DFF SME - Downtown Cairo Regeneration

Location:

Egypt

Project number:

47961

Business sector:

Property and tourism

Notice type:

Private

Environmental category:

B

Target board date:

29 Nov 2016

Status:

Signed

PSD disclosed:

24 Nov 2016

Translated version of this PSD: Arabic

Project Description

The provision of a senior loan to Al Ismaelia For Real Estate Investment S.A.E. (the "Company"), a joint stock company registered in Egypt, to finance the refurbishment of a number of buildings located in Downtown Cairo (the "Project").

Project Objectives

Financing the refurbishment and commercialisation of a number of historic buildings owned by the Company and located in Downtown Cairo and supporting the regeneration and revitalisation efforts in the area.

Transition Impact

  • Setting standards, through introducing sustainability in the refurbishment concept by utilising best international practice energy and resource efficiency techniques at both design and operation stages.
     
  • Market expansion by increasing the availability of high quality modern commercial space in Downtown Cairo and potentially attracting other investors in the area by creating a demonstration effect of successful project refurbishment and commercialisation.

Client Information

AL ISMAELIA FOR REAL ESTATE INVESTMENT

Al Ismaelia For Real Estate Investment S.A.E. is a real estate development company established to acquire and renovate historic buildings in Downtown Cairo. The Company is owned by a number of Egyptian and Middle Eastern investors and is managed by BPE Partners (Formerly Beltone Private Equity).

EBRD Finance Summary

EGP 145,000,000.00

Total Project Cost

EGP 433,600,000.00

Environmental and Social Summary

The Project was categorised B in accordance with 2014 EBRD Environmental & Social Policy as the environmental and social impacts associated with the Project can be readily identified and addressed by adequate mitigation measures. Environmental and Social Due Diligence (ESDD) undertaken by ESD staff focused on examining the Company's environmental and social risk management capacities, legal compliance, impacts and mitigation measures related to the refurbishment work, and the potential impacts to existing tenants. The ESDD was based on a review of the completed EBRD Environmental and Social Questionnaire for Property Development and follow-up communications with the Company.

The Project aims to refurbish a number of the Company's 22 historically and architecturally valuable properties located in a protected historical downtown area of Cairo, to increase the commercial value of the largely neglected historical buildings. One of the key items identified during the ESDD was that the Project is associated with on-going negotiations with the existing tenants over compensation to terminate their tenancies, as many of the residents and commercial users hold "Old Rent" agreements based on rent controls established in the 1950s. The Company has baseline data
for each individual property, tenants and the lease status. This data indicates that majority of the remaining tenants utilise the space either as office or retail space. After the refurbishment, the building space will be used mainly for office and retail purposes. A Resettlement Framework developed based on the principles and requirements of PR 5 will be adopted by the Project. It underlines the procedures to ensure legal compliance for the negotiation of termination of the tenancies without evictions and displacement, as well as a grievance mechanism.

The key results of the ESDD showed the following: the Project conforms to the city's zoning and planning requirements; the refurbishment works are in compliance with historical and architectural conservation legal requirements; and there is no past contamination associated with the Project.

All the buildings within the Project are Type B historical buildings. This category allows changes internally, and it restricts any changes to the facade except for restoration purposes. The facade restoration works of the Project will be implemented by one of the municipality/government approved restoration contractors and the work scope and design are to be approved by the National Organization for Urban Harmonization. There are also certain conditions imposed by the municipality with regards to colours and materials used in the refurbishment of the buildings.

A structural engineering survey has been carried out for each building prior to refurbishment works to examine structural soundness and determine the scope of the works. The buildings are not associated with asbestos as local natural materials are traditionally used as construction material.

The Fire brigade / industrial safety authority may inspect the buildings, during the construction phase, or when applying for an operating license as there are potential for fire hazards from premises on site, such as restaurants, or safety concerns relating to the movement of large numbers of people
such as from theatres and other venues that hold large crowds. The project will however undertake life and fire safety audits in line with PR 4.

Construction workers' engagement in the refurbishment work is relatively small, ranging from 20 to 50 workers, and the Company will require the contractors to comply with relevant laws through contracts as well as regular monitoring visits to the work sites, to check health, safety, labour and
environmental standards.

Due diligence resulted in an action plan that includes a number of improvements, such as the Company will develop and implement written environmental and social risk management procedures and require a Manager to coordinate environmental, health, safety and social (EHSS) matters for each project. They will undertake a risk assessment, ensure that relevant operational controls are in place for such issues as the identification, handling and disposal of asbestos or other hazardous materials, traffic management, changes to utilities, noise and vibration, impacts to neighbours and dealing with grievances.

An Environmental and Social Action Plan (ESAP) has been developed to structure the Project to meet the Banks PRs. It includes the requirements for: the adoption and implementation of the formal Environmental and Social Risk Management Procedures (ESRMP) and Resettlement Framework (RF); implementation of contractor management for environmental, health and safety mitigation measures as part of ESRMP; consultation with the tenants for the negotiated settlement; implementation of the third party life and fire safety audit; consideration of the visual impacts of billboards and signs by the commercial tenants in conformity with historical neighbourhood traditions and continuation of robust communications with wider stakeholders about the Project and historical downtown Cairo redevelopment initiatives.

The Company has its own website to highlight its social commitment through cultural activities in Cairo including a tour map of the historic downtown area and sponsorships for cultural events. Any comments, suggestions or concerns can be brought to the Company's attention either verbally or in
writing, or via the Company website.

The Bank will monitor the project by annual environmental and social reports, and site visits, if needed.

Technical Cooperation

The Bank has mobilised technical assistance from the SEMED Multi-Donor Fund and Shareholders Special Fund (SSF) to partially assist with the assessment of the Project from the market, technical and legal perspectives.

As part of a wider remit, the EBRD has mobilized technical assistance from the Government of Austria for an integrated and sustainable regeneration of Downtown Cairo. The technical assistance will aim to develop a strategic implementation plan for the regeneration of the area, maintaining its
cultural and historical heritage, and conducting energy and resource audits of major buildings in the Downtown area. The later will be complemented with a national policy engagement with key public and private stakeholders.

Company Contact Information

Mr. Karim El Badrawy
kbadrawy@bpepartners.com
00201006882949
http://al-ismaelia.com/

Business opportunities

For business opportunities or procurement, contact the client company.

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Email: procurement@ebrd.com

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Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.