An Interview with Hisham Talaat Moustafa, One of Egypt’s Most Influential Real Estate CEOs According To Forbes Middle East

Earlier this year, Hisham Talaat Moustafa was the highest ranked Egyptian CEO in the real estate sector on Forbes Middle East’s list of the most powerful CEOs in the Middle East.

Here, the CEO and managing director of his namesake company, Talaat Moustafa Holding Group, reveals his future plans as well as the life experiences that have shaped his success. Amongst those formative experiences was his journey through education. As a young student, Moustafa was advised by his father to switch his studies from engineering to commerce – a move that set him on a new path that would later lead him to build a real estate empire and lay the foundations of a new future.

Today, you are one of the most prominent real estate moguls in Egypt. How did your journey begin? My career started in 1980 when I was in charge of structuring at the family business, Alexandria Construction Company. During this period, I realized that the real estate sector was about to witness great changes, as the government was starting to get involved and propose significant projects. This got me thinking about how I could create a real estate entity for Talaat Moustafa Group so that we too could play an active role.

From 1975 to 1984, I traveled a lot outside Egypt, and I became acquainted with the latest developments in the real estate field in America and Europe. I

always thought about our inability to reach similar levels of real estate development and I was determined to change that. In particular, I was interested in the middle class and the lack of suitable housing that catered to its needs.

How did you succeed in creating the entity you dreamed of?

At the time, the company owned plots of land on the northern coast of Egypt, which helped us launch the Al Rawda Al Khadra project, followed by the Virginia Beach project. We then shifted our focus to Cairo in the early 1990s through the Al Rabwa project in Sheikh Zayed and Mayfair. These ventures propelled us to consider the Al-Rehab project in 1995, as studies showed that East Cairo had a purchasing power of 65% compared to 35% for the West Cairo area. From there, we signed contracts with consulting companies from America and Egypt to lay down the general plan for the new city — a breakthrough in the real estate scene in Egypt at that time.

Al-Rehab was an outside-of-thebox idea. How did you face and overcome the challenges that came with it?

Indeed, we have faced great challenges. To overcome that challenge, the idea was to create an integrated living experience with transportation lines, hospitals, clubs, malls, parks, and entertainment options. We had to provide our customers with a full package of services that met their daily needs.

How did you convince customers to buy into the idea?

We started in reverse, we would pay business owners the cost of opening and operating their businesses in the city, and we would buy their products from them if they were not sold. In quick succession, we opened the school, club, mall, pharmacy, and private clinics. People then started to go and live in Al-Rehab, and enjoy a different life experience, surrounded by green spaces and the highest-level of services. Today, Al-Rehab is a popular city, inhabited by almost 42,000 families, including around 300,000 permanent residents.

How did you succeed in securing the required funds for this mega project?

With our shift in thinking towards building cities, we had a comprehensive plan to grow from a medium real estate company to a large company. With that in mind, the idea of a public offering for Alexandria Real-Estate Investment came up in 1997. When we listed on the London Stock Exchange, we were 17-times oversubscribed.

“Over the next 30 years… Egypt is expected to need more than 30 million housing units.”

Do you remember how much the selling price was at the time in Al-Rehab?

The average price per meter for residential units was about EGP 900. The price for a residential unit of 70 square meters was about EGP 54,000. The middle class couldn’t find a suitable housing place, but when they moved to Al-Rehab they were impressed with the quality of life.

How did you come to join Alexandria Construction Company in the first place?

After graduating high school in 1976 with top grades, I went to enroll in the College of Engineering, but my father had different ideas. He wanted me to study at the College of Commerce as we did not have anyone with the right skills to help us develop the performance of the company. Thank God, he had a farsighted vision.

From there, I joined the company and benefited from many experiences that helped me achieve my vision of restructuring the sector. I must note here that the company started in 1985 with a capital not exceeding EGP 2 million. Today the company’s capital is EGP 20 billion. The summary of my experiences and the message that I’d like to convey to every young person who is starting their life is that they must have the determination to achieve their goals.

How big was the company’s land portfolio in the year 2000 when Al-Rehab City opened its doors for business?

At the time, it was around eight million square meters. Today, the land portfolio of the Talaat Moustafa Group stands at 74 million square meters, and we have developed about 50% of it.

In your opinion, what are the lessons learned from the experience of Al-Rehab?

After Al-Rehab, we gained experience in city planning, which was reflected in our second experience in Madinaty, where we sought help from planners and international consulting offices to become the best in the industry, in line with the modern age.

How do you balance the difficult equation between operating a profitable business and providing services to people, some of which are considered unprofitable? When you provide distinctive services that attract a greater number of users, you create added value for the project and generate a demand for it, which is what happened in our experience. Today we have 700,000 citizens in Al-Rehab and Madinaty, and we expect that number to increase to one million by 2025.

What is the timeline for the completion of the Madinaty project?

Madinaty is a considerably large project, equivalent in area to the city of Beirut. So far, we have completed 70% of the development and the project should be finalized within seven or eight years. Every year, a new phase is added according to the

“The group has 100,000 clients, including 10,000 from Arab countries.”

project schedule, meaning that it gets completed “by default”.

You mentioned previously that Madinaty was the main engine for Talaat Moustafa Group in 2020. So, what is the most prominent project for 2021?

Aside from Madinaty, the main project for this year is our fivethousand-acre site in Capital Gardens. Right now, we are working to complete the project designs in preparation for the launch of the first phase in mid-2021. We are currently working on market research. Through studies, we are focusing on how to create a balance between the forces of supply and demand, and how to offer products compatible with the available purchasing potential. On the topic of purchasing power, we will be providing attractive payment plans to potential buyers. We started intensive negotiations around four months ago with the banking system and other parties in order to develop the best offers.

