Madinaty Master Plan - Talaat Moustafa Group

venture intends to develop projects in both Riyadh and Jeddah that are similar to TMG’s Al Rehab complex. See“Material Contracts — Saudi Joint Venture Agreement”. TMG believes that the real estate market in Saudi Arabiahas many characteristics in common with the Egyptian market, including a stable legal environment and favourabledemographics. Moreover, TMG is familiar with the Saudi Arabian market, having maintained a sales presence theresince 1991.TMG plans to continue to evaluate additional opportunities for expanding its development platform internationally,particularly in further locations where it believes it would have competitive advantages similar to those in itsdomestic market. In addition to its Saudi Arabian projects, TMG is currently evaluating potential projects in theMENA region in countries that, among other things, offer (i) stable political environments with government policiesaligned with increasing housing and tourism, (ii) similar middle and upper class demographics to those seen inEgypt and (iii) a robust legal environment that recognises, among other things, land rights. As in Saudi Arabia,TMG will consider expansion through joint venture arrangements with a partner who has relevant experience in thelocal market. TMG intends to manage its international expansion such that its initial project in one country hasmoved beyond the master planning stage before it embarks upon the master planning stage in a new country.Increase weighting of stable revenues from hotel and resort complexesTMG intends to expand its hotel and resort business through investments in, or the acquisition of, hotel and resortcomplexes or increasing its investments in the Group subsidiaries through which it carries out this business. TMGhas allocated LE 2.3 billion (US$404.0 million) for this expansion in the near term, which it expects to fund througha mixture of debt and equity financing. TMG intends to use its existing model of combining a luxury hotel withresidential units to increase the proportion of stable revenues generated by its hotel operations.Maintain and enhance reputation for quality and attention to detailTMG endeavours to maintain full control over the management of each of its city and community complexes, frominception of the project, through development, construction and post-construction. This ensures the quality of itsoutput and enables it to conform to precise construction specifications. Furthermore, TMG believes that retainingcontrol over management of its properties following the completion of construction enables it to maintain thequality of its complexes on a long-term basis, thus helping to maintain the resale value of the residential units. Thisprovides a strong selling point for additional phases in the same development and for other TMG city andcommunity complexes, and helps to maintain the resale value of residential units. Once construction is completed,TMG retains control of maintenance, repairs, staffing, security and other services in the common areas of its cityand community complexes on behalf of its residents, on a cost-neutral basis. TMG has also retained control ofutilities such as water, electricity and sewers within its complexes up to the point at which they are connected topublicly-maintained infrastructure. By retaining control of these services, TMG ensures the quality of itsdevelopments on a long-term basis, thus enhancing its reputation.Explore new financing techniquesTMG has developed an innovative financing technique whereby it has entered into arrangements with local andregional banks that enable it to provide financing facilities to the purchasers of its residential units, which in turnallow purchasers to pay for their residence over a longer period than is typical in Egypt. Management believes thatthese arrangements represent the most developed and broadest scope of residential financing available from orthrough any development company in Egypt, and permit TMG’s city and community complexes to benefit from alarger pool of potential purchasers. To support the longer-term financing packages offered to its purchasers, undercertain of its arrangements TMG intends to convert receivables from its sale of units, comprised of post-datedcheques from purchasers, to cash through the sale, or factoring, of these cheques to two of the largest banks inEgypt. In addition, TMG is actively pursuing the future use of securitisation transactions as a further means ofconverting post-dated cheques to cash. Furthermore, in connection with recent amendments to Egyptian mortgagelegislation that permit companies to offer mortgage financing, TMG, together with its majority shareholder, hasformed a new company for this purpose and has made application to the State for the required license. TMG intendsto seek investment from financial institutions which will dilute TMG’s holding to a minority position, and to retaineither qualified staff or a third party management company to operate this mortgage company for the purpose ofexpanding and being in a position to control the availability of mortgage financing to TMG’s customers. See“Description of TMG— Sales and Marketing — City and community complexes — Sales terms and financingarrangements”.3