Successful revival of SODIC, one of the first listed real estate developers in Egypt

Interview with Ahmed Demerdash Badrawi, Managing Director of SODIC

What is your personal evaluation of the real estate and construction industry right now in Egypt? How has it been affected by the political turmoil of the past years?

We are real estate developers and in my opinion, the real estate sector has been one of the most resilient industries, fortunately. SODIC, as a company, has also been more resilient than others. I believe it is a factor of a very deep-willed demand in the market place that is not built on speculation or credit. Thus, people in the last few years have still maintained their interest and preference to invest in real estate, rather than other products, potentially, as a hedge against inflation and currency devaluation. Two reasons that have boosted demands are that we have a culture that, as parents you generally buy homes for your kids as well. It is the duty of the parents to set their kids up in life with at least a roof above their head. So they tend to buy early for their kids as well as for themselves – for those who are looking to move from the congested and polluted urban city into the suburbs, which are more planned better serviced. So, as a result, many real estate companies, SODIC in particular, have continued to grow even during the difficult times. The difficulties we faced were not just economic, but also as a sector, we suffered from a lot of political attacks as well, those were challenges in addition to the economic challenges. Fortunately, we have come out of all of those. In the last few months, actually, we have cleared all the legal challenges against us. And we are now very much on a growth and expansion phase.

In which particular segment of the real estate do you see the highest demand at the moment?

The one that I have been concentrating on that has been the least affected is the residential segment, because of the large pent-up demands. Even the retail segments continued to perform and operate in the last few years. Retail is continuing to benefit from the purchasing power, when you are starting from a relatively low base of organized retail and foreign franchises. Office segment has suffered a little bit more as large multinationals have delayed their decisions about relocating either internally or from abroad. Thus, the office segment has experienced a little bit of a slowdown. A lot of supply has come on to the market that was planned in the pre-2011 days—2009/2010. There is quite a good supply of office markets these days.

Please introduce us to SODIC. How did you become one of the largest real estate developers in the country?

SODIC is one of the first listed real estate companies. It has been around since around the mid-90s. Egypt fell through a very big recession in the early 2000s, where SODIC and many other real estate companies suffered very much from the huge recession and construction prices rose faster and the demands really dropped. Since 2006, SODIC had begun performing very strongly. We had started to really try and revive the brand with this new project called “Allegria”, which was a golf course development of 1,200 villas around the Greg Norman signature golf course. It was one of the first of its kind here. It performed very well. Today, we have sold 99+% of the project and we have delivered over 90% of the villas. So that was really the project that put SODIC back on the radar. Since then, we have gone from strength to strength with office projects such as the “Polygon”, with retail and entertainment projects as well. New land growth parcels in East Cairo as well as the 6-million square meter plot in West Cairo. We have tapped capital markets to raise money. We have good facilities with the banks. We have a strong and young management team. So we have really been able to revive the company. And today, it is largely seen as one of the better developers in the country.

Can you describe Beverly Hills and also your other landmark projects? 

The 6 million square meter of SODIC WEST are divided into many projects, of which Beverly Hills is one small component. Some of our landmark projects are Allegria, The Polygon Business Park, a 70,000-square meter office park; Forty West is probably the highest quality finished apartments that exist in the country today. We have a project called Westown Hub that offers restaurants and coffee shops and entertainment. We have three schools in our projects and Beverly Hills is probably one of our oldest projects that was designed and started out in 1998 that is fully complete now and three thousand families are living in it. So we have a very nice cross section of projects catering from mid to the high end and mixtures that include office and retail.

What in particular distinguishes you from other real estate developers? How do you stand out?

We stand out mainly in terms of delivery. We have continued to deliver all our projects on time, sometimes ahead of schedule, while most other people have faltered, because of issues related to collections or cash flows or government land obligations. We have managed to grow at a very steady and conservative space that has allowed us to kind of weather the storm very nicely. We are now very well placed to go into the growth phase that has started with the acquisition of a new plot recently in East Cairo. It is a new 301-acre plot that hopefully will be the beginning of an aggressive growth phase.

You are very closely involved in community development. Please mention some of your main CSR activities.

We have got a lot of things that we are very proud of – from small projects to very big ones. But we are heavily involved in trying to give back to the community from things that are related to our industry. We are involved in building schools in less privileged areas and in redeveloping slum areas in Cairo. We have a particular project called Ezbet El Assaal, where we are trying to transform one of the slum areas. We have various initiatives where we are involved in promoting young entrepreneurs, one in conjunction with the American university in Cairo. So, we have a very diverse strategy that is trying to focus on entrepreneurship, youth, unemployment and education.

What is your long-term strategy for the company? You mentioned that you just acquired new lands. Are you planning on launching the new projects in the next couple of months?

Absolutely, we have a very strong launch plan for the existing lands today. We have unutilized or “unlaunched” lands of nearly 2-million square meters. We have a launch plan for those, which will take us through for a good two to three years. In addition, we have a newly acquired land that was announced in June 2014. We plan to launch that hopefully by the end of the year. We are hoping to acquire new lands in the coming phase as well.

Where would you like to see the company in five years’ time?

The dream is very much to continue on the path that we are in, which is to grow – to grow organically when times are difficult and then to pick the right time to start growing a little bit more aggressively, which is, I think, where we are today. There is no reason why SODIC shouldn’t be the largest leading development company in Egypt and hopefully outside of Egypt as well.

What is your personal vision for the country?

I am very excited for the first time in quite a long time. I feel that we have been scraping along the bottom for a good three years now. We have now turned a corner and we are beginning to see the ability to actually capitalize on the opportunity in the coming period. So, we are quietly optimistic.

Is there anything else you would like to mention about Egypt?

Egypt gets a fair amount of negative press abroad about the political process, but I believe that as Egyptians, we have spoken up and we are fairly happy with where we are now. We are waiting for parliamentary elections, which we hope will be the last piece of the puzzle that gets rid of any remaining political uncertainty and overhang. I think it’s fairly clear now that everyone sees that the priority is getting the economy back on track. And as one of the private sector players, we are keen on playing our role in that.  

Are you looking to attracting some international investors? What kind of work-related investment are you looking for?

We are one of the largest private, publicly listed companies in Egypt. We have a very strong institutional shareholder base that comprises both Gulf and international investors. We have got some of the biggest names, specifically out of Saudi Arabia and some of the largest institutional funds, both UK and US and beyond and sovereign wealth funds. We are very active on the investor relations front. We are always keen to attract new forms of capital and to be quite innovative about how we can test the capital markets with new products. At the moment, it’s still fairly basic. We tap them for just regular capital, but there is no reason why, in future, we can’t do more. There are things that are more common in the West from bonds to convertibles to restructuring of products that bring money into the country by potentially reducing the cost of funds for us.

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