Merrill’s property venture with Turkish firm may expire
27 January 2010
Merrill Lynch may decide not to extend a property venture with Turkish developer Krea after it expires in July, according to Krea’s chief executive officer.
Bosphorus Real Estate Fund, owned equally by Krea and Merrill Lynch Global Principal Investments Group, will continue its partnership in six existing projects where it has committed $1.1 billion since the fund was set up in 2006, Krea CEO Hakan Kodal said in an interview on Thursday.
“After Bank of America’s takeover of Merrill Lynch, they are not clear about continuing the agreement,” Kodal said. “We may be seeking other investors after the deal expires because we will be free to choose new investors from July.”
Turkey’s real estate market has attracted about $30 billion of investment in the past decade, with a third coming from abroad, Kodal said. Revenue from shopping malls is forecast to rise 18 percent to 25 billion liras ($17 billion) this year, he said.
Officials from Merrill Lynch’s Turkey office declined comment on the agreement when asked by Bloomberg.
Merrill Lynch, formerly the world’s largest securities brokerage, was acquired by Bank of America during the credit crisis. It reported a loss of $27.6 billion loss in 2008, its last year as an independent company.
Merrill Lynch invested 25 percent of the fund’s “equity commitment” of 205 million euros ($290 million), Kodal said. The rest includes investors from the Gulf, the U.S. and Europe. The fund’s investments are financed through borrowing, he said.
The fund has so far invested about $600 million in two shopping malls, one in Istanbul and another in the western Turkish city of Eskişehir. A compound of luxury apartments in Istanbul will be completed this summer, Kodal said. It has an estimated value of $230 million, he said.
Krea may be interested in acquiring more shopping malls in Turkey and is in talks for two residential projects and another involving a shopping mall and residential complex, he said. “There is still potential for growth in Turkey,” Kodal said.
The country has 75 square meters (807 square feet) of shopping-mall space per 1,000 people, while the European Union has 200, he said. New investment will increase mall space in Turkey to 6.5 million square meters this year from 5.6 million in 2009
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