By Hamada Ismail
Palm Hills Development is one of the largest companies operating in the real estate sector, and has recently achieved an increase in sales that reflected its financial performance during 2015. Daily News Egypt interviewed Tariq Abdel Rahman, co-Chief Executive of Palm Hills, to learn of the company’s plans in the upcoming period.
The company expected to achieve an increase in sales next year. How much of an increase do you expect?
Palm Hills expects an increase in its targeted sales by end of 2015 estimated at EGP 5bn every year. It is working on developing 12 projects and plans to finish them by 2018. The company has carried out developments worth EGP 1bn during the first half of 2015 and targets a similar value by the end of year. In addition, the company is about to conclude contracts for two joint projects with the Ministry of Housing. The company is also working on developing 13 projects, including five in 6th of October City, five in New Cairo and three projects in the North Coast. It recently finished the “Hacienda White 1” project in the North Coast, and plans to hand over most of the projects by 2017, with a few projects to be accomplished in the first half of 2018. Palm Hills targets 1,800 housing units to be delivered by the end of year. The company expects an increase in its targeted sales by the end of year from EGP 4.2bn to about EGP 5bn in light of the growing demand on the company’s projects and achieving high profits in the first half of 2015.
In the first half of 2015, the company achieved its highest net after-tax profit, estimated at EGP 646m, with an annual growth rate of 381% after cutting minority interests.
What is the size of Palm Hills’ lands portfolio?
Palm Hills’ lands portfolio is estimated at 24m sqm, and the company is working on developing more than 10m sqm, especially in current projects, while it has about 5m sqm offered for sale in Riyadh, Saudi Arabia, and the company rejected a number of purchase offers. PHDC also has 7m metres on the Cairo-Alexandria desert road and it has provided capital to increase the construction rate from 2% to 7%. The company is now working on getting licences for a development project on it.
The company’s lands portfolio was not affected by the selling of two lands in Alexandria and the North Coast, and is buying another land next to “Hacienda Bay”. The sold lands did not meet the company’s policy, which prefers large lands.
Palm Hills signed three separate sale and purchase contracts for lands with net profit of EGP 481m after the deduction of the purchased lands value. It included two sale contracts of two lands; the first is near the North Coast, on an area of 252,000 sqm, and the second is in downtown Alexandria, on an area of 13,000 sqm. The company also agreed to buy a piece of land beside its main project in the North Coast, “Hacienda Bay”, on an area of 126,000 sqm, for a net purchasing value of EGP 182m.
Palm Hills signed a joint development agreement for a full-service residential project in eastern Cairo with Madinet Nasr Housing and Development (MNHD). What is the status of this project?
Palm Hills completed the general scheme for the 100 acres it plans to develop in cooperation with MNHD, and is currently working on finishing technical studies in preparation for receiving the ministerial decision and building permits. The initial phases of the project are expected to be offered for sale by the end of the year.
Palm Hills assumes responsibility of the construction works, internal facilities, development, and marketing for the project. MNHD will be responsible for buying the land and external facilities of the project. This project is set to be developed in four stages, and both companies are expected to include 2,450 apartments, with a total structural area of 465,000 sqm, and expected revenues of EGP 5.6bn. Palm Hills will receive 64% of the project’s revenues, compared to 36% for MNHD.
Palm Hills signed two memoranda of understanding (MoUs) with the Ministry of Housing on the sidelines of the Economic Summit in Sharm El-Sheikh. When will you begin implementing them?
The company is negotiating with the Ministry of Housing regarding the two MoUs signed to develop two lands in New Cairo and 6th of October City, and it is expected to reach a compromise formula for the final contracts before the end of year.
The first project is an integrated construction project on an area of 500 acres in New Cairo. It will include a variety of activities; residential apartments and villas, as well as administrative, commercial and service facilities. Further, there is a group of German consultants who are working on creating the general scheme for the 6th of October City project on an area of 10,000 acres.
A preliminary MoU was signed by the UAE’s Aabar Investments PJS and Egypt’s Palm Hills on the “October Oasis” project, on an area of 10,000 acres, and the work is still underway.
Does the company have sufficient liquidity to fund those projects?
Yes, the company has sufficient liquidity to implement its projects, as we have recently increased the capital by EGP 1.65bn, in addition to a loan of EGP 750m the company has received from Banque Misr, as well as another syndicated loan of EGP 2.4bn.
Is the company considering commercial and service construction within the company’s portfolio?
The lands allocated for commercial and service construction within the portfolio of the company are estimated at 337,000 sqm. Palm Hills is also working on a development project for two shopping malls in New Cairo, and it is about to complete another centre in 6th of October City. The company has allocated EGP 300m for the development of commercial projects.
There are a lot of companies working on the development of the Northern Coast. Are you worried about the competition?
The company is not worried of the competition in the North Coast after a number of companies recently offered a large number of projects, especially as Palm Hills enjoys a strong reputation and the confidence of customers, because it has worked in that area for a long period of time. In addition, Palm Hills’ projects are in an advanced stage compared to other projects that will not begin operating before five years from now.
Is Palm Hills interested in implementing the Administrative Capital project?
It is hard for a single company to develop the Administrative Capital project alone, as the first phase alone is scheduled to be built on an area of 30,000 acres, which makes the participation of a number of developers to accomplish it inevitable. Palm Hills’ contribution in the project will be determined according to the final plan of the project and the entity that will be responsible for development.
What are your expectations for the real estate sector in 2016?
The real estate market is expected to witness an increase in growth rates, as well as the demand for real estate in 2016, knowing that prices of real estate have increased since the beginning of the year by about 20%, which is directly related to the supply and demand concept.
There is an increase in the demand for medium-sized villas, ranging from 400 to 600 sqm, compared to a decline in demand for large areas that exceed 1,000 sqm. There is also an increase in the demand for apartments of 180 to 250 sqm and the company offers units for more than one category in the sector in light of its size and the number of big projects being developed.
What are the main challenges facing the real estate sector?
The shortage of land and bureaucracy are the key challenges that impede the real estate sector’s growth, and the Ministry of Housing seeks to eliminate them by offering more lands and diversifying systems for using them, as well as facilitating the licensing procedures through a new real estate regulation, which is currently being drafted.
The Cityscape conference is held on an annual basis. What is the importance of this exhibition for companies operating in this sector?
Palm Hills is keen to participate in Cityscape Egypt. being the largest annual event featuring major companies, and our company is planning to offer a number of projects in the North Coast, 6th of October City and New Cairo.