Resorting to luxury: Lebanon’s new tourism

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Lebanon’s new boom is tourism-related real estate. Significant developments – worth in excess of $4 billion – in this field have begun roughly four years ago and accelerated massively by this year. The Middle East’s largest resort project, Sannine Zenith, topped the list of headline-making projects by size. But other projects are also highly noteworthy, from the Metropolitan Park development in the Jamhour area above Beirut, which will be the Eastern Mediterranean’s first theme park, to a wave of new beach resorts with names such as Oceana, Bamboo Bay, La Voile Bleu, Edde Sands and, the latest addition, La Guava.

Ironically, as much as beach life has long been associated with the Lebanese scene, the development of good beach resorts is a recent phenomenon. As short ago as 2002, an economic guidebook on Lebanon could undisputedly label the nation’s publicly owned coast as having “little more to offer than uncontrolled industrial development and mountains of garbage.” Whereas beach facilities previously existed in some numbers, they did so either in form of elite islands for a most narrow clientele of Lebanon’s upper 10,000 or would meet only the lowest possible denominators of cheap fun, the new resorts are seeking to provide both class and relative affordability in an ecologically compatible setting.

The importance of resort development for the future of Lebanon can hardly be overestimated. These new trump cards in the Lebanese development game score on two crucial economic fronts – tourism and real estate. While sales of apartments and vacation homes on the high end of the market entered a boom phase over the past two years, economists, sector analysts and major real estate players cautioned that this flare of mostly foreign direct investments was restricted in its economic benefits. By contrast, resort properties are productive. As tourism destinations they attract visitors, offer jobs and operator profits. As real estate they boost values at the site and the surrounding area. Operators and developers of the new resorts reported sotto voce that their presence, whether on mountain or seashore, send land prices soaring in the immediate area by at least 50% and up to three times. In parallel, the developers uniformly agreed that the mere act of constructing a resort or setting up a building somewhere on unused land does not add any value. This value is created through sound commercial leisure activities that are up to 21st century standards on infrastructure, business concept, marketing, and environment.

Sannine Zenith

Beyond its image as behemoth and mother of all mountain resorts, much mystery still shrouds Sannine Zenith, the largest commercial real estate adventure ever attempted in Lebanon. The initial political hype over its ownership structure has settled and the land purchases have been registered to the As Salam company, which is now wholly Lebanese owned by Jean Abou Rached, according to public relations manager Firaz Amine. “This project is a golden egg. It is so beneficial to all of Lebanon that nobody can question it,” he enthused.

Burnt somewhat by controversies over an alleged sell-out of 1% of the nation’s surface, the developers prefer to liken Sannine Zenith’s current property tally of 75 million square meters to covering an area “four times the size of Beirut.” As the detailed final master plan and feasibility studies for the project are still being worked on, the use concept and ultimate scope of the mammoth site still has some vagueness to it. But the people of the company will gladly present feel-good videos that virtually glow with promise and reveal that in the end, after further intended land acquisitions, the project size will most probably amount to 95 million square meters of “virgin land.”

Of the land already bought for more than $200 million, about 30 % are earmarked for potential construction comprising of infrastructure and hotels (not less than 8), houses, and commercial buildings. Ski slopes (double the area of the Faraya ski slopes) and three, 18-hole golf courses will consume a substantial portion of the territory, for which the developers push the slogan “in the heart of Lebanon and above the clouds.”

A green spine with one million (yet to be planted) fast-growing Nordic pine trees, an artificial lake, a heliport and three residential villages – themed eco, sports and lakeside – are key characteristics of the design. Also important, areas above 1,600 meters elevation will not see any building of houses and other structures and the peaks zone above 2,200 meters will be turned into a nature preserve, Amine said.

As Salam, whose concept includes financing of the development by issuing $1.25 billion in Global Depository Receipts to willing investors, foresees a construction phase of 12 years, during which the project will provide thousands of jobs. A project of this magnitude cannot prey on only the rich as their clientele, and Sannine Zenith confesses to have a family-oriented approach that targets normal earners as well.

Asking prices for land in the area rose to $8 to $10 per square meter since the project was announced this spring, from $3/sqm, which As Salam paid in acquisitions last year, Amine said, marveling himself at the fact that the company could keep their intentions a secret during the purchase phase.

