URC focuses on creating value for its shareholders

URC Vice Chairman Mazen Issam Hawwa has extensive experience across many KIPCO Group verticals, including finance and real estate

The United Real Estate Company (URC), a leading real estate developer in Kuwait and the MENA region, announced its financial results for the 3rd quarter that ended on 30 September 2022. The Company recorded an increase in its net profit by 33.33% to reach KD 1.60 million for the 3rd quarter of 2022, compared to a net profit of KD 1.20 million for the same period in 2021. Moreover, 2021 marked a rebound of activities as restrictions from COVID-19 started to phase out.

Mr. Mazen Issam Hawwa took over as URC Vice Chairman and Group Chief Executive Officer in 2020. He had served in the senior management of Kuwait Projects Company Holding (KIPCO Group) for 19 years.

Mr. Hawwa has multi-facet experience in various verticals in which KIPCO Group is involved including real estate and financial services. As part of KIPCO Group’s strategy, Mr. Hawwa has been involved in various operating companies providing thought leadership and advice on strategic directives, financial planning, and governance.

Mr. Hawwa holds an Executive MBA from HEC Paris and is a graduate of the Lebanese American University. He has attended several executive education programs, including the General Management Program at Harvard Business School, and holds several professional qualifications from prominent USbased institutions.

In an interview given to the International Finance Magazine, Mr. Hawwa shares his insights on URC, commercial real estate, business strategies, and other factors, influencing the real estate sector in Kuwait.

IF: How is the current economic rebound impacting the different activities at URC such as shoppingrentals, hospitality sector, and real estate services?

Mazen Issam Hawwa: The year 2021 saw strict restrictions being imposed to ensure public health and safety due to the COVID-19 pandemic in Kuwait and abroad. By Q2 of 2021, our market operations witnessed an easing of regulations, and business returned to normal gradually. The last two quarters were positive, and the re-normalization improved to some degree. Further, URC's business verticals saw considerable operational recovery after governments across the world lifted the partial and complete lockdowns.

During these difficult times, we went the extra distance to fulfill the needs of our tenants and customers without compromising any safety protocols. This helped us maintain and improve our occupancy, without suffering any drop. On the contrary, occupancy started growing during the rebound.

On a local retail level, Marina Mall, Kuwait's ultimate shopping destination and home to 137 international multi-category mix brands spanning over 225,945 square meters, thrived as consumer spending power spiked, especially on luxury and essential goods. The mall attracted more footfalls and registered a good performance in the retail outlets.

On the real estate front, our expectations were borne out by the fact that the sales of residential units in Hessah Towers and Byout Hessah continued as planned.

Has demand for commercial real estate and hospitality picked up?

Demand for commercial real estate and hospitality has definitely seen growth in 2022. This was mainly due to the easing of health restrictions by the government. As a leading real estate developer and investor in Kuwait and the MENA region, we took timely measures to ensure that our offerings are well-placed to meet market needs, precisely Egypt.

We also expect further growth in Kuwait’s tourism sector. By 2025, we expect spending on travel and tourism in Kuwait to increase to USD 1.13 billion at a compound annual growth rate of approximately 21%.

What are your expectations for the year ahead?

URC works efficiently and effectively to uplift the living conditions in Kuwait, promote well-being for all, and promote inclusive and sustainable economic growth full of productive employment and decent work for everyone. Driven by our values, we also lay great emphasis on fostering innovation, increasing the quality of life, and making cities and human settlements inclusive, safe, resilient, and sustainable—in line with the sustainable development goals (SDGs).

Our priorities remain constant on creating value for our shareholders, building sustainable communities, and delivering high-quality projects. URC's commitment to continuous development ensures timely delivery in Kuwait, Egypt, and Morocco. When it comes to Kuwait, we are continuing with the development of our residential components “Hessah Towers” and “Byout Hessah” in the “Hessah District,” which are expected to be completed and ready for handover in 2023. We are also aiming to finalize the development of the Commercial District and are locked in negotiations with several retailers of all kinds—medical clinics, restaurants, cafes, malls, and hospitals.

In Kuwait, we have been creating a unique customer experience and a pleasant journey with Marina World, a landmark mixed-use development located on the Arabian Gulf Road and considered to be one of the country's most bustling areas & most visited malls.

Our project in Oman, the Salalah Gardens Mall & Residences, is fully operational and self-reliant as it has become self-sustainable to meet its obligations. Salalah Mall continues to promise its visitors a seamless shopping experience, an exceptional blend of culinary options, and a wide range of entertainment attractions for families to enjoy.

