With the latest cycle of real estate activity, a new generation of developers has sprung up. Some of them have come to the excavation sites with approaches that could be refreshing for the whole sector. Zardman is a young company that leapt straight into ambitious projects in the urban core, surrounding communities and outside of Lebanon. Executive quizzed general manager Makram Zard about the company’s performance and the force of experience that stands behind it.
What are your main lines of activity at Zardman?
We have two sides to the business, addressing the middle class in the Metn region and the higher-end market in Ashrafieh. As a third section we are now increasingly stepping into leisure with Nikki Beach [resort development in Damour] and a project in Faraya that is in the pipeline.
Between your projects in Metn and in Ashrafieh, and in the leisure developments, how much does each segment contribute to your business?
In the Metn region we have the bigger volumes in square meters [sqm] and in Ashrafieh we have the higher values. The Mondrian [building in Ashrafieh] alone is 27 floors at [an average sqm price of] around $4,500, so it can go up to $80 million in sales whereas our Bkheir project, which is our largest project in the Metn region, is $35 million. If we compare it in dollar terms, they are approximately equal. The leisure projects are just coming up in the pipeline so in terms of construction and sales costs, the leisure projects should reach about 20 percent of our portfolio; we are talking about 20 percent for leisure and 40 and 40.
How do land prices in the Metn region compare with Ashrafieh today?
Metn is still undervalued. If you ask me about buying a property to resell, not to rent, the Metn is the region to be today. The thing about the Metn region is that you have beautiful plots but they are not very accessible.
When comparing luxury and mid-market projects, where are the highest margins for developers in Lebanon today?
Margins are better at the high end but in terms of cash flow, easiness of the project [and] in terms of sales, the middle class is much easier, so it compensates.
How is the situation if you think beyond the middle class and high end, looking at the need for low-end housing where nobody seems to develop projects?
Actually we would love to do a project such as low-income housing and we tried to do a project. The only thing was that the land sale didn’t come through. As for construction it is totally feasible and very profitable. The margins are lower but you are doing many more apartments.
How big was this project that you were thinking of?
Our project was for around 140 sqm to sell for around $200,000 per unit, so it is very accessible to lots of Lebanese with the bank financing and home loan schemes that we have. Low-income projects require more from the developer because it needs 100 to 200 apartments to be feasible. Today as Zardman we are looking for that plot.
Does Zardman have a land bank of owned plots that you can develop at will?
No, we are not structured this way. My father, Georges Zard Abou Jaoude, is the backbone of the company. He of course is a big landowner in Lebanon. We as Zardman are only into developing projects.
You are a young executive. In Lebanon there is a perception that this can only happen in a family-owned company. Are meritocracy and family business mutually exclusive?
They do not exclude each other and if you look at our business cards we do not put titles. You always encounter this perception of being young as negative, especially in Lebanon where it is very rare that a young entrepreneur without the backing of a family will succeed. It is a shame for the country because if these young people go to the United States and London, they are really getting ahead.
What can you tell us about the projects portfolio of Zardman?
In talking about construction costs, our portfolio of projects under development comes to around $200 million, including Aura Erbil, a 200,000 sqm mixed-use project in Erbil, which accounts for a large chunk of this.
So you have $200 million in total construction cost, including Kurdistan, on your books?
About $200 million including Kurdistan but not including land cost and fees and without our latest leisure project in Faraya, which is another big project with 120 chalets of around 150 sqm each. It will represent around $20 million in construction cost.
How much of that $220 million total is in early stage, how much is ongoing and how much completed?
At the end of , we will have 10 percent completed, 70 percent ongoing and 20 percent in early stage.
So you went from a single project worth perhaps a few million dollars to a construction cost portfolio of over $150 million in ongoing projects in how many years?
We started in 2008 and will celebrate our fifth anniversary in 2013.
Looking at your equity, do you have investors?
We have mostly family-owned projects. We have a few projects where we have investors coming in. We do not usually get investors to come in because we do not need that cash for the equity. The reason why we go with investors is for potential other business partnerships, [or] for marketing and public relations purposes. Our view for the future is to have larger projects with investors coming in for equity.
Will the geographic scope of these future activities be in the Levant or beyond?
I think that Africa would be a region with great potential to visit. Especially Nigeria is growing at remarkable speed. In Lagos you have the Eko Atlantic Project, which is as big as Manhattan. It is one of the biggest projects in the world and there are lots of opportunities there. We are looking to establish in Erbil and grow more there.
You seem to be eager to grow and not only in Lebanon…
That is exactly correct but as we are a young company, we think we have time. We are very hungry to find the market but we are trying today to establish our name in the best possible way. We want to finish all our projects in the best quality and delivery dates so that whenever we go to another market we have the portfolio needed to enter a market strongly.
What have you achieved so far in total sales?
We today have around $180 million in sales, cumulative. Our sales versus construction costs are quite high so on that front we are safe and sleeping well.
What growth rates did you achieve on the sales side and how strong an increase do you project for 2013?
From 2010-11 we had about 15 percent sales increase but from 2009-10 we had around 40-45 percent. In 2012 we did not have many new projects coming to sales other than the second phase in Bkheir. In 2013 we will have Nikki Beach, Faraya and the third phase in Bkheir, and the Mondrian. I think sales in Erbil will grow tremendously because we are doing the whole marketing and sales launch right now. With all these projects we should reach 60 or 65 percent sales growth next year.
How much is your father’s vision driving the company, or how much is it a vision being developed now?
It is more supervision than vision itself. At first we were following his advice, which was more of saying to us what to do. It is becoming more of discussion and more give and take and I think in the following years it will be even less. Today, even if we think that we did a great job, we should say that it was mostly because he was behind us. I want to emphasize mostly [because otherwise] we wouldn’t have been able to grow that fast. We might have been able to grow and become an established name but not in this manner [as we did].