Madinaty Master Plan - Talaat Moustafa Group

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Any negative change in one or more of these factors listed above could adversely affect TMG’s business, financialcondition and results of operations.TMG operates in a competitive environment.TMG faces competition from other developers of residential properties, including city and community complexes,in Egypt. TMG’s properties face competition from similar properties in Egypt. Such competition may affect TMG’sability to sell residential units or attract and retain tenants for commercial and retail space, and may reduce the salesprices for residential units or rental rates for commercial and retail space. These competing properties may haveunsold residential units or vacancy rates higher than TMG’s properties, which may result in their owners beingwilling to sell residential properties at lower prices, or make space available at lower rental rates than the space inTMG’s properties. In addition, property developers from other countries in the MENA region have made recent,and, in some cases aggressive, attempts to enter the Egyptian real estate market, and may now or in the future besuccessful in acquiring prime land for development or compete with TMG in developing properties in Egypt. Thiscombination of circumstances could adversely affect TMG’s business, financial condition and results of operations.See “Description of TMG — Competition”.Economic conditions may limit TMG’s ability to sell properties according to its planned sales schedule andthe requirements of its preliminary sales contracts.TMG’s results of operations may be affected if it is not able to sell property promptly due to prevailing economic orother conditions. Rising inflation combined with slowing GDP growth may have an adverse effect on the demandfor new housing in Egypt. While the rate of inflation was 7.7 per cent. in 2006, inflation rose to a rate of 12.8 percent. in the first three months of 2007 and then dropped to 8.5 per cent. by June 2007, according to the InternationalMonetary Fund. A high rate of inflation combined with slowing GDP growth could result in a reduction of thepurchasing power of Egyptian consumers and may have an adverse effect on their willingness to incur long-termindebtedness to finance large scale purchases such as new houses or apartments. In addition, a high rate of inflationmay result in the Central Bank of Egypt raising interest rates to control inflation, which would result in higherfinancing costs for many prospective purchasers of real estate. As a result, TMG may not be able to sell units in itscity and community complexes as rapidly as planned or at anticipated prices. Since TMG does not typically beginconstruction of the units within its city and community complexes until they have been sold to purchasers, delays inselling units could lead to construction delays. This in turn may result in TMG’s inability to develop its city andcommunity complexes according to the construction schedule set out in its preliminary sales contracts with theState, which could lead to decreases in sales revenues and, in the worst case, the State reclaiming the land allocationfrom TMG. TMG’s inability to respond promptly to changes in the Egyptian economy could adversely affect itsbusiness, financial condition and results of operations.The right of TMG to obtain title to land is subject to legal complexities and uncertainties.TMG’s business involves the acquisition of ownership rights in land plots from the State for the purpose ofdevelopment. The State does not transfer title for a phase of a development project to TMG until TMG hascompleted development of and paid the full purchase price for that phase. Prior to such time, TMG is allocated theland pursuant to a land allocation decree and preliminary sale contract with the State, whereby TMG agrees todevelop the land in accordance with a development plan, project specifications and other conditions of the contract.TMG’s failure to comply with the development conditions or other terms of the allocation decree and preliminarysales contract could adversely affect TMG’s business, in that the State may in such circumstances scale back the sizeof the land allocated for the development or rescind the preliminary sale contract. If TMG fails to comply with thematerial terms of its preliminary sales contracts, including its payment obligations, the State could change itsposition in respect of TMG’s existing allocation decrees and preliminary sales contracts and these changes could bearbitrary and require amendments to be made to the contracts or impose other conditions to TMG’s rights to developthe property and to ultimately secure title to the land, which could have a material adverse effect on TMG’sbusiness, financial condition and results of operations.Land and property legislation in Egypt is complicated and often ambiguous. Due to the complexity of recordinghistorical changes to the legal status of land lots in the relevant Egyptian land registries, data in these registries arecommonly not updated with that in other conformed registries. Although registration of title in Egypt is notpresently required to confer ownership, personal rights or possession rights, it is essential to confer title to land. As aresult of inconsistencies and inaccuracies in the land registration system, transferring title to either TMG or thepurchasers of residential units in its city and community complexes may be delayed or suspended, which couldmaterially adversely affect TMG’s sales, and therefore its business, financial condition and results of operations.12
