CAIRO: With an ambition to create Egypt’s new downtown, real estate developer Sixth of October Investment and Development (SODIC) is gearing up to challenge market leaders including Gulf-based Emaar and Damac.
“Being an Egyptian company, allows us to develop projects that better suit tastes of the [local] community. At SODIC, we [know] what Egyptians want and what they are looking for in a property, boasted Mohamed Galal, commercial director at SODIC.
With Egypt’s heavily congested capital, the firm is optimistic on the extent and speed of migration to the new outskirts of Cairo as well as on the favorable land locations the company acquired. It aims, Galal explained, to create fully integrated mega projects that provide not only residence but also educational and financial services, shopping malls, leisure activities, sports and business facilities.
“We want to create a new city center that is more [contemporary] than the current one in downtown Cairo that serves the entire community, residents and non-residents, he said.
Amid a market trend of suburban living and gated communities, SODIC rolled up its sleeves and decided to grab a slice of Egypt’s booming real estate sector. Last April, the company launched Allegria, an upscale residential project in west Cairo (on the Cairo-Alexandria highway) that covers 2.38 million square meters.
Latin for happiness, Allegria has put SODIC on the map with total investments standing at $1.5 billion. The company has so far sold 70 percent of the project. Infrastructure and excavation work has already begun with first phase delivery due in 2010 and final phase in 2012. According to Beltone Financial, the project will generate in excess of LE 3 billion in sales.
“While Allegria appears as SODIC’s current flagship project, we believe SODIC’s main value comes from the forthcoming high-density development in east and west Cairo, in partnership with Lebanese-based Solidere, stated Beltone Financial.
Last summer, SODIC signed a landmark agreement to co-develop two projects in Cairo with Lebanon s real estate giant Solidere at a total cost of LE 22 billion ($4 billion). The much-anticipated “Solidere projects will be developed over two land plots, a 1.2 million square meter plot in West Cairo (in Sheikh Zayed City) and a 0.9 million square meter plot in East Cairo (in New Cairo). The plan is to create a mix of residential projects, commercial and office space, retail and entertainment facilities, as well as hotel facilities. Solidere recently completed the master plan while SODIC will finance and construct the projects.
“We particularly chose Solidere because we want to build a downtown. Solidere has already done this in Beirut after the civil war, and they are experienced in this concept, Galal pointed out.
Solidere is internationally renowned for its successful reconstruction of the war ravaged city center of Beirut into a thriving modern city center.
Construction work on the project is to begin early 2009, while sales and leasing are expected to begin during the first quarter of this year. SODIC expects the entire project to be completed within the next seven years and phase 1 in 2011.
Established in 1996, SODIC is valued at LE 5.5 billion ($1 billion). The company is publicly traded on the Egyptian stock exchange on an average daily turnover of LE 49.1 million and a market capitalization of LE 6.2 billion ($1.1 billion). Shares of the firm currently trade at an average of LE 197.49, however, Beltone Financial places the shares fair value at LE 302.74 (showing an upside of 53.3 percent) and thus recommends a buy position.
“Our best picks for 2008 [include] SODIC, [since] the current stock price does not reflect the value to be derived from the upcoming projects with Lebanese developer Solidere, Beltone mentioned in its latest report.
“By mid-January 2008, the market had taken SODIC’s price up 60 percent since our last note in June 2007, as institutional investors have perhaps woken up to the fact that SODIC stands out as a cash flow story more than a ‘land bank play’, Beltone Financial noted.
“Some of the initial rally on the stock two months ago was driven by rumors of a private equity or large developer buyout. In the last week, however, amid a wider stock market correction, the stock has fallen to some degree. Ultimately, we believe interest in the company is proving to be more genuine and sustainable, given [its current] strategy.
While Egypt’s real estate market has so far been dubbed by domestic and regional property developers an evergreen success story – with property prices shooting up as much as 100 percent since mid-2006 – skeptics wonder whether the Egyptian property market is showing bubble-like characteristics.
“People in Egypt tend to think things are a bubble if they suddenly increase over a short period of time, Maher Maksoud, SODIC’s managing director, previously told Daily News Egypt. “At the end of the day, in order to evaluate whether or not this is a bubble, it’s not enough to only look at price increase. You [also] have to look at supply versus demand. Is supply outstripping demand? That is the question.
He believes that prices in the real estate sector have increased because they are adjusting.
“The fact is that demand is outstripping supply and not vice versa. Most of the projects being developed nowadays, whether residential or commercial, are booked in advance.
In fact, SODIC sees a lot of potential in Egypt’s real estate market.
“Opportunities lie in Egypt, and backing my statement is the fact that non-Egyptian property developers [chose] to come and invest in Egypt, Galal said.
Amid fierce competition on the market, SODIC is confident it will stand out not only due to its high quality projects but also to its affordable prices that target a diversified segment of the society.
“Our prices are diversified to appeal to different customers, Galal added. “We do not want to focus on one particular market segment because it will eventually become saturated.
He pointed to availability of mortgage finance schemes that enable middle-end consumers to buy property and pay installments on 10 to 20 years.
“What encouraged us to invest in such mega-projects is [availability] of mortgage finance.
