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DOWNTOWN DEALS
The purchase and restoration of downtown Cairo’s historical buildings by the private sector promises generous returns and a revival of some of the country’s decaying heritage. Those opposed to the ventures call for a reevaluation of Egypt’s real estate ownership and leasing laws to protect historical property. When it comes to Egypt’s heritage, can national interests and those of private businesses be reconciled?
BY SHAIMAA FAYED
A stroll through the boulevards and buildings of downtown Cairo tells many a story. The area, designed by prestigious French architects commissioned by Khedive Ismail, was once home to the prosperous elite of late 19th and early 20th century Cairo. It is a relic of a bygone era – Egypt’s belle époque – and demonstrates the Khedive’s vision for developing Egypt.
Today, the neighborhood exhibits a plethora of sharp contrasts, juxtaposing antiquated and modern, refined and gaudy. Decades of neglect by the neighborhood’s landlords and tenants, precipitated by the exodus of the expatriate community after the 1952 Revolution and the ensuing departure of the upper classes, have left the regal splendor of its ornate edifices mired in decay. Lax enforcement of laws and regulations gave way to the entry of commercial establishments into the neighborhood, mostly with no regard to maintaining aesthetic harmony or preserving historical buildings.
Groups of heritage enthusiasts have long called for a national campaign to restore the area’s architectural beauty. Only since the 1990s, and perhaps more specifically since the 1992 earthquake, which caused notable damage across the country, did a national heritage campaign begin to see the light.
The government established the National Organization for Urban Harmony (NOUH) in 2004 to register valuable historical buildings and commence on pilot projects to restore the downtown area, and a secretariat for the protection of Khedivial Cairo was established. Presided over by the governor of Cairo, it comprises representatives from the governorate and the Holding Insurance Company, technical experts from NOUH, and the chairmen of both national and private investments banks.
The secretariat has already commenced on a four-phase project to restore the area extending from Tahrir Square to Gomhouriya Street, starting with Talaat Harb Square.
Such initiatives have led to collaborative efforts between the government, conservationists and heritage enthusiasts. Recently, a new group of actors has also stepped into the picture – the business community. With access to the funds required for large-scale restoration work, they view their involvement as one that could generate considerable long-term returns while speeding up the restoration process.
Al Ismaelia for Real Estate Investments was the first to launch a project of this kind, and magnitude, in Egypt. The company was established in February 2008 with Beltone Private Equity as its management company and is wholly owned by Samai Hills Ltd., a British Virgin Islands (BVI) based company with LE 308 million in capital, of which 35 percent of shares are owned by Samih Sawiris and the remaining 65 percent distributed between Sheikh Sulayman Abbanamay, Amwal AlKhaleej company and a number of Egyptian investors. The company intends to purchase one million square meters in downtown property.
The business of restoration
“The idea of taking old buildings and refurbishing them has been done everywhere, from Paris and Rome to Istanbul,” says Karim Shafei, chairman and CEO of Al Ismaelia for Real Estate Investments. He explains that the company’s project was one that quickly drew in investors, all of whom foresaw sizeable economic potential in restoring the downtown area. However, the details of the venture have yet to be ironed out. “This is a very dynamic project,” says Shafei. “We didn’t calculate the projected returns. It’s not that we don’t see that there’s going to be significant returns; but it’s very difficult to quantify something that is so dynamic and that will also take place in the distant future.”
The company has already acquired 11 buildings, including the one housing the popular Café Riche in Hoda Shaarawy street, purchased for LE 9.5 million, and the Davies Bryan building, with entrances on Abdel Khaleq Tharwat, Mohamed Farid and Adly streets, purchased for LE 32 million. It hopes to purchase properties clustered in close proximity. Possible options for re-use of the buildings following their restoration, which Shafei anticipates will be completed over 10-15 years, run the gamut from boutique hotels to office buildings, residences and malls. While the company hopes to acquire one million square meters, Shafei says that the project can become profitable once 300,000-400,000 square meters are purchased.
