Palm Hills down as land handed back in Cairo

What's Down: Palm Hills Developments' share prices hits a record low after approving the return of a land plot to the Egyptian government.

A man works on a home in the Palm Hills development. Reuters
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Palm Hills Developments' share price hit a record low after the company's board approved returning a land plot to the government to ease "future financial burdens".

The developer's shares dropped 5.9 per cent to 1.27 Egyptian pounds, the lowest since the company listed in May 2008.

Palm Hills's board has approved returning an 190-feddan (82 hectares) plot on the outskirts of Cairo, the company said in a filing to the Egyptian Exchange yesterday. The company had not developed or marketed the property, located on the eastern part of Sixth of October City, the statement said.

Property companies in Egypt are dealing with a string of legal challenges to their land holdings since a court ruled last year that a state deal with Talaal Moustafa Group, the country's biggest developer, was illegal.

Palm Hills is facing two court cases contesting the legality of its purchases of state land from the government.

Palm Hills Katameya, which is 85 per cent complete, and Palm Parks, which is 50 per cent complete, are the subject of the two cases.

These two plots represent less than 7.5 per cent of the developer's total land bank.

Property sales in the country have been subdued since the revolution that ousted Hosni Mubarak as president. Palm Hills said it had delivered 909 units since last year and 256 since February. The group plans to deliver 1,210 units in the next six months.

The company in June reported a first-half loss of 81.4 million Egyptian pounds, compared with a profit of 191.4m in the same period last year.

Analysts said the company's mounting debt and liabilities might cause it to sell some assets.

"It's no secret. They haven't got money, so they need to return the land," said an analyst who did not want to be identified. Yasseen Mansour, the company's chairman, was acquitted of graft charges in July.

Shares of Palm Hills have declined 80 per cent this year, bringing the company's market capitalisation to 1.3 billion pounds.