Eroğlu Holding Yönetim Kurulu Başkanı Nurettin Eroğlu Basın Toplantısı

We operate in three areas within textiles. Although it may seem like just one field when you say textiles, these are three different businesses. One is fabric — we have a factory in Egypt, as you know. In the first phase, we currently produce 25 million meters annually, and we will begin investment in the second phase, God willing, in early 2017. We sell 30% of this to Turkey, and the rest entirely within Egypt and to European countries.

Second, we do garment production, and in this area we are truly number one in Turkey. We produce approximately 1.5 million trousers per month, which is an enormous volume. About 35% of this is produced in Egypt and 65% in Turkey. We have three factories in Turkey — in Çorlu, Adapazarı, and Aksaray. The majority of our total workforce is here. In addition, these confection or ready-to-wear products — everyone thinks we only produce for Collins, Max, and Loft, but that's not the case at all. Only about 25% is for our own brands; the remaining 75% is production for major global brands, primarily American and European brands.

In addition to that, we have a knitwear confection factory in Avcılar where we produce approximately 1 million t-shirts per month. So combined with our other operations, we produce about 2.5 million confection pieces monthly, which amounts to roughly 30 million pieces annually — an enormous figure.

The third area is retail. Our brands are ranked — Max is number two and Loft is number three. As you know, we currently have 760 stores worldwide. About 200 of these are in Turkey, and the rest are entirely abroad. The largest market is Russia with 216 stores, followed by Ukraine, then Kazakhstan, Saudi Arabia, and other countries. As for Max, we acquired it in February 2015. Today it's a brand with a presence across all European countries — a truly major brand with a 3.5 billion euro turnover. Integrating this into the group, taking control of the entire organization — as you can appreciate, that's a massive undertaking and it's keeping us busy.

Loft currently operates mainly in Turkey and isn't very active abroad, because expanding internationally and activating all brands everywhere isn't easy. In the textile group, approximately 16,000 people work across the group. This is only the people on the payroll. For example, in the Skyland project we're currently in, there are nearly 2,000 workers, but only about 125 of them are included in that 16,000 figure — the rest are workers provided by subcontractors. The same applies to our ready-to-wear production — the directly employed workforce makes up about 30 to 40% of those 16,000 people. The rest, we also provide significant employment in Egypt, and in Turkey we subcontract washing and confection sewing. If you include the families of these 16,000 workers, that's about 50,000 people. If you include the external workforce, it becomes 100,000 to 150,000 people for the group.

Moving from ready-wear and textiles to real estate — as you know, we started in early 2007. We currently have 15 projects and have completed about 13 of them. Skyland, as you'll appreciate, is different from our other projects — it's equivalent in value to about 10 of our previous projects. The investment value is 800 million dollars, and it's a significant enclosed development. Location-wise, it's truly in one of Istanbul's most important spots — both within the city and just outside it, adjacent to Belgrade Forest. We've delivered all our other projects: two in Kıraç, Mert, Bursa, two in Antalya, our Fethiye mall, and an Edirne mall that will be completed by New Year's. We plan to deliver Skyland by early January.

We're currently working on three new projects — one is an out-of-town mall, and two are in Istanbul: one in the Güneşli area and one in the Kartal area. We're also working on one large project in the broader sense. When it comes to specifics — residential, out-of-town mall, Istanbul projects, residential and office — I'll address that shortly.

Regarding the Antalya region, the district of Fethiye has been quite productive for us. People had said beforehand that it wouldn't work because it's a small city, but now 400,000 people visit the mall monthly, which is extraordinary for a population of 180,000. There's serious potential in the south. We do have a mall in Antalya, but the drop in tourist numbers has affected it. However, compared to last year — to 2015 — there's actually been a slight increase. Our malls rely more on local customers. Especially with the easing of visa requirements, there's been a significant increase in Iranian customers.

Coming back to Skyland — it's taken a bit longer than expected, but we've essentially discovered a treasure trove here. The ground in this area is extremely hard. To give you an example, we encountered a vein of rock three times harder than the hardest granite. That kept us busy for about six to seven months. People living in or visiting these buildings can be very confident — this place is extremely solid. You can visit the viewing terrace without any concern — the buildings are very robust because of the serious ground conditions. After nearly 1.5 years working with those hard rocks, once the foundation was laid, as you can see, we've progressed very quickly. We had originally planned to deliver in nine months of 2016, but the difficult ground caused a three to four month delay.