Changes in laws or government policy could adversely affect TMG’s business or properties.The State has taken steps designed to liberalise the mortgage system and TMG has factored its expectations of theimpact of this liberalisation into its business model. The manner in which the State implements the new mortgagelaws may prove to be less favourable than that expected by TMG, which could result in the expected positive impacton TMG’s business not being realised.In addition, the State may attach further development conditions to preliminary sale contracts it may award in thefuture. For example, certain jurisdictions condition development authorisation on such things as the developeragreeing to allocate a certain portion of the land to be developed for low-income housing. The imposition of anysuch conditions may affect TMG’s development model, which could impact the sales and marketing of itsresidential units and the number and types of units developed and sold, which in turn may impact its revenues andresults of operations.Various other laws and regulations, including those relating to fire and safety requirements, building codes,environmental regulations, land use restrictions and taxes affect TMG’s properties. If TMG’s properties do notcomply with these requirements, it may incur governmental fines or private damage awards. New or amended laws,rules, regulations or ordinances could require significant unanticipated expenditures or impose restrictions on thedevelopment, construction, sale or lease of properties. Such laws, rules, regulations or ordinances may alsoadversely affect TMG’s ability to operate, sell or lease properties.TMG’s international expansion strategy may present unforeseen challenges.TMG has entered into a joint venture with partners in Saudi Arabia to develop new city and community complexes inRiyadh and Jeddah. See “Description of TMG — Description of Properties and Projects — City and CommunityComplexes — Current Projects — Saudi Joint Venture”. Although TMG has had a sales presence in Saudi Arabiasince 1991, TMG has no development or operating experience in the Saudi market or other markets outside of Egypt.Expansion into Saudi Arabia or other markets internationally may present operating or other challenges that aredifferent from those TMG currently encounters in Egypt. TMG will attempt to minimise this risk by collaborating withlocal partners familiar with the risks in the non-Egyptian markets and the workings of property development in thosemarkets, and intends to use local contractors and construction companies for its new non-Egyptian developments forthe same reasons. However, TMG may not always exercise control over its international joint ventures and its localpartners may have interests and objectives that differ from those of TMG. Moreover, there can be no assurance thatTMG will be able to anticipate or respond to the challenges of developing large-scale complexes in unfamiliar marketsoutside of Egypt, which could have an adverse effect on TMG’s projects in such markets and on TMG’s business,financial condition and results of operations as a whole.TMG’s rental revenues will depend upon the financial stability of its tenants.TMG develops large-scale city and community and hotel and resort complexes, most of which include commercialand/or retail space leased to tenants. The financial stability of these tenants may change over time, which may affectthe financial performance of these properties. Tenant defaults could result in a reduction in rental revenues, whichcould require TMG to contribute additional capital or obtain alternative financing. In addition, TMG may incurcosts in enforcing rights under the lease with a defaulting tenant, including eviction and re-leasing costs. Anydowngrading of tenants’ credit ratings or adverse change in their financial condition may negatively affect the valueof property in which such tenants lease space and the cash flows generated by them. Further, if TMG’s tenantsdecide not to renew their leases upon expiration, TMG may not be able to re-let their space on terms as favourable asthose contained in the current leases, if at all. If tenants do not renew their leases, TMG may need to expendsignificant time and money to attract replacement tenants. In addition, in connection with any renewal or re-letting,TMG may incur costs to renovate or remodel the space. As a result of these factors, TMG’s cash flow may bereduced.The real estate book values and appraisals included in this offering circular may not accurately reflect themarket value of TMG’s properties.The use of different valuation methodologies and assumptions would likely produce different valuation results.CBRE, an independent real estate appraiser, has valued certain of TMG’s real estate properties and projects. Detailsof the valuation methodologies used and the assumptions made by CBRE are described in “Annex A: CBREReport”. A number of factors could result in the values that CBRE has ascribed to these properties and projectsdiffering materially from the actual market value of such projects.13
Page 7 and 8: NOTICE TO PROSPECTIVE INVESTORS IN
Page 9 and 10: PRESENTATION OF FINANCIAL AND OTHER
Page 11 and 12: The terms set forth below have the
Page 13 and 14: SUMMARYThis summary should be read
Page 15 and 16: venture intends to develop projects
Page 17 and 18: THE COMBINED OFFERINGThis offering
Page 19 and 20: Summary Financial and Operating Dat
Page 21 and 22: Summary San Stefano Real Estate Fin
Page 23: RISK FACTORSAn investment in the Sh
Page 27 and 28: affect Four Seasons or its brand ge
Page 29 and 30: The allocation decree will not be i
Page 31 and 32: TMG’s internal controls may not b
Page 33 and 34: operating cash flows or existing de
Page 35 and 36: and semi-annual financial statement
Page 37 and 38: USE OF PROCEEDSThe proceeds to the
Page 39 and 40: services for their benefit pursuant
Page 41 and 42: SELECTED FINANCIAL INFORMATIONSelec
Page 43 and 44: Selected San Stefano Real Estate Fi
Page 45 and 46: For the sixFor the year ended 31Dec
Page 47 and 48: Profit sharing to employees and boa
Page 49 and 50: Stefano Real Estate and Alexandria
Page 51 and 52: and IT support, among other service
Page 53 and 54: Interest income on fixed deposits.
