• What made you start the Prime Residential business?
“I grew up in Cairo, then moved to Washington DC for college. In total, I spent seven years in the US where I received my Bachelor of Business Administration from the George Washington University and a Masters degree in Marketing, PR and Corporate Communications from the Georgetown University. During my time there, I was introduced to the concept of serviced buildings; coming from Egypt all I was ever exposed to were condos and hotels but that middle ground was never on the radar. As I was renting serviced apartments and moving from one to the other I began to appreciate the concept and wonder why it wasn’t offered back home.”
“Seven years later, I found myself going back to Cairo, with the expectation that I would go into the family business (oil/gas and automotive). While the thought was tempting, I quickly realised that I am more suited and passionate about entrepreneurship. I enjoy transforming a vision from something vague and theoretical into a concrete and innovative business. My family owned real estate in a fast growing suburb of Cairo called New Cairo. It instantly hit me that I should definitely create something similar to my experience abroad with the necessary adaptation needed for the local market. Given local dynamics, I have strived to link my efforts and growth under a single brand (Prime Residential). In my mind, creating a reliable consumer brand helps create real, defensible value and is the correct way to scale.”
• How did you become a successful entrepreneur?
“Well first of all, thank you for that. I see myself as someone that’s still taking his first steps into becoming the entrepreneur I hope to become one day. I think the most important part here is the ability to gather the right team, not being afraid of trying and failing. I am fortunate enough to be surrounded with a supportive family always pushing me to try new things. In addition to my cousin, Karim El Sayyad, a Wharton finance grad with M&A experience, and my best friend, Ahmed El Saharty, also a finance U of Toronto grad with experience in hedge funds, their support and efforts were crucial to reaching the milestones that Prime Residential has accomplished this far. Overall, I consider myself lucky to have had the foundations to establish a good amount in a short timespan, but it’s only the beginning and I think we’re on the right track.”
• Describe Prime Residential’s serviced apartment services?
“Prime Residential is a privately held real estate firm focusing on the development, acquisition and management of high-end serviced apartments for rent. We offer floor plans ranging from studios to two-bedroom apartments with upscale amenities, such as concierge services, fitness clubs, housekeeping, laundry/dry-clean, meeting rooms, 24-hour camera surveillance/security and underground parking. The company aims to fill a gap that’s been missing in the Egyptian market, and has successfully opened the doors of its first building, Prime Residence New Cairo in January 2016. We are opening our second building in New Cairo next month. We have also launched a summer vacation program in Egypt’s north coast this past May with serviced villas; which were an instant success.”
• How many serviced apartment units does Prime Residential own and operate and who is your target market?
“We currently own and operate 40 apartments in New Cairo, and are starting the construction of an 80-unit complex in 6th of October City to serve the west of Cairo. We are also aiming to offer up to 10 units in Sahel next summer. Our target market ranges from students and professionals looking to relocate for work or studies, tourists, expats, and newly-weds looking for a transitional home.”
• How big is the serviced apartment and extended stay market in Egypt approximately?
“Well right now it’s somewhat a virgin market, and therefore exact statistics are very hard to pull. On a high level, you are looking at a country with over 100 million population with more than 30 per cent of them between 20 and 40 years old. The number of marriages is also increasing – to about 750,000 per year today, so newly-weds transitioning into their homes are increasing, especially with rising costs of finishes and furnishing post the EGP devaluation. Also, as political stability in the country increases, corporate accommodation is slowly picking up as well as tourism. Finally, Cairo alone is expanding geographically and we’ve seen residents migrate from one area to another for a short period of time given the increasing amount of time one takes to get from East to West Cairo. So to answer your question the total addressable market is still unclear but there is certainly increasing demand for serviced apartments.”
• What’s the opportunity for serviced apartments and extended stay in Egypt?
“Well, let me first highlight the main problems people face when they’re renting an apartment, so that we can identify the opportunity. Renting an apartment in Egypt is not an easy experience and is an extremely inefficient process. First, the majority of the supply in the market is larger floor plans, which is designed for selling condos and becomes extremely cost heavy and inefficient to maintain for the serviced segment, and in general serviced apartment guests are usually looking at smaller floor plans for pragmatic reasons. Secondly, you need to surf a number of websites to find something decently furnished, well maintained and in a good location. Finally, you need to deal with unregistered and unincorporated parties with no legal guarantees. Our experience is simply much more aggregated, transparent and secure – a one-stop-shop that takes the guest through a less hectic process than searching, paying brokers fees, insecure payments, negotiations and no added value. We have changed all that.”
