UK fund clinches deal for Egypt shopping centres

A UK fund manager has teamed up with one of Egypt's largest property developers to create an $800m (£496m) retail venture to invest in shopping centres across Egypt.

Pradera, part of the Cadena Group, has agreed a debut deal with Palm Hill Developments to form a fund that will buy and manage retail schemes in Cairo and other large cities across the country.

Palm Hill Developments is listed on both the Egyptian and London Stock Exchanges and is part of the Mansour & El Maghraby Investment & Development group of companies.

The memorandum of understanding that Palm Hill has signed with Pradera – a specialist retail fund manager with €2bn of assets under management across Europe – could make the joint venture vehicle the largest owner of retail property in Egypt. The fund will be jointly owned by Palm Hill and international investors managed by Pradera.

It is Pradera's first expansion into the Middle East and North Africa and a response to growing demand from its European and US investors to invest in emerging economies.

Egypt is one of Africa's fastest growing economies and is expected to record an average growth rate of 5.5 per cent between 2010 and 2012. The country has a growing middle class, wanting to buy goods from global brands, and is becoming a huge target market for global retailers. Its domestic retail market is valued at $44bn and caters to an 83 million strong population that by 2014 should top the 90 million mark.

The Palm Hill-Pradera fund's final size has not been confirmed, but property experts in the region have suggested that it could eventually be between $400m and $800m.

Retail assets held by the vehicle will be a mixture of Palm Hill's developments and shopping centres bought from third parties. Pradera will manage the centres over the long term and the joint venture plans to invest in up to five centres over the next two years.

Palm Hill already has 19 projects under way across a 47.8million sq m landbank and the joint venture's first investment will be Palm Hill's Palm Galleria development in New Cairo – an eastern district of the capital city.

Palm Galleria is a 32,500 square metre shopping centre which will accommodate 100 retailers, 17 restaurant and food operators and a 1,200 seat cinema when it opens next year.

Yasseen Mansour, the chairman and CEO of Palm Hill Developments, said: "The shopping malls owned by this venture will help to meet the rising demand from Egyptians, seeking international brands in local shopping centres." He said that New Cairo had a high concentration of professionals living in larger family owner-occupied households.