The disruption was illuminating.
When the knock first came, Georges Chehwane tried not to interrupt his interview with Executive. The matter, however, demanded the chairman of Plus Holding’s attention. A client wanted to buy an apartment in a building Plus Properties is promoting, but needed flexibility in payment scheduling. It wasn’t long before Chehwane was standing, shaking the client’s hand. “Mabrouk,” he said.
“So that’s how it’s done?” Executive asks the man who only moments before was lamenting the slow pace of sales on the local real estate market. “You have to,” he says. Plus Properties is promoting four developments at the moment, in addition to constructing the company’s own projects. Why do developers come to him to market their apartments? Chehwane cites his company’s old-school marketing machine. He doesn’t do digital because he doesn’t see the value in it at the moment. “There’s a lot of competition. Everyone’s going digital.”
For Chahe Yerevanian, chairman of Sayfco Holding, Facebook is a money-maker par excellence. The pride in his voice is clear when he mentions the one-page case study Facebook wrote in 2012 about the $25 million in sales Sayfco generated exclusively from the social networking site for its Crystal Towers project, one of the few developments the company built itself. Yerevanian explains that of the 30 or so projects Sayfco has been involved with since 2004, it directly owned and developed land for only five (and was a partner in the land ownership on an additional two). Yerevanian’s model focuses on being a service provider. For 8 to 10 percent of sales revenue (plus a 30 percent bonus for sales above the pre-arranged target), Sayfco provides landowners with a development concept and markets the project. He claims the model is almost zero risk, but admits only 99 percent of the projects that he took on under that model will be completed. There’s reputational risk, and he says it has made him much more diligent when taking on new clients. He laughs when Executive asks about rumors the company is in financial trouble.
“I’ve heard I’m bankrupt,” he says, jokingly. “Or hiding in Brazil.” The slowdown has hurt, he admits, but insists the company is strong. Like Chehwane, Yerevanian says Sayfco benefited from a Banque du Liban circular from late October 2015 allowing for companies with cashflow problems to restructure their debts. Unlike Chehwane, Yerevanian says the process was painless. (The Plus Holding head contends that the banks are “not being very flexible” and says a union is needed to strengthen the developers’ hand). Aside from the debt restructuring, Yerevanian says he’s currently raising capital to help Sayfco expand into Saudi Arabia and the United Arab Emirates. Yerevanian says that in late 2015, he became Sayfco’s only shareholder after buying out his brothers, amicably. He plans to sell 50 percent of the company to unnamed silent partners for an undisclosed amount. Yerevanian wants Sayfco to be a global name in real estate development. He plans to grow the brand over the next five years and will only then begin thinking of floating a percentage of Sayfco.
Chehwane is similarly focusing on expansion at the moment by building in Cyprus, where he says margins are similar to Lebanon. But he also stresses the importance of diversification. A new member of the Plus Holding family should be coming soon, he says. Time does not allow an in-depth discussion but the project, Green Plus, will be well outside the real estate domain. It’s a hydroponics venture in the United Arab Emirates.
To survive as developers in Lebanon, Chehwane and Yerevanian agree it’s all about delivery these days. Chehwane admits it’s increasingly tough, however, and says he uses barters over cash whenever he can. While the number of real estate transactions is up 25.6 percent in the first two months of 2016 compared to the same period in 2015, a return to the boom days seems a distant possibility.
“Right now, we just need to get the buildings up,” Chehwane says. “It’s in everybody’s interest for projects to be completed.”