Ismaelia is renovating the dilapidated splendour of Africa’s biggest city
Standing under the glaring sun in an inner courtyard of the Viennoise building, a neoclassical mansion block in downtown Cairo, Karim Shafei recalls what it was like before its recent renovation.
“This open space was a dump, full of rubbish,” said the chairman of Ismaelia for Real Estate Investment, a property developer. “There were layers of grime on the walls. We exposed the stone by stripping the paint and plaster from it. Now the courtyard will become a recreational area for the employees of the company renting it.”
His company is trying to attract Egyptian businesses out of the suburbs of Africa’s largest city and back into the city centre, with its period buildings and good transport links.
Once a crumbling wreck that was at risk of collapse, the Viennoise has now been restored to its former glory as a gracious late-19th century property with marble and wrought-iron staircases, massive wooden doors and ornate plaster cornices. The building is being fitted out to receive its first tenant, Contact, a car finance company with 300 staff.
For Ismaelia, the 4,500 square metre Viennoise is not just its “flagship project” and first major renovation but is also proof that its business model works, and that companies that have long shunned the city centre because its buildings were neglected and shabby, could be lured back if offered well-refurbished premises at the right price.
Karim Shafei: ‘I think we will make more money than the traditional real estate model here with more sustainability and less risk’ © Christina Rizk
“The suburbia experience is showing its limitations and that it is not the answer that fits everybody,” said Mr Shafei. “Contact’s decision indicates that if there is a decent offer, people are willing to move and to pay a premium to be in the city.”
Founded in 2008 by a group of Egyptian and Gulf investors with $70m in capital, Ismaelia has been acquiring clusters of buildings, slowly buying out tenants and restoring premises to rent out to small and medium-sized businesses. The company owns 23 downtown properties including a disused 900-seat Art Deco cinema and the former French consulate which it bought in 2013 for €2m. It has also secured an $8.5m loan from the European Bank for Reconstruction and Development.
The plan now, said Mr Shafei, was to acquire five to eight more buildings and to develop a pipeline of about nine projects to be launched over three years. These will include a co-working space focusing on IT and the creative industries in the former French consulate, as well as retail and office developments. Mr Shafei said they were “more and more interested in renting to smaller companies such as architects’ firms, marketing companies, social media outfits and designers”.
In focusing on the city centre with its elegant but dilapidated European-style buildings, Ismaelia is bucking a Cairo trend running for two decades. Egyptian developers have flourished for years by building compounds aimed at prosperous Cairenes on the desert outskirts of the metropolis. Vast new suburbs complete with malls, international schools and office buildings have emerged, enticing large sections of the middle classes from the congested centre.
But Mr Shafei believes there is still a significant opportunity in the city centre with its good transport links and rich architectural heritage, dating mostly to the early 20th century. “I think we will make more money than the traditional real estate model here with more sustainability and less risk,” he said. “We are now starting to become profitable whereas before that we were breaking even. Per project, we can generate yields north of 20 per cent and we rely a lot on capital appreciation.”
With Ismaelia’s rents of $12 to $20 per square meter, he said the company’s rates fell between upmarket office blocks, which are still scarce, and the cheap apartments in residential buildings on which most small businesses rely.
Downtown Cairo went into decline during the socialist sixties when rent control laws slashed the income of landlords, who then stopped maintaining buildings. As the social and economic elite left the centre, workshops and small businesses took their place, often causing damage by altering features and original façades with garish signs and other changes. Then in 2011, the revolution in which Hosni Mubarak was overthrown as president saw the area turn into a battle zone between police and protesters, and attracted a flood of street hawkers, dealing a blow to the company’s hopes of marketing the area.
Though Ismaelia took “a big hit” and had to stop acquisitions during the years of upheaval, Mr Shafei said the revolution achieved “what we could have spent many years trying to do. It brought many people downtown who wouldn’t have normally come”.
Ismaelia is trying to overcome affluent Egyptians’ scepticism of the city centre by boosting the district’s cultural and creative credentials. The group has provided premises for art and photography groups and sponsored a contemporary arts festival. Plans for turning the disused cinema into a music hall venue with dining and live performances are also part of the vision, but hinge on the authorities rescinding a ban on new restaurants in the area. Mr Shafei also speaks of creating small retail clusters that would include cafés, art galleries and boutiques selling items by local designers.
“We are trying to find unique concepts that do not exist elsewhere in the city,” said Mr Shafei. “We also want downtown to be the launching pad for any new creative concept.”
Source: Financial Times