Revitalization of Downtown Cairo

From the April issue of Business Today Egypt.
Downtown hosts some of Cairo’s most beautiful architecture, but the buildings have been largely neglected.
Courtesy Al-Ismaelia for Real Estate Investments

Over the last half-century, Downtown Cairo, the “Paris along the Nile” of Khedive Ismail’s imagination, has seen its star wane dramatically. The effects of chronic underinvestment and archaic rent control laws have blighted its elegant belle époque architecture. The flight of the rich to satellite cities and the poor to the ashwai’yat or informal settlements, has hollowed out its residential core. Recent political turbulence has further battered the urban landscape. The one-time cultural capital of the Arab World is now a shadow of its former self.

Karim Shafei, the managing director and public face of Al-Ismaelia for Real Estate Investments, has been imagining Downtown’s renaissance for some time now. The self-professed Downtown romantic set out in 2008 to purchase one — perhaps a few — properties in the area to hold in perpetuity. But his initial foray into the real estate market, he says, alerted him to a far greater business opportunity.

“When I went down looking for opportunities to buy buildings I was offered by real estate agents whom I commissioned to find a building for me maybe 40 or 50 buildings that were available for sale. So it basically said that everyone who owns a building in Downtown wants to get rid of it.”

That triggered a partnership in 2008 with Aladdin Saba, the cofounder of Beltone Financial, and loftier ambitions. “We found maybe, instead of buying one building and waiting for 50 years, maybe if we can put together a fund to acquire the buildings, refurbish them, redo the public space, the infrastructure in Downtown or parts of Downtown, we could possibly change what Downtown looks like in a much shorter period,” Shafei adds.

Since then, Al-Ismaelia has acquired 20 buildings Downtown and secured the financial backing of some of the Middle East’s wealthiest investors, among them Samih Sawiris, the Egyptian real estate tycoon behind Orascom Hotels and Development’s El Gouna resort on the Red Sea and 23rd richest man in Africa with an estimated net worth of $560 million (LE 3.38 billion). The group is currently capitalized at LE 375 million.

Beyond its obvious profit motives, Al-Ismaelia has laid out a grand vision for Downtown. Its website declares its goal as “to revive Downtown Cairo as a destination for all Egyptians to live, work, shop and socialize.” Shafei elaborates, comparing the Cairo he envisions to Rome, Istanbul or Paris. “Basically Downtown city centers around the world are a melting pot,” he says. “They’re a meeting point for the different social economic segments of the city. It’s also a destination for businesses, for tourism, for entertainment and so forth […] That’s where we see Downtown heading. It’s becoming retail and entertainment for Egyptians across the board, offering Egyptian-like experiences.”

Not everyone is enthralled by the plan. From its inception, Al-Ismaelia has confronted a mixture of skepticism and outright opposition. Just mention the group’s name Downtown, and you’ll quickly stumble upon no shortage of speculation and rumors — whispers of corruption and money laundering and all sorts of financial malfeasance. Early on, some of its detractors even accused Al-Ismaelia of being a Zionist plot to install Jewish settlements in Cairo.

Courtesy Al-Ismaelia for Real Estate Investments (2)

Al-Ismaelia for Real Estate Investments’ gentrification of Downtown may displace its poorer inhabitants.

The most outrageous conspiracy theories aside, Al-Ismaelia and its designs remain a mystery to most Cairenes. Aly Gabr, an associate professor of architectural engineering at Cairo University, attributes the rampant rumors to what he calls a troubling lack of transparency on the group’s part. Even scholars like himself have found themselves in the dark as to Al-Ismaelia’s plans. “It’s all word of mouth and rumor,” he says. “Everybody was hearing a story, and then we were comparing stories with one another …. We were very, very concerned. We wanted to know what was happening. Did they have anything clear in their mind? To this moment, we don’t even know who Ismaelia group is beyond a list of people.”

