In 2020, the Government of Cyprus awarded the re-development of the Larnaca Port and Marina area to Kition Holdings. This project is perhaps the largest unified infrastructure and property development project attempted in Cyprus, and is valued at € 1.2 billion.
The Larnaca Port and Marina area re-development will include:
Expansion and modernisation of the existing Larnaca Marina to 650 berths. This includes expansions of piers and moorings, improvements in lighting and facilities, and space for larger vessels. The marina will include a Yacht Club, retail park, hotel, private island and residential properties. A dry repair dock for yachts will also be constructed.
Expansion and modernisation of the existing Larnaca Port with larger piers, modernization of docking and logistics infrastructure, construction of a passenger terminal, and development of cruise ship passenger facilities.
Investment in commercial and residential property along the littoral area connecting the Port and Marina. The total area involved increases the existing land surface by 220,000 sq.m., to a total of 510,000 sq.m.
Construction of 2 hotels, 9 mixed-use office buildings of up to 15 floors each and 6 luxury apartment blocks of up to 13 floors each.
Kition has estimated that the Cyprus government will receive more than € 19.6 billion over the lifetime of the project. This includes the annual licensing and lease fees as well as revenue-sharing based on the concession agreement. It has also stated that 4,000 places of employment will be created during the life of the project, and that the total investment will be € 1.2 billion.
The complete project duration is estimated at 15 years, given the construction of properties including 2 hotels, 6 apartment blocks and 9 mixed-use office buildings.
The Kition consortium includes the Prosperity Group (a UK-based Cypriot-owned entity) and REM International of Israel, which manages the Eilat Port and Marina.
Some points to consider in this ambitious project:
The Port and Marina are not owned by the investor. They are based on a build-operate-transfer (BOT) concession where the port / marina is operated based on a 40-year lease and the real estate on a 125-year lease. At the end of each period, the Government will take control of each lease and re-tender for further operation.
The Municipality of Larnaca and Government of Cyprus are supporting related investments, such as the relocation of the oil bunkering facility adjacent to the Port. The Government has also tendered (in the past) the re-development of the old Airport Buildings at Larnaca International Airport.
A key challenge faced by the wider region of Larnaca will be managing the overall impact of this investment in terms of cannibalisation of existing retail and operations. Although new demand from foreign investors should lead to a net benefit, we need to remember that Larnaca is a relatively small city and economic area, and even the construction of the Metropolis Mall has led to a significant impact on small retailers in the town centre.
A further key challenge to take into account is sustainability and global warming. We are entering a period where buildings should be built with maximum energy efficiency and where, as temperatures rise due to carbon emissions, traditional destinations like Cyprus face challenges from heat, desertification and ocean acidification. Cyprus already has some of the highest electricity consumption costs in Europe, and a major water shortage. Should this project adapt best practice in environmental and sustainability practices, it would be both a competitive advantage as well as a case study in sustainable large-scale development.
One immediate benefit of this project would be in the companies that can take advantage of Grade A office space and relocate to Larnaca. Cities like Limassol and Nicosia suffer a shortage of larger-scale office space at acceptable prices. Larnaca is advantageous because it is also closer to the airport, and has a relatively large stock of cheaper housing.
The Larnaca Port and Marina Development project is definitely one of the most interesting and transformational projects implemented in Cyprus, and the entire Mediterranean. Together with other landmark investments in Cyprus, it promises new opportunities for investors and residents in Cyprus.
For further information relating to investing in Cyprus, investment due diligence, business valuation or property valuation, please contact us.
Sources:
All photos are © Kition Ocean Holdings and have been taken from the project website.