London-based Cordea Savills is to launch the Cordea Savills Turkish Property Ventures fund.
The opportunistic vehicle is looking for 20 percent –plus returns in the country, which is outside the European Union.
Cordea Savills, which has €4.7 billion ($7.4 billion) of real estate in Europe, points to Turkey’s “fast expanding economy” as a reason to invest in development, primarily shopping malls and residential property.
In a statement the firm said Turkey’s economy has more than double the forecast annual average GDP growth of the Eurozone.
“It has a large and growing population that continues to undergo rapid urbanisation, creating demand for modern retail, commercial and residential property,” it continued. “With education standards having increased to Western European levels, candidature for European Union membership and stabilising inflation, Turkey is well positioned to enjoy rapid development and is attracting substantial investor interest.”
Despite Turkey’s economic expansion, real estate provision is yet to catch up. The market is characterised by low supply, creating potential investment opportunities with attractive risk-adjusted returns, said Cordea Savills.
There are cities with substantial populations but with limited modern retail provision. Despite strong retail sales growth, provision of modern retailing stock is still below the EU average. At the same time, international brands are clamouring to enter the market and are creating substantial demand for high quality product, it added.
The government estimates that 650,000 new houses a year are required to satisfy forecast population growth, combined with population movement from east to west and from rural to urban.
Ian Jones, director of investment and portfolio manager for the fund, said it would offer exposure to a large and dynamic economy characterised by high GDP growth and a young and growing population with increased spending power.
“There is a dramatic shortage of quality stock in all sectors and strong demand from some household name companies for retail outlets. Turkey is still an emerging market but by partnering with local developers we will tap into local expertise and mitigate substantially the development risk.”
The fund will be a Luxembourg domiciled with a planned life of five years. Target equity will be €400 million with target leverage of 60 percent loan to cost. On completion of the developments, the fund value is projected to be in the region of €1 billion.