Egypt, new dimensions, new frontiers

Mr. Hisham Talaat Mostafa, CEO & Managing Director of TMG Alexandria Company for Real Estate Investment
a member of

Egypt -

"Creating a better Egypt"

Interview with:

Mr. Hisham Talaat Mostafa ,
CEO & Managing Director

Cairo, May 24th, 2000
I understand that the Talaat Mostafa Group was founded over thirty years ago and is comprised of eighteen companies. Could you give us a brief overview of the group's activities?

We are one of the biggest players in the real estate business here, and we are involved in the tourism industry, in contracting and manufacturing of building materials, as well as agriculture and agricultural products. As you said, we have eighteen companies, and we employ around 15,000 people. The turnover for this group is about EGP 3 billion per year, and capital is close to EGP 2 billion.

Would you say that you are the largest construction and real estate company in the private sector at the moment?

We are one of the biggest construction companies in Egypt, but we are the outright leader in the real estate business in terms of volume of work and annual turnover.

One of your major projects at the moment is the Al Rehab city, in New Cairo. Could you tell us about your investment in this project?

The idea for this project was born in late of 1995 when we had a visit by President Mubarak during the reconstruction annual fair, he suggested to us that the private sector could become involved in building a new series of small cities for the growing middle class. We developed a huge team and started investigating and researching the potential, then produced a report and then presented it to the Minister of Housing. We got permission to develop a new city on 6 million square meters for development, and then had to decide how to go about developing the first privately built city in Egypt (El-Rehab city)

We assembled consultants and specialists in the field, from France and the United States, and issued a tender. We received bids from about 55 international consultants, and they all entered their ideas and plans, from which we chose three successful plans.

I imagine that the whole infrastructure, including shops and so on, will have to be planned from scratch?

Yes, not just shops, but hospitals, schools, universities, shopping malls, clubs, nurseries, workshops, absolutely everything. We began in October 1997, and the first phase will be completed and delivered in June 2000. This is about 7,500 apartments and 1,500 villas, as well as all the associated facilitates and services mentioned above. We are ready to start receiving people now, so things are really going as planned.

We are seeing a lot of new suburban developments now, with such the Beverly Hills and the Sunset Hills developments. Would you say that this is the new concept carried out by the private sector?

Yes, but we are slightly different from the projects that you have just mentioned, in that we are catering for the middle class, the real middle class, and trying to build a complete city, with all the requisite amenities. This is a new concept from the private sector, and there is a huge demand for this business. The population of Egypt is around 63 million, and 60% of these people are under thirty years old. This means that we need to be creating 600,000 units per year. Looking at Greater Cairo we need at least 150,000 housing units per year, and the private sector is doing its best to meet this need.

You are also involved in the tourist and hotel trade. Could you tell us about the Four Seasons project in Sharm El Sheikh?

We are presently building three Four Seasons Hotels here in Egypt. One in Cairo, near the Meridien, one in Sharm El Sheikh, which will be ready by February 2001, and the third one is in Alexandria.

How did you build this relationship with Four Seasons Hotel and Resorts Corporation?

We have established ourselves in the tourist and hotel business during the last ten years. In my opinion it is clear that Egypt lacks top-end, high quality hotels, and because of this we are loosing a sizeable sector of the tourist market. This segment of the market is the highest income bracket, and one that we should be trying to attract. The building of hotels such as the Four Seasons is very important for Egypt, and they attract foreign revenue, which is needed to combat the deficit in the trade balance in Egypt.

The Minister of Tourism believes that tourism will be the engine for growth in the Egyptian economy. Do you agree with him on this?

Yes, this is very evident. Egyptians are very talented in the tourist industry. So it makes sense to put resources into this field and develop the industry. According to the strategic location geographically and being so close to Europe, Egypt enjoys a great strategic position for tourism.
You are also involved in the development of the San Stefano hotel in Alexandria, are you not?

In fact the historical San Stefano Hotel, Alexandria has been demolished and we are developing a modern San Stefano with a new concept that combines a Four Seasons Hotel and a plaza and numerous other facilities.

You mentioned that you are diversifying out into agriculture. Could you tell us about your interests and operations in this field?

We presently own 5,000 acres in Novaria, a place about 50 km to the South West of Alexandria , and we now have a very active farm and dairy business.

There were numerous opportunities for the development of Egyptian agricultural exports. Will you also look to export your produce abroad?

Yes, we are already exporting some of our produce.

What was your diversification strategy, moving from Real Estate and Tourism into Agriculture?

We started in 1970 as contractors and developers . In 1995 we diversified our activities as to include agriculture and agricultural products.

In fact, we are very keen to further diversify the operations of the Group, and we are looking into several different sectors and business opportunities at the moment.

In the construction industry, forming consortiums is the essential ingredient to winning contracts. In which areas are you looking for partnerships and foreign involvement to further your successes?

Of course, we already have joint operations with several international entities and figures such as prince Al-Walid Bin Talal, who is one of the main shareholders with us in the Forseasons Cairo and Sharm El Sheikh and he is also a shareholder in Alexandria Company for Real Estate Investment. besides, we have numerous foreign banks and Abu Dabi Investment Authority as shareholders. In this industry you cannot work alone, you always need to form partnerships to overcome challenges and to be successful.

Having said this, in which sectors of the Talaat Mostafa Group would there be opportunities for foreign investment or strategic partnerships?

The most important sector we are concentrating on is the tourism sector, and we are in the process of creating a new Tourism Holding Company which will own five hotels; the three Four Seasons Hotels I have mentioned in addition to the Nile Hotel development in Garden City, Cairo, and huge tourist project in Marsa Alam on the Red Sea south of Hurghada. We will be ready to sell shares in this company. In approximately three months we intend to float about 40%, to raise capital for growth. At the moment we have EGP 500 million in capital, and we are hoping to bring this up to EGP 750 million. Egypt has enjoyed a great deal of expansion in the tourism sector in the last two years. Now we have close to five million tourists per year - representing an increase of 27% from 1998 to 1999.

I understand that the group aspires to become "a global group built for the future". In light of this, what is your growth strategy?

We are looking for opportunities in different parts of the world. We have not yet made any decisions, other than to concentrate to a greater degree on the tourism industry.

What has been your biggest challenge, and how have you overcome it?

Our biggest challenge is keeping the company wealthy and maintaining good returns on our investments. In business you need to be innovative in management, in order to maximize returns from your investments, and this is what we have done.

Forbes Magazine regularly profiles the background of key players in the economy. Could you tell us a little bit about how you became CEO and Managing Director of the Alexandria Company for Real Estate Investment?

I was born in 1959, and I have been working since 1979, after graduating from the faculty of commerce. When I took the company over from my Father it was a small construction company. I have two brothers who also work in the business, and we have been continually building up the business since we took over. I am quite proud to say that we did a very good job during the last 20 years.

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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Egypt published in Forbes Global Magazine.
August 7th 2000 Issue.
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