Currently, around half of downtown’s buildings are owned by public sector insurance companies, the remainder by private owners. Among the latter, many are frustrated by antiquated rental laws that prevent them from raising their leasing prices. All leasing contracts in Egypt signed prior to 1996 fall under the old rental law, which forbids rent hikes to protect the interests of lower-income residents.
Owners were glad to find investors that would purchase their buildings, explains Shafei. In many cases, he says, “they come to us, we don’t go to them. Tenants want to leave because either they have left their apartments closed for ages, or they don’t like downtown. They don’t want to be living here. The buildings are in a miserable state.” In the case of occupied buildings, Al Ismaelia for Real Estate Investments is negotiating with tenants wishing to give up their rent contracts in exchange for financial compensation, a proposition that has been met with mixed sentiments. The company has taken the same approach with the stores in the area, offering to buy their properties or asking them to comply with storefront alterations that conform to the architectural design of the buildings.
Shafei explains that purchasing buildings in their entirety is necessary to ensure adequate supervision over the restoration process. “I think that to sell these buildings as individual apartments and shops is a major problem. Once you lose control over the entire building, it means that maintenance and refurbishment become the responsibility of none,” he says.
The execution of Al Ismaelia for Real Estate Investments’ project, a mammoth venture and a novel one for Egypt, does not come without its challenges. Management of the buildings, or “stopping the hemorrhage” as Shafei describes it, is a primary concern. He explains that the company is in the process of cleaning up the purchased properties and applying preventative maintenance to address potential fire, water and electricity hazards. Shafei illustrates the challenge with the example of the decrepit alleyways behind downtown’s corporate buildings, which have long been used as disposal grounds for old furniture and office waste. “This is a fire hazard. It’s a disaster,” he notes, adding that the buildings’ abandoned apartments, many with collapsing walls and broken windows, are infested with cobwebs, soot and rats.
The early phases of restoration pose another challenge: equipping the buildings with up-to-date amenities, such as air conditioning units and modern piping, without damaging their original structure. “Restoration and modernization have to be done in parallel,” he says. “Twenty years from now, if no one touches their maintenance, they will collapse all by themselves,” he asserts.
Yasmine El-Dorghamy, founder and editor of Turath – Egypt’s Heritage Review, is among the keen supporters of private sector companies purchasing and restoring historical buildings. Asked about refurbishment of downtown buildings, she says, “every time you ask what the solution is, [people] say the government should buy them. The government cannot buy all of these buildings. [The government’s] money should be put into education and health.”
El-Dorghamy considers a project such as the one initiated by Al Ismaelia for Real Estate Investments to be a smart investment opportunity. She argues that while real estate developers have focused their long-term plans on developing properties in desert areas such as Sixth of October City, their attempts to imitate the grandeur of historical buildings will not succeed. “[Developers] are recreating poor imitations of these buildings, and no matter what they do it won’t be one tenth of the beauty of these old buildings,” she says. “Why let the original [buildings] decay and disappear and then go build poor imitations? Why not try to restore what’s there and make money out of it?”
A double-edged sword
While Shafei maintains that Al Ismaelia for Real Estate Investments does not intend to have downtown refurbished to the extent that it has “an expelling power on the average Egyptian,” and that the company will work towards preserving the socioeconomic heterogeneity of the area, much of the controversy surrounding the project stems from fears of the negative repercussions that may accompany gentrification. The added value of the restored properties, and the inevitable surge that will take place in the area’s selling and rental prices, as well as property taxes, could significantly alter who lives there in the future.
Perhaps the biggest challenge for the company is negotiating with the buildings’ current occupants. “We’re working on a very sensitive project because we’re buying buildings that are inhabited, so people are either living there or making a living in those buildings,” Shafei says.
Downtown’s lower-income dwellers opposed to the mass selling of buildings to the private sector fear being displaced and ostracized. Reda Galal, a keysmith and a tenant in one of the buildings purchased by the company, claims that following his refusal to sell his apartment, the company employed various tactics to expel him and other occupants from the building. “I have lived here for 50 years, three months and six days,” says Galal. “I married here, had kids here, married off my kids here. I can’t leave this building. It is five minutes away from my work. They offered to buy me another apartment in the same area. I am 80 years old. How can I spend 50 years in this building and then spend the remaining few years of my life in another home?”
