Daily News Egypt met with Abraj Misr company leaders, CEO Ali Rabie and commercial director Tarek Bahaa, to talk about the company’s expansion plans and the current business.
What are the company’s plans for expansion?
Rabie: Abraj Misr is taking its plans for expansion in more than one direction in the coming period, the most important of which is executing our plans for projects on the ground in the next two years.
The Gate project is being executed, and the contractor has started construction. Abraj Misr is also looking into the execution of The Shore project. At the end of 2016, the company will deliver all the units for the Florenta project.
The second direction is a study of the projects that the government is developing, such as the New Administrative Capital, New Cairo, and other developments in eastern Cairo. Developments in the North Coast, Ras El-Hekma, and Ain Sokhna have seen great demand and a great turnout of investors—I think this is due to the state’s interest in the region.
We are studying how we may be involved in these projects.
What is the value of the construction contract that was signed this year?
We signed a construction contract worth EGP 1.1bn with SIAC Holding for the first phase of The Gate project which will be executed over 24 months. Meanwhile, Mena for Engineering Consultation and Development is developing the first phase of The Shore project with a EGP 2bn contract. Abraj Misr is carrying out the work itself for the last phase of the Florenta project.
What is the size of the company’s investments in these projects?
The investments amount to approximately EGP 7bn; the largest proportion of these investments goes to The Shore and The Gate projects. The Florenta project receives no more than 15%.
It was said that the company mortgaged The Gate project’s land in favour of the Arab African International Bank (AAIB), in return for a loan worth EGP 600m. Is the company facing any problems in executing this project?
The investment cost of the project was EGP 4.5bn before the recent increases in the US dollar exchange rate. Now this cost has risen to EGP 7bn.
To begin with, the project’s financial structure depends on three main sources of capital: the first source is from Abraj Misr shareholders, the developer, and the main partner of the project; the second source is funding from banks; and the third source is the return from sales of the project’s units.
Banks are a common source of funding that all real estate developers depend on when implementing their projects. Abraj Misr has received a pre-approval for finance from AAIB (EGP 700m) and Ahli United Bank (EGP 500m), and will receive pre-approval from a third bank (EGP 500-700m). I think that by the end of the year, we will have a clear vision for obtaining funding.
Does the company plan to implement projects in eastern Cairo by itself or through partnerships?
Partnerships are a successful model for developing projects in the real estate market—whether they be partnerships with the government or between private sector companies—as this contributes to reducing the financial pressure on the project. Our company is seeking for partnerships to develop new projects in eastern Cairo.
What is the size of sales for The Gate and The Shore projects?
Before executing The Gate project, about 20% of its residential units were sold, which amounted to EGP 560m. We expect 24% sales for The Shore project after the pre-opening its newest phase View 46 last week. After Eid El-Adha, the company will continue marketing the Gate project.
What are the company’s targeted sales by the end of the year?
We target reaching EGP 1.6bn in sales for our two main projects, compared to EGP 560m last year.
Do you have concerns about the possibility of a decline in Egypt’s real estate market?
According to statistics, there are 600,000 marriages annually. So, even if not all of these represent a demand for units, there is still a huge demand. Moreover, the real estate market in Egypt was not affected by the political turmoil. The real demand comes from socio-economic segments A- and B+, and this demand is growing.
What is the value of Abraj Misr’s land bank?
The value of the company’s land bank cannot be measured due to the size of lands. For example, the company has plots of lands totalling 36,000sqm in Nozha city, worth EGP 1.2bn. Furthermore, The Shore project accounts for 180 acres in the North Coast. This is besides other land worth EGP 250m the company hasn’t developed yet.
What caused the delay in delivering the Florenta project?
We delayed the delivery of the units in this project; some clients have been compensated as the company paid fines for the delay.
I want to clarify that the process of delivering units consists of three parties: the developer, the client, and governmental procedures. The developer bears responsibility for any delay in these procedures, which is why the company had to compensate the clients.
Implementation of this project started immediately after the 25 January Revolution.
The company had announced that it will list its shares as an IPO on the Egyptian Exchange. Are there any updates on this matter?
Recently, we saw some companies announce their IPO, but they then delayed the decision. For us, we see that now is not the best timing, especially following the US dollar crisis in the country due to low foreign currency reserves. If there is a change in our plan, it will be by the end of the current year.
In mid-August, the company announced the launch of the newest phase of The Shore project, View 46, which includes 500 housing units in a variety of styles. How many phases are there in The Shore project and what is the total number of units?
Bahaa: The project is located on an area of 180 acres with total investments of EGP 2bn. The project consists of 2,000 units that will be developed over four phases between three to five years.
How has the US dollar crisis affected your business?
The US dollar appreciation contributes to increased sales, as the depreciation of the national currency has led people to invest in safer assets, such as real estate units.
Have costs increased following the devaluation of the Egyptian pound against the US dollar?
Prices used to increase annually by 25% to 30%, but in the wake of successive increases in the dollar exchange rate, the company is going to increase the prices of units by 40%, in 10% increments every three months. This is acceptable in Egypt’s real estate market.