16 Nisan 2011 Cumartesi

Crisis-hit US property market may whet Turkish investors' appetite

Astrum, a US-based investment fund founded and managed by a Turkish-American, says the slowly -recovering US property market promises great opportunities for foreign investors, particularly Turkish businesspeople. The fund also recommends investing today to gain big money five years later. Still, the plan signals macro and micro risks
A sign for a realty company is displayed in front of a short sale home in Lake Worth, Florida. Investment fund Astrum says it might buy houses for Turkish investors in US.

A sign for a realty company is displayed in front of a short sale home in Lake Worth, Florida. Investment fund Astrum says it might buy houses for Turkish investors in US.
The top executive at a U.S.-based investment fund has invited Turkish investors to take advantage of low-priced properties in the crisis-hit real estate market in the United States.

“This is the right time to invest in the U.S. real estate market,” Nevin Sanlı told the Hürriyet Daily News & Economic Review on the sidelines of a sector meeting in Istanbul on Friday.

Sanlı, who is of Turkish descent, also warned investors about a possible burst in the growing Turkish market.
His company, Astrum Investment Management, or AIM, will raise $50 million initially from Turkish investors and borrow over $70 million to invest in U.S real estate, as the values are at or around 50-year lows, Sanlı said.

“The fund will buy properties now, stabilize and improve them and sell when the economy recovers,” he said, noting that the fund promised a 17 percent annual profit over five years from office and medical buildings and apartments to be rented by the U.S.-based company.

Under Sanlı’s plan, the company will purchase at least a dozen buildings in the U.S. The investment will generate an estimated 60 percent net operating income in this five-year plan.

“A potential investor needs to put a minimum of $1 million and maximum of $5 million into the fund,” he said. Investors cannot directly withdraw before the five-year period ends.

“There might be gradual payback of the investment in two years’ time if the investor wants to leave the fund, with no interest plus a certain fine,” he said.

“With a total purchase power of $118.75 million, we aim for a 115.7 percent – after U.S. taxes – return to investors on capital,” he said.

“I personally am investing $1 million into AIM and also bear the operational expenses of the firm,” Sanlı told the Daily News.

Sanlı said at the meeting that in order to avoid the bureaucratic details for foreign investors, the company would function through an offshore firm to be located either in Belgium or Luxembourg.

Responding to the Daily News’ question on which country would be a competent authority in the case of a dispute between the investor and AIM, Sanlı said, “it could be arranged according to an agreement: Turkey, the U.S., Belgium or Luxembourg.”

Recovery chances

Larry Kosmont, chief investment officer and a shareholder of AIM, said the U.S. economy was expected to continue its modest recovery this year. “But it remains fragile due to high unemployment, a depressed housing market, consumer debt and mixed confidence levels.”

Noting that the U.S. economy had been going through the worst economic crisis triggered by the mortgage crisis, Kosmont said, “I believe that it’s the right time for investors to buy properties at low prices right now.”
Pointing out that 5 million jobs were lost in 2009 in addition to another 3.6 million in 2008, Kosmont said, “Over 10 million homes have been foreclosed since December 2007 and historically low home prices have started to attract buyers.”

The empty houses would sell faster when people get back jobs, he said. “Companies in the U.S. are still hesitating to add long-term jobs.”

Noting that the commercial real estate market appears to be heading in the “right direction,” Kosmont said, “Occupancy demand is on the way up and rents are still at bottom but a possible increase is also coming.”
New construction projects will be at a minimum for a couple of years, he said, predicting that a lack of new buildings would luckily support gradual rent increases over the next few years.

Addressing journalists, Kosmont said the fundamental signals support a buying strategy. “The possible exit strategy will be in five years when the prices of the real estate reach its peak point,” Kosmont said. “South Korean pension funds and other big investors are buying and looking for opportunities in the U.S real estate market.”

Turkish real estate bubble on the way?

Exaggerated prices for houses in Istanbul could lead to a real estate bubble, according to the director of a U.S.-based investment firm.

“Most of the houses are overpriced in Istanbul,” Nevin Sanlı, director of Astrum, told the Hürriyet Daily News & Economic Review.

“If the prices are as high as $2,000 per square meter for some apartments in Istanbul, I start having doubts about what could happen when the house is on sale again for the second buyer,” he said. “It is sure that the first seller of the house would make a great profit, but the house might stay in the hand of the owner as the buyer already purchased the property at the peak price.” 

Talking about the Turkish real estate market, Larry Kosmont, chief investment officer and shareholder of Astrum Investment, said, “The real estate sector is significant.”

“The Turkish real estate sector reminds me of the margins that we had six years ago,” he said, adding that it was in Turkish investors’ best interest to diversify risk by investing in different countries rather than focusing on a single location.

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