Bilgili lines up €106.8m of properties for Turkish fund

The Istanbul-based investment firm has placed an unoccupied palace and two student housing developments in Turkey into its first opportunistic real estate fund.

Istanbul-based Bilgili Group has lined up €106.8 million of investments in Turkey for its first opportunistic fund, PERE has learned. 

An Italian-style palace built in 1873 and two student housing developments have been put in the group’s first commingled real estate vehicle, BLG Turkish Real Estate Fund.

The palace, known as the Palazzo Corpi, sits on approximately 5,000 square metres of land in the Beyoglu section of Istanbul. BLG Holdings, the group’s real estate investment, development and management arm, was warehousing the property and has sold a 50 percent stake in the Palazzo Corpi to the fund for €9 million.

Although the subsidiary serving as the fund’s GP declined to comment, sources familiar with the situation have told PERE that BLG Holdings first won the asset – used by the US government as a consulate building from the turn of the 20th century until 2003 – through a limited auction.

Through the fund BLG Holdings plans to invest an additional €37 million of capital to reposition the property. It intends to turn the asset into an upscale, 100-room hotel and private club. Once renovated, private club and hotel management firm SoHo House has agreed to manage the property. Including Bilgili Group's 50 percent stake – also €9 million – the total investment made by the whole company will be €55 million.

BLG Capital also has acquired two student housing assets being developed in Turkey on behalf of the fund. The first is in Ortakoy, near 12 university campuses. The total cost of the property, which will have 646 beds, was €39.8 million. The other asset, West Blocks, is in the airport region of Istanbul, near seven university campuses. The total cost of that asset was €21 million. Both properties will be opening for the summer semester and are expected to be fully operational for the 2012-2013 academic year. 

In addition, BLG Holdings has obtained from the Ministry of Forestry the right to develop Faith Forest, an unused park within Istanbul, north of the business district. BLG Holdings, which currently is warehousing the asset on behalf of the fund, intends to construct two assets on the property: an office park and a luxury hotel. BLG anticipates a total cost of €41 million for that development project for the fund.

Launched last year, BLG Turkish Real Estate Fund is seeking €125 million in equity, with a hard cap of €300 million, to target all property types throughout Turkey. According to documents from the University of Michigan’s Board of Regents, which committed €15 million to the vehicle, BLG Capital is expected to invest the equity primarily in hospitality and residential assets, including student housing. A final close is expected in June. London- and New York-based MVision is the placement agent.

Formed in 1952, Bilgili Group is a family-run firm currently headed by Serdar Bilgili, who is well-known across Turkey as a real estate investor. Bilgili’s portfolio companies have redeveloped the Akaretler Row Houses and W Istanbul into a high-end mixed-use area comprising 60,000 square metres of space. Bilgili Group has been investing in real estate since the 1980s.