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Summer 2012
Turkey’s Time to Shine

Globe Trotter

Right after she graduated from The Fashion Institute of Technology in New York City, Alison Rehill-Erguven knew she wanted to work abroad. In fact, her first post-graduate assignment was teaching fashion and marketing in Istanbul, Turkey to LaSalle University students (a division of McGill University in Toronto).

The International Business Management major thrived in Turkey in the 1990s. In 1999, she returned to America with her Turkish husband and worked as a regional specialty leasing manager for Simon Properties based at Menlo Park Mall in Edison, NJ. She had a brief stint with Simon Brand ventures only later learning that sponsorship was not the right fit for her.

A year later, she became the regional specialty leasing manager for General Growth Properties and moved to Atlanta. In a few more years, Rehill-Erguven was promoted to Vice President of Business Development for GGP and she moved to Chicago.

In 2004 when GGP formed a small international investment team to explore business development opportunities in Turkey, Brazil, and Costa Rica, she signed up. In 2005, GGP International formed a joint venture with ECE of Germany to manage and develop shopping centers in Turkey. “I was approached to join them and oversee the joint venture because I can speak the language and I understand the culture,” Rehill-Erguven says. She worked for GGP International for four years, overseeing the Turkish joint venture and travelling to China, Russia, Brazil and the Ukraine to open further business opportunities.

Later, Rehill-Erguven switched to Pradera. She is now responsible for two properties and says her responsibility is to make Pradera’s “footprint in Turkey bigger by growing the business steadily.”

With her extensive experience in specialty leasing, Rehill-Erguven hopes to eventually launch a comprehensive program of RMUs and kiosks in Cevahir; one of Turkey’s largest shopping centers. Currently the center has approximately 100 kiosks that are located in strategic access points—escalators, amusement areas and entrances where foot traffic is high. The center is the hub for mainstream middle market customers who frequent the center because of Atlantis, a center-run amusement park attraction.

No doubt Rehill-Erguven will continue to retool Cevahir.  “I’m happy being in a market that’s growing and expanding and I am very proud of what we have been able to accomplish thus far,” she says.

Sharing borders with both Europe and Asia, Turkey’s role on the world stage remains strong. Here’s a look at the specialty retail opportunities this dynamic country has to offer.

GBThoroughfare-copyThe man in a simple white shirt and jeans spoke in a loud, singsong voice. “Lady, over here … Lady, here, Lady, want some tea? I show you rugs, silk rugs or do you want a leather coat? My friend next to me has leather coat for you.” His name was unknown; his store, a collection of silk and woolen rugs in the world’s largest and oldest covered market—The Kapalicarsi or Covered Bazaar, also known as The Grand Bazaar, in Istanbul, Turkey. This is a shopper’s paradise—a rambling maze of 3,000+ shops, restaurants, a mosque and even a police station. A visitor gets an immediate sense of the age of the ancient buildings, built in the fifteenth century. It feels incredible to be in these ancient Ottoman buildings that are still standing after hundreds of years.

The bazaar teems with all kinds of people—storekeepers, suppliers, shoppers, tourists and wholesalers. The bright colors of Turkish merchandise, rich textures, and the scents of incense and tasty treats, all mingle to deliver a rich sensory experience. The skilled vendors can decipher in one glance whether you are a tourist or a local. If you are a tourist, they accost you with offerings of tea and bargains. It is nearly impossible to walk fifty feet without being invited to sample some Turkish delight—a jellied candy or piping hot cup of tea.

Most stall retailers enjoy haggling over price—especially if you are a tourist or out-of-towner. As a rule of thumb, you can halve the amount the retailer first asks for. Traditional Turkish malls, like
their North American counterparts, frown upon the hawking of products but in The Grand Bazaar it is expected.
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Birthplace of specialty leasing?

The bazaar is organized into very small stores, like inline kiosks. To make it convenient for shoppers, the Grand Bazaar clusters like retailers together. Stores are arranged by type—jewelry, antiques, silks, leather goods, pottery, carpets and spices.

“I believe clustering of merchandising does make sense today. People are busy and when you place like merchandise together for them you make their lives easier and the shopping experience more pleasant,” says Alison Rehill-Erguven, shopping center executive at Cevahir shopping center in Istanbul. She is also the head of the Turkey operations for Pradera, an investment fund management company based in London.

Rehill-Erguven adds that Turks like to believe that the first organized shopping mall ever created was The Grand Bazaar, so in essence, they also tend to believe that they created specialty leasing. The world has taken its cues from here and souks and other organized bazaars such as the German Christmas markets, and Camden Town and Portobello market in London, she adds.

It isn’t simple to lease a space at The Grand Bazaar. It seems as though space is handed down over generations and stays closely guarded within families. The Grand Bazaar Association manages and operates the 3,000+ stores within the bazaar. Most retailers have leases that are five-year terms though most leases are handed down through generations.