This is a mixed-use project. Three towers form a mid-rise complex. One tower is entirely office space with the top eight floors as home offices, one is entirely residential, and one is a hotel. However, with the hotel, given the current tourism situation — the market is somewhat stagnant and there appears to be oversupply. We're considering converting it to serviced apartments, especially given strong demand from Gulf countries. We're evaluating that option as well — long-term leasing, where buyers acquire units and we operate them through a well-known brand. In Turkey, Divan does this, but there are serious brands in the Gulf countries as well.

So there's that kind of demand, and we're evaluating it. The three towers are mid-rise — let's not call them short either, because 20 stories is what we'd call a tall building in our Ümraniye projects. As for whether there's investor demand for the address itself — yes, there's demand from the Gulf. Not for operating it themselves, but there's demand to purchase and convert. There are bulk purchase requests. They want to buy the tower in this format and operate it with a management company in this concept. The branded operators — there are 67 such brands worldwide. Gulf buyers prefer this because when they come here and buy an apartment, they don't stay year-round. So they want to buy a building in a location like this, sell to their own clientele, and operate it to provide services. It's actually not a bad idea — similar to timeshare, but not exactly.

We're in discussions with various firms. We've spoken with companies interested in the whole thing as well. There's that kind of demand from the Gulf. Our current concept is a hotel, but this alternative demand exists too and we're evaluating it. These investors want to buy, sell pieces to people in their Gulf countries, and then partner with an operating company — one of those brands we mentioned — to run it. This is a new phenomenon because Gulf buyers come here, buy property, visit maybe once a year or a month and a half per year. In our Pınar project, for example, 50% of buyers are from Gulf countries, but most don't come regularly. So they're thinking: let us sell this kind of property where owners use it for one month a year and we rent it out the rest of the time.

The mall underneath the towers is different from the typical malls we know. We're creating a very different concept. Because the number of malls in this area is somewhat in oversupply, but we won't reveal the details now as we'll have another launch for it. It's a 40,000 square meter enclosed space — not like the textile malls we're used to. We've been researching extensively worldwide and are working with relevant companies on a very different concept.

Alongside the vertical offices, we have serious standalone horizontal office spaces of about 7,000 to 15,000 square meters. These are an interesting office type with 7 to 7.5 meter ceiling heights. We're not selling these in pieces like the tower offices — they're sold as whole units with single entrances, from 7,500 square meters up to 20,000 square meters. We have five separate office blocks. We're moving the group headquarters here. Part of the 20,000 square meter space will house five separate blocks — 7,500, 9,000, two at 11,000, one at 9,000, one at 14,000, and one at 20,000 square meters. The Eroğlu Holding main headquarters — not just the holding, but Loft, Max, and the retail operations — we're moving the headquarters here. Production obviously can't be relocated here, so we're moving the new Bosna facility closer.

You're going to ask about sales anyway, so let me address that. We're selling about 65% of what we planned to sell — the mall and horizontal office portions. As I mentioned, we're also moving in ourselves and leasing some space. Currently, about 65% of the planned sales are done. On the residential side, approximately 70% has been sold. On the office side, we're at about 35 to 40%. Based on our experience in Kağıthane and Ümraniye, office properties don't see investor demand upfront like residential — demand increases as the project nears completion. In Kağıthane, we finished, leased 20,000 square meters of office space, and when we started leasing people said 'wait until it's done, walls in, windows on.' A year after completion, we made a bulk sale to Hüs Bey. We didn't sell Ümraniye at all — it was entirely a rental concept. With offices, we have that experience — either bulk sales or bulk leasing. Here, in the high tower, sales are at 35 to 40% for offices and 70% for residences. So overall, we've sold about 65% of what we intended to sell. It's a good project overall, and you'll tour it shortly. One tower is already fully completed — there's no more height to build. The other high tower has 3.5 floors left to complete, and the mid-rise tower has the same. The structural work should finish around the 20th of next month, and we'll deliver to buyers in early to mid-January.

We believe we've created a fine addition to Istanbul — both in location and architecture. God willing, it will be beneficial for our country and our family. Welcome once again to all of you.

Regarding the height — I really haven't measured it exactly. We don't have ambitions about being the tallest or anything. It's just a beautiful project.

Prices right now are approximately between 10,500 and 12,500. At the beginning, when we started, they were 5,500 to 6,500. Office prices per square meter — our current office prices start at 20,000.

