State company breaks off real estate deal, cites fluctuating land value amid rumored interest from UAE partner

Due to rapid changes in the value of land, partnership plans for Helio Park, a project that was set to see over 17,000 apartments built in Cairo’s upmarket east, were terminated last week by a state-owned real estate development company.

Sources told Mada Masr on condition of anonymity that, although the government’s real estate developer has broken contract with the local partner, the project could be revived in partnership with an Emirati sovereign fund that has shown interest in buying into Egypt’s government real estate assets on multiple occasions.

A series of knocks to Egypt’s economy have seen inflation soar to its highest rate in four years since plans for the Helio Park project were first publicly laid out by the Heliopolis Company for Housing and Development almost two years ago.

The dynamic has sent the government in pursuit of foreign investors willing to divert foreign currency into Egypt’s economy, with Saudi Arabian and Emirati companies making a belt of notable purchases in state companies in 2022 that sources suggest could resume with the Emirati interest in Heliopolis Housing.

Announcing the termination of its agreement with local partner Mountain View to implement Helio Park, Heliopolis Company for Housing and Development, a subsidiary of the state’s real estate development holding company, cited the substantial rise in land valuations due to economic instability. The company noted that the project's lands were last appraised six months ago.

What Heliopolis Housing plans to do next is unclear, though Emirati investors are said to have shown an interest in stepping in as new partners to the deal, and the company does not appear to be pursuing another public tender reflecting a more accurate valuation of the Helio Park project’s 1,695 feddan plot.

Heliopolis Housing concluded its deal with Mountain View as early as January 13, said sources with knowledge of the partnership from MENA for Real Estate Development Consultancy, the company that drew up the first partnership tender that Mountain View ultimately won in 2022.

Informed sources at the state’s Holding Company for Construction and Development, which owns over 70 percent of Heliopolis Housing, told Mada Masr on condition of anonymity that a real estate developer belonging to Abu Dhabi’s sovereign fund, ADQ Holding, is considering an offer to Heliopolis.

It wouldn’t be the first time for ADQ to seek out stakes in the Egyptian state's real estate assets, as the company’s subsidiary, SODIC, was said to be interested in partnering with Heliopolis Housing in 2022, according to Mahmoud Gad, a real estate analyst at Arab African International Securities.

A partnership between SODIC and a different Holding Company for Construction and Development subsidiary, Madinet Nasr for Housing and Development, was almost sealed in 2022, yet Madinet Nasr ultimately rejected the deal, saying SODIC had undervalued the company. 

Commenting on the likelihood of the UAE’s SODIC taking on a role in Helio Park, real estate analyst Youssef al-Banna said that Heliopolis Housing is unlikely to sell the entirety of Helio Park to the Emirati company, on the basis that Helio Park represents 41 percent of the company’s unexploited lands and that it falls in an exclusive upmarket area between the Rehab and Madinaty urban projects on the road to the new administrative capital. Given this, said Banna, revenue-sharing would be the best option for SODIC to get involved. Heliopolis Housing likewise denied news reports earlier this month that Helio Park is on the table for sale to Gulf investors.

Government plans to involve the private sector in its real estate companies, part of the key demands placed upon Egypt by the International Monetary Fund since 2018, have stumbled on multiple occasions.

While the state sought to promote private sector investment in the public companies that hold its real estate assets in 2020, bidders weren't forthcoming.

Instead, it has increasingly carried out more stage-managed sales to state-affiliated companies in the Gulf.