Istanbul mall offered at half price shows property slump

Işbank, a top Turkish bank, is offering Profilo, a shopping centre in central Istanbul, at a knock-down price after its owners failed to repay their debts.

Investors are invited to bid for the 75,000 square metre squared mall, opened in 1998, at a starting price of 425 million liras ($74 million), local media including Sabah newspaper reported. Its owners, the Kamhi family, had asked for $150 million five years ago.

The sale of Profilo, located near Trump Towers and Istanbul’s main financial district, comes in the middle of an economic slump in Turkey. Sales of real estate have dived and prices are sliding. The government, seeking to reverse the downturn, has called on banks to restructure a mounting pile of bad debts and is using state-run banks as a means of funding troubled firms.

The mall was part-owned by German firm BSH and Deutsche Bank, according to reports when the property was previously put up for sale in 2014.

Işbank is asking investors to place a deposit of 8.5 million liras in order to bid, Sabah said.

Profilo is built on five storeys. It comprises 232 retail units, sports centres, bowling alleys, a food court and cinemas. One corridor of the mall, known as “White Street”, offers wedding gowns and accessories from multiple retailers.

Turkish banks are saddled with around 18,000 properties, including luxury homes and business premises. Many of the assets are being sold at a discount of 25 percent as banks seek to get them off their books, Posta newspaper reported two weeks ago. Like Işbank, the lenders are offering the real estate via special websites or through third-party companies. 

Hundreds of shopping centres have been built in Turkey since President Recep Tayyip Erdoğan’s government came to power in 2002. An economic slowdown, which turned into recession last year, has put some of the investments in jeopardy as competition for customers increased.

Turkey has around 400 malls with a total floor space of some 11 million square meters. Spending by consumers had surged due to growth in credit cards and a surge in consumer lending – loan growth has often exceeded 20 percent annually. Turks are known for holding multiple credit cards and juggling their debts between banks.

Non-performing loans in the banking industry now exceed 4 percent of total loans, according to official data. Some analysts say the figures may be double that amount, excluding restructured loans, which may otherwise have fallen into default.

Erdoğan’s government has encouraged the spending splurge in the chase for economic growth. Economists partly blame a slump in the value of the lira against the dollar of almost a third last year on concerns about an overheating economy, stoked by borrowing.

This week, the central bank relaxed a requirement on banks to set aside cash reserves to back up their deposits so long as they expanded their lending to consumers and businesses by more than 10 percent per year.