Fairfax Financial Holdings Ltd. is investing $244-million to become the largest shareholder of one of Greece's top real estate companies.
The Toronto-based insurer and investment manager is increasing its position in Eurobank Properties S.A. – a subsidiary of one of Greece's top lenders, Eurobank Ergasias SA – which is focused on commercial real estate and privatizations in the country and its surrounding region.
Fairfax's stake in the property company will increase to 42 per cent, from 19 per cent, marking one of the larger foreign investments in a Greek public company since the Great Recession shook the European nation about five years ago.
Fairfax's investment is a show of confidence from chief executive and noted market bear Prem Watsa, not only for Southern Europe's commercial real estate market, but also for the ongoing Greek economic recovery.
"We believe that Greece has taken significant steps towards addressing many of the key areas of its economy, thus encouraging foreign investment and creating a positive momentum that will foster increased employment and development in the country," Mr. Watsa said in a statement following the release early on Wednesday morning.
The deal allows Fairfax to take on a larger position in Eurobank Properties after new shares are issued with rights that favour existing stakeholders. The capital share increase should raise $274-million and leave the parent company with a 33.5 per cent stake in the real estate business.
But Fairfax won't take over operational control. Eurobank will still have management control of the business for about seven years. During this time, Fairfax will have members on the board of Eurobank Properties as well as other rights. The two companies are locked into this agreement as long as Eurobank's investment in Eurobank Properties remains above 20 per cent.
"Indeed, we believe Eurobank Properties to be one of the best run real estate companies in Southern Europe. The company has a strong real estate portfolio, strong earnings, significant growth prospects, and a top tier management team," Mr. Watsa said.
These remarks follow a tumultuous week of trading in Greece's markets. The Athens Stock Exchange dipped after index provider MSCI Inc. cut the country's classification down to emerging market status from developed market status last week. Mass demonstrations and protests also erupted across Greece in recent days after Prime Minister Antonis Samaras shut down a state-run broadcaster.
But periodic spurts of volatility aside, Mr. Watsa thinks the picture is improving. "The Greek people have worked through tremendous hardship but we think the light is now visible at the end of the tunnel," he said.
Eurobank's deputy CEO Nikolaos Karamouzis also pointed to the symbolism in Farifax's investment "This is a vote of confidence to the country, its policies and to the company itself in challenging times," he said in the release. "This is a transformational transaction for Eurobank Properties, enabling the company to play a leading role in real estate privatizations and the commercial real estate market in Greece and in the region."
The deal is expected to close in the third quarter of this year, pending regulatory and other required approvals.