Experts advocate real estate companies to partner up

Daily News Egypt
5 Min Read

By Ahmed Samir

Political disturbances in Egypt affected investment in a number of sectors, particularly the real estate sector, which has suffered from a lack of liquidity and capital flow. Developers have begun to search for greater liquidity, either through joint ventures and partnerships or merging with other companies in order to increase companies’ capital.

Taha Abdel Latif, Chairman of the Board of Directors for Cordoba for Real Estate Investment, stressed the importance of establishing strong real estate development partnerships and achieving co-operation in order to overcome the challenges and lack of stability in prices currently rocking the real estate market.

He said that his company is currently studying the possibility of approaching several Egyptian and Arab companies to purchase land in Libya and Iraq for low cost housing projects. Abdel Latif noted that partnerships are one of the most important factors for success for many global real estate companies, but that the domestic market does not apply the principle to the required extent due to the lack of separation between capital and company administrations, particularly among small and medium sized enterprises.

The prevailing culture among Egyptian companies, Abdel Latif added, makes it difficult for them to give up decision-making power to those who have more experience, noting that his company is an exception. He said that his company is prepared to merge with large companies to benefit from their experience, particularly in the field of marketing real estate in foreign markets as well as the domestic one.

Mamdouh Al-Toukhy, Director of Upper Egypt Contracting, however, predicted an increase in the number of partnerships and mergers between developers and contractors during the coming period.

He said that his company is currently looking in possible partnerships with large Egyptian contracting companies to build new commercial and residential projects.

He pointed out that negotiations are currently taking place with real estate development companies for projects in a number of new cities.

Tarek Shokry, a real estate development official with an investment company, said that mergers between large companies and small companies must proceed with caution because of the ability of the former to gradually take control of the latter. He said that such a process would increase the monopolistic power of the largest companies.

He added, however, that partnerships between large and small companies are natural, particularly because many small companies do not have the necessary experience to succeed in the real estate sector. According to Shokry, partnerships between companies have succeeded when both companies understand each other’s needs well and when neither company is so large that it can dominate the other.

Mohamed El-Gendy, Chairman of the Board for El Nasr Building and Construction Company, welcomed the idea of a partnership with a company with more experience in real estate development and marketing. He noted that his company owns a number of residential areas and has the necessary liquidity for its building projects, but that the company lacks experiencing in marketing its properties.

Gendy explained that his company recently signed a partnership deal with the United Bank to create a 41,000 square metre housing project on land owned by the bank in El-Mahalla El-Kubra. The project will require investments of EGP 670 million.

He hinted that the Egyptian market is in need of partnerships between strong companies and companies that have experienced difficulties, in order to strengthen the latter. He did not predict success for a partnership between weak companies.

Gendy also said that partnerships between large and small companies give the latter an opportunity to compete for large construction and development projects. Contracts for large projects are usually out of reach for small and medium sized companies.

Anas Lasheen, Director of Amaer, said that the primary obstacle facing weak companies is the difficulty in appraising old capital. For such companies, financing from banks, not partnerships or joint ventures, is the best way to find a way out of their difficult economic situation.

Lasheen pointed out that partnerships are a better option for companies than mergers and acquisitions because it allows companies to benefit from cooperation instead of integrating into the structure of a new company.

He said that his company is studying expanding housing construction in the Egyptian market starting next year, but that the plan will depend on demand.

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