In Jordan, our Abdali mall has been a strategic investment for URC and has seen improvement after the easing of restrictions by the government in 2021. Currently, we are continuing to navigate new methods to incorporate value-added elements that attempt to recast the mall through innovative services that provide a level of leisure and entertainment to share quality time with friends and family.

Our Egypt market has seen considerable growth in 2022. Hence, the company has completed one project – Aswar Residences – and one project in the making – Medius Residences.

In March 2022, URC announced the merger of United Towers Holding Company and Al-

Dhiyafa Holding Company. What are your goals with this merger?

True, in March 2022, URC decided to merge with Al Dhiyafa Holding Company (DHC) and United Towers Holding Company (UTHC). These two companies had already signed a Memorandum of Understanding (MoU) in which URC is the merging entity, while they become the merged entities.

In July 2022, URC further announced that its board of directors has approved the asset valuation report and the independent investment advisor's fairness opinion report related to the merger of DHC and UTHC.

In August 2022, URC announced that it has obtained the approval of the Capital Markets Authority (CMA) to merge by amalgamation with DHC and UTHC. The merger is a non-cash transaction, and the share swap ratio has been set at 0.64 URC share for every UTHC share, and 0.58 URC share for every DHC share.

Shareholders of the URC have approved the company’s merger with UTHC and DHC at the Extraordinary General Assembly held on October 24, 2022. The shareholders also agreed to increase the company’s capital by about KD 24.3 million from KD 118.8 million to KD 143.1 million, by issuing 242.6 million ordinary shares at nominal value.

We are working within a clear strategy that aims to achieve the desired value and results from this merger, which is to enhance URC’s asset portfolio and improve the company’s capacity. We’re basically looking to increase revenues, which leads to added value for all the shareholders participating in this entity resulting from the merger.

Moreover, we expect to capitalize on the advantages that the merger of two operationally synergistic entities (United Towers Holding and AlDhiyafa Holding Company) would bring us.

We are confident that this transaction will create a unified entity that achieves synergy between the merged companies in order to expand and diversify investment and assure growth. We look forward to completing the final procedures and implementing the deal by the end of 2022.

How is the merger likely to affect URC’s activities and business performance?

This step will impact URC by increasing revenues and improving the bottom line and focus.

We want to describe to our readers the reach and operations of the group through its geographical presence. So, let's analyse the completed operations, the ones in the process, and the ones to come. Let’s start with Egypt, here the company has developed the Aswar Residences and Medius Residences, which is under development.

What are your expectations for your properties in Egypt?

This step will impact URC by increasing revenues and improving the bottom line and focus.

After the sale of Aswar Residence, a gated residential community comprising 75 three-story villas located on the eastern side of New Cairo, we are preparing to launch the sale of our residential project in Cairo, along with the possibility of resort development in Sharm El-Sheikh. Medius Residences is a high-end residential community developing in the heart of New Cairo, Egypt.

The project spans a 108,000 square meter plot and comprises six clusters. We have divided the clusters into 61 apartment buildings, including 468 apartments with various flats and duplexes, retail complexes, and office units.

The hospitality sector in Egypt has also seen a considerable improvement due to the easing of restrictions and specific economic measures taken by the government. Furthermore, Egypt's new capital city, currently under development, will be a spring of new contract opportunities in the coming years. As a result, our Egypt market has seen considerable growth in 2022, and we hope to launch Medius Residences apartments soon.

With the climbing demand in Egypt's real estate market, the country has begun to develop new cities with scope for large-scale real estate projects. The ongoing development and construction of new cities, in addition to the development of the existing new towns, present attractive investment opportunities.

The excellent macroeconomic stability in Egypt will result in funneling international investments into the country's non-residential sector. Due to the high population, developing residential projects will be the state’s top priority in its bid to construct affordable housing for the average Egyptian.

What are your plans for development as the economy continues to boom?

Our plans include developing a world-class allinclusive resort in Sharm El-Sheikh. In Morocco, the Assoufid is of particular significance. The first phase included a golf club, and now we’re developing the second phase which boasts a fivestar hotel and a residential component.

When will the second phase be fully operational?

The five-star hotel, St. Regis Marrakech, is expected to commence construction in Q3 of 2023 and will be completed in mid-2025.

In Morocco, we’ve managed to overcome the stagnation in the local tourism industry by creating a new wave of branded luxury-living in the Assoufid project. With infrastructure works completed, we are the construction of the award-winning five-star hotel, The St. Regis Marrakech Resort, alongside branded villas, premium residences, and a retail hub soon. In addition to our world-class golf course, these high-end components will be part of our success story in creating valuable experiences.

By creating a new wave of branded luxury-living with the Assoufid project, we’ve managed to overcome the stagnation in the local tourism industry. The second phase of the Assoufid development will introduce the iconic five-star hotel brand, The St. Regis Marrakech Resort, operated by Marriott International, Inc.

