Joseph Mouawad, chairman of Mouawad Investment Group (MIG), has gradually earned his place among Lebanon’s top developers of residential properties, country clubs and mixed-use offices since the start of Lebanon’s post-civil war reconstruction effort. Two of his major ongoing projects, covering almost 90,000 square meters in Faqra, will soon put his footprint on the famous Lebanese resort town. Executive chatted to the developer about his latest resort operations and his sway toward hospitality projects in Beirut.
After the success of Park Tower Suites in Ashrafieh, you seem to be gravitating towards more hospitality projects in Gemmayze, Saifi and Monot…
In our new residential project Monot 38 on Monot Street on land we acquired about a year ago, we will also have a boutique hotel, Monot Suites, of about 25 rooms, along with the residential tower of about 20 floors, which will consist of small to medium-sized residential units of 100 to 300 square meters, of which 35 percent is sold.
And in October of this year, Saifi Suites will function as a boutique hotel, offering 70 suites. From our previous experience at Park Towers, we were able to put up a good [internal] management team to manage the new hotels that are coming up.
Why hotels? Is the profit margin higher? Is there a gap in supply?
We believe there is shortage in hotel supply in Beirut. Even before the [civil] war, we had more rooms. We believe that building a hotel will be an added value for a long-term investment, especially when you have a prime location.
You have signed with Rotana to manage an upcoming Gemmayze hotel project, correct?
We are developing a new hotel project with Rotana’s new brand Centro, as the manager, on Rue Pasteur in Gemmayze. It will have a view to the port, and it’s a nice area that allows visitors to walk to trendy shops, bars and pubs. The restaurant in the hotel will cater to both hotel clientele and the Gemmayze crowd.
And why did you choose Rotana to run operations?
I found an opportunity in the new brand they’re putting up: the Centro brand. It is a trendy budget business hotel that will cater mainly to business people and tourists, and Beirut has few three and four-star hotels so this will garner much demand, and their reservation system will help fill the 170 rooms. [In March, Rotana Hotels became the first Middle East hotel operator to sign an agreement with Google to display Rotana rates and availabilities on Google platforms.]
In Beirut,since [MIG’s] The Palladium building [near Starco center] was finished three months ago, are there any new tenants?
Bank Audi rented around 7,000 square meters of office space, which will accommodate around 400 employees of the bank. But in terms of retail space, just recently, Santiago [womans clothing boutique] opened [in addition to Lanvin, Balmain, and Isabel Marant, which belong to the same owners, as well as Manasseh, the renowned Silverware store]. In terms of restaurants, in addition to Kampai [Asian restaurant] already open, we will also have Le Cocteau that is expected to open in June 2011. ..We are partners in both of them. We are now in the process of closing some other retail shops.
How much do you want to grow the hospitality wing of your activities?
We want, eventually, 50 percent of our activities to be under the umbrella of hotels and restaurants.
Since the banks are tightening their fists, how has your financing strategy changed overthe last few years?
Our debt-to-equity-ratio will start changing from now on because banks are demanding higher equity in the projects, as they believe the market is saturated. They are requiring 50 percent equity compared to 20 to 25 percent previously. Now we cannot count on presales as much, so we have to put in more equity.
The Oakridge residential resort is probably your largest residential project to date, sitting on about 46,000 square meters of land, 100 meters from Faqra Club. Is this kind of resort setup new to Faqra?
To me, there is nothing similar in the area to what we are delivering. [Oakridge] is different. We saw an opportunity to create a resort, not [just] chalets. The resort will consist of residences, town houses, villas, and it will have about 12,000 square meters of touristic facilities. That includes a spa, club, hotel, furnished apartments, indoor and outdoor pools, a restaurant, bar and children’s playground. We started construction about two years ago after buying the land in August 2008 and plan to deliver at the end of 2012. Today, around 60 percent of the project is already sold.
In a resort project like Oakridge, how do you anticipate how much demand there will be for the different residential facilities — villas, townhomes, chalets?
We try to anticipate demand from the existing market, so we look at the existing demand in the area of Faqra, and we try to meet this demand. But at the same time we bear in mind that we need to cater to all budgets; we don’t want to limit ourselves. In Faqra club, 10 years ago, the demand was only for big chalets and villas, but now the young generation is showing more interest and looking for smaller chalets so we try to cater to both budgets. In Faqra, most people buy a piece of land and then build for their own use. Very few are building commercial projects, the only project that was built in Faqra club is Clouds.
What does the price range look like for units in Oakridge?
We have an increase average price of $3600 per square meter now. There are some villas and townhouses, which we priced by unit not by square meter, so $2.2 million for the townhouse and around $3.2 million for the villas. These are sold on core and shell.
What is the plan for the Silver Rocks plot in Faqra?
Silver Rocks is a land development project, on a plot of about 40,000 square meters that we bought at the same time [as the Oakridge plot], in summer of 2008. It consists of 39 plots for sale and we already sold 60 percent. We decided to have a closed gated community and build a small clubhouse and swimming pool to be used by the residents. We are mainly selling plots to people who will build their own chalets, but of course, the design has to be approved by our company.
What’s the incentive to develop land and sell off plots, instead of building residences and selling them?
Many people prefer to buy a plot instead of a chalet. They consider a land purchase a safer investment for the long term.
What are these two large projects costing?
The total project cost for Oakridge is $45 million including land and construction. Silver Rocks costs around $10 million.
How would you characterize the swelling of supply in Faqra now as around nine residential and hotel projects are underway?
There are still plots of land in Faqra, but there are too many projects being built, so project development will definitely slow down and many projects under planning will be put on hold. The demand will pick up again once the political situation gets better.
Do you think prices will dim?
Cost of construction in Faqra area is high due to the weather conditions that allow only seven months of work per year and also due to higher cost in labor and transportation. The cost is at least 20 percent higher than [the cost of building in] Beirut. Prime lands are limited, which also led to a high land cost, so prices will not decline since the profit margin is not significant.