Korfez Gayrimenkul Yatirim Ortakligi AS jumped 15 percent on its first trading day in Istanbul after 95 percent of the shares in its initial public offering were bought by a sister company.
Shares of the property developer, a unit of Islamic lender Kuveyt Turk Katilim Bankasi AS, surged to 1.32 liras at 2:45 p.m. in Istanbul. The company sold 16.5 million shares on April 24 and April 25 at 1.15 liras each to increase its capital to 66 million liras ($31 million) from 49.5 million liras, with most going to a related company due to a lack of investor interest.
“Demand was low,” Deputy Chief Executive Officer Ahmet Alga said in a phone interview today. “Even huge property developers are trading at big discounts in Istanbul. We didn’t do much promotion or advertising, which could be a reason.”
Korfez Tatil Beldesi Turistik Tesisleri ve Devremulk Isletmeciligi AS, also owned by Kuveyt Turk, bought 95 percent of the shares offered, according to an April 29 statement from Gedik Yatirim Menkul Degerler AS (GEDIK), which managed the IPO.
Korfez GYO is the fourth company to start trading in Istanbul this year, according to data compiled by Bloomberg. That compares with nine in Indonesia, four in Israel and two in the United Arab Emirates.
Investor demand for new real estate companies may be limited by their profitability outlook, Zafer Aksoy, director of corporate finance at Gedik, said by phone.
“If property developers do not have a regular rental income, they generally focus on build-and-sell,” Aksoy said. “They have to invest for two, three years and only after that are able to report a profit.”
Turkish REITs are obliged to apply for an IPO of at least a quarter of their capital within three months after establishment, according to Capital Markets Board regulations. While their income is exempt from corporate tax, at least half of the value of their portfolios has to be invested in the real estate industry.
Borsa Istanbul’s REITs index rose 22 percent this year, outperforming an 11 percent gain in the benchmark Borsa Istanbul 100 index. That reverses the trend last year, when the retreat in the REITs index was 26 percent, double that of the benchmark.
Korfez GYO’s portfolio includes 4,520 square meters of land in Kilyos on the Black Sea coast outside Istanbul, a property project currently being built by revenue-sharing partner Dumankaya Insaat Sanayi ve Ticaret AS in Kartal, Istanbul and facilities in the western province of Balikesir which are planned to be rebuilt as a joint hotel and time-share property project.
Korfez on April 30 reported a loss of 443,265 liras for the first quarter, compared to a 1.18 million liras loss in the same period last year.
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