• Nine Egyptian real estate developers at our one-on-one conference Management representatives from nine Egyptian developers, namely SODIC, Emaar Misr, Talaat Mostafa Group (TMG), Palm Hills Development (PHD), Egyptian Resorts Company (ERC), Medinet Nasr Housing & Development (MNHD), Amer Group, Porto Group and Orascom Hotels & Development (OHD) attended EFG Hermes one-on-one conference held in Dubai on 7-9 March 2016. The conference was attended by 455 international fund managers and institutional investors from 221 institutions with 117 companies presenting. In this note, we share the common themes we saw amongst the nine companies, especially related to the operational environment in general and the most frequently asked questions to management with their respective responses and our views on these questions.
• Common themes: weak contracted sales in 1Q16; concluding a number of revenue-sharing agreements; increasing exposure to recurring income streams Companies have generally guided for slow contracted sales in 1Q16, yet most companies confirmed that they target higher Y-o-Y numbers for 2016. Growing land banks remains a focus for management; finding a plot in an attractive location with favourable payment terms continues to be a challenge. We note a higher appetite for revenue-sharing agreements, as a way to waive the high initial cash outflow upon the acquisition and to limit downside risks, in case the relatively more difficult economic conditions weigh down further on potential buyers’ ability and willingness to invest in real estate. Finally, most companies communicated their medium-term plans to establish/grow their recurring income portfolio, in the face of the property market’s high cyclicality.
• Company specific issues: agreement with Heliopolis Housing for SODIC; dividends for PHD; slow sales for TMG; plans for investment portfolio for Emaar Misr; fate of Phase III for ERC For SODIC, investors wanted further details on its agreement with Heliopolis Housing (expected launch date: early 2017, total sales: EGP30 billion). As for PHD, the sustainability of dividends was questioned by investors, in light of its increased cash flow constraints, starting next year. The reason behind the lower contracted sales numbers in 2015 was a common inquiry for TMG, which management mainly attributed to challenges securing building permits in Al-Rehab and Madinaty (resolved in 4Q15). The timeline for the launch of Emaar Square (expected in 2H16) was a common asked question to the management of Emaar Misr. As for ERC, it was related to the fate of the Phase III land, which it confirmed it was confident about the outcome, but uncertainty remains on the timing of the resolution of the case.

Mai Attia
Sara Boutros