Page 55 and 56: Interest income on fixed deposits w
Page 57 and 58: Other income. San Stefano Real Esta
Page 59 and 60: Gross profit. As a result of the fa
Page 61 and 62: Income tax expense. Income tax expe
Page 63 and 64: which were partially offset by:•
Page 65 and 66: Year ended 31 December 2005Net cash
Page 67 and 68: For the year ended 31 December2007
Page 69 and 70: which were partially offset by:•
Page 71 and 72: For the year ended 31 December2007
Page 73 and 74: elation to share of results of asso
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outstanding indebtedness under long
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The preparation of the Annual and I
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TMG was one of the early private se
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Set forth below is a chart showing
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market-leading position and its ext
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TMG’s Nile Hotel project and the
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final fit-out will be undertaken ei
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The following table sets forth cert
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parking area. The commercial space
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number and type of residential unit
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Although there have been few histor
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Information TechnologyTMG currently
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Title to the Al Rehab II Land will
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all technical, financial, administr
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MANAGEMENTBoard of DirectorsThe Com
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Hossam Abdallah Helal has been prop
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• respond to the queries of the s
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THE SELLING SHAREHOLDERS AND PRINCI
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INDUSTRYCertain of the information
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The following table sets forth info
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The CASE is characterised by a rela
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(or their representatives) represen
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such surplus, provided, however, th
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Convention Between the United State
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Non-U.S. Holder to be subject to U.
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consequences for U.K. Holders who h
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PLAN OF DISTRIBUTIONEFG-Hermes and
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SELLING AND TRANSFER RESTRICTIONSSe
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(ii)(iii)(iv)to any legal entity wh
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SETTLEMENT AND TRANSFERSettlement a
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INDEX TO FINANCIAL STATEMENTSIndepe
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AUDITOR’S REPORT TO THE SHAREHOLD
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ARAB COMPANY FOR PROJECTS AND URBAN
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2.1 Basis of preparation — contin
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2.4 Summary of significant accounti
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3 Revenue and cost of revenue2006LE
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6 Property and equipment — contin
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10 Development properties — conti
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15 Interest-bearing loans and borro
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21 Financial risk management object
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3 Revenue and cost of revenueThree
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7 Investments in associateControl o
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13 Legal reserveAccording the Artic
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17 Transactions with related partie
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SAN STEFANO FOR REAL ESTATE INVESTM
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5 Income tax expense — continuedT
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8 Available-for-sale investments200
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14 Legal reserveAccording to the Ar
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19 Financial risk management object
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REPORT ON REVIEW OF INTERIM FINANCI
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8 Development properties — contin
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16 Interest-bearing loans and borro
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21 Events after the balance sheet d
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AUDITORS’ REPORT TO THE SHAREHOLD
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ALEXANDRIA FOR REAL ESTATE INVESTME
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3 Revenue and cost of revenue2006LE
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6 Property and equipmentEquipmentLE
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7 Investments in Associates — con
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13 Share capital2006LE2005LE2004LEA
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21 DividendsA cash dividend of LE 1
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26 Events after the balance sheet d
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REPORT ON REVIEW OF INTERIM FINANCI
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5 Income tax expense — continuedT
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7 Investments in associates — con
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11 Account receivable and prepaymen
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18 Accounts payable and accruals30
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23 Alexandria group entitiesSignifi
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ANNEX A: CBRE REPORTA-1
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3.2 In accordance with the Standard
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Market ValueFreeholdEGPTotalEGP(i)
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9. Plant and Machinery9.1 The plant
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19.2 Neither the whole nor any part
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PROPERTYAl Rehab City (I), New Cair
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PROPERTYFour Seasons, San Stefano,
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PROPERTYFour Seasons, Nile Plaza, C
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Phase 3Description Land area (sq m)
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PROPERTYMarsa Alam Land , Puerto Ve
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PROPERTYNile Hotel, Cairo, EgyptLOC
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[This page intentionally left blank
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Central Park & Club Project’s Man
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