TOURISM DEVELOPMENT COMPANY (TDC) AND OPPORTUNITIES FOR TOURISM INVESTMENT IN GREECE. By: Konstantinos Zacharopoulos (Managing Director, TDC)

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1 TOURISM DEVELOPMENT COMPANY (TDC) AND OPPORTUNITIES FOR TOURISM INVESTMENT IN GREECE By: Konstantinos Zacharopoulos (Managing Director, TDC) (A speech given in the AHI Forum held on 21/3/2006) CONTEXT 1. Introduction 2. TDC Legal Status 3. Business Environment 4. TDC Strategic Principles 5. Real Estates Development Regimes 6. Tender Procedures 7. Projects Develeoped 8. Projects to be Developed 9. Risk Mitigation 10. Epilogue 1. Introduction Ladies and gentlemen, May I begin by saying what a privilege and pleasure it is for me to deliver this presentation to such a distinguished audience like you. It is a fitting tribune to the initiative of the Greek Government and especially to Prime Minister Mr. Konsantinos Karamanlis, to give special emphasis to the tourism policy and upgrade its implementation on the coherent basis secured by the newly established Ministry of Tourism Development. What I have to say today falls conveniently under three main headings. First, I shall review the TDC legal status and the business environment encompassing its activities. Second, I shall attempt to consider more

2 systematically to strategic principles of the TDC s activities, as specified by the management on the basis of the revised institutional identity (by Law 3270/2005) and the potential administrative and operational capacity of the company. And finally, I shall tackle the core of the matter, namely the business plan of TDC with respect to the development of the most investment attractive real property assets. 2. TDC Legal Status TDC is a wholly State-Owned entity created in 1998 for the purposes of managing and developing the Greek State s Tourist Property portfolio. TDC is managing a unique asset portfolio consisting of: 371 individual real property assets throughout mainland Greece and the islands (Hotels, Marinas, Golf Courses, Ski Resorts and large Estates in the most unique and desirable locations for development). These assets benefit from a diversity of infrastructure and current usage and can be distinguished into three main categories: o Undeveloped Large Plots of Land without infrastructure, o Business Units, that is plots of land with diversified infrastructure related to specific usage, some in operation either by the TDC (defined as active branches) or third parties under lease contract (defined as active private units) and the remaining at idle state (defined as idle branches), and o Subsidiaries 3. Business Environment The management and development of the asset portfolio is taken place within a positive and investor friendly business environment in Greece, which has been extensively presented by the Minister and the previous speakers. I would like to briefly highlight a few points that relate to a great extent to the development of our real estate portfolio: Greece, as a member of the EU and the Euro-zone (EMU), has a strong and stable currency. The rate of growth is expected to remain at 3.6%, amongst the highest achieved in Europe for this year, despite high oil prices and the Euro-zone s below-par economic performance. Greece is located at the crossroads of three continents, it has a mainland mostly surrounded by coast, a great diversity of islands and constitutes a land which is commonly considered the most attractive tourism real estate in the world. Greece proudly bears a respectable brand name gained from its acclaimed successful organization of the Athens 2004 Olympic Games and, having completed an extensive infrastructure development programme for that occasion, is ready to utilize its achievements towards its tourist goals. 2

3 Opportunities are intensified by the fact that the Greek economy is in a structural transformation process, enjoying a renewed liberalisation in a free economic system, thus boosting investment activities, enhancing productivity and encouraging development. The New Investment Law that provides strong relevant investment incentives for the tourism sector and the lowering of corporate tax rate are among others significant milestones for the potential of the development of TDC s real estate tourism portfolio. 4. TDC Strategic Principles The activities of the company are being carried on within a frame of sound strategic principles and effective business plan, approved by the BoD of the company. With respect to the strategic principles, these are well specified, reflecting the legal status, the business environment and the potential operational capacity of the company. TDC Mission is the management and development of the State owned tourism real property asset portfolio. TDC Strategic Goal is to promote the tourism development of Greece by lengthening the tourist stay and upgrading the tourist product through exciting diverse new developments. TDC s strategy is to achieve this goal through: Realization of long term viable investments in the state-owned tourist property Product-Specific Development (thermalism/spas, agrotourism, congress & exhibition centers, etc) Development of infrastructure required for special forms of tourism (marinas, golf courses, theme parks etc) in conjunction with tourist villas where applicable These new developments can: achieve an added competitive value, become a main driver for economic growth in Greece, attract investment and specialist know-how, and maximize returns for TDC and the Government. 5. Real Estates Development Regimes As to the means of strategy implementation, that is the debelopment regime applied, these reflect methods of co-operation between the public and the private sector in developing the portfolio of its assets. Depending on the case, the strategy for the development of the assets could be either of the following regimes: Long-term Lease of state tourist properties, under the contractual obligation by the successful Bidder of building-up new and/or redeveloping existing infrastructure and operating them for the duration of the lease period. 3

