The United Real Estate Company (URC), a leading real estate development and investment company in Kuwait and the MENA region, has reported an increase in its net profit by 417% to reach KD 6.58 million for the first half of 2022. In addition, 2021 marked a rebound of activities as restrictions from COVID-19 started to phase out.
Mr. Mazen Issam Hawwa became URC Vice Chairman and Group Chief Executive Officer in 2020. He had served as the senior management of Kuwait Projects Company-Holding (KIPCO Group) for 19 years.
Mr. Hawwa has extensive experience across many KIPCO Group verticals, including finance and real estate. In addition, he has been associated with numerous operating companies as part of the KIPCO Group’s strategy, contributing thought leadership and counsel on governance, financial planning, and strategic directives.
The URC Vice Chairman and Group Chief Executive Officer, an alumnus of the Lebanese American University, holds an Executive MBA from HEC Paris. He has participated in several executive education courses such as the General Management Program at Harvard Business School.
In an interview with the International Finance Magazine, Mr. Mazen Hawwa shares his insights on URC, commercial real estate, business strategies, and other factors influencing the real estate sector in Kuwait.
(Q) How is this economic rebound spread across the different activities of URC (shopping-rentals, hospitality sector, and real estate services)?
(A) The year 2021 also saw strict restrictions being imposed to ensure public health and safety from the COVID-19 pandemic in Kuwait and abroad. By Q2 of 2021, our market operations witnessed an easing of regulations, and business resumed gradually. The last two quarters were positive, and re-normalization improved somewhat. Further, URC’s business verticals saw considerable operational recovery after governments lifted the partial and complete lockdowns.
During these difficult times, we ensured that we stayed close to our tenants and customers, which helped us maintain and improve our occupancy. We engaged effectively and ensured that the occupancy did not drop. On the contrary, occupancy started growing and improving 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 with increased consumer spending power on luxury and essential goods. As a result, it attracted more footfalls and good trade performance in the retail outlets.
As for the real estate sector, URC also noticed that our residential sales in Hessah Towers and Byout Hessah continued as planned.
(Q) Has demand for commercial real estate and hospitality picked up?
(A) Demand for commercial real estate and hospitality have seen growth in 2022. This was mainly due to the easing of health restrictions by the government. Hence, as a leading real estate developer and investor in Kuwait and the MENA region, we constantly ensure that our offerings are well placed and meet the market’s needs.
We also expect further growth in the tourism sector in the State of Kuwait. 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%.
(Q) What are your expectations for the year ahead?
(A) Over the past six months, we have taken time as a company to develop customer-centric strategies for enduring growth. We created a formula that combines customer-centricity with innovation. The objective is to build sustainable communities. Although there have been factors that led to noticeable changes in the overall market and consumer needs and preferences, we were able to adapt to these changes, deliver and meet the emerging demands for unique experiences.
Our vision goes beyond improving the company’s operational and financial performance; we aim to build sustainable communities. Our vision aligns with Kuwait’s 2035 vision, “New Kuwait,” aiming to transform Kuwait into a regional financial and trade hub and make it more attractive to investors.
I remain optimistic and confident in the Kuwaiti market and our capability to achieve excellence in real estate projects that cater to changing consumer preferences and the latest trends. As an innovative real estate developer, I believe we will have noticeable growth.
(Q) In March this year, URC announced the merger of United Towers Holding Company and AlDhiyafa Holding Company. What are your goals with this merger?
(A) 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 both companies 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 with URC.
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 shares for every DHC share.
We took this step that goes in line with our objective of increasing our portfolio of income-generating assets. In addition, as these two entities (United Towers Holding and AlDhiyafa Holding Company) have common synergies, we want to capitalize on those synergies.
Such a merger will increase the focus of our operations, and the expertise of the acquired firms will be at our disposal. It will also strengthen URC’s position as a leader in the real estate sector, increase the company’s financial competitiveness, and expand the firm’s ability to deliver projects that meet the requirements and demands of current and future clients.
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.
(Q) How will it impact URC activities and business performance?
(A) 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 Kuwait. Here the company has developed the Kipco Tower, the Marina World, and the Saleh Shehab Resort and has the Hassah Towers and BYOUT Hessah, which are under development.
(Q) What are URC’S short-term plans?
(A) Our focus remains on creating value for our shareholders, building sustainable communities, and delivering high-quality projects. URC’s continued development engine ensures timely delivery in the states of Kuwait, Egypt, and Morocco. When it comes to Kuwait, we are continuing with the development of our residential components in the “Hessah District.” Hence, the “Hessah District” residential units are expected to be completed and ready for handover in 2023. In addition, we aim to finalize the development of the commercial district and negotiate with several retailers of all kinds—medical clinics, restaurants, cafes, malls, and hospitals.
For the shopping sector, we will keep creating a unique customer experience and a pleasant journey for Marina World. Set along Kuwait’s coastline, Marina World is a landmark mixed-use development located on the Arabian Gulf Road in Salmiya, one of the country’s most bustling areas. Marina World was first completed in 2003 and launched in phases to create six components: Marina Mall, Marina Crescent, Marina Yacht Club, Marina Waves, Marina Walk, and Marina Hotel.
URC works efficiently and effectively to uplift the living conditions in Kuwait, promote well-being for all, and promote sustained, inclusive, and sustainable economic growth full of productive employment and decent work for all. In addition, we foster innovation, increase the quality of life, and make cities and human settlements inclusive, safe, resilient, and sustainable—in line with the sustainable development goals (SDGs).
(Q) Of particular interest is the “Hessah District” development. When will it be fully operational?
