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British investors are getting the chance to buy into a Middle Eastern property boom

by Carlo Svaluto Moreolo

A top Egyptian holding company has brought its real estate business, Palm Hill Developments, to London’s main market, through a global offering of 63.4 million shares, which values the business at just under $2 billion.

Palm Hill Developments is partly owned by Mansour & Maghraby Investment & Development, which owned a 66% stake in the business pre-float.

The Egyptian holding company is floating the business in Cairo and Alexandria, but London institutional investors bought global depositary receipts (GDRs) quoted on the main market. One GDR represents five shares at $20.31 per GDR.

The IPO should fetch more than $200 million, with the free float set at around 18.4%. A separate offering to retail investors of more than 12 million shares is being made in Egypt. The deal boosts a quiet first quarter in terms of main market IPOs.

Mansour & Maghraby appeared in 1996 when El-Maghraby and Mansour merged. Mansour struck a deal with General Motors in 1975 to become the American company’s dealer in Egypt. Now Mansour owns a stake in the largest automotive conglomerate in Egypt, which distributes Opel, Chevrolet, Cadillac and other General Motors brands.

In Egypt, El Mansour also has the sole dealership for Caterpillar and John Deere; sole distributorship for Philip Morris cigarettes and Kraft Foods, and the franchise of all McDonald’s restaurants.

Backed by such a portfolio, Mansour & Maghraby is seeking international exposure for Palm Hills, primarily a developer of high-end residential real estate and resort projects. The set-up dates back to 1997 when its sister company, Al Ethadia, operated in real estate investment.

The market value of Palm Hills property portfolio has been independently valued at $3.5 billion. Last year the company registered revenues of $96.7 million and made a net profit of $32.5 million. This year has started on the right foot, as the company said in the three-month period to the end of March, it registered unaudited sales of $58.9 million and taxable profits of $36 million.

Palm Hills’ reckons its land bank is ‘one of the largest land banks held by any developer operating in the Egyptian market’, consisting of more than 38.9 million square metres of land. The company has 21 projects, five of which are under construction and another 12 in ongoing planning.

The company is developing land in Cairo, Alexandria, Egypt’s Mediterranean northern coast, and locations on the Red Sea coast.

Palm Hills hopes to benefit from Egypt’s fast-growing economy, with some forecasting GDP will rise more than 7% this year. Property development is booming too, thanks to foreign prospective buyers, and overseas property advisers and dealers expanding their focus there.

The GDRs start trading on Thursday 8 May.