Emlak Drops Most on Record as Share Sale Shelved: Istanbul Mover

Emlak Konut Gayrimenkul Yatirim Ortakligi AS (EKGYO) slumped the most on record after the state-owned property developer delayed a share sale, citing stock market turmoil triggered by the anti-government protests in Turkey.

The shares plunged 9.7 percent to 2.79 liras at the close in Istanbul, the most since Emlak started trading in December 2010. The benchmark Borsa Istanbul National 100 (XU100) index slid 2.5 percent, while the 28-member property developers’ gauge in which Emlak Konut has a 43 percent weighting dropped 5.6 percent to its lowest level since Nov. 29.

Emlak’s secondary public offering has been delayed until market conditions become “more suitable,” the company said in a statement after trading closed June 7. Protests against Prime Minister Recep Tayyip Erdogan and his government have roiled Turkey’s markets, with the stock index slumping 11 percent and the benchmark two-year bond yields surging 43 basis points, or 0.43 percentage point, since June 3.

The decision to delay the sale was made in consultation with international and domestic bookrunners, the company said in the statement.

Emlak Konut, which is 75 percent owned by the Housing Development Administration of Turkey, sought to raise as much as 4 billion liras ($2.1 billion) from the sale of 1.3 billion shares at a reference price of between 2.65 liras and 3.1 liras a share. Eighty percent of the offering was allocated for foreign corporate investors, according to an investor presentation prepared by Emlak.

Foreign Investors

“An investor might question why one should buy Emlak Konut at current levels when the company was unable to find demand at 2.65 liras,” Kurthan Atmaca, an analyst at Ekspres Invest in Istanbul, said in a phone interview today, referring to the lower limit of the delayed offering. “What we have here is a company that has failed to attract foreign investors.”

Erdogan addressed thousands of supporters in the cities of Adana, Mersin and Ankara over the weekend, blaming a so-called “interest-rate lobby” for stoking street unrest. In the event protesters remain in the streets, “we’ll have to answer them in the language they understand,” he said.

“If the tensions were resolved today, we wouldn’t have seen such a decline,” Atmaca said. “Nobody knows what’s going to happen -- that’s the uncertainty that the market is currently pricing in.”

Emlak planned to use most of the delayed sale’s proceeds to “finance investments related to land purchases,” according to the investor presentation. The company reported net income of 523.4 million liras in 2012, more than double its profit in the previous year, according to data compiled by Bloomberg.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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