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Khaled Bichara

CEO, Orascom Development Egypt

Orascom Development Egypt (ODE) is a leading developer of fully integrated destinations that include private villas and apartments, hotels, golf courses, marinas, and supporting infrastructure such as schools, universities and hospitals. The company got started 30 years ago with El Gouna, once a desert outpost which has grown into a thriving multinational town with world-class sports events and film festivals. This success is now being replicated across Egypt, where the asset-rich company still has 70 million square meters of land to build on, on top of its existing developments comprising 27 hotels with a total of 6,023 rooms. Supporting this success is the fact that the company has begun trading on the EGX30, which comprises the 30 most active companies in Egypt in traded value and liquidity

How has the company evolved since its beginnings over 30 years ago?

The company today has a presence in seven countries and three continents: the UK, Switzerland, Morocco, Montenegro, the UAE, Oman and, of course, Egypt, as we are originally an Egyptian company. Our main holding is listed on the Swiss stock exchange SIX, and the Egyptian subsidiary owns all the Egyptian assets and is listed on the Egyptian stock exchange. I joined in 2016 to focus on continuing with company growth while ensuring that it makes financial sense.

It is still early in our journey, considering all the assets we still hold and the increased interest by analysts in our company and in the country as a whole

What is ODE’s main activity?

We are probably one of the only private town developers in the world: we develop towns in every sense of the word, on land covering over 105 million square meters. We typically purchase large plots of land in underdeveloped areas and build them up. Our flagship town is El Gouna, which is how the company got started over 30 years ago. At that time, nobody was doing anything similar. El Gouna is also different in that it is built north of Hurghada airport, while everyone else was going south. It was a pure desert, and we had to build our own water and electricity stations, but that uniqueness gave it a special character. El Gouna has nearly 2,500 hotel rooms, around 20,000 people who live there year-round, its own airport, hospital, four schools, master’s degrees from the University of Berlin, a stadium, and its own football team that plays in the Egyptian premier league, so it’s really a complete town, and a model for our other towns around the world.

The company has achieved revenue growth of 40%. To what do you attribute this?

We’re building up entire towns and it takes time to reach a critical mass. Once this is achieved, growth takes place at an accelerated rate: once a town is full, when more people are living there and buying things, the price of real estate rises. At first it is harder, because the towns are empty. We are one of the few groups who have made very long-term plans in terms of real estate development, ranging from the oldest, El Gouna, to others that are around eight years old. It takes time to reach this critical mass, and that is why you are now seeing double-digit growth numbers; and, in fact, in the last two or three years you see 5x and even 10x revenue growth in some towns that have just reached that point where everybody wants to go there. We foresee similar growth in the future because we still have a lot of land left to develop, around 70 million square meters. And this growth holds out if you look at any of the metrics: number of sold units, hotel occupancy rates, average price per room, and so on.

We are looking for new partnerships, not only in Egypt but across the group, to build more hotels, and we are seeking added value through expertise or branding

What is your investor profile?

We have very different types. Some come and invest inside the destinations themselves, whether building hotels and businesses, or buying real estate. In El Gouna we have investors from Germany, Switzerland, Italy, the UK and, of course, many from Egypt. We have a Belgian family that runs a couple of hotels there. So we have a lot of European investors, not just in El Gouna but across the group. And then we have people who invest in our stock. Our largest investor after Orascom is a northern European fund, and then we are on the Swiss stock exchange, where our investors are Swiss and German. So they’re a diverse group, focused on different things.

What are the advantages for a German investor of choosing Orascom Development?

Orascom offers high growth and a rich asset base that increases in value, so if you are interested in developing countries and a company that is very asset-rich, we provide this security because even if there is a bump in the road, which happens in emerging markets in general, the business can sustain itself, as we have proven over the last 30 years, which included slowdowns, terrorist attacks and revolutions. The other thing that makes us attractive is the diversity of geographies that we have a presence in: mature markets like UK and Switzerland; emerging European markets like Montenegro; African markets like Morocco and Egypt; and Asian markets like UAE and Oman, constituting a diversified country risk. 

Casa Cook El Gouna is set to open in October. What can you tell us about this latest luxury hotel project?

This is the first Casa Cook outside of Europe, and the fact that Thomas Cook selected El Gouna definitely says something about the town’s potential. We’re actually doing two projects with them: Casa Cook, due to open in October, and Cook Club, due to open in August, both targeting different sectors of the market. One is an upgrade of a previous hotel, and the other one is a brand new hotel. It’s a very important milestone that Thomas Cook trusted us with this project. When I joined the group in 2016, tourism in Egypt was not going through its best days, and the notion of creating new hotel rooms did not have much support. But we always took a long view, knowing that everything is cyclical.