“The opportunity comes from multiple angles, one being that the macroeconomic dynamics in Egypt are currently in favour of this project. Recently, the currency in Egypt has depreciated by 100 per cent relative to the US dollar, so the purchasing power of the people has decreased because consumer staples, that are mostly imported, have doubled in price and therefore disposable income that was available to the upper middle class to buy and maintain large real estate properties has decreased. Interestingly enough, real estate properties have not doubled in price, property values have increased by 30 per cent in Q1 2017 (post devaluation) as per JLL, and perhaps another 20 per cent in Q2 2017. Here at Prime we see this as a clear opportunity to acquire more assets and expand our portfolio in different key locations. Moreover, we have decided to capitalise on dormant properties by introducing our management service, which we are striving to bring live soon. The demand was clear to us when our residents at Prime asked if we could help them rent out their properties. The types of properties ranged from full residential buildings, to stand alone villas or apartments. The idea was to take over the management of their property while still offering all of our services (concierge, dry clean/laundry, maintenance support, housekeeping and so on). People in Egypt right now, given the market conditions, prefer not to sell their real estate until the currency and macro factors stabilise, but would still love to generate a good sustainable income from those dormant assets until it’s time to sell. This is where our service will come in.”
• The Cairo serviced apartment and extended stay demand is picking up post the Egyptian crisis in 2011-2014 – what are the main drivers of this growth?
“I guess the main factor is the access to the web along with the platforms that have bridged the guests to the hosts. Moreover, 2011 to 2014 were unstable times. Expats who returned to the country post revolution favoured serviced apartments, a need for heightened security was required, and cash liquidity was squeezed and therefore real estate transactions were frozen.”
• What proportion of your demand is leisure or corporate travel?
“For the time being I am a market maker so I would say that I personally like keeping a slight higher focus on long-term rentals, which tend to lean more towards corporations and expats. In our case, newly married couples love our concept, as it’s an ideal, transitional, ready-to-live-in home. I would say around 60 to 70 per cent corporate or long-term residents, and 30 to 40 per cent leisure or short term guests.”
• What distribution channels does Prime Residential use to fill its apartments, and what is the occupancy percentage flow through the year?
“I started with a website that I was promoting along with a few Facebook and Instagram ads. A few months after opening our first building in January 2016, we started using Airbnb; a website/platform that was still very new to the Egyptian market, where we successfully earned Super Host status after a consistent number of good reviews. Recently, we started using Booking.com where we hold an average rating of 9.2/10, so props to our property/leasing manager, Mr Ahmed Essam. Our occupancy percentage has been above 90 per cent for the past year.”
• What are your thoughts on the growth of short-term rental operators and landlords using booking platforms like Airbnb and HomeAway, and are they popular in Egypt?
“They are still relatively new, especially HomeAway, a platform I personally still do not use. There are many platforms out there. We view these all as great opportunities for us as they allow for more visibility and verification of quality. We want our apartments and guests to speak for themselves and most platforms today give a great voice to the consumer.”
• What challenges and opportunities does Prime Residential face now and in the future?
“Scaling and being present in more key locations, while maintaining the same quality, is our priority.”
• What do you think the Egyptian serviced apartment market will be like in five years time?
“The market will grow, that’s inevitable. The Egyptian population is constantly striving to increase their quality of life, a concept we all feel when we travel abroad and come back home. We believe the service we provide is the norm and as the concept grows, it will become the norm from a consumer perspective as well.”
• What challenges do you think the serviced apartment industry faces now and in the future?
“The industry is on its way in establishing itself as a solid competitor to traditional hotels and the traditional residential renting. Another potential hurdle for serviced apartments’ growth is the low use of technology within the sector. Guests are getting accustomed to faster and more efficient booking systems. Unfortunately, the current serviced apartment providers in the market are lacking the ability to meet this fast paced environment. We are working very hard on connecting technology to our brand in the future.”</p