When will the project details be announced including prices, number of units, and payment plans?

All the details will be revealed in June and we believe that the project will create a big shift in the market. The project has a total investment of EGP 800 billion, and the city is expected to accommodate more than 600,000 people. The design of the city is currently underway, with a focus on making it a completely green city and at the same time fully “smart” with everything controllable through a mobile phone or laptop.

With this latest project, we aim to achieve a new paradigm shift. Al-Rehab was the first move in 1995, then came Madinaty in 2005, and now our next project in the Capital Gardens marks the third shift, corresponding with the generation of 2020-2030. We are also bringing new ideas to the Egyptian market. For example, we are thinking about finding a more sophisticated way to deal with garbage. In Madinaty, all garbage is collected underground, but in the new project, we are thinking more along the lines of not letting anyone see any garbage at all. We are also looking into making it an air pollution-free city, by relying on electric vehicles for most of the internal transportation network within the city. Another key consideration is how we can provide 100% security for children.

Besides the Administrative Capital, do you think that the country is moving towards supporting business in certain other regions? The Administrative Capital project is considered one of the largest projects that the state is currently implementing. When you have this huge investment in the Capital Gardens, the matter carries great risks. We as a company cannot work on small projects, for each real estate developer has its range, and our company is large and works according to its economic criteria.

What is the outlook for the real estate market in Egypt and what are the challenges?

The challenges that Egypt will face over the next 30 years relate to the demand for housing. Egypt is expected to need more than 30 million housing units, but has a current stock of just 22 million. In fact, Egypt will need to build more units over the next three decades than it has built over the past 150 years. This rise in demand will also create the need for better roads, water supply, and energy infrastructure. The cost of these projects at today’s prices will exceed EGP 2 trillion annually. Here, I believe we need to think outside the box and attract global foreign investment that will give us the ability to finance these plans.

What if Egypt cannot achieve these goals?

In that case, the Egyptian economy would be affected. However, looking on the bright side, we are currently experiencing strong GDP growth, and in light of Egypt’s ambitious development plans, the opportunities for employment and economic growth over the next three decades will be immense. Here, attracting a larger segment of foreign investment, will be key to enabling Egypt to achieve its goals, and this relies on the creation of a new legislative environment.

What do you mean by a new legislative environment?

We need new laws to regulate partnership projects between the public and private sectors that operate on the build-operatetransfer (BOT) system. We also need to set a framework for the relationship between the government and the investor, and to determine the returns, operating conditions, and pricing.

What are Egypt’s strengths when it comes to attracting interest from GCC?

Egypt has distinctive features, including its beaches, a moderate

climate, and a breathtaking north coast. That’s in addition to the Red Sea, which is a global winter destination. With such an offering, clients come from all over the world. For example, the group has 100,000 clients, including 10,000 from Arab countries. Why? Because they found an attractive product that suits them in a country they love. I also believe that a large number of Egyptians living abroad decided to return to Egypt when they saw AlRehab and Madinaty.

How would you describe your experience as a CEO of a prominent real estate company during the COVID-19 crisis?

The most difficult period in my life was the onset of the COVID-19 pandemic. I have learned more in the past year than in the past 40 years. I have faced challenges beyond my imagination, like searching for a way to deal with 80,000 employees; I was required to maintain their safety, maintain the stability of the company’s cash flow, revenues and profits, and maintain the company’s shares in the stock market. Then there was the responsibility for the residents in our projects, in addition to the hotels, malls, and clubs, as well as the transportation and service companies. All this is happening while the purchasing power in all areas is almost completely disrupted.

What are the most important decisions you have had to make during the pandemic?

The most important decision was to not lay off any worker or reduce salaries, despite knowing that it would have an impact on the company finances. The challenge was guaranteeing the preservation of the company’s revenues and profit levels while keeping the employees and the shareholders onboard. In the end, we were able to do that and to push forward through the crisis to reach where we are now.

What were the measures taken to push forward through the crisis? All of these measures were disclosed on the stock market, such as the agreements aiming to develop joint projects with some banks, and other decisions that contributed to the stability of the company’s sales and profit rates.

How long do you think the pandemic will continue?

I believe that the crisis will continue for another four to five years, though at a less severe level. After vaccination rollout, there will still be cases, but year after year the number of cases will decrease.

Your projects are distinguished by their enormity and the high volumes of liquidity they require. How do you ensure this liquidity?

The secret of success for any large real estate company is not to be over-reliant on bank financing for their projects. The company’s loan size from banks is very small, and the percentage of property rights to borrow is negligible. At Talaat Moustafa Group, our recipe for success is greater reliance on customer payments, unit reservations, and installments.

What is your dream for the group?

I look forward to the group remaining a well-established institution that will continue for generations to come, and for the new generation to be even more sophisticated and advanced. This is actually what we are working on now; we are preparing the new generation to be ready to take over. Our up-and-coming people have earned top qualifications from institutions overseas and they are a mix of family and non-family members. My hope is that within the next five to seven years, they will get their chance to join the workforce, adding new blood to the company.

Who runs Talaat Moustafa Group? We have three main sectors in the family business. The real estate and tourism sector is the largest, and it is the sector I am responsible for. Then there is the contracting and manufacturing sector, which is managed by Engineer Tarek Talaat. Finally, there is the agriculture and agro-industrial products sector, and that falls within the responsibility of Engineer Hany Talaat.

Is there anyone who works with you in the company from the second generation?

Of course, we already have people from the second generation working at Talaat Mustafa Group, including Ahmed Hani Talaat, Omar Hisham Talaat, and Muhammad Hisham Talaat.

“I look forward to the group remaining a well-established institution that will continue for generations to come.”