Foreigners Buy $450 Million in Turkish Real Estate Shares

In addition to direct domestic investment, foreigners are also playing an increasingly active role in Real Estate Investment Partnership (GYO) companies that are traded on the Turkish stock exchange.

The real estate sector in Turkey has taken a big leap forward in the past two years, mainly due to a demand for residences. In that time some 600,000 people have become homeowners in Turkey, motivated to capitalize on the decrease of interest on bank loans that reached as low as 1 percent. Not only consumers are benefitting. Investors have also taken advantage of the growth in Turkey's real estate sector.

This incentive-laden environment has also become attractive for foreign investors. In 2005 and 2006, they have shown interest in residences as well as commercial real-estate by investing in Real Estate Investment Partnership (GYO) companies that are traded on the stock exchange. Their share in the 10 real estate firms that are traded on the Istanbul Stock Exchange (IMKB) reached 29.5 percent at the beginning of 2007.

$445 million in foreign investment:

A total of 10 real estate companies are traded on the IMKB. Foreign investors own an important share of this amount - $230.25 million according to data from Garanti Foreign (Garanti Yabancı) and Citibank Foreign (Citibank Yabancı). When the acquisitions from Akmerkez's public offering and the changes in the partnership structure of İhlas GYO are taken into account, the market share of foreign investors is actually $445.1 million. This demonstrates that foreigner investors now own 29.5 percent of the public shares of 10 firms. The total market value of these firms has reached $1.5 billion.

The 10 real estate compainies include Akmerkez GYO, Alarko GYO, Atakule GYO, Garanti GYO, İhlas GYO, İş GYO, Nurol GYO, Pera GYO, Vakıf GYO and Yapı Kredi Koray GYO.

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Three direct partnerships:

Besides trading shares of real estate companies in the stock exchange, foreign investors are direct partners in three of these firms. Among them, Holland's Corio bought 48.12 percent of Akmerkez in 2005 and became a direct partner in the firm. İhlas GYO sold 30.69 percent of its shares to Yeşil İnşaat and the U.S. firm Rudolph Younes last August, making Rudolph Younes a 15.34 percent direct partner. Also, 50.98 percent of Garanti GYO will be picked up by Doğuş and General Electric Real Estate Europe, thereby making the foreign firm a 25.49 percent direct partner.

Interest from Gulf countries:

While Turkey's commercial real estate sector is being closely watched by foreign investors, “Middle Eastern capital is steering toward Turkey for investments," one analyst commented. "People are waiting for the mortgage system. We expect foreigner investors to become more active once the mortgage system has been established.”