Ioannis Orfanos is a Partner of Arbitrage Real Estate and heads its Asset Management practice. He has more than 15 years of experience in real estate investment, management and advisory. He brings to the firm development, sustainable investing and asset management expertise. Ioannis is currently based in London, where he is working closely with international and institutional investors to originate, structure and manage large-scale value add real estate development and asset management investments in commercial and hospitality sectors across SE Europe as well as high yield opportunities in NPL and REO portfolios in Greece.

 

  1. Can you give us an overview of business at Arbitrage as we approach the end of 2019? 

Arbitrage Real Estate (RE) is an Athens and London based real estate advisory and management firm covering a wide spectrum of services in the property sector. Arbitrage RE combines local market knowledge with international experience, strategic advice with hands-on execution.

In the hospitality market, Arbitrage RE is focusing on detecting and unlocking transactional opportunities from the Greek hotel NPL and REO market as well as from family owned hotels and resorts. As an example, we recently tendered a hotel operating lease and a management agreement for two important family owned assets, one in Athens and one in Mykonos respectively.

The firm is also focusing on creating value surplus through its advisory work. We are supporting international capital of institutional investors and family offices interested in investing in SE Mediterranean market. We offer them among other things valuation, technical due diligence services, strategic feasibility advice, market research and analysis.

  1. The session you are moderating at MR&H 2019 next month will discuss the growing trend of institutional investment into resorts. What activities are you seeing at Arbitrage that supports this trend.

As resort operations have started to move away from traditional family-run properties, towards a more institutional offering, we will discuss in this session with our distinguished panellist, who represent major well-known investment funds, whether this evolution is a value-add strategy. And whether the institutionalisation of a hotel or resort operation, governance or ownership would lead effectively to a higher yield.

On our side, we have seen a lot of interest coming from institutional capital intending to invest in the Mediterranean market and in Greece in particular. Greece is dominated by family owned and run hotels and resorts, therefore our role is to act as a bridge between the current local owners and the institutional capital. We work to prepare family owned assets for a successful sale or for co-investments and also to create win-win opportunities for both parties to grow the business or expand the portfolio of operating hotels.

  1. Data is king. As data, and the intelligent analysis of it continue to shape global business practice, what data are your clients requesting when considering investment opportunities?

One of main advisory aims is to provide reliable market data to investors. Our market research team gets often requests about targeted market data per destination such as valuations, major hotels, upcoming hotel investments and new  developments and competition KPIs (ADRs, RevPARs, Occupancy Rates, Seasonality, etc). It is also provides data related to international arrivals (airports, port, road networks, etc) and domestic tourism. Our clients are also looking for more technical and specialised information on planning, development law subsidies and other legislative incentives related to a specific submarket or assets.

 

  1. Sustainability is climbing further up the agenda for investors and now a very real consideration in the investment process. What factors do you advise clients to contemplate in relation to sustainability?

I think it was about time! Sustainability is a cross cutting theme and a very important aspect of how we develop, build, utilise and operate assets in a low carbon way. It has become a major investment parameter in the office and residential real estate markets, and hospitality assets cannot be an exception. It is important for all hoteliers to focus on low carbon energy consumption and localised production and also on how they manage their energy water and waste. It is also important to acknowledge and practically address their impact in the environment.

As it has happened in other institutional real estate markets, we are not expecting green premiums but mostly grey discounts. Hoteliers who do not adapt and show genuine interest in addressing sustainability, they will effectively lose competitive edge and face marketability issues. Especially since holidaymakers and business travellers are much more aware about the importance of sustainability and resilience given the now visible consequences of climate change.

  1. The high ratio of non-performing loans (NPLs) that remain within the Greek hospitality sector is cited as a challenge for the future growth of the industry in the Arbitrage Hospitality Market Report released at the end of last year. Can you update us on this as of Q3 2019 and whether it is still seen a barrier to funding?

The amount of non-performing loans (NPLs) in the hospitality sector has resulted in the lack of liquidity and consequently in under investment in certain market segments and locations. Some local hotel groups have found themselves in a position whereby they essentially share decision making with their lenders and are lacking the necessary capital to reinvest in their assets. The lenders on the other hand have found themselves also in a difficult place as they are required to effectively jointly run hotel business operations and make important hotel business decisions in their effort to decrease their non-performing exposures in the industry.

Clearly, this challenge is also creating numerous opportunities for well-placed investors, who know how to manage distress situations. They get involved, either directly through the banks or by supporting local groups, to provide the much need capital to turnaround the situation, especially in well-sized and prime located hospitality assets. This route helps them also become majority shareholders in very good assets.  Our expectation is that the active management of NPLs, either on a standalone basis or through structured portfolio auctions, will create and it is creating a lot of transactional opportunities s, that will lead to further institutionalisation in the hotel market.

  1. What is the importance and relevance of attending events like MR&H?

MR&H provides the opportunity to do targeted networking and meet other important professionals in the industry, to participate in discussions with industry leaders, learn from experts and share knowledge with market participants. The case studies presented during the conference also help to think forward and understand current and future trends. MR&H is undoubtedly the most important annual event in the Mediterranean resorts market. A must attend.
 

Ioannis will be moderating a conversation on Institutionalising Your Asset on Wednesday 30th October 3:45pm - 4:25pm during MR&H 2019. Full details on this session, along with speaker details available here.  

Join Ioannis, us and a host of brilliant minds at #MRH2019 to Experience the Opportunities.