Why is Turkey an appealing country for Multi to invest in?
Turkey’s been an appealing country for Multi to invest in for six years now. This is not the newfound appeal that other people in the marketplace may be finding. Turkey always had appeal for us in that it was a quickly developing country close to Europe; it had good demographics; it had an undersupply of modern shopping space; and it had an upwardly mobile middle class.
The outlook for the economy, a stable government with reasonable laws and court systems to settle legal and property disputes, combined with continuing strong demographics and the current supply and demand ratios for real estate, all remain highly appealing. In Turkey it’s not the rich that are getting richer, it’s the lower classes who are moving up, and it’s those people that are really driving retail. Turkey’s young, growing population knows what is available in the developed world and
they want it too.
Can you explain the ‘first mover advantage’?
Multi saw what Turkey had to offer before others did, and we took the first mover advantage, meaning we were the first movers internationally. Because of that first mover advantage we were able to build and deliver a lot of the premier shopping centers throughout Turkey, creating a great group of shopping centers at a time when there was the debt financing available to do so at a reasonable cost, which is much harder to come by today. With the first mover advantage we got prime locations, were able to bring in leading tenants, and were able to move to cities where no one else was operating. The Forum Turkey Fund is a product of that first mover advantage that Multi Turkiye had in moving into Turkey.
How did the Forum Turkey Fund come into being?
It came into being as an idea at the end of 2007, when it was first known as Project Bazaar. We were fortunate at the end of 2008 to secure the Canadian Pension Plan Investment Board (CPP) as the cornerstone investor. At the end of 2008, when the global outlook for work looked bad everywhere, having one of the largest institutional real estate investors in the world give us that vote of confidence allowed us to create the structure which is now known as the Forum Turkey Fund. The Fund today has Multi and CPP as its investors, with a split of about 73% for Multi and 27% for CPP.
What is your vision for the Forum Turkey Fund?
Today the Fund is moving forward with the standing inventory as well as two other centers, which are already in the development pipeline: Forum Gaziantep and Forum Antalya. It is the largest retail portfolio in Turkey and one of the largest country specific retail portfolios in Europe, with a gross value in the range of €1.5 to €2 billion. The Forum Turkey Fund is now separate from Multi Turkiye. In the end the Fund will encompass 10 shopping centers. Beyond those 10, Multi Turkiye is working on eight other sites, which may or may not eventually be taken into the Fund.
Are their plans to go public?
We will eventually take the Forum Turkey Fund public. It is our intention that the fund will eventually be listed as a REIC in Turkey. We feel that the appetite, both internationally and domestically, for a public real estate offering with strong and stable fundamentals is something that will be very well received.
We’ve had a lot of interest from people looking to invest, but first we’re finishing the plan that we started in 2008 with CPP, and that is to build out this portfolio before eventually taking it public. In 2011 we opened Marmara Forum and Forum Kayseri; Gaziantep should hopefully be done next year and Antalya will be started next year. When we get all that done and we feel the assets are stabilized then we need the right timing for the marketplace to be receptive. We’re not in a rush; we’ll take the time we need to get this done right. So we’re probably looking at a flotation somewhere between the end of 2013 and early 2015.
Do you think the Forum Turkey Fund will hold appeal to foreign investors?
For foreigners it’s difficult to understand Turkey and know how to invest in Turkey. Whereas if you have the opportunity to buy an international standard, large, well-diversified, major retail asset portfolio in Turkey spread around the country with two very large centers in Istanbul, that’s probably a very good way to get your real estate exposure in Turkey.
How is market transparency progressing in Turkey?
The combination of smart phones which we all carry around these days, combining the ability to access information with the huge quantity of information available, is making market transparency in almost any market around the world better. In some respects the fact that there hasn’t been a lot of commercial property trade in Turkey makes it seem the transparency is not as good as it really is. A big difference remains between the expectation of the seller and the buyer, the bid-ask spread, so not many transactions are taking place. But as far as information about rents and lease terms and such, the Turkish market is pretty transparent these days.
Are some retail markets in Turkey over-saturated?
Firstly, what we’re hearing about the restart of many delayed projects is very often just talk. We will see many fewer starts than what we are hearing. That alleviates some of the concern of overbuilding. Having said that there is little doubt that Ankara has a large retail offer. Part of the reason for this situation is that a lot of international players couldn’t get into Istanbul or Izmir, but they found a way to get into the capital city. The greatest opportunities are in the large and medium sized regional cities, many of which are under-supplied by quality retail offerings.
