March 7 (Bloomberg) -- Turkish developers Varlibas Holding AS and GAP Insaat AS plan to sell real estate certificates to fund construction of the country’s tallest building.
The sale would be the first time such securities are used in Turkey and it can only take place if their use is approved by the country’s financial regulator, Varlibas Holding Chief Executive Officer Erdinc Varlibas said at a news conference in Istanbul today.
The certificate is “a kind of sukuk,” GAP Insaat Chief Executive Officer Feyzullah Yetgin said at the conference, referring to the sharia-compliant bonds. “But it’s more designed for investors in real estate projects, not companies.”
As much as half of the project’s value will be offered as certificates, Varlibas said. The companies have hired an investment bank to manage the sale over the three months through June, he said, without naming the bank. The regulator, known as SPK, is expected to approve legislation that will allow the sale of certificates by the end of this month.
The certificates will be traded on the Istanbul Stock Exchange.
The Metropol Istanbul tower project is located within the Istanbul International Financial Center, which is being built as part of Prime Minister Recep Tayyip Erdogan’s plan to lift Turkey’s economy into the world’s top 10 by 2023.
The project, now 20 percent complete, will cost as much as 1 billion liras ($556 million) and will start delivery in 2015, Varlibas said.
The certificates “will allow people with limited income to be able to invest in high-end projects,” Varlibas said. “Even if they don’t buy the property, they can benefit from the increase in the value of the certificates in the project’s lifetime,” he said.
The joint venture has sold 25 percent of the development, he said.
The three-tower project, includes a 250-meter (820-foot) residential block and will have 1,381 residential properties and 470 commercial units, according to a statement release distributed at the news conference.
Varyap Insaat AS, a Varlibas unit, is building Metropol Istanbul with GAP Insaat, owned by Calik Holding AS.
Construction has begun on the Istanbul International Financial Center, on the city’s Asian coast. Agaoglu Group, a Turkish builder won a government auction to build the center, plans to sell $2 billion in Islamic debt, also known as sukuk, to finance the financial center project.
To contact the reporters on this story: Ercan Ersoy in Istanbul at firstname.lastname@example.org