Limassol without asking permission

How private capital can pay for the seafront, without the state putting up a euro By Bruno Weigle Limassol has an ambitious climate plan worth about €1.3 billion across some 300 projects. Yet the municipality will directly deliver only around 9 per cent of it. The rest depends on national and European funds and on private investors. On 10 November, officials, banks and investors meet to discuss how state guarantees and blended finance might make the flagship project, the Aktaia Odos seafront, investable. I propose a different answer: a structure where risk and reward are private, the state contributes no money, and investors know exactly which business pays their dividend. What investors would buy A private consortium would raise capital by selling participating preferred units. Each unit targets a 7 per cent annual distribution in euros, paid monthly once the seafront opens, and rising with the project’s profits. During construction the dividend accrues rather than being paid out; paying out before there is revenue would simply return investors’ own money. The consortium would not own the land. It would own the businesses: restaurants and shops along the promenade, sunbeds and beach bars under municipal licence, bike rentals, city tours, advertising and naming rights. The state’s only role is the one nobody else can play: granting concessions over the public coastal domain. No guarantees, no subsidies, no availability payments. Do the numbers work? Not on rent alone. Aktaia Odos, a 1.5 km linear park linking the Marina to the new port, is estimated to cost around €50 million. I modelled a 30-year concession with two years of construction, 8,000 m² of retail space at €30 per m² a month and 85 per cent occupancy, plus advertising and events. Discounted at 8 per cent, the project’s net present value comes out at roughly minus €23 million. Cash flow would cover only 70 per cent of the dividend. Cruise passengers, often cited as a goldmine, barely move the needle. What changes the picture is a stable revenue anchor. A larger commercial footprint, or a modest levy on neighbouring developments that benefit from the regenerated front, turns the NPV positive, with double-digit returns. That levy is not a fantasy: Limassol’s Chamber of Commerce says six or seven major private projects are waiting for Aktaia Odos to advance before they break ground. They should help pay. Green space without subsidy Parks generate no cash, but they can be financed inside the businesses that do. Whoever wins the concession for bars, sunbeds and bikes on a section of the seafront should be obliged to build and maintain the green space beside it. The park becomes a cost of the profitable business, as it is on many European waterfronts. Carbon credits are no answer: a park absorbs a few tonnes of CO2 a year, and Cyprus cannot use municipal credits to meet its EU obligations. Scaling up: sell only what pays The same logic can be applied to the wider €1.3 billion plan, with one condition: savers should only be offered the projects that generate cash. A blended portfolio that includes cycle lanes and beach restoration would yield around 5.5 per cent before costs, not enough for a 7 per cent dividend. But energy projects and building retrofits, which together could account for roughly €780 million, yield closer to 7.6 per cent, contracted directly with private owners. These figures are my own estimates. The right vehicle already exists: a European Long-Term Investment Fund, or ELTIF. It is designed for infrastructure and can be sold to retail investors across the EU. One compartment would hold the profitable core and pay the preferred return. A second, holding the public works that generate no cash, would be financed with green or blue bonds and EU funds, not with retail savings. A home for Cypriot savings The natural anchor investors are local insurers and pension funds. Their liabilities are long and in euros, exactly like a 30-year concession. According to the Central Bank of Cyprus, pension funds still hold 14 per cent of their assets in cash and deposits, double the eurozone average. Most are too small to back a project alone, but a pooled fund solves that. They would take a senior tranche at 4 to 5 per cent, and that cheaper layer is what makes the 7 per cent preferred return sustainable. The risks None of this works without the relocation of the traditional shipyard, a decision for central government that still has no date. The 7 per cent must be marketed as a target, not a guarantee. And because concession assets revert to the city, every euro of return must come from operations. Limassol does not need to wait for the state to guarantee every euro. It needs to separate what pays from what does not, sell savers only the former, and make profitable businesses carry the green space around them. Do that, and a 7 per cent dividend stops being a promise and becomes a consequence of the business. *Bruno Weigle is a structured finance specialist who spent several years working in Cyprus’s financial sector.