The confidence many developers have in the Lebanese real estate market is certainly not inspired by the numbers. On paper 2015 and 2016 look like the two worst years since 2007, yet this year and last have seen the launch of a handful of large-scale residential projects – one of which is the largest development in the country’s history and will easily clear the $1 billion mark.
The first seven months of 2016 saw slight growth (2.62 percent) in the number of real estate transactions (which include the sale of land and built property as well as inheritances) compared to the same period of 2015, according to BlomInvest Bank. Looking back a bit further, however, the situation looks more dire. Compared to the first seven months of 2014, 2013 and 2012, transactions are down by 13, 11 and 15 percent, respectively, for January-July 2016, BlomInvest reports. Additionally, 2015 ended with transactions down just over 10 percent compared with 2014. Like looking up at stars twinkling in the night sky, however, these numbers provide a hazy glimpse into the past, not a snapshot of the current market reality. Sales transactions for built property only show up in the statistics once the property is registered by its new owner, meaning all of the sales figures cited in the rest of this article are not captured in the numbers (which also means they’re impossible to independently verify).
[pullquote]After blazing growth in the price and sale of both land and property … between 2005 and 2010, things have since cooled off[/pullquote]
After blazing growth in the price and sale of both land and property (or property pledged to be built) in Beirut and its environs between 2005 and 2010, things have since cooled off. Developers have been talking for years about being cautious about new investments and shrinking unit sizes to accommodate local salaries in an effort to boost sales. This hasn’t dramatically changed, especially in the old hot spot of Beirut and its immediate surroundings. Central bank stimulus money is still welcome assistance for both developers with existing stock to move and those pushed to execute construction permits under pressure of hefty extension fees. But not everyone’s in the same boat.
There’s something happening here
Executive tried in vain to get a breakdown of outdoor advertising spending dedicated to residential real estate projects. A drive from Damour to Tripoli, suggest the ad dollars are flowing. Without reliable real estate data on multiple fronts, conclusions can be difficult to draw, but the digital age is changing the world in often unnoticed ways. Unlike ten years ago, developers today disclose the percentage of their projects sold (this could be a marketing ploy and official statistics would always be welcome) and upload photos of construction progress on their websites. Gated villa communities further and further from the capital are trending (there are at least six currently under development), after years when developments tended to be within 20 kilometers of Beirut and consisted of apartment blocks – gated or otherwise. This is not to say the Lebanese residential property market has fundamentally changed. In August, HEC Holding launched Dreamville, 174 apartments dispersed among 19 buildings in a gated community in Metn. And small investors are still ubiquitous. You can find a “Brand New Apartment” in a low-rise building (or at maximum a cluster of three) on any number of websites listing property in Lebanon.
In the past two years, six projects were announced, each with plans for at least 100 units and an estimated value near $500 million or above, based on interviews and project websites. Executive spoke with four of them and found a diverse group. Two projects (Medyar and Mirador, see below) belong to owners new to development in Lebanon. All interviewees Executive met with for this article describe a vision of creating an exclusive community where like-minded people want to live, and each is building that vision in a different way.
The Whopper, with cheese
Robert Mouawad, a Lebanese jeweler who took his family’s business global, built himself a country club in the Chouf mountains with an olympic sized-pool and panoramic views of the coast, including Beirut to the north-east. If he had plans to use it commercially, they remained unfulfilled by the time he sold the land it was built on, according to Firas Abdel Rahman, sales director for the Medyar project in the Chouf district. Attempts to interview the project’s owners – Youssef Tajieddine and his family – were unsuccessful, but Abdel Rahman says the land was purchased from Mouawad and a few other landowners in the area (facts confirmed off-record by other players in the market) in 2010. The purchase was memorable because it was so large – 2.1 million square meters of land (or 2 square kilometers). That’s three times the area of Lebanon’s previous largest megaproject, Beit Misk, which Medyar resembles in terms of housing mix (villas, townhomes and apartments). The under-used but surprisingly new looking country club was part of the land deal, and will eventually be incorporated into the “centerpiece” of Medyar – the “Old City,” according to a project brochure.
[pullquote]“The market needs cheaper units and cheaper land … this is a market need.”[/pullquote]
Abdel Rahman explains the “Old City” will be an open-air retail, food and beverage, and entertainment cluster accessible by the public (and, of course, a selling point for trying to convince potential residents to buy). While infrastructure started back in 2013, the formal project launch was this year at the DREAM exposition in July. The working plan envisions the project fully delivered in 10 years, but Abdel Rahman explains that it’s still too soon to speak of project residents.