When work is underway full steam, the company “will be happy to sell a square meter at $100,” he gave as an approximation of anticipated future prices. If all goes according to plan, As Salam might even attempt to take their mountain identity to the sea and launch a new big seaside resort venture in North Lebanon, under the name Sannine-sur-Mer.

If successful, Sannine Zenith, with a population projection of 45,000, would provide a case study for what appreciation a large, desolate chunk of land, that no one knew what to do with, can achieve in a grand development scheme. “Once it is developed, it most definitely will be a project to lift the Lebanese GDP,” Amine said.

Oceana

Widely credited with having broken the ground for more stylish beach resort ambiences on the Lebanese coast, the Oceana resort is reopening this summer at a new site in the coastal plane of Damour, to where the resort relocated this year from their previous address in Rmeileh several kilometers further south. The all-new Oceana resort will be a double feature with a landside pool face for the day and a seaside promenade face at night.

The natural Mediterranean beach in Damour is narrower than in Rmeileh and the old railroad tracks cut right through the property, so Oceana operators Cimes focused their creativity on turning these two limitations of the site into advantages, Cimes CEO Gilbert Khoury told EXECUTIVE. To do so, the developers aligned a boardwalk on the railroad right-of-way to create a 310-meter promenade along which they strung a lineup of restaurants designed to serve the resort patrons as well as a hoped-for dinner crowd. Since Lebanese beach goers mostly won’t seek direct exposure to the ocean waves and prefer to frolic between swimming pool and picnic tables, Khoury expects that the narrowness of the natural beach will not hurt the resort which is laid out to accommodate these customer desires during the day with the recreation facilities on its 30,000 square meter site and the restaurants facing it along the boardwalk.

Come evening, however, the promenade should rise to a second life as destination for people who fancy a walk and a meal or a party on the seafront. Then the restaurants will shift their attention to their west-looking terraces. Under this concept, “the short distance to the water is an attraction instead of a handicap,” Khoury said. The big pulling point that led Cimes to establish the new Oceana at Damour are the green surroundings. With the nearest building 500 meters away, the beach resort aims to entice Beirut dwellers to its Utopian setting only 15 kilometers from the capital. “It might be pretentious but we think we can create a wholesome destination for people to come there,” Khoury said.


This determination includes a commitment to preserve the integrity of the Damour plane, which represents a unique alveolus holding fresh air in the country’s coastal zone. Being to close to the sea for their purposes, farmers could not find much use for the land. For several years, the area had been under study for development as eco-tourism realm, and Oceana wants to be an anchor for environmentally sound recreation there. According to Khoury, all soil dug out during Oceana’s construction was reused in landscaping and above ground structures are built with wood.

With time, the resort intends to promote bicycle and horseback riding, and jogging as alternative to morning walks in the polluted city. With such features, the Damour plane fits the profile of new tourism-related real estate projects that can create new leisure values, property appreciation, and economic opportunities.

Apart from the location’s great overall potential, one reason for moving Oceana to the new site, so Khoury, was that Cimes didn’t want to operate the resort on conditions of a short-term lease. When first venturing into developing beach resorts four years ago, the company wanted to reduce its risks and rented the land for its first two beaches, Oceana and Bamboo Bay. The new Oceana, which involved a $2 million investment, is still set up on leased land but the terms are longer, seven years in Damour versus three years in Rmeileh. In Jiyeh, where the company is working on improving and expanding the Bamboo Bay resort by adding hotel facilities, the contract is for 10 years with extension option.

Ultimately however, the drawbacks of leasing arrangements can outweigh the advantages as the market for beach resorts is heating up, Khoury discovered with a laughing and a crying eye. “Now we are established in the market, but most of the added value is going to the landlord instead of us,” he said. In the case of the Damour property, the cost of the lease is still slightly better for Cimes than the cost of finance in purchasing the land, partly because owners in the area revised their prices for selling substantially upwards within the relatively short time from when Cimes signed their lease agreement until today.

