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Originally published Saturday, October 30, 2010 at 6:15 AM

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Developer aims to transform run-down area of Istanbul

ISTANBUL — When Emrah Gultekin looks at the crumbling facades, dangling laundry lines and narrow streets of Istanbul's working-class Balat district, he envisions a prosperous neighborhood with the best views and highest prices in the city.

Bloomberg News

ISTANBUL — When Emrah Gultekin looks at the crumbling facades, dangling laundry lines and narrow streets of Istanbul's working-class Balat district, he envisions a prosperous neighborhood with the best views and highest prices in the city.

Gultekin, 37, the chief executive officer of a local property developer, plans to spend $140 million to renovate more than 60 buildings, dating mostly from the early to mid-19th century, in Balat. The rundown neighborhood surrounded by Byzantine walls is within walking distance of Istanbul's Sultanahmet tourist area.

"That cafeteria used to be used by drug dealers; now it's part of a college," he said, pointing to a wooden platform with tables occupied by art students. "This place has a lot of potential, but no one wants to move here at the moment."

Gultekin said he expects the values of the mainly residential properties may jump sevenfold, to $5,500 a square meter, within about five years. That's in line with what similar high-end apartment buildings are now selling for, according to Ipera AS, another real-estate developer in the city. He's among investors seeking to profit from fixing up residences in the dilapidated historic districts of central Istanbul as Turkey's affluence increases.

Since Recep Tayyip Erdogan became prime minister in 2003, gross domestic product per capita has nearly doubled to $8,578, even after an 18 percent drop from 2008 to 2009, according to the State Statistics Institute. Some of that growth is new wealth from the less-developed eastern part of the country known as Anatolia.

"Lots of people with accumulated wealth from Anatolia are coming to Istanbul and looking for a place in the center," said Murat Ignebekcili, a real-estate analyst at EFG Istanbul Securities. "We'll be seeing some massive urban-transformation projects in that area."

A hot spot in the 1800s

Balat, a UNESCO-protected district on Istanbul's Golden Horn waterway, was once one of the city's most prestigious areas. A century and a half ago, it was home to a merchant community of Turks, Jews, Greeks and Armenians. By the 1990s, its crowded streets had been largely left to poor migrants.

Gultekin's company, Balat AS, plans to convert the crumbling wooden structures into classrooms, offices, shops and residences around the arts school.

Baran bought the first building, the five-story Ipera10 on Serdar-i Ekrem street, in 2005 for the equivalent of $800 a square meter. He invested the same amount in improvements to the 1903 structure and then sold three refurbished duplex luxury apartments for an average of $4,000 a square meter about three years later. A commercial space in the same building sold last April for $10,000 a square meter, he said. Fashion designers have set up shop on Serdar-i Ekrem, helping to lift prices, Baran said.

High-end apartments in the centrally located Beyoglu area now cost as much as $8,000 a square meter if they have views of the Bosphorus Strait, Golden Horn and landmarks, including the Blue Mosque and Topkapi Palace, he said.

"It went from being an inner-city slum area to one of Istanbul's trendiest areas," Baran said of Galata in Beyoglu.

Gentrification hasn't always been welcomed by established residents.

But Gultekin said his company hasn't experienced neighborhood tensions, partly because he's negotiating deals with each property owner individually. He declined to provide details.

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