United Real Estate Company: MEED Assessment

17 December 2013

Volatility in Lebanon and Egypt continues to pose risks for URC’s real estate projects

United Real Estate Company (URC) benefits from a diversified portfolio and schemes that are situated in prime locations. Although its projects in Lebanon, Jordan and Egypt were affected by the recent social unrest, the extent of the impact was limited to three specific schemes: Raouche View at 1090; Aswar Residential Villas; and Manazil Apartments Compound in Egypt.

In Egypt, URC’s luxury hotels, Fairmont Heliopolis and Fairmount Towers, posted strong growth in 2012, and the development of the company’s residential projects in New Cairo continue uninterrupted, despite the ongoing instability the country is witnessing.

However, volatility in Lebanon and Egypt continues to pose risks for URC’s real estate projects. Investing in Kuwait also poses challenges for URC, as the economy has failed to live up to expectations in recent years. As a major oil exporter, Kuwait has long had the potential to be a major projects market in the region. However, a combination of political issues and a reluctance to commit to spending has meant the market has largely underperformed over the past decade. With just over $10bn of deals awarded in 2012, the state represents less than 10 per cent of the total GCC projects market.

For the past two years, URC has been working on an initiative to improve its overall operations along with those of its subsidiaries and affiliates, while rationalising its asset pool and improving its financial indicators.

This focus has paid off. URC recorded its highest net profit in 30 years in 2012, reaching KD22.5m. In the third quarter of this year, URC made a net profit of KD5.3m, an increase of 338 per cent compared with the same period last year. Earnings per share jumped to about 5 fils during the quarter, compared with 1.1 fils during the third quarter.

While instability in certain parts of the region continues to pose challenges for URC, the firm is well-positioned to see a revival of growth, especially if there is a peaceful resolution of the Syrian conflict, which would greatly benefit Lebanon and URC’s development there.

The company’s backing from Kipco gives it a key advantage in terms of being able to weather economic storms in the region and to fund investment when new opportunities arise.

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