In the longer term, however, Khoury wants to achieve gains from both operating beach resorts and from the real estate appreciation a resort creates. His aim for future projects is to have a two-pronged structure of a real estate investment firm and an operator company – but with separate shareholding bases, to avoid conflicts of interest between the resort operation side and the real estate aspect of the business.

Faqra and Mechref

The ancestral tree of the new Lebanese resorts family includes a number of projects that were important in evolving this particular real estate culture over the past thirty years. On the mountainside, the Faqra gated community was established in 1974 as a winter sports resort and pioneer of such developments. After the war years presented it with the challenge of serving different needs from the original design – customer demand for plots and construction was driven by Faqra’s security and insulation from the conflict zone – the project could re-emphasize its original focus over the last 12 years and today continues to grow, marketed now as an all-year, high-altitude resort community.

At a size of two million square meters, the Faqra Club group of companies, whose original investment has been estimated to translate into approximately $73 million in today’s dollars, saw a substantial recent increase in sales prices for their properties, from an average of $200 per square meter two years ago to at least $300 today, according to company managers. Plots are also tending to be larger. While the company designed its plots originally to measure from 700 to 1,000 square meters, a new 100,000 square meter segment under development today offers land ranging up to 4,000 square meters per plot.

While its presence pulled nearby land values up, the remoteness of Faqra granted the project an existence largely undisturbed by problems with individuals developing land outside of the community’s boundaries, although Faqra’s strict building codes were not implemented there. The value-added that the company provides to its residents comes from the infrastructure it established and from communal services – water, electricity and such – which the project owners in fact subsidize.

Industry observers regard Faqra as a successful development, which however remains by necessity restrained in scope to a comparatively narrow profile of a second or third-residence community for a small target group of affluent Lebanese, Lebanese expatriates and regional buyers. Within these limits, the project’s standing is strong and if the prospect of a belt of ski slopes interlinking the entire Faraya-Sannine area under the Sannine Zenith concept is realized, the good new neighbors could give Faqra yet another boost.

A further landmark in the history of private developments in Lebanon was established when the Mechref community saw the light in 1996. While earlier upscale suburban developments, such as the Rabieh subdivision to the north of the capital, had to face the handicaps caused by the conflict years and the social environment of the time, Mechref opened the gates for a wholly privately planned and structured community angling into the market as new one-site answer to the residential and recreational needs of the well-heeled.

The Mechref community covers a land surface of 3.3 million square meters at 30 to 350 meters above sea level overlooking the Damour coastal plane. Since the developers acquired the land in the mid nineties for an average $17 per square meter, value appreciation of both land and built-up real estate has been substantial. According to general manger Fouad Salha, cost per square meter to the company stands today at $85 and selling prices average $250 to $300, with upward outliers. Calculating that 300 villas have been completed, at average size of 600 square meters per dwelling and $750 cost for land and construction per square meter, the real estate worth of the Mechref community easily reached more than $130 million over eight years.

About 30% of the total area comprises developable land, 40% of which are still available in the market, Salha said. The company today tries to discourage the buying of plots by persons who speculate on increases in their value and do not intend to establish residences there. He described the increase of land prices in the developed as 35 to 40% since 1996, which he claimed was juxtaposed by a contraction of real estate values in much of the overall Lebanese real estate market by a similar percentage, thus further underscoring the Mechref value proposition.

In Salha’s expectation, the community will gain further from clustering of attractive tourism projects nearby, such as the Oceana beach resort in Damour. The awakening of tourism in the area would allow taking a new look at a hotel project in Mechref, which the developers had shelved after earlier feasibility studies had not projected satisfactory returns.

The visions do not end here. The developer of the Edde Sands resort in Byblos, Roger Edde, has a full plan up his sleeve to capitalize on the cultural and natural wealth of this ancient Phoenician city kingdom to amplify its tourism power into a leisure land embracing tennis camps, wellness hotels, green villages and its own port for yachts and even cruise liners – a $2 billion dream for the Byblos-Amcheet stretch alone, and that is without counting in Edde’s ambitions for a snow-side resort development in the Tannourine-Jaj cedars region. “I am fully bullish on the Byblos destination,” Edde told EXECUTIVE. “I feel the tourism industry and tourism related real estate in Lebanon are two years ahead of a moving curve, which will move up substantially in the 15 years that follow.”

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.

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