Shafei asserts that claims of the company attempting to evict tenants forcefully are unfounded. “As a company with such high-profile investors... [and one] that intends to go public one day, we can’t afford to [employ] such practices at all,” says Shafei, who adds that such tactics are in direct opposition to the company’s values.
El-Dorghamy explains that any attempt at gentrification will inevitably incur social costs that need to be addressed. She believes that the problems that plague the neighborhood stem from the current residential leasing laws; downtown’s low-income tenants pay strikingly low rental rates to landlords, dissuading them from investing in maintenance work for their buildings, while tenants, also, are often unable or unwilling to do so. “The dwellers are victims [and so are] the owners of the buildings,” says El-Dorghamy. “Everybody is a victim here. The culprit is the law. It’s an unfair law. How can I own a building that can be rented for $2,000 a month and [then be obliged to] rent it for LE 20? These buildings, when gentrified, can generate a lot more income.”
Those opposed to the private sector’s restoration projects claim that it is garnering interest in these projects owing to rumors of an imminent law set to liberalize the relationship between landlords and tenants. The law would allow landlords to hike up rental prices. Shafei refutes the claims, asserting that “it would be ridiculous to invest LE 300 million based on hearsay or a potential law that could or could not pass... That’s insane.”
He maintains that upgrading downtown, rather than full-blown gentrification, is the goal of Al Ismaelia for Real Estate Investments. “We don’t want to gentrify downtown,” he says. “We don’t want to end up with downtown being a super-exclusive seven-star area. We want to conserve, not only the buildings, but the spirit and the historical, cultural and social elements.” Cairo is a city where wealthy and poor have always coexisted, notes Shafei, who envisions a downtown that will enjoy the same cultural heterogeneity after its restoration.
A legal framework
Not all heritage enthusiasts view private sector investment in historical neighborhoods as entirely positive ventures. Mamdouh Hamza, chairman of architectural and engineering firm Hamza Associates, is among those calling for a change in the country’s real estate ownership laws. While Al Ismaelia for Real Estate Investments currently has no direct competitors in the downtown area, Hamza, privy to rumors that various companies with foreign shareholders are currently purchasing buildings in bulk across various districts in Cairo – including Shobra, Boulaq and Maadi – has expressed concern that the sale of property in Egypt, in particular historical property, is not being adequately monitored. “Selling historical buildings in Cairo is exactly like selling the statue of Ramses II,” he says.
Hamza believes that, like in Switzerland, Saudi Arabia and Algeria, there should be a real estate ownership law in Egypt to prevent foreigners from purchasing certain buildings and property in some districts, both for national security and economic reasons. “Let foreigners buy villas and chalets in tourist areas but not in cities and towns,” he says. “Cities are for Egyptians. If you allow foreigners to buy [property in cities] you raise the price of property to international levels and Egyptians are [left] outside the competition.”
Shafei dismisses concerns that Al Ismaelia for Real Estate Investments is attempting to sell off downtown buildings to foreign shareholders who, many fear, may pay little heed to preserving the buildings’, and hence Egypt’s, heritage. “So what if [foreign actors] refurbish buildings so long as the buildings are being refurbished and the tenants are being respected?”
Hamza also blames the decrepitude of downtown on rent control laws, which have prevented property owners from generating the revenues they otherwise would have, given the buildings’ values. He is among those advocating the law liberalizing the relationship between landlords and tenants, “but only for commercial and administrative spaces, not housing... for social reasons.” He adds that commercial and administrative establishments constitute 60 percent of downtown. “Only when this law passes can anyone do anything useful in this area,” he asserts.
Hassan Bahgat, head of the Central Department for Planning and Technical Affairs at NOUH, is confident that since Law 144/2006 regarding the protection of historical buildings passed, there is little fear that individuals or business entities will attempt to mar or demolish buildings of value. “They are now bound by law,” he asserts. Any restoration work on these buildings must receive a permit from NOUH, which is affiliated with the Ministry of Culture, Bahgat says. He clears common misconceptions that downtown buildings fall within the jurisdiction of the legislation on antiquities. “There is not a single building in Khedivial Cairo that is considered an ‘antiquity,’” he says. Rather, he explains, most of the district’s buildings are legally defined as “building(s) of value.” This means the building meets one of five criteria: it enjoys unique architectural heritage, is linked to a historical figure, is linked to a historical event, was designed by a well-known architect, or is a tourist site.
