Talaat Mostafa launches South Med, another multi-billion dollar real estate partnership with government

Real estate tycoon Hesham Talaat Mostafa and Prime Minister Mostafa Mabduly announced on Tuesday the launch of South Med, a US$21 billion public-private investment project on Egypt’s northwest coast.

The project is the largest tourist real estate project in the region, Madbuly said during a press conference broadcast live from the New Administrative Capital, adding that it is on an area of ​​23 million square meters with an eight km beach.

South Med is the latest multi-billion-dollar public-private venture to be led by Talaat Mostafa, coming just a few months after the government signed off on the landmark $35 billion urban development project with the Talaat Moustafa Group and the United Arab Emirates’ ADQ in Ras al-Hikma, on Egypt’s northwest coast.

The projects, both largely geared toward tourism, were announced as Egypt’s government continues to seek private sector investment as part of a bailout from an ongoing economic crisis and chronic scarcity of foreign currency inflows.

Talaat Mostafa said on Tuesday that $35 billion in inflows are expected from sales in the South Med project, adding that since booking opened on Monday afternoon, sales had already reached an unprecedented amount of LE60 billion.

An advertisement for the development project starring American actor and filmmaker Sylvester Stallone premiered on June 29, advertising the “global destination” as an alternative to southern European resorts.

The earlier Ras al-Hikma deal, a usufruct contract between the Emirati sovereign fund’s development arm and Egypt’s New Urban Communities Authority, sparked commentary from pundits describing the deal as “rescuing” Egypt’s economy and speculation about whether similar partnerships would become a “pattern” for similar projects to bail Egypt out of its economic crisis.

But during Tuesday’s press conference, Talaat Mostafa did not specify the nature of the “partnership agreement” between the Talaat Moustafa Group and the government, noting only that the government would reap revenues via its “share” in the partnership.

He only said that the project comes as a “model” for the state’s partnership with the private sector in real estate development projects, which he described as part of the state’s exit from the economy and the increase of the private sector’s role in development.

Under pressure from global actors to reduce its footprint in the national economy and make more space for the private sector, Egypt’s government prepared a “state ownership policy document” in recent years mapping sectors, including real estate, in which it plans to scale down its activity.

Talaat Mostafa stressed that the project is set to secure a real income for the country, noting that taxation revenue alone could reach as much as LE1 trillion, or $21 billion. It is also expected to generate an additional LE2.4 trillion to government output and offer 1.6 million job opportunities.

He announced that the project will be a global tourism destination, which he added will attract “huge dollar revenues” to the state through real estate exports and increasing the flow of tourism to Egypt, given that, for the first time, several units will be managed by global companies.

Other than tourism, Talaat Mostafa said that, given the weather conditions in the North Coast and the nature of its land, the area the project will be constructed on is an opportunity to accommodate a large number of individuals in the coming period given the population increase in Egypt.

Speaking for the government, Madbuly described the project as “one of the greatest icons” that will attract direct foreign investments into the country and become an international tourist destination, with the aim of doubling the number of tourists by 2023, increasing the number of hotels and providing 2000 rooms. The targeted clients are high-income foreign tourists, Mostafa added.

Talaat Mostafa, notorious both as a politically connected businessman and as a convicted murderer, has played a leading role in other government privatization deals in partnership with the Emirates over recent years leading up to the Ras al-Hikma press conference in February.