For-your-information from Lebanon and the region
Solidere trumps 2010
Due to a surge in operating profits, Lebanese real estate firm Solidere was able to increase net profits by 7.8 percent in 2010 to reach $196.5 million, according to a June 15 statement by the firm. Sales of land plots and increasing revenues from rental units expanded Solidere's operating profits to $272.2 million last year, a yearly increase of 16.5 percent. Based on its market capitalization of $3.1 billion at the end of 2010, the company was ranked 61st in Al Iktissad Wal Aamal magazine's annual survey of the Top 100 publicly-traded Arab firms in the region, down from 45th place in the previous survey. As the largest property developer in Lebanon, its total assets are estimated to be worth around $10 billion today, while unsold property is valued at $7.5 billion.
Gloom and dividends
Property transactions contracted 21.3 percent year-on-year by the end of April, while the value of the sales dipped 16 percent over the year, according to BLOM Bank. Further indicating a slow-down in construction activity this year, the major supply indicator, cement deliveries, fell 3.5 percent as of the end of April in comparison to the same time last year, according to the Order of Engineers of Beirut and Tripoli, and Byblos Bank. Holcim Liban, one of the major cement producers in Lebanon, will pay $30.25 million in dividends to shareholders starting June 27, at a dividend ratio (dividend payout as a ratio of 2010 net income) of 80.8 percent. Société Libanaise des Ciments Blancs, another major local producer, will also distribute dividends based on last year's profits on the same day.
Noor International's dodgy dealings exposed
Beirut-based developer Noor International, founded by Mohammed Saleh, has not completed more than 5 percent of its residential projects sold off-plan, according to a June 1 article in Lebanese daily Al Akhbar. It further claims that Saleh fled to Saudi Arabia in May after scamming investors of around $10 million. Noor International first gained notoriety (or infamy, depending on one's perspective) in 2006 when Saleh sought to raise $1 billion from investors to build "Cedar Island", a dredging and construction development that would have seen the creation of a 3.3-square-kilometer island off the Lebanese coast in the shape of a cedar tree. To the relief of many, this project was among the 95 percent of Noor's development ideas never to see the light of day.
Tourism takes the cake
Of the 35 business developments launched with the help of the Investment Development Authority of Lebanon (IDAL) between 2003 and 2010, tourism projects accounted for 79 percent ($860 million) of the $1.1 billion total mobilized investment. IDAL indicated that the bulk of tourism projects were the construction of luxury hotels and resorts, generating nearly 3,300 jobs over the same time period. The industrial sector was the second largest recipient of IDAL-supported investment between 2003 and 2010, receiving $131 million. IDAL mobilized investments accounted for some 4,760 new jobs over the seven-year period.
From Damascus to Mayfair
A June 20 article in British daily The Telegraph reported that former Syrian Vice President Rifaat al-Assad bought a 10.3 million pound [$16 million] Mayfair townhouse in 2007 by signing a 110-year lease from the Grosvenor Estate, with funds paid by an offshore company based in the British Virgin Islands. Given the current unrest in Syria and the possibility of several Syrian officials facing international investigation, the properties could be confiscated in the event of a criminal investigation against Rifaat al-Assad for "crimes against humanity," as he is blamed for ordering the massacre in the Syrian town of Hama in 1982 that killed tens of thousands. The article added that the 73-year-old uncle of current Syrian President Bashar al-Assad did not live in the residence until more than a year ago, but has been residing mostly in France and Spain. In 2008, Hafez al-Assad also bought a lease on the adjacent property, but Land Registry documents did not reveal the amount of the contract. In related news, Rami Makhlouf, the maternal cousin of the president, appeared in a rare televised appearance on state television on June 17 and pledged to relinquish all his real estate in Syria to the state and give up any business ventures that bring him personal gain, such as his stake in Syria's monopolistic telecommunications company Syriatel.
Dubai's cedar shoreline
By the fourth quarter of this year, the island of "Lebanon" will be home to the first commercially operating project within The World, the 300-island man-made archipelago off the coast of Dubai developed by Nakheel. The island is fully owned by Indian entrepreneur Wakil Admed Azmi, who has spent approximately $16.3 million [AED 60 million] on the construction of a beach club and facilities, in addition to the initial cost of the island. Reza Sinnen, operations manager at the World Island Beach Club (which is being developed on the island), told the United Arab Emirates (UAE) daily Arabian Business in a June 15 article that another $2.17 million [AED 8 million] would have to be invested to complete the commercial resort, which includes a restaurant, lounge, entertainment venue and cabanas, with facilities that allow yachts of up to 80 feet to be docked. The resort aims to sell club memberships that cost up to AED 40,000 [$10,889] per year. Sinnen said problems with the delivery of water, electricity and on-island services mounted as Nakheel's credit burdens grew, but that the owner cut construction costs by nearly 70 percent and managed the project himself in order to complete it on time. "We are about four months away. We are tying up with partners, yacht operators, travel agents, the Road and Transport Authority, Sealink...there is a lot to do," Sinnen said. While 70 percent of the 300 islands are sold, according to Nakheel, none of the other owners have begun construction, except Kleindienst Group, which is developing resorts on the six islands it owns, which together are known as the Heart of Europe Project.
