CBREGI 'in early stages' of looking at Turkey

CBRE Global Investors (CBREGI) has confirmed it is in the 'very early stages' of looking for opportunities in Turkey several years after a previous attempt to enter the market was scuppered by the financial crisis.

Martin Sabelko, head of Central and Eastern Europe at CBREGI, said he had been investigating Turkey on behalf of ING REIM before the outbreak of the global financial crisis in 2008.

He told PropertyEU's second Turkey Investment Briefing that he had travelled a lot to Turkey before the crisis as there was a feeling that it was 'the place to be'.

Speaking from the audience, Sabelko revealed: 'I was there so often and had the most knowledge about the market that I was referred to internally as ‘Martin Ataturk’. So, I was really unhappy as we were very close to signing a joint venture with Renaissance to enter the market when the crisis stopped us.'

Based in the Turkish capital Ankara, Renaissance Development has developed or is developing a total of 2.9 million m2 of commercial space in Turkey, the Russian Federation, Ukraine, Libya and Syria.

Sabelko said CBREGI was looking again at Turkey as there was investor demand to access product in the country. 'I have to be very clear that we are at a very early stage.'

Based in Prague, Sabelko's remit covers the eastern European region but not Russia or Ukraine. 'Some of the other markets like Albania are too small so the logical consequence is to go further.' If CBREGI follows through and buys into the Turkish market the asset manager will be following in the footsteps of private equity group Blackstone and Singapore's Government Investment Corporation (GIC) who have both recently completed sizeable deals in the market.

Sabelko said 80% of CBREGI's investments in his region were in the retail property sector. One of the largest recent deals was the joint acquisition with AXA Real Estate of a majority stake in Zlote Tarasy mall in Central Warsaw.

While international real estate investors, like Blackstone, and developers such as Multi Development, have to date focused on retail in Turkey, Sabelko said he had learned during the investment briefing that the insular office market is slowly opening up and becoming 'more interesting'.

He cautioned, however, that he would have to work hard to convince CBREGI board members in Amsterdam, who report to the head office in Los Angeles, that Turkey was a market the firm should invest in at all.

'Turkey is on the radar. I am happy to be there as soon as possible but at the same time I face issues like Redevco, a company with a similar risk profile to CBREGI and its investors. Redevco left the market and sold to Blackstone. I have to have very good answers as to why.'

Echoing other speakers during the Investment Briefing, Sabelko said Turkey is seen as a 'new' market and investors expect the benefit of a yield premium. Based on the thin transactional evidence available it appears prime yields in the country's main office market Istanbul stand at about 6.5%, Jos Tromp, head of research for CEE at CBRE and Anthony Labadie, CBRE's head of Turkey, told the Investment Briefing.

Most international investors are looking for yields ranging from 7.5% to 8%.

Sabelko said CBREGI's investors - including a lot of Nordic and Dutch pension funds - are looking for these higher yields because of the perception of Turkey as a new market they wanted to start doing business in for the first time.

'Is it fair? No, it isn't but we have to live with that. If I come with yields of between 6 and 7% I had better stay at home because it doesn’t make any sense.'

Sabelko transferred to CBREGI following the acquisition of the majority of ING REIM's European and Asian operations, plus the Clarion business in the US, from ING Group in 2011.

The combined firm had $90 bn (€67 bn) of assets under management at end-September 2012, confirming its position as the largest real estate asset manager in the world.

PropertyEU's Investment Briefing on Turkey was hosted by CBRE in London on 14 February. Click on the link below to read the other articles.

Click here for interviews with the panel at the Turkey Investment Briefings