Outside of Lebanon’s second largest city lie the foundations for what soon could be Tripoli’s newest suburb and a new way for banks to cash in on development opportunities. Zeitoun 1589 is a project owned by a company of the same name and currently managed by BlomInvest Bank, a unit of regional financial player, Blom Group.
Located just south of Tripoli’s Abou Samra and north of the village of Rass Maska, the land under the ownership of Zeitoun 1589 has been re-allotted into just more than 163,000 square meters (sqm) and divided into 85 plots, ranging from 1,500 sqm up to 3,300 sqm.
Lara Kanj, head of BlomInvest’s real estate unit, said that in 2010, Omar Ouayda, the previous owner, approached the bank about purchasing the land from him, which Kanj said BlomInvest saw as a good opportunity for their investors. “We got the land at a very good price, below the market price,” she said, adding that now that the infrastructure — including roads, sewage and electricity — has been developed, they can sell at the market price. Although she would not disclose the original price of the land or the cost of developing the infrastructure, Kanj did say that the bank expects shareholders in Zeitoun 1589 to realize a minimum return on investments “in excess of 15 percent”.
The expected success of the venture rests on the role that BlomInvest played in overseeing the project’s development. “BlomInvest acted as sponsor of the project, by originating the opportunity and raising the funding,” Kanj told Executive. “The management role is twofold: project and investment management.” As she pointed out, Lebanese law prohibits banks from directly investing into real estate projects, unless they are building bank branches or employee housing.
To get around this, BlomInvest created the company Zeitoun 1589, thus distancing the bank from direct financial involvement. The bank brought its investors on board, who became the shareholders in the project. Kanj added that members of the Ouayda family also invested in Zeitoun 1589, but exited, being “paid in cash”.
BlomInvest also contracted North Excellence Real Estate — Omar Ouayda is a co-owner — to develop the land, as well as Socotec and A. Manasseh Ingénieurs as technical supervisors. Providing an idea of BlomInvest’s level of engagement with the project company, when Executive called Zeitoun 1589’s office number listed on the project’s website, an associate at the investment bank picked up the phone.
Since the surrounding area is already developed commercially and with the center of Tripoli only “10 minutes away by car” (discounting traffic), Kanj estimated that 95 percent of the plots would be developed into residential units.
The prices of each plot currently average around a modest $450 per sqm, depending on the location, market fluctuations and upon the specifications of each plot. Yet she is hopeful that these prices will appreciate, because the region “is going to boom anytime soon”.
In other words, Kanj expects that Tripoli’s municipality may increase the coefficient of exploitation, from the current 20/80 percent to 20/120 percent, meaning that developers can increase their built-up area.
Given the general perception in the local investment and development circles that real estate in Lebanon is an ‘un-losable’ money bet, the project appears to be safe even if the area is exposed to further risk factors. Indeed, Kanj was unconcerned about Tripoli’s poor security record and the effects of the civil war next door in Syria. She argued that since the assets were land-based, risk is low, and investors can “sit on it” for a few years to wait for things to calm down.
When asked if there were other projects in the pipeline for BlomInvest similar to Zeitoun 1589, Kanj said yes, but did not give any details.