Investing in the Educational Elite on the Bosphorus

Turkey has not only become a regional economic powerhouse – its economic profile has also evolved on a broader international scale. Education is an important factor in such success, and Turkey’s young population is studying hard. Under these circumstances, a financial commitment to the country’s university campuses is a promising endeavor.

(firmenpresse) - By Uwe Peter Timm
There is a constant demand for student housing as an affordable alternative to living with one’s parents, and it’s not only in Germany that the number of students has grown by leaps and bounds in the past. But while demand in Europe may start dropping in the coming years, due to demographic changes, the number of young people pursuing higher education in Turkey continues to increase. As of 2011, there were still fewer than two million eager university students; by 2013, that number had already grown to approximately 3.8 million. For years, Turkey has had the fastest growing student population among all European countries.
Kevin Martin is confident that this trend will continue, making student residences between Istanbul and Diyarbakir a lucrative investment. Martin is a Managing Partner of Oakland Capital, an investment and development company based in Frankfurt. In mid-December, 2014 he outlined the market opportunities presented by this segment to 600 attendees at the annual European meeting of the Turkish business association MÜSIAD, in Frankfurt, Germany. MÜSIAD is an association of entrepreneurs of small and midsized companies. It is a global network with 84 branches in Turkey and 163 representatives in 59 other countries, including ten in Germany. For its rather conservative members entrance into the European Union is no longer the only option. They also view the EU’s planned free trade agreement with the United States with skepticism.
Turkey has 77 million inhabitants, a number that’s growing at a rate of 1.1 percent per year. The average age of its population is 28 – quite young in comparison with the EU’s average age of 41. It is largely urban – including more than twenty cities with populations of over a million – and orients itself towards the living standards of the developed countries of Europe. Its per-capita income was almost $10,750 in 2013, and a GDP of $821 billion is expected in 2014. The most recent figures for the Turkey’s foreign trade volume amounted to $376 billion. The country’s economy, generally structured around midsized companies, is the 17th largest in the world, and the fastest-growing after China’s. By 2050, the ambitious plans of those running the country are to make it the 9th largest economy worldwide.

On top of this, the Turkish government sees education as an essential political objective. The increasing numbers of universities being founded since the nineties have been accompanied by a growing demand for student residences, which has brought along interesting prospects for the construction sector. In 2003, there were only 1,545 private student residences in the country; ten years later, there were already 4,580 such residences, housing a total population of 428,000. The number of spaces available in government student housing has more than doubled since the beginning of the nineties as well.
It is an attractive market environment for Oakland Capital. Martin says that the company plans to develop ten to twenty new student residences in the coming years, with a focus on midsized Turkish cities. The total investment should reach €100 million – the market potential, however, is more than €200 million.
The company plans to develop premium-quality energy efficient and environmentally sustainable student residences. According to Martin, Oakland Capital has access to sites in cities where there are gaps between supply and demand, and thus a promise of long-term growth. The company will take advantage of its sponsor Yangden Holding’s expertise developing energy-efficient buildings, as well as other such modern technologies. Oakland Capital has already secured an option on a 22,000-square-meter plot on a public campus on which it will develop a residence for 1,000 students. Oakland Capital and the university have already signed a letter of intent for the development of a “green” building on this land. A survey compiled by the real estate consultancy TSKB should be available in January 2015, providing details regarding proposals from architects, market information, rates, as well as estimated construction and maintenance costs.
Oakland Capital’s activities in Turkey will be financed to a considerable extent by Yangden Holding, as well as by a local Turkish bank. largely private investors who wish to enter this prosperous market will be attracted as well.
The attention that Turkey is giving to this project became clear at the meeting of MÜSIAD’s European representatives in Bad Homburg. Ufuk Ekici, Turkey’s Consul General in Frankfurt, was personally present at the event, and sitting beside Oakland Capital’s managing partner Martin and MÜSIAD chairman Nail Olpak were Rolf Königs, president of the Turkish-German Chamber of Commerce and Industry in Berlin, as well as Nurettin Nebati, deputy chairman of the AK party and Turkish president Recep Tayyip Erdogan’s special representative for Europe.
Oakland Capital sees itself as being well-equipped for success in Turkey. In addition to Martin, a cosmopolitan businessman who is experienced in managing large international projects, the company’s management team also includes Canadian Mohammed Khalid El Rayes and American Michael Friedman. El Rayes, an investment banker, is a founding member of NBK Capital, the investment and commercial arm of the National Bank of Kuwait, and has more than twelve years of experience in the real estate sector. Friedman has managed business units and companies for more than twenty years, fifteen of them in Asia.
The undertaking is receiving country-specific expertise from Ismail Ertug, a member of the European Parliament since 2009. Ertug, a German of Turkish origin, acts is Oakland Capital’s independent advisor for Turkish affairs. For contacts with local authorities, Oakland Capital has engaged Gökhan Kutlu, a well-connected local political advisor who understands the Turkish banking sector as well as the country’s political administration. The company will also receive financial advice from Turkish banking specialist Mehmet Kutlu, who has been active in the country’s financial industry for more than 16 years and has wide-ranging experience with real estate projects. Experienced local partners with the relevant country-specific know-how strengthen Oakland Capital’s position and support the company in successfully exploiting up-and-coming student residence market.
For architectural expertise, Oakland Capital relies upon the internationally renowned architectural firm KSP Jürgen Engel, which has designed the National Library of China in Beijing, Wanda Plaza in Chengdu, and the Jumeirah Hotel in Frankfurt, among others. “Besides location, one of the essential criteria that determines real estate value is the presence of high-quality buildings that are suitably designed and equipped,” stresses Martin.
Student residences are seen as lucrative investments in Germany, England, and the United States, since they yield good returns and, more importantly, reliable income, with parents acting as guarantors for their children. This makes it all the more amazing that Turkey, being so massively underserved in terms of student residences, has not yet come into focus as a place to invest in this asset class.
Nevertheless, the Abraaj Group, headquartered in Dubai, took a first step in mid-2013, investing in two student residences in the Istanbul metropolitan area with a combined 1,274 beds. The group is a private equity company that is mostly active in the Middle and Near East, managing assets worth $7.5 billion; it is the largest company of its kind from an emerging market country.
Martin stated that Oakland Capital will be the first large institutional player in this market and that all indications are that it will be able to generate substantial returns for its investors.

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Datum: 27.01.2015 - 11:44 Uhr
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