Turkish real estate firm to sell stock, reduce debt in tough 2019

ISTANBUL, March 12 (Reuters) - Turkey’s largest private real estate trust said on Tuesday it will wait out this year’s soft housing market and high borrowing costs by selling stock, reducing debt and focusing on foreign buyers until business starts to improve next year.

“We will aim to complete investments which we have already started and reduce debt during 2019-2021. New investment is difficult with the current financing costs,” Aziz Torun, chairman of Torunlar Real Estate Investment Trust, told in an investor conference.

Torunlar REIT’s net assets were worth 7.6 billion liras ($1.39 billion) and net debt was 4 billion liras at the end of last year.

The Turkish economy, once a star emerging market for investors, tipped into what could be a protracted recession when it contracted 3 percent in the fourth quarter of last year, its worst performance in nearly a decade.

The central bank has hiked interest rates to curb inflation, which spiked higher than 25 percent in October. In turn, the construction sector - long a beneficiary of Turkey’s credit-fuelled building boom - contracted 8.7 percent in the fourth quarter as demand slowed.

Torunlar REIT’s chief financial officer, Ismail Kazanc, said the real estate market is expected to be “weak” this year. “The primary client will be foreigners. We are more optimistic for housing market in 2020-2021,” he said.

In what could set the tone for 2019, housing sales in January decreased by 24.8 percent year on year while sales with mortgage loans decreased by 77.2 percent, Turkish data showed.

Turkey’s new homes stock was 1.06 million units at the end of 2018. ($1 = 5.4503 liras) (Reporting by Ceyda Caglayan Writing by Ezgi Erkoyun Editing by Jonathan Spicer)