Patrick Werr: Egyptian state has no business in the property market
The announcement last month that Cairo’s historic Continental Hotel will be demolished should be a wake-up call to ask why the government is in the real estate business to begin with. Does government ownership of so much of the country’s property really serve Egypt?
According to news reports, the Cairo governorate gave the state-owned Egyptian General Company for Tourism and Hotels, or Egoth, its final permission to demolish the hotel last month. The governorate’s secretary general, General Mohamed Al Sheikh, told Al Youm Al Saabi newspaper that Egoth would be required to preserve the hotel’s facade and other original architectural elements.
This demolition order in my mind demolishes one of the main arguments this and other state real estate holders have used to justify their presence in the property market, that by owning historic buildings they are somehow protecting the country’s national heritage.
The Continental Hotel is probably Egypt’s oldest hotel still standing. It was built in 1869 by the Oriental Hotels Company on land just across from the Ezbekiya garden, at the time Cairo’s most upscale neighbourhood. It opened just in time to lodge the dignitaries who Ismail Pasha, the Khedive of Egypt, invited for the inauguration of the Suez Canal.
Originally called the New Hotel, it had three storeys and was surrounded by arcades, gardens and verandas. Across the square from the hotel lay the new opera house, also built for the canal’s inauguration.
At the end of the 19th century the hotel was given an extensive makeover, with the addition of a fourth floor and side arms that extended outwards from either end. A glass canopy was erected over the main entrance and terraces overlooking the street were added on either side, according to The Grand Hotels of Egypt, the book by Andrew Humphreys. When it reopened in December 1899 it was given a new name, the Grand Continental.
The hotel was soon second only to the Shepheard’s Hotel just down the street, attracting some major world personalities. T E Lawrence stayed there in December 1915, not long before he left for the Hejaz to rally Arab fighters against the Ottoman Empire. Lord Carnarvon, who financed the search for King Tut’s tomb, was a regular guest.
He died in one of the rooms, allegedly of Pharaoh’s revenge, in April 1923, four months after he and Howard Carter became the first people to enter the tomb in more than 3,000 years.
The hotel’s demise came after the government took it over in a great wave of nationalisation in the early 1960s. The terraces at the front of the hotel were filled in with shops and the extensive gardens in the back were replaced by an unspeakably ugly shopping arcade.
I had the opportunity of eating dinner in the hotel when I was a student in the late 1970s. The restaurant still had an air of past elegance, with white tablecloths and waiters in white shirts and black bow ties.
A few years later I had the misfortune of spending a night there. The rooms were filthy and the staff surly. Not too long afterwards the hotel stopped taking guests entirely.
In the 1990s, Egoth did undertake a nice renovation of a portion of the hotel – as chic offices for its own top management. Management eventually moved, leaving the hotel to crumble.
Egoth, and its state-owned parent, the Holding Company for Tourism, Hotels and Cinema (Hotac), own a host of hotels and partial stakes in many others. It has turned management of some over to international chains. Others have been shuttered up, such as Shepheard’s, which was built in a new spot on the Nile after the original burnt down in 1952.
Other state companies with extensive real estate holdings include Misr Real Estate Assets, which owns nearly 700 properties across the country, including 180 of a historic nature.
Many of these are disintegrating for lack of maintenance. Holding companies under the ministry of public enterprises control dozens of department stores and other properties. Ministries, the central bank and the ministry of religious endowments have their own portfolios, as does the army, which owns the bulk of Egypt’s desert.
The government is desperate for money. It is hoping for a boost towards the end of the year as new natural gasfields begin production, as tourism recovers and investments flow into the country after the IMF agreement signed in November.
The sale of property holdings could help to tide it over. But more importantly, the sale of these assets would attract dynamic private sector investors, helping to revitalise Egypt’s main cities.
Perhaps the successful sale starting in 2004 of the government’s stakes in 38 “joint venture” banks could be a model. The sales streamlined the entire industry, putting Egyptian banks back on the map.
Patrick Werr has worked as a financial writer in Egypt for 26 years.
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