4 The alternative regime is the setting up TDC affiliated Special Purpose Vehicle companies for the construction and the operation of the infrastructure to be developed for long-term periods in excess of 40 years. In this case, private investors contribute capital and know-how into such companies, acquire majority shareownership and undertake the management of the operation. 6. Tender Procedures As to the tender procedures applying to the asset portfolio development, TDC s Financial Advisor, Mizuho Corporate Advisory, will describe soon after in more detail the philosophy and procedure of the tenders in this respect. Briefly, I would like to mention a few main points: We adopt International Standard procedures accrediting the identification of reliable business consortia, fulfilling the required criteria of expertise, know-how and strong financial standing. We follow International competitive two-phase tenders: In the first face, the candidates submit their non binding proposals and the preselection procedure takes place. In the second face, the preselected participants submit their binding proposals and after negotiations the successful bidder is selected. Apart from these standard procedures, TDC management is at the disposal of any potential investor to supply them any explanation, information and data needed to make up their minds for the specific asset to be developed. 7. Projects Developed At this point it is worth mentioning few of the significant Projects already developed by TDC, which demonstrate TDC s effectiveness on achieving goals. Such projects already developed by TDC are the following: The Mont Parnes Hotel & Casino complex, is a former 100% subsidiary, where TDC transferred 49% of the share capital together with the management to the private sector following international competitive tender. Marina of Flisvos, is a former active branch of TDC, long-term leased to the successful bidders following international competitive tender, against annual lease payments to TDC and the obligation by the lessee to undertake a specified investment program for the upgrading of the Marina. TDC also holds a 25% participation in the share capital of the Marina. The Marina accommodates mega yachts as long as 80 meters. Its capacity is of 180 berths and is expected to increase to as many as 250 berths. The investment project is of 44 million and is in progress. 4

5 Marina of Zea is a former branch of TDC, developed on the same terms with those of Marina of Flisvos. Its capacity is of 190 berths. Grand Resorts at Lagonisi in Attica is a former branch of TDC, long leased for 40 years to the successful bidder following international tender. It is a complex resort of hotels, bungalows, congress center, spa, health and beauty facilities, etc. The investment projects is of 110 million. It has a unique lacation, 40 kilometers from the center of Athens, near to Venizelos international airport. It is considered the largest investment of TDC. Xenia Hotels at Nafplia in Peloponnese, is a coplex of three hotels situated in the narrow region of Nafplia, long leased for 40 years to the successful bidder following international competitive tender. 8. Projects to be Developed Given the strategic principles of TDC, the selection of the individual real property assets for development is based on the prerequisites for the fulfillment of some criteria such as the institutional (i.e. existing land planning, environmental permissions, forestry and archaeological clearance permits) legal and technical maturity, investment attractiveness, consistency with regional development policy (if any), etc. In this respect, the management of TDC, proceeding with the preparation of the fulfillment of those criteria for a number of assets, has scheduled two batches of projects under development concluding within the coming year. These two batches constitute the priority business plan of the company for the period As to the first batch, this has been scheduled for the immediate development, with the relevant tender procedures to be initiated at the latest in January of the coming year. This batch has already taken the necessary official approval (consent) of the Inter-Ministerial Committee of Privatization, which is the competent authority for allowing the private development of State owned property assets. The batch comprises the following real property assets: 1. The Corfu Casino 2. The Marina of Faliro in Attica 3. The Golf Cource of Afantou of Rhodes Island 4. The undeveloped plot of land in Anavyssos of Attica 5. The Four Xenia Hotels respectively in: Skiathos island, Thathos island, Vitina in Peloponnese, and Pilio in Volos. The next batch of assets, whose tender procedures are being scheduled to commence in late spring 2006, consist of: The XENIA Hotels of Karteros, Samos and Kythnos (hotel & thermal spring) The Thermal SPA centers of Thermopyles, Ipati and Kallidromo in the Fthiotida region The Paliouri Estate in Chalkidiki 5

6 The Tourist Pavilions of Delphi, Xanthi, Arvanitia, Louros, Platamonas, Kavala 9. Risk Mitigation Finally, as far as the forthcoming tenders are concerned, it is also worth mentioning that: TDC takes all the proper precautions to mitigate the risk of the projects that it brings to tender by maturing the property before the tender commences Furthermore, TDC will enter into a Memorandum of Understanding (MOU) with the local municipalities, for the fair treatment and mutual support in the realization of the investment, and The Contractual Agreement between TDC and the Investor will have clauses that establish a fair risk allocation between the parties. 10. Epilogue Ladies and gentlemen, It is my strong belief that the combination of the unique real estate tourism portfolio of TDC and the business opportunities offered in the post Athens 2004 Olympic Games period, together with the sound potential of the tourism sector in Greece, and our commitment to attain TDC goals, secures an attractive environment for domestic and foreign investors the tourist sector. We look forward to your participation in the forthcoming tenders for the development of the TDC assets. Thank you for your attention. 6