Arkan Group Egypt

Company Description :

  • El Badr for Investments & Commercial Spaces (“EL Badr”) is a real estate developer specialized in constructing and operating commercial complexes
  • Its flagship project is Arkan Plaza, which is located in the heart of Sheikh Zayed. It’s a mixed-use project comprising of commercial and office spaces with a total net-leasable-area of 29,609sqm
  • In 2013, Egycap Investments Ltd, acquired majority stake of 68.8% of the company, with a vision of expanding the current complex
  • In early 2016, the company acquired 3 adjacent land parcels with a total land area of 80,585sqm, increasing its gross built-up-area by 96,600sqm(1)

Deal Rationale :

  • Capitalizing on Arkans’ strong brand name to expand the current complex into a mega complex
  • An unique management with diversified skills to execute the expansion plan. The management team has expertise in mall development, mall management, and creating optimal tenant mix
  • Debt free balance sheet which could get levered up for further developments
  • Dollar linked long term revenue stream to hedge against soring inflation. Unlike residential leasing contracts, commercial lease is typically dollar linked with contract duration of 9 years
  • Capitalizing on Arkans’ first mover advantage in Sheikh Zayed to reach high occupancy levels in short time

Value Creation :

  • Institutionalizing the company from a family managed enterprise through setting up a robust corporate governance system, hiring experienced and diversified board of directors, and setting up a supervisory committee
  • Provided financial enhancements through allocating all costs to different profit center to detect shortfalls and to better price each revenue stream
  • Optimized the capital structure mix through leveraging the company in the development phase
  • Implemented a cost saving strategy in the development of the new complex. Currently, the new complex is developed through an EPCM model supervised by the owners representative committee

Pre/ Post Deal (2013-2016) :

     Revenue              EGP 40mn        2.4x⇒       EGP 95mn

      EBITDA                EGP 25mn       2.6x⇒       EGP 64mn

   EBITDA M                   63%    +500 bps ⇒         68%

   Occupancy                  60%            1.6x⇒            100%

  Land Area*            16,753sqm        6.4x⇒       97,338sqm