The most serious questions concern what exactly Al-Ismaelia has in mind when it speaks of “reviving” Downtown. Four years after its founding, the company has not begun any of the planned refurbishments, citing delays brought on by the revolution and global economic crisis.

Of course, urban revitalization efforts are almost by nature controversial. For all its problems, Downtown Cairo remains a cherished space. As Walter Armbrust, a lecturer in Oxford’s Oriental Studies department explains, Downtown is the one neighborhood in the city where “lots of different people from different social classes can come and more or less rub elbows.”

One commonly-voiced fear is that Al-Ismaelia will fundamentally alter the fabric of Downtown Cairo, displacing longtime residents and shopkeepers to appeal to higher-paying tenants. The cautionary tale most often cited is of Downtown Beirut’s reconstruction in the 1990s after the Lebanese civil war. Tasked with rebuilding Beirut, the company, Solidere, instead gave it a face lift, forcing out residents and small shop owners to make way for luxury hotels, high-end retailers, and ritzy office complexes.

Shafei is sensitive to the analogy. He preemptively insists that Al-Ismaelia is no Solidere. “That was a top-down change that happened,” he says. “Our project is more organic. We want to respect the existing culture in Downtown, the existing social fabric in Downtown — impact that to an extent, but without taking away the spirit of Downtown.”

To that end, Al-Ismaelia has worked assiduously to reassure residents and other Downtown stakeholders. It has contracted the Institute for International Urban Development, an affiliate of Harvard’s Graduate School of Design, to help it formulate its development plans. It has also collaborated with local art and cultural groups to stage regular galleries and exhibitions. Al-Ismaelia’s activity on this front, Shafei says, is part and parcel of its goal of reviving Downtown as an inclusive social and cultural center.

The group’s outreach hasn’t gone unnoticed. Vittoria Capresi of the Architecture and Urban Design program at the German University in Cairo praises Al-Ismaelia’s investment in the arts, citing in particular its collaboration with the Townhouse Gallery, a contemporary art gallery off Talaat Harb Square. “I think that the only way to sustain architecture is to reinforce the link between the inhabitants and the people who are doing something from an architectural or artistic or whatever point of view,” she explains. “So the work of Townhouse Gallery is fundamental to revitalize that area.”

Capresi wonders, however, whether Al-Ismaelia is in it for the long-haul. She recalls a meeting with Shafei a couple years back, at which he explained the group’s intentions to her and some of her colleagues. “Karim was explaining to me that they signed a kind of contract that Townhouse would stay for 10 years. And then, I forgot to ask, ‘What after?’ What would happen afterwards?”

Again, Al-Ismaelia’s precise intentions are somewhat opaque. When asked what the group has in mind for the coming years, Shafei offers only, “What we want to do is start with one project at a time — see how it integrates with the environment around it and go for the next one or two projects, and go from there. So probably by the end of this year, beginning of next, we should start with one of our projects. Maybe a number of restaurants or a small boutique hotel or something like that. And then from there, every six months to a year, launch a new initiative.”

While Al-Ismaelia has foresworn the slash-and-burn model of Solidere, it makes no secret of its desire to effect significant changes to the Downtown landscape. Shafei readily concedes that the group’s goals amount to “gentrification” and speaks openly of his desire to see certain economic activities displaced from Downtown. “We think that some of the functions that are in Downtown probably should not be here. So we don’t think that warehousing should be one of the activities in Downtown. We don’t think that workshops manufacturing T-shirts should be located Downtown. That’s a city center at the end of the day, and there are industrial zones where such functions should exist.”

Shafei is adamant, though, that carving out space in Downtown for higher-end residents and retailers need not work to the detriment of the area’s less wealthy denizens. That said, he is keen to supplant the informal economic activities that account for at least one-third of Egypt’s GDP with established domestic and international vendors: “Having a retailer that abides by the law, that respects the visual space in Downtown, respects the urban heritage and the social heritage does not mean that it’s going to be an expensive retailer.” By way of example, he cites Walmart and Carrefour as formal economy retailers that sell affordable goods.