A greener prospect
A new environmental initiative that rates the green credentials of buildings in Lebanon was launched in June. The scheme was announced on the closing day of the 16th Project Lebanon, the international trade exhibition for construction and environmental technology that saw around 500 contractors and construction companies from 26 countries set up shop at Beirut International Exhibition and Leisure Center (BIEL) for the week. The ARZ Building Rating System is the first of its kind in the Middle East to classify the environmental performance of existing commercial buildings. The system takes into account Lebanon's water and electricity shortages, and includes renovation conditions to reduce greenhouse gases. Building owners can invest between $100,000 and $4.9 million, based on building size and condition, to save between $35,000 and $890,000 in costs per year, according to Lebanese Council for Green Buildings President Samir Traboulsi.
Shop till you drop in Shiraz
United Arab Emirates-based developer and shopping-mall specialist Royal Star International has completed an $830 million [AED3.04 billion] shopping mall in Shiraz, Iran, the largest project in its portfolio of $1.5 billion [AED5.50 billion] in assets and equities. With 420,000 square meters of retail space and 2,500 shops, the Fars Shopping Complex will rival in size Emaar's Dubai Mall, currently the region's largest, and hold double the number of stores. Addressing the project's exorbitant costs, the group's director of operations, Hamzah Abu Zannad, said, "The retail sector there is still largely untapped and creates many opportunities for the kind of development we are bringing in. The investments make for a sound business case," as quoted in Gulf News. Opening in September 2011, the project will include the five-star luxury Burj Fars hotel by the end of 2012 as well as an amusement park and convention centers. The anchor tenant on the 150,000 square-meter plot is French supermarket Carrefour, to be joined by six 240-seat capacity cinemas, a 28,800 square-meter video arcade and other entertainment facilities. Across the Middle East, Europe and Asia, the group has delivered more than 750,000 square meters of retail space hosting 5,300 shops.
Innovation in Property
Abu Dhabi-based property developer Sorouh Real Estate has launched a rent-to-own offer in which tenants at the Sun Tower at Shams Abu Dhabi will own the right to convert 90 percent of paid rent into down payments. This option allows leasers to purchase residential property after a three-year rent agreement, with the possibility to exit without penalty. This lucrative plan does not only exempt buyers from a 15 percent down payment normally required for purchase, but also offers all of the state-of-the-art amenities with no agency fee. Sun Tower at Al Reem Island comprises 680 one-, two- and three-bedroom apartments, with rental prices starting at $24,231 [AED89,000]. Being 85 percent pre-sold, Sun Tower offers residents access to three gymnasia, cafes, restaurants, a retail mall, a supermarket chain, swimming pools, tennis courts, children's playing areas and other open-air facilities.
Qatari real estate titan offers $3.8 million to charity
Chairman of Qatar-based Ezdan Real Estate Company and member of the Qatari ruling family Sheikh Thani bin Abdullah al-Thani has donated 605 million shares in the company, worth $3.8 billion [AED13.9 billion], to charity. The donation to an Islamic endowment -- an asset or fund allocated for the poor and for places of worship -- appears to represent about 25 percent of the outstanding shares in Ezdan and was described by a United States academic researcher as the eighth largest donation made globally over the past decade. Shares of Ezdan have been publicly listed since 2008, but according to financial information site, Zawya, more than 99 percent of the property developer's stock has been held by a holding company owned by the al-Thani royal family. The shares have been trading around QAR23 [$6.31 or AED23.19] since February 2011, but dropped precipitously between December 2010 and then losing around 30 percent of their value with daily trading volumes during the period rarely exceeding 10,000 shares. According to a press release, the donation creates a source of sustainable income for humanitarian needs of the community, and Ezdan's performance would undoubtedly lead to an increase in the value of the donated shares to the equivalent of 18,000 housing units, from the current 7,000.
Commercial housing takes a dive in Kuwait
Global Investment House's June 2011 report revealed that Kuwait's commercial housing sector slumped by 66 percent in the first quarter of 2011, with the total value of transactions amounting to KWD395.4 million [$1.437 billion or AED5.27 billion]. Prices still rose by 5 percent, despite the falling occupancy rates reaching a low of 20 percent. This shortfall was mainly due to the global real estate crisis and lack of mortgage options. The report also stated that the commercial housing sector made up 55 percent of transactions, while the investment real estate sector, which grew by 49 percent year-on-year to a value of KWD281 million [$1 billion or AED3.68 billion], accounted for 39 percent of total transactions for the first three- month period.
Investing in vitality
Ithmaar Development Company has announced the completion of the preliminary phase of the $1.6 billion [AED5.87 billion] Bahraini Dilmunia project and the launching of the infrastructure development tender. "Dilmunia is aimed to become the region's biggest wellness and vitality location, providing a prospering community with a balanced lifestyle", said Chief Executive Officer Mohammed Khalil al-Sayed at Cityscape Jeddah. The project is tapping into the fast- growing sector of global wealth and wellbeing tourism, which is expected to reach a value of $100 billion [AED367.29 billion] by 2012, according to the Deloitte Center for Health Solutions. The Dilmunia mixed-use development spreads over an area of 125 hectares, comprised of healthcare, wellness, hospitality, commercial, retail and seafront residential communities, and is expected to provide housing for 12,000 to 15,000 residents.
© Executive 2011