(A) Completion of construction works at Hessah Towers will take place in Q1 2023. And Byout Hessah will be completed and ready for delivery in Q3 2023. In Egypt, the company has completed one project – Aswar Residences – and one project is in the making.
(Q) What are your expectations for Egypt properties?
(A) After the sale of Aswar Residence, a gated residential community comprised of 75 three-story villas located on the eastern side of New Cairo, we are preparing for the sale launch of our residential project in Cairo, along with the possibility of resort development in Sharm el-Sheikh. Avaris 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 source of contract opportunities in the coming years. As a result, our Egypt market has seen considerable growth in 2022, and we hope to launch Manazel apartments soon.
Since Egypt’s real estate market is seeing high demand, the country has begun to develop new cities with the 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 in Egypt.
The excellent macroeconomic stability in Egypt will result in leveraging international investment into the country’s non-residential sector. Due to the high population, residential development will remain the domain of the state, as they must construct affordable housing for the average Egyptian.
(Q) What are the plans for development as the economy continues to boom?
(A) Our plans include developing a world-class all-inclusive resort in Sharm Al Sheikh. In Morocco, the Assoufid is of particular significance. The first phase included a golf club, and now it is developing its second phase with a five-star hotel and a residential component.
(Q) When will this second phase be fully operational?
(A) The five-star hotel, St. Regis Marrakech, is expected to commence construction in Q3 of 2022 and will be completed in Q1 of 2025.
In Morocco, we transcend the status quo for the local tourism industry by creating a new wave of branded luxury living in the Assoufid project. With infrastructure works completed, we anticipate this year’s construction of its award-winning five-star hotel, The St. Regis Marrakech Resort, alongside branded villas, premium residences, and a retail hub. In addition to our world-class golf course, these high-end components will be part of our success story in creating valuable experiences.
‘Morocco’s Best Golf Course 2021’ and ‘Africa’s Best Golf Course 2021’ at the World Golf Awards went to Assoufid Golf Club.
Spanning a total area of 2.5 million square meters, Assoufid is a luxury mixed-use integrated tourism and residential resort situated in the vibrant Marrakech, Kingdom of Morocco.
The first phase of the Assoufid development consists of a multiple award-winning 18-hole high-end golf club. The golf course lies on naturally undulating terrain, with the beautiful, snow-capped Atlas Mountains providing a stunning backdrop. In addition, this phase includes a signature restaurant, pro shop, member’s lounge, and several luxury residential villas.
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. The hotel will consist of 80 keys (60 rooms and 20 villas) equipped with exclusive amenities such as a world-class spa, a swimming pool, a state-of-the-art fitness center, and three specialty restaurants for a world-class culinary experience.
The second phase includes 22 branded residences, 28 real estate residences of tourist promotion (RIPT), 25 residential villas, 120 apartments, and a retail area of 2,312 square meters. At the same time, the third phase of the Assoufid development will introduce additional premium villas and apartments.
(Q) What is the company’s position for the future in Morocco? Do you see enormous potential in real estate?
(A) The real estate market in Morocco has always been attractive due to its geographic position, and we expect good growth on the completion of the residential project 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 assuming an authentic experience for a unique lifestyle for the residents.
Marrakech in Morocco is one of the most luxurious destinations for international stars, and many actors and singers choose it as their usual holiday destination.
Analysts project a robust but moderating industrial performance and a noticeable recovery for the tourism sector at a fast pace for Morocco’s economy. In addition, the ongoing reforms might enhance potential growth over the medium term.
As the country’s economy is healing from the pandemic, and as I look ahead, 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 the most quintessentially 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 again for all visitors to discover, explore, and enjoy the many facets of the Moroccan experience.
(Q) 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?
(A) Oman’s residential real estate market could register a CAGR of more than 13% during the forecast period (2022-2027). However, due to COVID-19, Oman’s real estate sector has felt the consequences of slower economic growth in 2020.
Oman’s commercial real estate market could also register a CAGR of more than 11% during the forecast period. In addition, it is experiencing significant growth in the hospitality and travel sectors.
Our project in Oman, the Salalah Gardens Mall & Residences, is fully operational and self-reliant—it has become self-sustainable to meet its obligations. Hence, the properties comprise a leasable retail area of 28,810 sq.m and 166 serviced rooms.
(Q) What are the long-term development plans for Oman?
(A) Currently, our focus is on the operational improvement of our existing assets.
(Q) 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?
(A) Despite the challenging economic situation in Lebanon, we managed to rent out the majority of our apartments in Raouche View 1090 in Beirut in particular. Hence, the occupancy rate (by area) is 75.5%. Raouche View 1090 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.
(Q) How do you plan to maximize URC’s performance during your tenure?
(A) Maximizing URC’s performance is to be achieved by enhancing the capabilities of our internal team, product innovation, and digitalizing our operations. We accomplish this by responsible digital transformation, which increasingly promises enormous growth opportunities. In addition, we aim to continue engaging with our customers, ensuring operational excellence on all our operating assets, and exiting certain targeted assets and investments.
(Q) How does URC’s overall strategy fit into KIPCO’s?
(A) KIPCO is our biggest shareholder, and URC is the real estate arm of KIPCO and fits with the overall strategy of safeguarding and improving the stakeholders’ interests.
(Q) As a corporate leader in Kuwait with a US academic background, you have the authority to explain the challenges Kuwaiti entrepreneurs and corporate leaders face as the country passes the torch of economic leadership to the private sector and makes a big push for economic diversification. Could you please summarize these challenges?
(A) Kuwait’s long-term challenges are related to the economy’s heavy dependence on oil and domestic consumption and 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 containing mounting fiscal pressures while 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.