Courtesy Al-Ismaelia for Real Estate Investments

Rent control laws keep rent so low that they disincentivize the upkeep of Downtown properties.

But such gentrifying initiatives are sure to place pressure on many of Downtown’s poorer residents. As Ralph Bodenstein of Cairo University, an expert on Islamic architecture, notes, “One should always be aware that there’s also a considerable part of cheap residential space that many people depend on and that shouldn’t necessarily be discarded with completely. And I’m not talking only about the formal flats in the buildings, but also these floors on top of buildings where poorer people live. One has to take this into consideration. It might be necessary to integrate that into a larger, more encompassing plan of saving Downtown. But this is something that Ismaelia company is not — that’s not their scope.”

As of yet, Al-Ismaelia’s reassurances have done little to win over public opinion. In the end, though, the company’s relatively minor presence in Downtown — it owns just 20 of almost 500 buildings — should preclude it from realizing its most ambitious designs for the city. Observes Walter Armbrust, “Personally, I think that Downtown is a fairly amorphous area. I don’t think it makes that much difference if Ismaelia comes in and buys 40 buildings and rents them out to relatively high rent-paying tenants.”

Still, he cautions, “Of course there’s also the dynamic that they want to buy more […] If they acquire 80 buildings, 100 buildings — enough contiguous buildings that they can affect what happens in the streets — then maybe that’s something to worry about in terms of them changing the fabric, the aura of the Downtown area.”

Ironically, Shafei’s reassurances to those worried about Al-Ismaelia’s impact are nearly identical to Armbrust’s. When asked if the group’s acquisitions would drive up prices throughout Downtown, Shafei responds, “I don’t think this is entirely true. We own 20 buildings out of about 470 or 480 [buildings in] Downtown. So basically we have less than 5% of Downtown. It’s a very small […] bit that we have bought so far. And we can’t go much further without further funding, and it doesn’t look like we’re going to have more funding, so maybe we’ll reach 30 buildings, 25 buildings, and that’s the maximum that we’ll be able to buy.”

The merits of Al-Ismaelia’s plans notwithstanding, its foray into the real estate market has underlined the immense obstacles to urban revitalization. One of the prime culprits, analysts agree, is rent-control laws first instituted in the 1950s. By keeping rents artificially low, the laws disincentivize the upkeep of Downtown properties. They also precluded all but the wealthiest of conglomerates from injecting new capital into the real estate market.

Aly Gabr explains that for a group like Al-Ismaelia to acquire a new property, it must do two things: “First of all, buy the property, which means that they get something like LE 300 or LE 400 a month from rent, which is nothing. Then, they have to pay each individual in every flat a sum of money to evacuate the flat. So it cannot be an individual. It has to be a group of very rich people. There has been very little intervention [in Downtown real estate]. It is not in everyone’s capabilities to intervene.” Thus, even companies with über-rich backers like Al-Ismaelia find themselves quickly running up against the limits of their resources.

Meanwhile the government, which owns about half of the buildings in Downtown, has shown little inclination to reform the archaic rent control laws. After all, says Gabr, many prominent politicians own rent-controlled apartments themselves. Nor has the government made investing in the area a priority. Instead, it has committed its resources disproportionately to the burgeoning satellite cities in the desert, which despite housing less than five percent of Greater Cairo’s population receive more than one-fifth of its housing budget. Even longtime Downtown fixtures like the Mugamma are being considered for relocation to the peripheries of the city.

And so, whatever Al-Ismaelia’s impact on Downtown, it will pale in comparison to the much larger forces driving Cairo’s urban development, one characterized by scant investment in Downtown — not to mention the sprawling informal settlements that are absorbing more than three-fourths of the city’s population growth — and an almost compulsive focus on building a new Cairo, far removed, both geographically and conceptually, from the chaotic vitality of its core. For now, it would seem, any significant revival of Downtown Cairo, for better or worse, is on indefinite hold. bt

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