TMG, GB Capital, and EFG Hermes to launch mortgage finance company

Egypt, April 17, 2019: Three of Egypt’s leading publicly traded companies announced today they have entered into an agreement to create a mortgage finance joint venture serving Egypt’s large, growing population of home buyers.

The three partners are TMG, Egypt’s leading developer of premium master planned communities, GB Capital (the NBFI arm of GB Auto) and EFG Hermes Finance (the NBFI arm of EFG Hermes Holding), each of which will hold one third of the joint venture’s equity.

Commenting on the agreement, Hisham Talat Moustafa, Chief Executive Officer and Managing Director of TMG Holding (TMGH on the EGX): 

“The new joint venture will capitalize on TMG’s four decades of experience in real estate development and over 100,000 units across the Group’s multiple projects. Our aim is to bring to the market real estate units with long-term and competitive financing solutions that would increase affordability and better align housing supply with Egypt’s large, growing population of homebuyers. I am particularly pleased to note that the joint venture will be offering finance solutions for move-in new homes in the existing projects as well as potential developments in TMG’s pipeline. EFG Hermes and GB Capital are longstanding partners with whom we look forward to doing business for years to come.”

Added Dr. Raouf Ghabbour, Chairman and CEO of GB Auto (AUTO on the EGX) “We know that several years of high inflation have eroded consumer purchasing power. And as Egyptians, we also know home ownership remains a cornerstone of a society that sees more than 900,000* couples each year marry and start new lives. We are bringing to the market a portfolio of easy-to-access financing solutions that will feature the fastest decision-making time in the industry. We have worked for years with EFG Hermes and are honored to partner with them and with TMG on a joint venture that complements our established, fast-growing consumer, lease and micro finance ventures and our fleet-leasing solution.”

Commenting on the agreement, Karim Awad, Group CEO of EFG Hermes Holding (HRHO on the EGX) said: “With approximately 700,000** people entering the workforce each year, the huge potential of Egypt’s market for home buyers is underserved and under-penetrated by non-bank financial institutions. This joint venture is the natural evolutionary step to help grow the mortgage business in Egypt and expand our non-bank financial services platform, which today includes leasing, microfinance, fintech-enabled consumer finance and factoring. We can think of no better partners with whom to move forward than GB Capital — a consumer finance powerhouse in its own right — and the oldest real estate developer in Egypt, TMG, which owns the largest land bank and backlog of any developer in Egypt.”

The joint venture, whose brand name will be revealed at a later date, will have an initial paid-in capital of EGP 150 million and is expected to be increased to EGP 250 million as the business grows. It will offer mortgage finance to all consumers looking to buy move-in homes across TMG’s existing projects and potential developments.

The partners will appoint a chief executive officer to lead the new venture, which will be staffed by an independent management team. The joint venture, which is targeting to fund a portfolio of units worth EGP 450 million in its first 12 months of operations, will offer unrivalled mortgage solutions with the fastest turnaround time over 10-year tenures available to Egyptian clients at competitive interest rates in the market. It will also introduce new, variable-rate financing solutions.

EFG Hermes Investment Banking is acting as the sole financial advisor on the transaction, which is subject to the approvals of the Financial Regulatory Authority (FRA) and other regulatory approvals.

The joint venture will take place at the level of an existing mortgage finance company that is currently owned by TMG, where the parties will increase the company’s capital to allow each to have one-third ownership.

Egypt is slated to become the world’s fastest-growing mortgages market, according to a 2017 report from Euromonitor International, due to attractive fundamentals such as the magnitude of its population growth and the number of marriages, which were expected to drive an 18.9 percent increase in home mortgages.

In anticipation of this uptick in demand, the FRA has homed in on non-bank financial service operations in the country, setting a four-year strategy that would see the body take an active role in growing the volume of the country’s mortgage financing market.

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