The settlement agreement between the Egyptian Resorts Company and Pyramisa Hotels and Resorts aims to alleviate the legal disputes facing the company, according to an official at the Egyptian Resorts Company.
Five years ago, the Tourism Development Authority (TDA) decided to cancel the allocation of an area of 20m sqm in the area of Sahl Hasheesh to the Egyptian Resorts Company. Pyramisa had filed a lawsuit in the court at the State Council to demand the termination of the allocation contract of a piece of land in the area of Sahl Hasheesh by TDA for the Egyptian Resorts Company.
The source explained that, in accordance with the settlement agreement, the lawsuit filed by Pyramisa will come to an end. Moreover, this will include the intervention of Pyramisa against the Egyptian Resorts Company in the lawsuit filed by the latter against the TDA following the decision to cancel the allocation of 20m sqm in Sahl Hashish.
The settlement will strengthen the companies’ position in the dispute with the TDA, the official said.
The source said the settlement comes after the company achieved legal progress last March, after the State Council accepted the company’s intervention in the lawsuit filed by one of the lawyers to demand the termination of the allocation of the land. This is in addition to not accepting the original lawsuit filed by the lawyer, as it was filed by a person with no official capacity.
There were other disagreements between Pyramisa and the Egyptian Resorts Company, which pushed Pyramisa to file a lawsuit to prove the invalidity of the allocation of Sahl Hasheesh land. In this context, Pyramisa chairperson Magdy Azab previously said that his company filed this lawsuit after being harmed by the non-commitment of the Egyptian Resorts Company to the development operations and the provision of electricity and water for the hotels built in the area.
As a result, Pyramisa refused to repay a debt owed to the Egyptian Resorts Company worth EGP 1.259m, an outcome of a business partnership that pushed the Egyptian Resorts Company to file a lawsuit demanding Pyramisa’s declaration of bankruptcy. However, the Economic Court in Cairo refused this demand in March 2014.
In a research paper, the investment bank Beltone said the settlement agreement includes settling conflicts related to present projects between both the Egyptian Resorts Company and Pyramisa.
The paper explained that the settlement is expected to result in creating cash flow for the Egyptian Resorts Company in the coming period, when revisiting the old projects that the board of directors decided to delay in implementing due to the conflict.
Beltone noted that this agreement partially reduces pressure on the shares of the Egyptian Resorts Company and supports the company’s position in the lawsuit filed against TDA.
The bank added that in case of ending the lawsuit in favour of the Egyptian Resorts Company, the company’s land portfolio will increase from 12m sqm to 32m sqm, since the extra area is the third phase of the 20m sqm land project in Sahl Hasheesh.
The third phase will include a university, schools, a commercial complex, and a residential area.
The issue dates back to a decision tkane by the TDA in April 2011 to cancel the initial approval of allocating the third phase of Sahl Hasheesh land to the Egyptian Resorts Company under the pretext of not committing to the terms of the agreement. As a result, the company filed a lawsuit against TDA to challenge this decision at the court of the State Council.
The court referred the lawsuit to the State Commissioners Authority to conduct a legal report on the issue, in order to use the report as an advisory opinion before sentencing.
The Egyptian Resorts Company generates its revenues from the businesses of selling lands and real estate, and expanded in equipping hotels and retail projects in Sahl Hasheesh with facilities and services.
Beltone noted that the company continues to incur losses due to the unstable tourism situation, especially after the Russian plane crash in October 2015. The company launched a marketing campaign to attract Egyptians to Sahl Hasheesh.
The area available for sale in the first and the second phase in Sahl Hasheesh amounts to about 1.6m sqm.