Speaking to Let’s Talk Business, Çetin Gül, the CEO of Gül İnşaat, a leading Turkish construction company, said new projects have been put on hold for the moment until the company sees signs of a comeback, which he predicted won’t happen before May. He stressed, however, that his real estate development firm will be among those few standing tall once the crisis blows over.
He made clear that Gül İnşaat is committed to finishing the projects it has already launched, despite a slump in sales of both residential and commercial properties nationwide. Based on 34 years of experience in the real estate development and construction business, Gül İnşaat has made a name for itself in the highly competitive Turkish construction industry, which is the third largest in the world after the US and China, according to the international Engineering News-Record (ENR) weekly.
Gül İnşaat is among the top 10 largest real estate development firms in Turkey. “Since 2005, the company has experienced quadruple growth, and we expect to find ourselves in the top-five tier soon,” Gül noted. Stressing that the company’s financials are in good standing despite plummeting sales, he said Gül İnşaat has always performed better during periods of crisis, in sharp contrast with its competitors.
 He built his first high-rise building when he was 19 Gül İnşaat has its roots in the town of Şiran, a city in the northern province of Gümüşhane. “My father [Mehmet Gül] was the most prominent merchant in town; he used to deal in everything from furniture to fertilizer,” Çetin Gül recalled. His father moved to İstanbul in 1975 to expand into the construction business. “I think he also thought the big city would offer better educational opportunities for us,” he noted. Gül gave up on his dream of going to college when his father passed away in 1984. “I learned the business in the field,” said Gül, who later earned a degree in business management from Anadolu University through a long-distance learning program. After he established a reputation as a successful real estate developer in İstanbul, he thought he needed to give something back to the community. “The building that housed Büyükçekmece High School, a public school that I graduated from in 1983, was in poor shape. We demolished the building and built a brand new school there, all with our own money,” he said. Construction industry in Turkey The Turkish construction industry is amongst the largest in the world. The international Engineering News-Record (ENR) weekly has ranked the Turkish construction and contracting sector amongst the top three worldwide, behind only the US and China. In 2008, 23 Turkish firms made ENR’s Top 225 International Contractors list. In terms of revenue, the sector has almost quadrupled since 2004, from an estimated $5.5 billion then to an estimated $22 billion in 2008. “We started to see a slowdown in the sector beginning in the second half of 2007,” Çetin Gül said. The downward spiral seems to have continued since then. According to figures released by the Turkish Statistics Institute (TurkStat), the Turkish construction sector dropped by more than 4.3 percent in the third quarter of 2008, representing an overall drop of 1.1 percent in the first three quarters of the year. Another report issued by Yapı Endüstri Merkezi (YEM) predicted that this drop is likely to have worsened in the fourth quarter of 2008; figures will be released in the coming months. Sector growth was 20 percent on average in 2005 and 2006 before dropping to 5.7 percent in 2007. In the first nine months of 2008, the sector posted negative growth of 1.1 percent. Many predict, however, that the housing market will turn around in the second half of 2009 and emerge from the recession. In addition to the domestic market, Turkish contractors and construction firms have been awarded international contracts. According to data released recently by the Turkish Constructors Union, the value of jobs Turkish construction firms undertook around the world had reached $19.5 billion by the end of 2007. The largest share was in Libya, where Turkish construction companies carried out $4.5 billion worth of projects. Russia followed with $3.6 billion. |
Gül İnşaat has participated in major real estate development projects in various locations in İstanbul. It joined in a consortium consisting of Mutlu, Evren, the Keleşoğlu group and AOG Construction company to build a sizable residential and business complex called Metroport in the Bahçelievler district of İstanbul. “We redesigned the project in favor of the ‘busidence’ concept,” Gül said. “It is common in major business cities, such as Tokyo, London and New York.” A busidence aims to fulfill both the commercial and private needs of businessmen within the complex, with amenities ranging from a meeting place for client interactions to all the perks of a home office.
It also took part in completing major mall projects, including the Capacity, Fatih Historia and Fly Inn shopping centers. “The steady revenue coming in from these mall operations serves as a lifeline for Gül İnşaat during the crisis and helps us finance ongoing developments,” Gül said. Construction on Pelican Hill, SkyMall, Perla Vista and other shopping centers is still ongoing. “We have not suspended the completion of these projects simply because there has been a slowdown in the residential and commercial property market,” Gül added.
