Egypt launches $21bn Mediterranean mega-project in new public-private partnership

Egypt's Prime Minister Mostafa Madbouly has announced the launch of a major new real estate development project named South Med on the country's Mediterranean coast, in partnership between the government and the private sector.

The project, developed by Egyptian real estate giant Talaat Moustafa Group Holding, is expected to attract investments worth 1 trillion Egyptian pounds ($20.7 billion) and generate sales of 1.6 trillion pounds ($33 billion), the company's CEO Hisham Talaat said during a joint press conference with Mr Madbouly.

In just the first few hours after reservations opened, the project achieved actual sales of 60 billion pounds, “an unprecedented figure in Egypt's real estate and tourism sectors”, according to Mr Talaat.

He emphasised that the project comes as a model of partnership between the state and the private sector in real estate, in line with the government's policy of encouraging the private sector to play a larger role in developing the national economy.

He said that “local investment is capable of generating projects that match global ones to create real added value for Egypt and its economy”.

The project is also expected to create 1.6 million direct job opportunities through construction and other related industries.

During his speech, Mr Madbouly emphasised the government's commitment to developing the north coast as a focal point to maximise the tourism sector. The goal is to double the current number of tourists visiting Egypt by 2030, he said.

The prime minister highlighted that the north coast's moderate year-round climate and topography make it one of the most important areas capable of absorbing a large portion of Egypt's future population growth.

To encourage Egyptian youth to reside in the north coast region, the government is working to provide more job opportunities through implementing a large, integrated set of projects.

Mr Madbouly stressed that this project, along with others such as the New Alamein City and the Ras Al Hikma project in partnership with the UAE, will attract millions of foreign tourists from around the world, especially from the higher-spending segments from Europe and Arab countries.

He highlighted the job opportunities these projects will create for Egyptian youth, both directly and indirectly, encouraging them to settle permanently in the region.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Egypt launches $21bn Mediterranean mega-project in new public-private partnership

Deal expected to attract investments worth 1 trillion Egyptian pounds and create 1.6 million local jobs