Orascom Development Holding focuses on developing the integrated cities it owns, as the company currently owns about 12 cities in 7 different countries, and adopts an expansion strategy, as it recently launched The Nines project inEl Gouna, with a total real estate inventory of $60m.
Daily News Egypt interviewed Omar El-Hamamsy, CEO of Orascom Development, to learn about the company’s expansion plans and the impact of economic variables on the company.
Given the high levels of inflation and monetary tightening decisions, how do these changes affect the Egyptian real estate market in general?
The fiscal year 2021/22 began with difficult economic challenges and turmoil at the global and local levels due to the Russian-Ukrainian conflict, coinciding with the repercussions of the global pandemic and the jump in energy prices, which led to a global inflationary wave. The global economic repercussions of these factors prompted the Central Bank of Egypt to raise interest rates by 1%, and Egypt also devalued its local currency against the US dollar by about 14%.
As for Orascom, it is characterized by the spread of its business across several countries, as the company owns cities in 7 countries. We monitor the real estate markets very carefully, and despite the company’s management being prepared for all scenarios, we do not see what necessitates changing our basic business plans so far.
But in light of all of the above, we look at the current situation in a positive way and are working to exploit all available opportunities. For example, we recently opened the first global sales office for Orascom Development Holding in Dubai with the aim of contributing to real estate export.
What are the expected financial indicators for the company during the current year?
Despite the ambiguity of the global economic situation, the company’s management feels optimistic, as the company has been able to overcome many crises that faced the local and global economies. We trust in the wise local policies and decisions that have been able to withstand global challenges. There are no indications of a major disruption in the company’s business.
Do you plan to launch new phases in the company’s projects?
Orascom Development Holding is currently focusing on the development of the integrated cities it owns, as each city is in a different stage of development. The company owns 12 cities in 7 countries, of which 11 cities are in advanced stages of development.
In the second quarter of 2022, a new real estate project, The Nines, was launched. It overlooks the golf courses in El Gonna, with a total inventory of about $60m. The company aims to deliver more than 200 units during the first half of 2022.
What about the new phases of O West?
The company continues to accelerate the construction process in O West, as 444 units have already been built, and construction of other 864 apartments has begun. The company kicked off construction of O West Club in the second quarter (2Q) of 2022. A partial opening of the club is expected in 3Q 2023.
The city’s real estate sales rose to reach EGP 1bn during 1Q 2022, an increase of 31.1%, compared to EGP 774.4m during the same period last year, while total revenues increased by 29.9% to reach EGP 1.7bn.
Do you plan to launch any schools in the city during the coming period?
Orascom Development is working on developing its cities and equipping them with vital services, such as schools, hospitals, clubs, and others. O West includes an educational district, and the company pays great attention to the educational services, to ensure the provision of high-quality education, and to create an integrated community.
O West will have 5 schools with advanced and different curricula (German – English – Egyptian), and the opening of a new school in Makadi Heights will be announced soon.
How much does the hotel sector contribute to the group’s revenues?
With the continued easing of precautionary measures and the return of full operation of hotels, the company was able to achieve positive results during 1Q 2022 in the hotel sector, where revenues increased by 173.7% to reach EGP 260.6m.
The sector recorded a remarkable growth in all the leading operational performance indicators compared to the same period last year, despite the spread of the Omicron mutation during the first two months of 2022 and then the conflict between Russia and Ukraine, which negatively affected tourism in general.
What much is the occupancy rate at the group’s hotels?
Egyptians represent more than 46% of the total occupancy in El Gouna hotels. Our main tourist export markets are in Western Europe, especially Germany, Belgium, France, the Netherlands, the United Kingdom, and Switzerland.
What are the financial precautions adopted by the company?
The immediate implementation of cost-saving and conservation measures for liquidity led to achieving a total operating profit of EGP 110m in 1Q 2022, an increase of 11.3%. The group’s hotels continued to benefit from the increased demand for travel, which resulted in an increase in the number of foreign tourists, in addition to an increase in local bookings.
What is the company’s expected sales volume during the current year?
During 1Q 2022, we witnessed an increase in real estate sales led by O West. We also witnessed an influx of purchases from Egyptians residing abroad who contributed to the increase in real estate sales. All these indicators are supported by the efforts of the Egyptian government to maintain the stability of the economic situation and make us cautiously optimistic.
What is the current situation of the company’s indebtedness?
The company continues to improve its financial position, as the company’s cash balance reached EGP 3.2bn during 1Q 2022, an increase of 4.1% over the same period in 2021.
The balance of loans amounted to EGP 3.8bn in 1Q 2022, and the increase in loans is mainly due to the depreciation of the Egyptian pound against foreign currencies. Meanwhile, the company’s cash flows amounted to EGP 224.2m during 1Q 2022.
What is the volume of the company’s land portfolio during the current year?
The company has a land portfolio of 101 million square metres in 7 different countries, nearly half of them in Egypt. Currently, there is no intention to buy or sell lands, as the company’s strategy continues to focus on existing cities, while developing untapped areas.
What is the size of the company’s real estate inventory?
Orascom Development is keen to continue increasing its real estate inventory. InEl Gouna, we added a real estate inventory worth $25.9m in the Shedwan and Cyan projects.