Top 10 listed companies account for 88% of real estate net profits over the past decade: 10 Tooba
The top ten listed companies, accounting for less than a third of EGX-listed companies as being primarily active in real estate, accounted for 88% of real estate sector net profits over the past decade (2010-2021), according to a new research “Who Owns Cairo? awarded by 10 Tooba for applied research on the built environment.
The year-long project aims to shed light on one of Egypt’s main industries, as the real estate sector is the fourth largest contributor to the country’s GDP and a key sector for local and foreign investors.
The research chose to measure profitability over the long term rather than taking one year to compensate for fluctuations in earnings. This shows an immense concentration of activity in a relatively small number of companies, all of which are primarily involved in building gated communities targeting upper and upper middle income buyers.
“The most profitable listed real estate company was Emaar Misr for Development, with an average of EGP 2.3 billion ($100 million) in annual net profits since its IPO in 2015. It was followed by the group Talaat Moustafa with an annual average of EGP 1.2 billion ($62). m) net profits between 2010 and 2021, and Palm Hills Development earning an average of EGP 500 million ($26 million) over the same period,” reads the report.
The companies studied are Emaar Misr for Development, Talaat Moustafa Group Holding, Palm Hills Development Company, Madinet Nasr Housing and Development, Housing and Development Bank (only housing and real estate activity), Six of October Development and Investment Company ( SODIC), Pioneers Properties for Urban Development (PREDCO), Heliopolis Company for Housing and Development, Orascom Development Egypt and Arab Developers Holding (formerly Porto Group Holding).
The companies in the case study owned or controlled more than 140 developments in the Greater Cairo area at the end of 2021 – the study timestamp, comprising 41,000 feddan. Although this number is relatively small compared to the massive 750,000 feddan in the region, it becomes more significant compared to the new residential desert land added to the twin cities of Cairo Valley and Giza from the late 1970s. estimated at 209,000 feddan. Here, business operations accounted for 18% of this area, reflecting how their primary development has been suburban rather than urban. In some of the new desert towns, such as New Cairo, Hadayek October and Capital Gardens, their properties make up more than a quarter of their residential areas.
Talaat Moustafa Group Holding held by far the largest holdings, controlling 16,442 feddan representing 40% of the total land held by the ten case study companies at the end of 2021. It was followed by Palm Hills Development controlling almost 6,400 feddan or 15% of the case study land. The third largest landowner was Heliopolis Housing and Development, which controlled more than 5,700 feddan in the Greater Cairo area, or 14% of the land surveyed, according to the study.
The study found that nearly 100 individuals, families and states held significant stakes in the 10 case study companies at the end of 2021. According to the Ultimate Beneficial Owner (UBO) methodology we used , just over half (51%) of the land in the case study was estimated to be owned by Egyptian investors, showing how well the Egyptian real estate sector has been internationalized. Based on broader studies, this is believed to have a negative impact on affordability, and therefore calls into question official efforts to seek new foreign investment in this country. The second largest shareholders by acreage are unknown investors on the EGX float – individuals or institutions investing directly – in smallholdings below disclosure thresholds, or funds and private companies whose owners we could not identify. . The third and fourth largest landowners are Saudi and Emirati investors, holding 14% and 12% of the surveyed land respectively. This was widely expected given Egypt’s preference for regional investors since its economic liberalization in the 1970s and the passing of the Arab and Foreign Funds Investment Law. Norway was the fifth largest landowner, owning 2% of surveyed land through its sovereign wealth fund.
“In terms of types of investors, so-called high net worth individuals, or families, were the largest investor by land area, owning 35% of the land in the case study. So did thousands of unidentifiable smallholders on the EGX and other exchange floats, who also owned – but without any control – an additional 35% of the land surveyed. It was surprising to find public enterprises or state-owned enterprises, owning 25% of the surveyed land, three decades after the implementation of the IMF and World Bank structural adjustment program in Egypt, pushing for the privatization of state industry. However, Egyptian state-owned enterprises were only a part of this, as will be explained later. The remaining 5% of the land was owned by private and listed companies and funds which the study could not establish their ownership, or, given some of their small holdings, was deemed more representative to retain as institutions such as the world’s largest asset manager, the Vanguard Group and BlackRock Inc.” the report read.
At the investor level, the report pointed out that the Egyptian government turned out to be the largest owner of the case study land, owning 16% mainly through the construction and development holding company, as well as through the New Urban Communities Authority – NUCA, which is mainly responsible for building the new desert towns, and some public banks.
The Egyptian Talaat Moustafa family, founders of the eponymous group, was the second largest landowner and the first non-state owner, directly owning nearly 5,600 feddan, or 14% of the land surveyed. In third place was the Saudi Bin Laden family, owner of 2,800 feddan, or nearly 7% of the land surveyed. The UAE government was the fourth largest landowner in the case study, and the state with the second largest land holdings, comprising 2,500 feddan or 6% of the case study land, notes the study.
According to Yahia Shawkat, lead researcher of the study, by bringing more transparency to the housing sector, the government can better regulate it and residents can better understand who is building their homes.