“At the moment, we’re focusing on B-to-B sales,” he says, elaborating that project owners are currently courting clients among the well-known developers across Lebanon to build a still undetermined percentage of the project. Medyar will include apartment buildings (to be built by the corporates currently being pitched to), townhomes and private villas. Medyar is selling land in the apartment building and townhome zones for $400 to $600 per square meter, Abdel Rahman says. Villa land prices will presumably be higher. Abdel Rahman expects land value to appreciate 20 to 30 percent per year and anticipates 15 to 20 percent of buyers to do so speculatively. However, he notes “we control” speculation and insists “we want buyers to build.” As for concerns about launching now, he offers: “The market needs cheaper units and cheaper land [than one finds in and immediately surrounding Beirut]. This is a market need.” He says the project has so far reached 12 percent land sales.
The forgotten north
Twelve years ago Ahmad Alameddine made a large investment. He bought over 800,000 square meters of land on both sides of the mountain overlooking Tripoli. He’s finally ready to develop (after a 2009 idea failed to entice buyers). Like a number of smaller projects also in the north – Dream Land by Tom Construction, Deddeh Hills and Happy Lands – Alameddine’s El Mirador is a gated villa community. Like many other developers Executive spoke with for this and previous articles, he says part of his target market are Lebanese expatriates used to living in single-family homes with a yard. Unlike many others, however, he has a laser focus for his marketing campaign: Lebanese in Australia. He claims tens of thousands of people from his native town of Minyeh, north of Tripoli, live Down Under. When including all of the North Lebanon governorate, he says the number reaches hundreds of thousands (it’s worth noting that no accurate data on the size and location of Lebanon’s diaspora exists). He’s investing in space at property expositions in Australia and considering opening an office there.
[pullquote]He wants to keep forests unspoiled and plans to build a bio-farm that will help feed chalet owners as well serve as an educational attraction for school kids[/pullquote]
Infrastructure works are nearly complete in phase one, on the east-facing slope of the mountain near the town of Terbol, he says. Alameddine put 41 plots up for sale and 38 were bought up in seven months, he says. Buyers will own the land they purchase, and Alameddine is working with a contractor to build the villas, offering four types to choose from (with sizes ranging between 212 and 800 square meters with an accompanying garden – sizes of which also vary). He’s selling at $1,200 to $1,500 per square meter. Future plans for Mirador are ambitious. He never plans to put townhomes or apartment blocks in the development, but does hope to attract a school, a small hospital, and various retail, food and beverage and entertainment venues, including an “old souk” as a heritage attraction. A brochure touts the project as a future tourist magnet. Like Medyar, he wants Mirador to become a destination for people living in the north. He says the final project will consist of 720 to 730 villas.
Finding a niche
While the projects previously mentioned are suitable for year-round residency, two big projects announced in 2015 are decidedly not. Kye – a resort including more than 700 chalets spread over 200,000 square meters near Tabarja (at the top of Jounieh Bay) – and Red Rock – a project that aims for 500 chalets on 500,000 square meters of land near Faqra – are seasonal retreats for the wealthy. Because they are not primary residences, buyers of chalets in these projects cannot benefit from subsidized loans offered as part of the central bank’s stimulus package. Claude Sakr, VP of sales and marketing with Rise Properties – a partner in Kye – describes the project as “recession proof” given that it targets “a select group of people”. Kye is being sold in phases, although plans are to deliver all at once. Owners are still waiting on final approval for a marina they’d like to build (which requires a presidential decree or – in the absence of a head of state – a unanimous decision from the council of ministers, Sakr explains). Sales phase one (totaling 312 chalets) is 90 percent sold and sales phase two is 50 percent sold, he adds. Like many beachfront developments, Kye will feature attractions for chalet owners, residents and visitors, but will not allow “public or paid access,” he explains. Chalets are 45 to 85 square meters and start at $4,800 per square meter. The land is privately owned by Rise and JV partner Saab Marina, who together self-financed the land purchase in 2014.
Red Rock is similarly targeted at buyers looking for a second or third property, but Alex Demirdjian – CEO of Demco Properties – says he’s not expecting to profit much from it. He says he’d be happy to break even, even as he bounces potential project slogans off of Executive and Demco’s Managing Director Alain Dibo, who sits in on an interview. Demirdjian bought 500,000 square meters of land (relying on a mix of personal and debt finance instead of bringing in outside partners as Demco does with its other projects), but will build on only 20 or so percent of the land (he claims to regularly rebuff offers to buy some of the land he won’t be building on). He wants to keep forests unspoiled and plans to build a bio-farm that will help feed chalet owners as well as serve as an educational attraction for schoolkids. The masterplan calls for two phases with phase one – currently underway – including 212 chalets. Chalets range in size from 40 to 150 square meters and start at $2,800 per square meter with phase one 70 percent sold.