An agreement between Egypt and the Emirati firm Capital City Partners to build a new administrative capital on the outskirts of Cairo appear to be in flux due to the financing scheme.
Conflicting reports abounded Wednesday over whether Egypt had cancelled the memorandum of understanding it signed with Mohamed Alabbar, the founding partner of CCP, at the economic summit this past March. Alabbar also sits on the board of UAE-based property developer Emaar.
Reports indicate that Alabbar insists on securing financing for phase one of the project from outside sources as opposed to Egyptian banks, which is not sitting well with the government.
Announced as an administrative and business center of the future, the project is expected to initially cost US$45 billion and was to be spearheaded by Egypt’s Housing Ministry along with CCP, which is a private real estate investment fund. CCP had also brought in its longtime partner Skidmore, Owings & Merrill (SOM), a US-based architectural, urban planning and engineering firm.
Earlier today, the privately owned Al-Masry Al-Youm newspaper reported that Egypt canceled the MOU with Alabbar’s CCP but that it would move forward with its ambitious plans to build a new city with a new partner.
However, the state-run Al-Ahram portal published an article on Wednesday citing an unnamed official in the Cabinet as saying that negotiations between the Housing Ministry and CCP are ongoing, and that Alabbar has not withdrawn from the talks.
Al-Masry Al-Youm later published another article citing an Emirati official’s quotes to the Turkish Anadolu news agency, saying that negotiations are ongoing albeit with more complications than before, and also citing the proposed financing scheme as the main issue of contention.
The source says the confusion over canceling the MOU is due to the fact that it had a three-month timeframe which expires June 15, but added that there is a tacit understanding that the deadline would be extended so negotiations can continue.
Earlier this month, commenting on the contract negotiations, Housing Minister Mostafa Madbouly had told Reuters, “There are very many complications. We are still in the negotiations stage for this project.”
Al-Masry Al-Youm’s first article had cited an unnamed but “well-informed source,” reporting that sovereign Egyptian entities will carry out the feasibility study and draw up the masterplan for the project within a year, and then it will present these plans again to international and local real estate investment firms, “without relying on one firm.”
The article claimed that Alabbar was unable to present financing sources for the project, “especially since the company has no ties to Emaar or Emaar Egypt, and would therefore not act as a guarantor for Capital City when it applies for loans.”
The reasoning doesn’t stack up since it is a well-known fact that CCP has no business ties with Emaar, although when the agreement was first announced in March, many confused the two since Alabbar himself sits on the Emaar board. It is also the specific line of work that CCP raises money to fund these large scale development projects, and has successfully done so with King Abdullah Economic City in Saudi Arabia, as one example.
There is dismay among high-level officials at Alabbar’s alleged lack of commitment to what was agreed upon in the MOU, to provide nearly two-thirds of the financing for phase one of the project, the paper reported.
Egypt may resort to dividing the project into phases and presenting those separate technical and financial studies to local, Gulf-based and foreign firms, according to Al-Masry Al-Youm.
Egyptian businessman Hassan Heikal took to his Twitter account to laud the news of the MOU cancellation, which may be a significant indicator as to the overall sentiment regarding the contract. He says, “The mistake was in rushing to sign due to pressure at the Sharm conference.” He went on to cite reasons for why cancelling is a good decision, including “Alabbar is not Emaar” and that “there is no real financing with the developer” as well as the fact that no real studies have been conducted.