How does this affect things? Well, we have quite a few customers — footballers, referees, coaches. And passionate fans too, I imagine. The advantage of this location is that there's access to the project from where we are now. A new road is being constructed underneath. Don't judge it by how it looks now — in six months the entire character will have changed. Roads will be fully opened. The road runs right under the stadium. The project has both underground and ground-level access. Those entering from above can exit below and vice versa. Inside the building, there's a wide, turning road system — about 60 meters of height difference, turning a few times. It provides access to different levels of the project.

Feel free to ask questions, I'll be happy to answer them. Let's make it a Q&A session.

Residential prices are approximately 10,000 to 11,000, about 1,000 less than office prices. The showroom fittings will be ready by year-end.

The three projects are approximately 1 billion TL each — about 3 billion total.

1 billion TL. You can see how our brains have adjusted to the currency changes — we mix up millions and billions.

Two residential projects and one mall. 1 billion TL.

The top floors with the penthouse system — those expensive units? Those are the last floors and we haven't opened them for sale yet.

We'll sell them after completion. Let people see them and be amazed — we'll sell them at double the price. Just kidding, the price stays the same.

The Russian crisis — it didn't affect us. Why? Because we have a deeply established presence there. Those who were merely exporting or operating on a small scale may have experienced some discouragement, but we're an established firm with 216 stores, the largest retailer in Russia, and we've been there for 20 to 23 years. We've essentially become a Russian company. We have 2,500 employees in Russia. Of those, only 11 are Turkish — actually only 7 are Turkish, 5 are from the Caucasus region. They speak Turkish, they're from former Soviet republics. Only two come and go with visas. The rest are all Russian citizens. We don't do production there — production is in Egypt, Bangladesh, China, and India.

As for when we'll open Max stores — we're planning to open 10 by year-end. The first store will open in the coming month, but we'll have a major press event. We have a couple of important flagship stores that will anchor the launch, not the smaller ones. Yes, İstiklal Avenue. We've currently leased 10 store locations, and renovation is ongoing in five of them. We'll have a major Max press conference around August or September. By that time, three stores will already be open, but the launch event will be at the larger locations like İstinye Park, İstiklal Avenue, Emaar, or Zorlu.

We're currently working on projects. God willing, in Kartal too there are many projects. I can't describe the exact location because I rarely go there — I'm always on the European side. I know where it is but can't give directions from here.

We were truly textile people before real estate. Before construction, the Anatolian side of Istanbul — we used to think that was Ankara, and we'd go there maybe once a year. Once we got into real estate, we started visiting those areas for development and exploration. Textile is an extremely busy business — it's like being in a closed environment, a prison of sorts. You go in in the morning and come out at night, and it's very intense. You know some textile people but rarely see the leaders because they're inside the company from 8 AM to 9 PM. Textile requires serious logistical thinking — not product logistics, but mental logistics, because it's a very complex business with a genuine retail dimension.

Right now we source products from 22 countries — for Collins, Max, and Loft. If you count, we sell to about 30 countries, and with Max, it's nearly 50 countries. There's no European country where we don't have a store or employees.

Annual turnover: textiles are about 1 billion dollars, real estate 250 to 300 million. So 1.3 to 1.4 billion. Actually, these revenues used to be higher. The currencies of the countries we operate in have depreciated significantly. In Russia, the ruble has lost about 60% in dollar terms, though in ruble terms there hasn't been a decline. The same in Turkey — we used to be at 2000s levels, now the rate hovers around 3. In retail, you can't double your revenue just through price increases. The purchasing power is limited. Russia is the same — when we entered in 1998, the ruble was 6 to the dollar, then overnight it became 24. For nearly 15 years it fluctuated between 24 and 30, and then suddenly jumped to 80. Now it moves between 65 and 70. Ukraine's currency has also devalued by about 80%. In all these developing countries, the same thing happened — Azerbaijan, Kazakhstan. Our 2014 group revenue was 1.4 billion dollars. Without these currency effects, we would have been approaching 1.8 to 2 billion.

