- By Region
At the centre of a Turkish bid to get hundreds of millions of dollars from the Gulf is a mound of reddish brown earth, bordered by Istanbul’s financial district, a forest, and a military range.
Agaoglu, the construction group developing the site, claims its plan to build 5,000 apartments in the area, with accompanying facilities, amounts to the biggest real estate project in the country’s history, with a TL5bn ($2.8bn) price tag.
But the 322,000 square metre development, named Maslak 1453, after the year Constantinople fell to the Ottomans, is more than that. It is also squarely aimed at attracting large-scale investment from the Gulf, in line with a general push in Turkey to increase business, political and economic ties with the region.
The pitch will be refined on Wednesday at a gala dinner in Dubai featuring Tarkan, a Turkish pop megastar. The goal is to win over more corporate investment into the as-yet unbuilt project.
Ali Agaoglu, the developer who together with the Turkish government is behind Maslak 1453, has come a long way since the 1970s, when he says he and others in the sector used low-grade sand for buildings in earthquake prone Istanbul. Today he has a fortune Forbes estimates at $2.1bn and the Turkish construction sector, which often depends on cash from sales to finish building, is booming.
Although not a single apartment in Maslak 1453 has yet been built – the project is planned to be completed by the end of 2016 – Mr Agaoglu says it has already netted $400m from Gulf investors even before this week’s glitzy dinner.
The move that made the investment possible was a reform of property law this year that is speeding the way for purchasers from the Gulf.
“They have so much money and they want to spend money, Europe is not doing well and Turkey is cheap,” says Serhat Cesmeci, the project’s sales manager, explaining the focus on Arab investors. “We are Muslim, they are Muslim, they trust us.”
He added that last week one Saudi businessman had bought 12 flats as an investment and convinced a friend to buy a thirteenth and that a Saudi company had bought 80 flats at the same time.
Nor is Maslak 1453 an isolated case.
When Amin El Kholy, managing director of asset management at Arqaam Capital, a Dubai-based investment bank, last visited Istanbul in August, he saw desks set up in the lobby of his hotel, hawking real estate to Arab investors.
He did not buy an apartment but sees the benefit of investing in Turkey, not least because the country’s status as a large-scale energy importer makes it a hedge for funds exposed to the oil-rich economies of the Gulf.
But Mustafa Abdel-Wadood, chief executive of Abraaj Capital, one of the only Gulf-based private equity groups to have profitably exited from Turkey, cautions that few deals with the Gulf are actually getting done.
“Everybody talks, but very few people have done anything,” he says. “When a market is to a certain extent flavour of the month people’s view of their own assets can be a little inflated.”
Other private equity investors also complain that valuation levels are high in Turkey, where the economy boomed in 2010 and 2011.
Fadi Arbid, chief executive of Amwal al-Khaleej, the Riyadh-based private equity group, says the country remains an alien market for many Arab investors, adding that Egypt or North Africa are easier targets for Gulf private equity groups.
Indeed, over the last decade, the Middle East has accounted for just under 10 per cent of $91bn in foreign direct investment in Turkey.
“We have been waiting for this capital from the Middle East for the last six or seven years,” says Ozgur Altug at BGC Partners in Istanbul. He dismisses predictions that the liberalised laws will unleash $5bn in real estate sales to foreigners a year. But he expects Gulf investment to rise in Turkey all the same – just rather less rapidly than some enthusiasts would suggest.