As an investor, you can use Egypt as a base to serve the whole Middle East, but then again the Egyptian market is maybe 50 times bigger than other Middle Eastern markets

What is your ideal investor?

We are looking for new partnerships, not only in Egypt but across the group, to build more hotels, and we are seeking added value – expertise, brand, some angle that we cannot provide ourselves. We’ve been growing our room portfolio significantly and now have over 7,000 rooms as a group around the world and continue to grow each year, recently adding hotels in Montenegro, Oman and Switzerland. And this year we’re adding a couple of new hotels in Egypt. So every year we are adding one or two hotels to the portfolio, serving specific purposes. And since we still have so much land left to develop, we are expecting to build many more hotels.

In what ways are you interested in the German market?

We go to the ITB trade fair in Berlin every year with a booth presenting the diversity of our portfolio. We partner will all the tour operators in Germany. The number one nationality in El Gouna in terms of tourists is Germany, and we keep on top of the market in order to offer it what it likes in terms of preferred food at the hotels, or what kind of an experience they expect. So we go to all the big fairs with people who speak the language and understand the culture on the customer side. And on the real estate side, we are seeing a renewed influx of European investors, including from Germany. In 2010, 50% of our real estate sales were to Europeans; after the revolution that figure went down to zero, but now it is coming back, and this year it is at 20%. And on the stock market side, we are soon going to Germany with a Swiss bank to meet with German investors, present the company and show its opportunities. So we have a multi-track approach: visitors, real estate investors and stock investors.

Why is Egypt a good partner and why is this a good time to invest?

Egypt has a lot of potential for a lot of different reasons: a strategic location, great weather, infrastructure that has improved significantly in recent years, far fewer challenges than in the past for investors, a large and young population that represents a growing customer base, and a talented workforce with a significant amount of university graduates to help businesses flourish and grow. We ourselves have a multinational management team. As an investor, you can use Egypt as a base to serve the whole Middle East, but then again the Egyptian market is maybe 50 times bigger than other Middle Eastern markets. The government has significantly supported investors, not just by changing regulations, but also by investing in roads, electricity and other infrastructure.

Our focus over the next three years is to make sure that the people in our towns are happy and the businesses profitable

How would you like to build on El Gouna’s reputation on an international scale?

We believe that the number one thing we need to do is to keep offering quality and keep delivering on our promise. The people who are in El Gouna are its best promoters, but we are also doing a lot of work on the international scene with events like world-class squash tournaments and film festivals, which are the kinds of things that get media attention. Last year we had Patrick Dempsey and Sylvester Stallone, and the year before that we had Vanessa Williams and Oliver Stone, and these are good ambassadors for us. We’ve had kitesurfing competitions and more, and El Gouna is now developing in ways that we do not control, both culturally and as a platform for businesses to develop.

What are some of the corporate social responsibility activities that Orascom is engaging in?

We’ve been working a lot in the last year in sports, focusing on events in the Red Sea region and supplying coaching and equipment to needy communities, where we encourage kids to participate in sports activities. Before focusing on sports, we were building housing. We foresee continuing to work with sports in the future, as we see it brings a lot of joy and pride to the Egyptian people. And getting kids to play sports is beneficial for the whole country.

What are your key priorities for the coming years?
Continuing to develop our towns. We have a great opportunity but also a great responsibility towards our investors, and we take that very seriously, especially when it comes to the people who joined us early – who joined a dream when we began to develop El Gouna. We change our structure for each one of our towns, which has its own live-in management team. Our focus over the next three years is to continue on this journey that we began over 30 years ago, to make sure that the people in our towns are happy and the businesses profitable, which in turn will mean that our company is doing better and our stock going up. Because of the scope of our projects, our time frames are longer than your average development. But we believe that a lot of effort has been done in the last three and a half years and that is why we have seen much better results in 2018 than previously, and this year we are growing even faster. We have also seen more interest in our stock, both in Egypt and in Switzerland. Our stock has begun trading on the main Egyptian exchange, the EGX30, and on the Swiss exchange. This is all very good, yet it is still early in our journey, considering all the assets we still hold and the increased interest by analysts in our company and in the country as a whole. We expect the next three years to be very exciting.

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