The acquisition of Max was primarily driven by European expansion. Max is truly an important brand — a 3.5 billion euro retail turnover. It doesn't even exist in Turkey but is spread across all of Europe. It's considered one of France's top three brands, alongside Air France and Philips. It's very famous — and in perfumery, it's a significant player. We earn royalties from their perfumes, eyewear, and home textiles. People want to license various categories — we're trying to extract value from every aspect of the brand. And it's helping Kin grow in Europe significantly, because before Max, we couldn't get into certain department stores or couldn't secure appointments. Now with Max products in those stores, they recognize us and see us as permanent, which has helped Kin's European expansion considerably.

The apartment sizes — there are studio units as well. They start from about 53 square meters, ranging up to 297 square meters. So roughly 53 to 300, from studio and 1+0 up to 4+1 or 5+.

When finished, this will be a truly magnificent and extraordinary project. The architecture — as you know, four firms competed in the design competition. They're all prestigious firms — two Turkish local firms and two from Europe. We specifically chose a firm from the Americas — one that designed the Twin Towers before they were demolished. The other is from Britain, experienced in mall design. The local firm is Murat Kader, who is currently the project architect for Emaar. The fourth is Emre Bey — a very distinguished architect who has created significant works for Turkey and won the competition. The entire architectural language follows the competition-winning design.

Many large firms approached us because of the competition name — asking who they'd be working alongside so they could participate too. They truly worked hard, and the result is very elegant architecture. Despite being tall towers, they don't stand out harshly because the design tapers and has a certain grace. The facades have an interesting quality. And in a unique feature for this height, there are balconies — even on the highest floor at around 152 meters. High towers rarely have balconies, but this project has that feature.

How many shops in the mall? It depends on the concept. If you take 200 square meters as an average and divide the 40,000 square meters, that gives you about 200 shops. I know Edirne's mall has 96 shops because 90% of leasing is already done. Once leasing reaches a certain level in a mall, you don't need to oversell it. The Edirne mall is also an incredible project — it too went through a four-firm competition, and we combined two firms to create one concept. It's not a small mall — 35,000 square meters of leasable area. Edirne is a very historic city with serious tourist traffic from Bulgaria and Greece, plus religious tourism from the Selimiye Mosque. The total catchment population is over 500,000.

The Thrace region was commercially beneficial for us, because we had developed the Tekirdağ mall before and then sold it to Konya. We have 1,700 employees at our factory in Çorlu, and we're looking at a project site there because it's one of the largest cities in the region — even though it's technically a district of Tekirdağ, it has large factories and a significant population. We have such a mall project in mind but haven't found the site yet.

We have a plan for 2017, not for this year. Right now, Fethiye is active, Antalya, Edirne is opening, this project is opening. We have shops and a commercial base in Bursa.

As you know, in real estate — and in textile production too — although the raw material is cotton, someone is always planting. You buy it, it's a cycle. Real estate doesn't have that kind of continuous planting cycle. So building too many projects in quick succession in real estate is debatable. We initially said we'd focus on projects averaging around 300,000 square meters, ideally no more than five concurrent projects. At one point we had eight, because mistakes can happen. Real estate is an expensive business — if you don't build in the right place with the right project, your success rate can suffer. I think we should stay with no more than 1 to 1.5 million square meters of concurrent projects. Finding proper land isn't easy. Right now, for example, we've been working on urban renewal in Ataşehir for 2.5 years and are still spending money, because urban renewal isn't simple — it's like pulling teeth. Everyone has rights, each person has their own apartment that they guard jealously.

There are good intentions but also people looking to extract more value and break things up to get a better deal. I understand because it's difficult, long-term work. The government is putting serious effort into this. Yesterday there was a key handover ceremony in Esenler and I was there — the people receiving keys were genuinely happy. The city is emerging from old, squatter-type construction into a much nicer environment. The government is giving real priority to this, which is wonderful. But urban renewal is a long process — many countries have spent decades on it and are still continuing. We're only three to five years into it. I'm confident that just as our Ümraniye project transformed an empty area with only a couple of bank buildings into what it is in five years, in 10 to 15 years, many of these old, bad structures will be replaced. Kağıthane was the same — it's been gradually transforming since our project. This area you see now, which had very poor squatter housing, will become an elegant neighborhood next to the forest once the Skyland project is underway.

I'm very optimistic about this. Along Büyükdere Avenue on the Bosphorus side, there's not much left to build. But between Büyükdere and the Kağıthane stream, and behind it, there are highly valuable areas. Even Haliç is very suitable for transformation — we're working on locations there. It will be beautiful. Real estate right now — with interest rates being high and the global economy and politics...