As branded residences continue to prove successful, the standard of luxury living continues to evolve.

The upcoming Assoufid Residences are changing the standards for luxury living, with exclusive amenities and personalized services that will include a worldclass spa, a swimming pool, a state-of-the-art fitness center, and three specialty restaurants for a unique culinary experience.

What are the company's future prospects in Morocco? Do you see enormous potential in real estate?

The real estate market in Morocco has always been attractive due to its geographic position, and we expect good growth on the completion of Assoufid.

Our main objective is to position Assoufid as the first exclusive St. Regis branded residence in Morocco that provides a variety of premium offerings and services, in addition to providing an authentic experience for a unique lifestyle to the residents.

Marrakech in Morocco is one of the most luxurious destinations for international stars and celebrities, who choose it as their regular holiday destination.

Analysts project a moderate but robust industrial performance and a fast-paced recovery for the tourism sector in Morocco. There’s also hope that the ongoing reforms would pace the growth rate over the medium term.

As the country's economy is recovering from the pandemic, I believe Morocco's tourism sector will be performing better this year.

In the first eleven months of 2021, the number of people staying in hotels, Airbnbs, and Riads increased by 30%. Riads are looked upon as the quintessential Moroccan accommodation. Many traditional Riads have been converted into guesthouses, allowing visitors to live like a local while in Morocco.

At the crossroads of Africa and Europe, Morocco is a destination that offers endless possibilities for travel lovers. Morocco has everything for discovery, nature, culture, gastronomy, or luxury stays. It is open for all visitors to discover, explore, and enjoy the many facets of the Moroccan experience.

In Oman, you started operations with the Salalah Gardens Mall, and other projects are waiting for the green light. What are your expectations for your Omani properties?

Oman's residential real estate market could register a CAGR of more than 13% during the forecast period 2022-27. However, due to COVID-19, Oman's real estate sector has felt the heat of an economic slowdown in 2020.

Oman's commercial real estate market could also register a CAGR of more than 11% during the forecast period. It is experiencing significant growth in the hospitality and travel sectors.

Our project in Oman, the Salalah Gardens Mall & Residences, is fully operational and selfreliant. The properties comprise a leasable retail area of 28,810 sq. m and 166 serviced rooms.

What are the long-term development plans for Oman?

Currently, our focus is on the operational improvement of our existing assets.

Your development in Lebanon, Raouche View, has been praised locally as one of the top residential developments in the country. Could you share your strategy or plans for Lebanon?

Despite the challenging economic situation in Lebanon, we managed to rent out the majority of our apartments in Raouche View 1090, Beirut, in particular. The property has 42 apartments, including two penthouses. We have sold twelve apartments, while out of the remaining 30 apartments; we leased 24. We are currently not pursuing further development projects in the country.

How do you plan to maximize URC's performance during your tenure?

I believe in a three-pronged approach towards maximizing URC's performance, namely, enhancing the capabilities of our internal team, product innovation, and digitalizing our operations. All businesses have to take the path of digital transformation to realize the enormous growth opportunities that are there. Meanwhile, I will lay great emphasis on engaging with our customers, ensuring operational excellence on all our operating assets, and exiting certain targeted assets and investments.

How does URC's overall strategy fit into KIPCO's?

KIPCO is our biggest shareholder, and URC is the real estate arm of KIPCO. We fit well with the overall strategy of safeguarding and improving the stakeholders' interests.

As a corporate leader in Kuwait with a US academic background, what’s your opinion about the challenges that Kuwaiti entrepreneurs and corporate leaders face as the country’s economic fulcrum shifts to the private sector with a big push for economic diversification? Could you please summarize these challenges?

Kuwait's long-term challenges are related to the economy's heavy dependence on oil and domestic consumption and the slow progress in implementing diversification plans.

Non-oil growth is stalling due to short-term challenges related to the fallout from the coronavirus pandemic and structural problems such as the lack of a dynamic private sector, compounded by political barriers to structural reform. Additionally, Kuwaiti authorities still need to balance between containing the mounting fiscal pressures and supporting citizens and businesses disrupted by the pandemic. As a result, capital spending and development projects have stalled; fiscal outturns show a 27.5% reduction in capital spending in FY20 and FY21.

As I look ahead, I remain optimistic about the Kuwaiti market as it actively seeks to create new business sectors within the economy. The Kuwaiti government's policy to diversify the economy recognizes the value of SMEs and, consequently, has instituted schemes to provide entrepreneurs with funding, advice, and support to encourage the growth of the SME sector.

editor@ifinancemag.com

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