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DUBAI (Zawya Dow Jones)--Egypt's cabinet agreed late Sunday that Egyptian developer Talaat Mostafa Group, or TMG, should be allowed to keep the land of a massive real-estate development outside Cairo that was at the heart of a dispute.
The cabinet's decision affirms the findings of a legal committee that ruled last week the controversial project could go forward.
The cabinet decided to invalidate TMG's original Madinaty development contract and reallocate the land to the same company under a new contract, the cabinet said in a statement on its website.
"We consider this news positive, since it will allow TMGH's operations to continue to run smoothly, with no significant impact on the company's future plans," Cairo-based CI Capital said Monday.
The decision comes after an Egyptian court ruled that the land for TMG's flagship Madinaty development in new Cairo was given to the group by the Ministry of Housing through the ministry's New Urban Community Authority, or NUCA, and not allocated through a competitive bidding process.
The court's decision on Sept.14 caused selling pressure on TMG shares as investors feared that the company would demand more money from land owners.
The cabinet said the value of the government's share will be "at least" 9.97 billion Egyptian pounds ($1.74 billion) under the new contract.
"The government had already announced earlier that it was not looking to charge TMG more for the land, and the current price quoted by the government (EGP10 billion), remains lower than the expected value under the existing contract (EGP14 billion-EGP15 billion)," Cairo-based investment bank Beltone Financial said Monday.
"This further clarifies TMG's position, in terms of the rights of the land acquired from the government, and the stock should react positively," Beltone added.
On Wednesday, the legal committee confirmed that the legal position of contractors on the project won't be affected by the court ruling. It also concluded that "the land of the contract judged to be null is no longer in the condition it was in when this contract was concluded, where the area changed from a desert to an urban community with public utilities costing massive sums of money, something which can not be neglected".
TMG's Madinaty project is located east of Cairo. Madinaty, built over 33.6 million meter squares, features 120 residential units mainly designed for wealthier residents trying to flee busy urban Cairo.
The developer also has a number of hotels and developments around Cairo, including Al Rabwa and Al Rehab.
TMG shares closed 0.1% higher Sunday at EGP7.20 in a slightly positive market. The company's shares fell as low as EGP6.23 on Sept. 16.
-By Shereen El Gazzar, Dow Jones Newswires, +201 2429 8286, Shereen.elgazzar@gmail.com
© Zawya Dow Jones News 2010