Less debt, good financials are strong points
It is no surprise that Gül İnşaat has been able to say afloat and keep its financials healthy. First and foremost, considering the sizable projects it has undertaken, Gül İnşaat operates on very low debt -- usually 5 percent of its investments are supported by creditors. “We allocate our own liquid assets to finance projects in real estate development,” Gül explained. “Continuous income flow from completed projects such as malls keeps the engine running.”
The most important asset, however, in the real estate development business, he argued, is customer loyalty. “We have a steady and loyal customer base that follows our investment projects closely,” he said. “Each satisfied buyer brings at least one other on board.” Customer retention is certainly another strong point of Gül İnşaat. “Client loyalty is a very valuable currency, especially during an economic crisis.”
In fact, swamped by the news of half-completed and abandoned projects that have resulted in huge losses for investors, customers today are very selective when it comes to choosing contractors and builders. They carefully examine companies’ track records and often rely on the recommendations of friends and relatives. “We have never once left a client hanging out to dry in this business and have always turned over houses and apartments that were fully completed,” Gül underlined.
Part of the problem, Gül explained, is that many businesses that had no experience in the construction sector became involved in property development during boom years and later found themselves in a tight spot when the crisis hit. “Unscrupulous builders gave a bad reputation to construction companies that have long been involved in housing and property development,” he said.
Another distinct characteristic of properties built by Gül İnşaat is the attention they garner from first-time home buyers, Gül noted. “Over 90 percent of our clientele consists of buyers who purchase properties to make their homes,” he said, indicating that property investors make up a very small portion of their clientele. “Our customers know we will deliver on our promises and turn over problem-free homes equipped with energy-saving and earthquake-resistant features,” he added.
A good track record seems to be helping Gül’s property sales as well. At a time when the housing market is flooded with many units in newly constructed high-rise buildings in İstanbul and contractors and builders are forced to slash prices to make sales, Gül İnşaat is relatively happy with their sales figures. The ratio of properties available for sale in Gül’s developments is not very high compared to other builders.
For example, 95 percent of Metroport’s residential properties have already been sold. The RoseMarine residential complex, a seaside real estate development on 10 acres of land in the Sinanoba district of İstanbul, has 320 residents already moved in out of 417 units. In the Pelican Hill mansions, 170 villas out of 225 in the first phase of development have already been sold. To encourage sales in the residential market, the company has recently started to offer brand new, fully furnished units in the Vista Residenza complex located in the Beykent district of İstanbul.
Pelican Hill: largest mansion development in Turkey
Gül İnşaat shifted into high gear when it embarked on the $200 million Pelican Hill project, which is Turkey’s largest themed luxury property development, featuring beautiful villas stretched over 1.5 million square meters (371 acres) of land in İstanbul. “It is designed for life within nature just outside a city and with elegant and prestigious living in mind, only 20 minutes to the international airport,” Gül explained. The company partnered with the Keleşoğlu and Kameroğlu construction firms to complete the project by 2010.
The development, overlooking the Sea of Marmara and Büyükçekmece Lake, houses 520 villas in eight architectural designs. The net living space in each villa varies between 522 square meters and 1,085 square meters, and prices range between $1.3 and $2.5 million. Gül said they borrowed the concept from a similar development in Beverly Hills, California, and contracted Irvine-based architectural firm RNM Design. Robert Tyler, the president of RNM Design, drew up plans for Pelican Hill to reflect the latest in lifestyle planning fused with architecture that reflects both contemporary design and traditional Turkish influence.
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Tyler was also tasked with coming up with the plan for a 30,000 square foot recreation center in the development, Gül said. He has designed a social complex that includes restaurants, indoor/outdoor pools, spas, fitness centers and squash and tennis courts, with an architectural theme that reflects the natural layout of the land along with a series of glass “crystals” that form geometric icons when seen from a distance. The landscape architecture was drawn up by Italian designer Paolo Spaziani. “We wanted to create a luxurious residential neighborhood whose residents would be able to enjoy open space, wide boulevards, parks and sunset scenery,” Gül emphasized.
With a business concept that relies on innovative designs and coupled with better building materials, Gül İnşaat will continue to attract customers, the company’s CEO emphasized. “We employ the latest technology and construction know-how to make apartments and houses earthquake resistant and energy efficient,” he said. For the Pelican Hill properties, Gül İnşaat recruited engineers from Boğaziçi University to study the landscape and soil to determine its earthquake susceptibility before giving the go-ahead on the development.
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