CAIRO: Abraaj Capital said Monday that its real estate fund, ASAS, acquired a grade-A commercial office building in Cairo.
ASAS is an income-generating real estate fund, which complies with Sharia doctrines, and is long-term in focus, aimed exclusively at the real estate sector.
“The investment rationale is supported by an undersupply of premium office space in Cairo and by attractive economics,” Faisal Khan, principle at Abraaj Capital, said in a statement.
The firm says that ASAS “capitalizes on the opportunity resulting from the lack of institutional ownership of commercial real estate in the Gulf and wider Middle East and North Africa (MENA) region, as well as the asset-heavy balance sheets of many regional companies and the severe undersupply in certain real estate sectors.”
Yet, the private equity firm isn’t strictly in the business of making money. The firm has sought to permeate its foundations with corporate social responsibility (CSR) initiatives.
This is illustrated through a partnership it established with a firm in which it invests, Al Borg Laboratories — the Middle East’s largest medical testing group with control of around 25 percent of the local Egyptian market — to offer subsidized medical laboratory testing.
The corporate social responsibility program, called Charitable Diagnosis (CD), will offer up to 10,000 tests targeted to communities that are in the most need in Egypt.
“Through this program, patients can get screening for 25 different disease groups,” which include diabetes and various liver diseases, said Amr Helal, Abraaj Capital’s principle and responsible for sourcing, structuring and negotiation transactions, told Daily News Egypt in an interview.
Abraaj Capital believes private equity institutions are often viewed unjustly by the public. In an attempt to thwart such views, the firm has engaged in a campaign to raise awareness about the benefits that private equity can have in terms of driving the economy as well as its CSR activities.
The private equity firm, with offices that span the Middle East and North Africa as well as India and Pakistan, has distributed $3 billion to investors since it launched in 2002.
Although Helal was reticent to comment on how much Abraaj has invested in CD, he stated that the tests cost patients between LE 1-2 to cover administration costs, which would typically cost a patient between LE 20-40.
To ensure the success of the program, as Abraaj is a business focused rather than social responsibility expert, such as a non-profit organization, the firm enlisted the support of charitable organizations that specialize in such fields.
With their expertise and local knowledge, combined with Al Borg’s technological know-how, Abraaj launched CD, which will be available in over 80 Al Borg branches nationwide, and will be operational in the coming weeks, Helal stated.
“[Abraaj] wants to expand” this concept, but first it is important to build on lessons learned, and thereafter take the idea into other areas, he said. The CD initiative fits within the mindset of the broader CSR initiative of the firm, which is based on their “triple five program.”
Each staff member of the company must contribute five days per year to socially responsible activities outside of work, and the firm requires that 5 percent of an employee’s salary be allotted to a CSR program. As well, the firm itself contributes 5 percent of its net management fees to CSR issues.
Abraaj’s strategy is to demonstrate to the public that private equity firms are conscientious about social responsibility contrary to common beliefs. “They see that we invest in a firm for, say, $100, and then exit a year later for $200,” he said. Thus, people see massive sums of money being made in short periods of time, which, he says, is not the full or accurate story.
Such views, Abraaj and other private equity players, believe are unfair and incorrect.
Helal pointed to the example of Al Borg Laboratories, noting that before Abraaj’s involvement the firm had only two staff members working a lab, but Helal’s firm decided that it was in Al Borg’s interest as well as the community’s to have three workers managing the lab.
Ordinary citizens also believe that private equity firms avoid paying taxes, he says. However, he pointed to the fact that by investing is such firms as Al Borg Laboratories and others, Abraaj and other private equity players are able to expand local business’ activities and hire more employees, which in turn helps grow the economy as people have more income at their disposal.
The obvious end result is that more taxes are paid to the government, which means that more revenue is generated to spend on various services, which invariably includes socially oriented programs.
The statistics are palpable: after acquiring a 76.9 percent stake in 2008 through a $150 million investment, thanks to Abraaj’s intervention in the management of the firm, Al Borg has increased its revenue by 14 percent, from LE 130.8 million to LE 172 million between 2008 and 2009.
Furthermore, it has increased its number of branches, from 60 to 83, as well as increasing its staff, from 842 to 1,100 since 2008.
Helal thinks that changing people’s perceptions is possible, but that it will require time and engaging not only in its core business as a private equity firm, but also as a socially responsible corporate entity.