Bringing downtown building ownership under one entity will help protect the neighborhood’s heritage, Bahgat says. “If the owners in downtown do not have any benefit in having the buildings renovated, they will not pay anything,” he explains. “If the owner changes to one entity that agrees on this vision – invest[ing] in the area without breaching the laws – I see this as positive.” He adds that a knowledgeable owner who understands the role of restoration in raising the value of their property will cooperate with the ministry in its campaign to restore historic neighborhoods. “The poor owner whose building is worth LE 40 million and earns a revenue of LE 400 a month from it, not only will he not spend [on maintenance], if he could demolish it, he would.”
Bahgat views the involvement of the private sector as a welcome step in speeding up the government’s restoration plans. He adds that the refurbishment of the buildings is necessary to boost their value. “The most expensive hotels abroad are those in buildings that are old,” says Bahgat. “There are grand chains that seek out those buildings,” he states. He adds that refurbishment of downtown’s historic buildings for business purposes, irrespective of who the owners are, will generate economic benefits. “Let’s say a hotel is built. Who will be working there? Egyptians.”
Amid the impassioned positions of those concerned with the revival and protection of national heritage there are those who favor the middle ground. This camp asserts that the most pragmatic solution is collaboration between the government and the private sector, the former to mandate the rules and regulations governing historical property as well as to closely monitor buildings of value, and the latter to supply the necessary funding for restoration. “As a principle [the project] is good because [the private sector] has the money and the resources, but it is the government’s job to monitor what is being done with those buildings,” asserts El-Dorghamy. “The architectural heritage of Cairo can only be saved by private sector interests and strict government regulations.”
TAWAKOL BUILDING (CAFÉ RICHE BUILDING)
One of the most renowned downtown buildings, its centerpiece, Café Riche, opened in 1908. The venue has witnessed many historically significant events over the last century. It is said to be where King Farouk first saw his second wife, Nariman Sadek; where the perpetrator of the 1919 failed assassination attempt on Prime Minister Youssef Wahba Pacha lay in wait for his target; and where, in its basement, several members of the resistance during the 1919 Revolution met to organize their activities and print their flyers. Café Riche later became an intellectual hub frequented by the likes of Naguib Mahfouz, Taha Hussein and Ahmed Fouad Negm.
THE VIENNOISE BUILDING
Built by Thomas Weston Forsyth in the 1910s, this building was acquired by Abdallah Mirshak, an Egyptian-Lebanese businessman, in 1945. It was appropriated by the government at the time of nationalization, then reclaimed by Mirshak’s five daughters in 1981. The building housed the Viennoise Hotel, which was shut down in 1999. Georges Fahoum, the late husband of Emma Mirshak, represented Egypt in the 1936 Olympics in track events.
THE DAVIES BRYAN BUILDING (CHOURBAGUI BUILDING)
Named after John Davies Bryan, a Welsh businessman who moved to Egypt in the 1880s, the building was once home to the largest branch of the Davies Bryan stores in Egypt. Established in 1910 by Davies and two of his brothers, the store sold imported goods, mainly men’s and ladies’ apparel. Rich with stucco motifs and decorated with engravings of shields, roses and thistles, it was purchased in 1957 by three wealthy Syrian brothers, the Chourbaguis, and has become alternatively known as the Chourbagui building.
ISAAC AMIEL BUILDING
Erected in 1916 by Egyptian boxing champion Isaac Amiel, the building was designed in the French new baroque/art deco style and completed in 1920. It was sold to the Morcos family in 1956 then later to the Gharib family in the mid-1970s. In 1997, a tailoring workshop worker’s heated iron set the entire mezzanine level on fire, causing the first floor staircase to collapse. The rebuilt staircase remains a striking, and still visible, reminder of the incident.
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