of our charity, I would prefer to be described as being useful to society, helpful and giving. I would also like to be characterized as a person who dares to think that we can make our world a better place”. The Foundation will start off with an annual budget of approximately €500,000, aiming to double the amount in 2-3 years’ time. It will work on a grant basis, paying diligent attention to the process of selecting eligible persons for the grants. Andrey and Julia Dashin have years of experience in philanthropic activities, having founded the Alpari Charitable Fund in Russia in 2005, which received the “Philanthropist of the Year” Award for two consecutive years in Russia.