Beirut Gate, the $600 million Abu Dhabi-financed real estate development in Solidere, is going ahead as planned. How quickly and successfully it does so will be a confidence test for the local market.
Covering a total footprint of 21,448 m2 and a built-up area of 178,500 m2, the project consists of eight separate plots, on which eight separate but thematically-linked buildings are to be constructed. Residential space will anchor the development, accounting for 120,000 m2, whilst 25,000 m2 is set aside for ground-floor retail units and the rest is offices.
In terms of location, it will occupy most of the remaining empty land in the north-east of Solidere, including the open area near the Tabaris overpass, and, most controversially, the sites currently home to the ‘dome’ cinema and the nearby ruined church.
Six of the planned buildings will be designed by two architects: Christian de Portzamparc, the man behind Paris’s Cité de la Musique and New York’s LVMH building; and Arquitectronica, a US-based firm. The other two will be designed by Nabil Gholam, a Lebanese architect who has produced other downtown developments; and the Erga Group, another Beirut-based firm.
Predictably, given its size and location, Beirut Gate looks set to stir emotions. Rumors have already circulated about the possible demolition of one of Beirut’s 1960s icons, the dome-shaped cinema, and its alleged replacement with mixed-use space. However, Abu Dhabi Investment House (ADIH), the UAE-based fund which bought the eight plots from Solidere back in March, denies that the cinema will be turned into a tower block.
“It’s a sensitive issue,” says Nicholas Fraser, Executive Director of Real Estate at ADIH. “And although we have no preservation orders, we have decided to build a new cultural center on the site. This will be given to the city, and could be used for modern art galleries or installations. As for the church, it will either be rebuilt or restored.”
In business terms, Beirut Gate might be emitting positive signals at a critical time—and Fraser hopes the Beirut municipality will accelerate the permit process to encourage other investors—but is demand sufficient to make it a financial success?
ADIH say they have already sold one 38,984 m2 plot to a developer at a price of $2,200/m2, with a second sale currently under negotiation. Fraser hopes that all eight will be sold by spring or summer of next year, probably to a combination of Lebanese and GCC-based investors. If they all buy at that price, then ADIH itself will generate a handsome return—and it claims that investors or developers can expect returns of 18%.
A litmus test?
“I’d estimate that ADIH bought the land from Solidere at around $1,200/m2, which would produce a substantial margin if they sell all the plots at $2,200/m2,” says RAMCO’s Raja Makarem. “A secondary developer who then buys the land from ADIH would need to charge about $5,000/m2 to individual tenants to be able to make a decent profit.”
At pre-war levels, $5,000/m2 is certainly within the top bracket of downtown property, though not at the very pinnacle of pricing. But whilst residential space is still a fairly solid bet, and any developer purchasing a Beirut Gate plot should have a specific clientele in mind, office space in central Beirut is already subject to quite high vacancy rates, a situation which is likely to persist.
Other more immediate concerns include that of construction access for such a large site, especially in a city that already suffers from debilitating traffic. Fraser, though, predicts that the building process will be staggered.
Beirut Gate could prove to be a litmus test for confidence in the post-war Lebanese real estate market. With the other huge downtown project—the 100,000 m2 Kuwaiti-financed Phoenicia Village—temporarily on hold, the success of this development will be an important gauge for the local market as a whole.