Bonyan, a subsidiary of Compass Capital, is planning to acquire new administrative buildings next year as part of its strategic expansion plan. Shamel Aboul Fadl, CEO of Bonyan, said the company is constantly on the lookout for new investment opportunities and is in constant negotiation with potential sellers. However, he stressed the importance of selecting the right time for transactions to ensure optimal returns. Aboul Fadl highlighted that Bonyan recently increased its capital from EGP 1.238bn to EGP 1.654bn, adding over EGP 416m. This capital increase is part of a broader plan preceding the company's IPO preparations for the Egyptian Stock Exchange, which aims to generate liquidity for upcoming expansions. To support the IPO process, Bonyan has appointed Arqaam Capital and CI Capital as financial advisors, along with MatoukBassiouny & Hennawy as legal advisors. Aboul Fadl said the company is awaiting necessary regulatory approvals to proceed with the IPO. Listing Bonyan on the Egyptian Stock Exchange would allow investors to participate in administrative and commercial real estate investments without needing to purchase a specific building or shop. Additionally, it would enable the acquisition of commercial or administrative buildings through asset consolidation, where sellers could receive shares in exchange for their property. Capital Utilisation for Administrative and Logistics Acquisitions Bonyan plans to use the proceeds from its capital increase to purchase new administrative spaces and buildings. The company also plans to acquire logistics assets, particularly warehouses leased to established companies across various sectors. Financing Strategy Amid Exceptional Interest Rates in Egypt Bonyan's business model relies on a blend of self-financing and bank financing, with ratios adjusted based on interest rates and expected rental income. However, Aboul Fadl noted that high interest rates in Egypt have complicated the borrowing process, making bank financing less feasible due to increased costs. "Currently, bank financing is not an ideal model given the high interest costs," he added. In March, Egypt's Central Bank raised the overnight deposit and lending rates, along with the main operation rate, by 600 basis points, reaching 27.25%, 28.25%, and 27.75%, respectively. Despite this, Aboul Fadl affirmed that Egyptian banks remain open to lending to Bonyan, given its clear business model, which positions administrative buildings as solid investment assets. Real Estate: The Leading Investment Tool in Times of High Inflation Aboul Fadl asserted that real estate has proven to be the most robust investment tool, particularly during inflationary periods, outperforming other investment vehicles like gold, foreign currency, bank deposits, and stocks over the past decade. He suggested that individual real estate investment in Egypt is not the most efficient method, and specialized real estate investment firms provide a more effective model than individual unit ownership. The CEO emphasized that Bonyan's listing on the Egyptian Stock Exchange would enable property trading, creating immediate liquidity for investors in commercial and administrative real estate. This move would support the Egyptian Exchange, attract small investors interested in real estate but unable to purchase full units, and offer them the chance to own fractional shares managed by industry experts. Expansion in Egypt's Commercial Real Estate and Logistics Sectors Aboul Fadl sees promising growth potential in Egypt's commercial real estate sector, expecting it to yield high returns. Bonyan is currently exploring opportunities in logistics warehouse leasing, as this sector has demonstrated solid demand. Looking Forward: Anticipating Interest Rate Decline and Exploring New Financing Solutions Forecasts indicate a potential decline in interest rates between 6% to 10% next year, which Aboul Fadl views as favorable for future financing opportunities. He noted that Bonyan is prepared to utilize future receivables securitization to fund its projects, although the company is waiting for a lower interest environment to maximize returns. Challenges in the Egyptian Real Estate Market and Growth Prospects Despite inflation, currency devaluation, and other challenges, Bonyan remains committed to its growth strategy. Aboul Fadl explained that owning high-quality commercial assets, primarily in East and West Cairo, positions Bonyan strongly in the market. Approximately two-thirds of the company's leasable space consists of premium administrative assets with multinational tenants, with the remaining third devoted to commercial assets. Compass Capital acquired Bonyan in July 2018, aiming to create a real estate investment platform that achieves high returns through capital appreciation and rental income.
