CAIRO: “Egyptian real estate has not existed for the past 50 years, it has been limited to the development of unplanned, concrete blocks downtown, which [house] everything from offices and houses to hospitals and schools,
Maher Maksoud, managing director of Sixth of October for Development and Investment Company (Sodic) told Daily News Egypt.
Sodic was established in 1996, a time when the real estate sector was much different from the one we know today.
Surviving through the period of economic stagnation was not easy, but today the company is capitalizing on the real estate boom with two new projects on the outskirts of Cairo.
“In the last five years there has been a complete change. The environment we live in right now is radically a different country than what it was. The support we are getting from the government and the empowerment of the private sector has created a shift in the retail industry, says Maksoud.
But that was not always the case. At the time the company was founded, “the government could not afford to subsidize planned real estate development, he remembers, “what we had was real estate development targeting a minority of wealthy Egyptians – limited to 2-3 percent of the population – through fancy apartment buildings in Heliopolis, Zamalek and Maadi or certain suburbs such as Kattameya Heights.
Thankfully, time has done the sector good. “Now we have a government with a vision and true commitment to grow using foreign investment and the private sector as its primary engines of growth, he said.
Sodic is one of the top four real estate companies in Egypt, listed on the stock exchange with a market capitalization of almost LE 7 billion. “It is actively traded and considered one of the most exciting real estate companies on the stock market, said Maksoud.
The company forayed into the market with the Beverly Hills project, which at the time was considered to be one of the most extravagant developments in terms of design, scope and ambition. The project targeted the upper-middle class sector.
“Beverly Hills kicked off with a successful start in terms of sales and general reputation. Soon, however, the market started to turn and the economy went sour, he said.
Even though Sodic started on a high note, it suffered a period of stagnation – along with the economy at large – that lasted until the early 2000s. With the economy’s turnaround in 2004, it was time for Sodic to capitalize on the boom that was taking place in the economy, particularly in the real estate sector.
“The time was right to reposition Sodic, so we changed the board’s structure, [instilling] a more dynamic, forward-looking line of thought among our shareholders, he said.
From 2004 to 2006, the board and shareholders worked to solve some of the problems incurred during the period of stagnation. “There was a bit of debt that was not being serviced, projects that were under-development that had not been fully completed and debt to the government for portions of land that were bought [over time] by Sodic, he explained.
The board succeeded in “giving Sodic a fresh start, by improving land sales, paying bank debts and returning portions of land in order to reduce its debts to the government.
With that done, the company had to find a new approach. In March 2006, a new management was brought in with the mandate of jump-starting Sodic operations, with a focus on making it the leading real estate company in the country.
“Real estate is becoming much more management intensive, rather than construction intensive. Now the quality of design, finance, sales and marketing are becoming the core competencies required for a successful real estate company, he said.
Initially, Sodic had a land bank that was under-development, a neutral balance sheet, no surplus cash and no way to fund future developments. The market capitalization was LE 200 million and the company shares were priced at LE 60.
“Now market capitalization is LE 7 billion and the company shares are at LE 245, one of the top five actively traded companies on the stock exchange, he boasted.
Thanks to the government’s active economic reform agenda and positive changes in the investment environment, the real estate sector is once again robust. “As a management team we have to admit that we’ve had a great tail wind supporting our endeavors, we’ve also started the development of several projects which are at different stages of development. They were well-received by the market and promise high returns, he said.
With everything in its right place, the company went on to acquire additional plots to boost their land bank. By the end of 2006, they were ready to launch two new projects: Allegria and Kattameya Plaza.
Allegria, located in Sheikh Zayed, is an upscale residential project being developed over 2.38 million square meters, featuring over 1,000 villas and townhouses with more than 400,000 square meters of built-up area surrounding Egypt’s first signature golf course by Greg Norman.
The project was initially expected to sell over three years, but by April 2007 Sodic was able to sell 70 percent of inventory. Its success can be largely attributed to the quality of the designs sketched out by international and local talents.
“In creating the master plan we tried to create something that would be more than a pretty picture, we wanted to create an environment that would be conducive to people wanting to change their lifestyle. We are targeting people who are living in an extremely congested Cairo and are dreaming of a healthier lifestyle, he said.
“When designing Allegria we allocated land to parks and paths to create safe zones. It is a refined and advanced adaptation of residential complexes in Egypt and abroad, he said.
The company’s two other main projects entail developing two city centers for Cairo’s growing suburbs in Sheikh Zayed and Kattameya. The projects are being developed in cooperation with Solidaire of Lebanon, best renowned for their successful redevelopment of Beirut’s city center.
The Sheikh Zayed property is located on the Cairo-Alexandria Desert Road, only five km past the toll station. The main Kattameya plot is on Road 90, the area’s main avenue, and adjacent to the American University in Cairo’s new campus.
“They are basically high density, mixed-use downtowns that are going to anchor and support the two main Cairo suburbs which are now emerging, he said.
The plan is to develop two fully-integrated city centers serving the needs of the communities in those areas. Total built-up area for those projects is forecast to be in excess of three million square meters. With master plans currently being finalized, sales are expected to be launched in early 2008.
The project in Sheikh Zayed City will be called West Town and will cost $2.4 billion while the other will be called East Town and will cost $1.6 billion.
“In the past five years, the [real estate] success has focused on developing housing units, but not enough attention was given to building city centers. So we decided to invest in developing city centers, the heart of service centers, he said.
These two projects are now in an advanced stage of master planning and will be presented to the government for approval within the next two to three months.
“We hope to start on these projects in 2008. They are exciting for us on all levels, they represent value-added for Sodic and as development projects they are lucrative and unlike any other real estate project in Egypt right now, he said.
Sodic acknowledges that the competitive environment in Egypt has also changed, however, “the amount of competition coming in is not selling enough units to cover the demand in Egypt right now, Maksoud explains.”We do not have a surplus of supply, we still have a surplus of demand, he said. Sodic also believes they have the comparative advantage of the local know-how.
With the expansion of Cairo to the east and west, mass transit is a challenge yet to be addressed. “There are many initiatives by the Ministries of Transportation and Housing but it still
remains a challenge. There is recognition of the issue and significant funding available to address it in the near future, he said.s