“It’s difficult to get a store here,” says Adem Kurtulmus, owner of Lema Jewels, a custom 200-square-foot boutique jewelry store on the main thoroughfare in the bazaar. Kurtulmus owns three jewelry stores in the bazaar. He began an internship here when he was just 12 years old and after years of training, he operates three stores all different from each other. His principal store, on the main street of the bazaar, turns merchandise 13 times a year allowing Kurtulmus to infuse new concepts and products regularly. Operators do not pay a percentage of sales here. Kurtulmus’ other two stores feature more moderately priced products and wholesale products, respectively.
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Turkish wedding customs focus on gifting the prospective bride a jewelry trousseau and jewelry retailers benefit from this tradition.  “In Turkey, the bride gets all the precious jewels and the groom typically gets a watch from the bride’s parents,” Kurtulmus says.

Kurtulmus says being in the Grand Bazaar is very different than being in a shopping center. “The customers are all very interesting—they find you, you don’t find them,” he says. “The Grand Bazaar is immune to the cycles a shopping center goes through,” he adds. There is seasonality to the sales in the bazaar.  “From November to March, the local customer shops here. At Easter and through the summer we have the advantage of the tourists and the cruise ship passengers,” Kurtulmus says.

While Turkey is secular with no official state religion, a majority of the country’s population is Muslim. The Bosphorus River that divides Istanbul between Europe and Asia, gives one the truest sense of the importance and power Turkey has as a water gateway to the West and the East. It’s no wonder that this shipping canal is still significant as part of “The Silk Road” trade route where tea, woolens and silk once traveled.

Strategically, Istanbul has become a vital location for the development of U.S. military bases in the Middle East. While peaceful now, the people here worry about terrorism as Turkey sits in the center of Middle East unrest.

A more traditional shopping center

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Cevahir is one of Turkey’s largest shopping centers. It has a six-story vertical layout and is known for its Turkish brands; its 50-stall food hall and the Atlantis family entertainment center. This center was originally built and owned by the Cevahir family from Istanbul—thus its name. The property was sold to the Kuwaiti government who then hired Pradera Europe to manage the asset. Pradera is a team of experienced fund managers, finance teams and seasoned property professionals. Pradera teams work from offices in London, Luxembourg, Madrid, Milan, Athens, Istanbul, Prague, Warsaw and Hong Kong.
While the birth of the traditional shopping center is just over a decade old in Turkey, it seems like most asset management companies and investors pursue management teams with American or Western training, hoping to reduce the learning curve. Here, Pradera Europe, an investment fund management company based in London, has hired a collection of the best and brightest Americans who have leveraged Western management practices and made them work at Cevahir. Leasing, merchandising, marketing and renovation  expansion are all part of the daily work plan.

Alison Rehill-Erguven says that right now, retail is strong because the economy is growing despite the global slowdown. “Occupancy at good malls can be at 100% to high 90’s, however, there are areas of Istanbul that have ‘micro-saturation’ of malls due to poor city planning, etc., so there is also some vacancy when a project has too much competition and cannot perform well,” says Shannon Quilty, Head of Asset Management for Pradera/Turkey.

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Quilty and Rehill-Erguven are shopping center professionals who have moved and advanced their careers by gaining international experience, sometimes through relocations to multiple cities. Quilty for example, is a 20-year veteran and former assistant general manager at Lakewood Mall in California, who moved to Russia five years ago and is now in Turkey. “I guess I have wanderlust in my DNA,” she says. Her job is to support two shopping center managers.

According to Quilty, in Turkey, the real estate laws favor the tenant, which can interfere with an owner’s ability to remerchandise a center by relocating tenants or weeding out the unproductive ones. Specialty leasing is new here and most permanent tenants are naive about lease restrictions in the common area. As programs evolve, and global retailers expand, retailers and landlords will become increasingly sensitive to sightlines that can impact a tenant’s sales. In emerging economies according to Rehill-Erguven, “people don’t think about the long term direction.  It’s an emotional culture here in Turkey. People think in terms of black or white, which can make for challenging tenant relations.”
The work to be completed at Cevahir is daunting but Rehill-Erguven has a methodical pace and focuses on the priorities.  When asked what keeps her up at night Rehill-Erguven says: “If I allowed myself to worry, it would be a major terrorist event or a national disaster. But my focused goal is to grow the business now while the economy is strong in Turkey and to make Pradera’s footprint bigger.”

The absence of North American retail real estate companies in Turkey is evident. Jones Lang LaSalle and CBRE are working here. Yet there are available opportunities for additional third party management. It is worth taking some risks to invest in dynamic Turkey. There are plenty of lessons that can be taken from the Grand Bazaar and implemented to create a more dynamic specialty retail programs in this vibrant city and country.

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