Sayfco CEO Chahe Yerevanian runs among the country's most successful real estate firms. Executive sat with him to discuss the company's long-term strategy, Syrian refugees and the government's role in the Lebanese real estate sector.
You have told us that your company has achieved development of 14 projects in a three-year cycle that started in 2010. What is your growth expectation in the next three years?
I think the slope is going to be extremely steep and I forecast that we will have 50 projects in a cycle in the next three years, because we already have many in the pipeline and many close to the pipeline. So I can foresee 50 projects increasing from 14.
Your projects have been concentrated in the Metn region. What is your strategy of geographic expansion?
The next step is to go to Beirut; our strategy is to come up very soon with signature projects of [small] luxury units in areas such as Ashrafieh, Bliss Street and Verdun. I can even tell you that top local banks have approached us with ideas to be their real estate development arm.
Overall, projects are getting bigger and bigger in Lebanon. What kind of a role do you and your peers in the development sector play toward improvement of urban environments, infrastructure and planning?
Not enough. We haven’t done anything and much more can be done. I have plans to create a consortium of big developers to lobby for these issues. If not, perhaps I should become a minister and do it myself.
So what is the biggest need for the government to address in relation to the property sector?
The government should do its utmost in the next five years to re-plan at least the main infrastructure arteries to get the blood of the economy flowing. I hope they will wake up and especially in my industry, real estate, I can say that the only important thing for the government to do is infrastructure.
Doesn’t there have to be urban planning too?
Definitely but infrastructure is the priority; if you give me infrastructure, then you can give me urban planning and so on. If there is no infrastructure, there is nothing. Start with infrastructure.
In interviewing developers and intermediaries I heard of no joint initiatives or even ideas from private sector developers on how to help the state in housing predicaments such as the Syrian refugee crisis. Why is that and what role should the private sector play in addressing national problems on housing?
The Lebanese mentality is patriotic only in words. For my part at least I am proud to be Lebanese and I believe I am patriotic. I had the chance to go to other countries and work as a developer but I chose to continue investing here in these difficult times of war and explosions. We created this brand from a family company that ten years ago was not even selling 50 units a year to a company that sells 500 units a month. That is what I call a success made in Lebanon.
What does your company promise to landowners as average internal rate of return (IRR)?
The median rate of return of the 14 projects so far is 52 percent annualized IRR. That was achieved as average of the 14 projects between 2010 and now.
Is that the return that the landowner achieves on his investment?
No, that is on the project. As the landowner measures the investment into the project, he will say that it brought 52 percent IRR but not as return on [cash] investment. His return on investment is on average four to five times cash — if he invested $10 million, he is making $50 million.
This of course raises the question if this kind of investment gain is moral.
Is there such thing as a moral corporate gain? It is a big debate.
When states tax corporate gains, the intention is to make society more equitable and that at least makes the system sound more moral.
And that is why it was important that the Council of Ministers [Lebanon’s Cabinet] proposed to tax the banking sector and the real estate sector within the basket of tax increases sent to Parliament. I am among those people who are not at all against this but what I say is that much has to be done first. Clean up the corruption, stop paying retired general managers and stop paying employees that do not exist, and privatize the electricity. There is so much to do to run the country in a proper manner. Tax me but before you tax me, first clean up [the administration].
And you are ready to help with cleaning all that up?
I am definitely ready.