Executive Magazine

The right kind of business

by Thomas Schellen February 5, 2014

written by Thomas Schellen

Two niche markets are driving the business and growth of Jammal Trust Bank (JTB) at the start of 2014. One is in the bank’s home base in Lebanon and the other in West Africa. This diversification is not bad for a medium-sized lender that feels very comfortable being a mid-sized operator with just under $1 billion in assets — but what is surprising is that these two niches are at first sight entirely unconnected and even appear to represent opposite poles of core banking competencies.

In Africa, JTB’s market comprises primarily the expatriate Lebanese business community “in every country that borders the Atlantic starting from Angola and all the way up to Dakar [Senegal]. We are present in these countries in the sense that we have clients there who are basically larger-end clients,” says Anwar Jammal, JTB’s chairman and general manager.
In Lebanon, his clientele is far from big-ticket accounts and corporate transactions. Here, Jammal describes himself as banker of the small and medium enterprise (SME) clientele and JTB as a specialist bank in the much-neglected business of micro-lending, which not only in Lebanon is of no particular interest to the biggest banks. “We cater to SMEs and micro-businesses and in fact were the first bank to initiate micro-lending in Lebanon back in 1999,” he says, differentiating microcredit from small consumer loans by its purpose.

best of both worlds
The common denominator behind the opposing specializations is market knowledge. With most members of his generation in the Jammal family born as Lebanese expatriates in Africa, he claims to have an edge over other Beirut-based banks that approach the market as outsiders.

In the domestic market, JTB nurtured its role to be the “people’s bank” and has developed its expertise in the behavior of small customers ever since conducting a study finding that 50 to 60 percent of the bankable Lebanese population did not bank with anyone. From this study, which according to Jammal was done more than 10 years prior, JTB concluded that it would not try to chase a very small slice of the Lebanese market for large corporate accounts but rather focus on cultivating a clientele among the unbanked population and specifically target those 30 to 35 percent of bankable Lebanese citizens who thought that no bank would be interested to take them on as clients.

The strategy of the two niches has rewarded JTB nicely, with appreciable growth in the past few years. Partial banking sector figures for 2013 up to the month of November have shown JTB with growth across key indicators: seen year-on-year, assets expanded 27.4 percent, deposits grew 20.5 percent and lending increased by just under 27 percent. Net profits shot up tremendously, by 182 percent, but this has to be attributed to a large drop in exceptional expenses from the same period in the previous year, Jammal tells Executive.

While full-year results for the Lebanese banking sector in 2013 were not yet available at the time of the interview with JTB, last year’s partial sector results retrospectively provide a nice frame for the bank’s 50th anniversary near the end of last year. In a wider look over JTB’s financial evolution over the period since Anwar Jammal assumed the bank’s chairmanship in May 2005, growth rates showed broad strength. “Our average yearly growth of loans from 2005 till last year is 19.4 percent, average growth of total assets is just under 11 percent and the average growth of deposits is about 13.4 percent,” he says, adding that this pace of development allowed JTB to move its ranking by size of assets up by about 10 positions since 2005, to 23rd or 24th place in the sector.

Notwithstanding the growth rates that JTB recorded since he assumed the chairmanship in family succession, Jammal insists that he made no fundamental changes. “I can’t say that I have done anything innovative. We basically streamlined ourselves and focused ourselves on our core banking business. We tried not to be anything other than what we are: a medium-sized bank and we cater to the SMEs of Lebanon.”

He appears, however, to be prone to understatement in a very British way. Moreover, besides its dual market focus there is a second combination of seeming contradictions in JTB’s corporate DNA that is linked to his chairmanship. Jammal is not only the bank’s chairman and general manager; he also is its controlling shareholder since 2005. But while this combination is as close to operational omnipotence as it can get for a banker, the heir of JTB explains that he instead created a new governance structure with a board whose members, apart from him, hold no executive positions in the bank.

“I gave full power to the board, believe it or not. When I took over the bank, the powers that the chairman general manager actually had were frightening. I said to myself we either come out of this particular cycle to have a professional institution or maintain a small family-run business mindset. The first decision was that we want to go into being a professional institution, so I rescinded most of the authorities that I had and gave to the board,” Jammal explains.

Looking forward to the coming years, he foresees no diminishing of demand for credit in Africa and expects that the bank’s lending growth abroad will be curtailed by central bank-set limits for lending in countries with lower sovereign ratings long before any slackening of demand from borrowers.

Demand from SME borrowers and micro-credit applicants in Lebanon is also not going to wane in Jammal’s expectation and he assesses this market segment as less likely than others to be impacted by the continuing economic challenges related to the Syrian crisis.
SME lending constitutes the bank’s most important domestic credit activity, with a total amount of LL74 billion ($49 million) in lending to SMEs in 2012, followed by housing loans at LL69 billion ($46 million) and corporate loans at LL67 billion ($45 million) and SME loans were also the fastest growing loan segment between 2011 and 2012, displaying a year-on-year growth of over 60 percent from LL46 billion ($30.5 million) in 2011.

just the right size
While Jammal says that micro-lending is actually less risky than consumer lending in terms of default, he concedes that dealing with this clientele, many of whom have never banked before, makes the credit business much more labor intensive, which is reflected in higher interest rates. While reluctant to divulge the premium in interest rates that his bank charges over common market rates in Lebanon, the JTB chairman is adamant to compare the bank’s loan offers to those of non-banking money lenders. He emphasizes that prior to JTB’s focusing on micro-lending, small borrowers had no alternative to dealing with loan sharks and their extortive interest charges.

For developing the micro-credit and SME credit business of JTB, Jammal says the bank has a strategy to lower costs by automating and streamlining delivery and at the same time attracting more borrowers. He adds that this two-pronged approach is supported by risk assessment processes that the bank has developed on the basis of its experience with borrowers and which enable the bank to calculate credit scores in the profiling of loan applicants.

While he is decidedly working for growing the business of JTB — and in the long term aims to dilute the family aspect in the bank’s shareholder base by bringing in new shareholders — Anwar Jammal is one Lebanese banker who wants to profitably remain situated in the upper tiers of the beta banks (with deposits between $500 million and $2 billion). To him, going alpha would mean losing the bank’s competitive edge. “For as long as I am chairman, I certainly don’t want JTB to be one of the top 10 banks in Lebanon,” he says.

February 5, 2014 0 comments

Finance

Jad Hatem – Q&A

by Executive Staff February 5, 2014

written by Executive Staff

Jad Hatem is a partner at B.E.C.A. Hatem & Partners, one of Lebanon’s leading accounting firms. The company has around 500 clients, many of whom are due to file taxes online for the first time ever in 2014, after the Lebanese government introduced the system at the end of 2013. In coordination with the Ministry of Finance, B.E.C.A. have been helping prepare their clients through specific training programs.

E What companies have to pay their taxes online this year?
For the year 2014, all the large companies will submit online but the smaller companies still do hard copies. In the coming years all companies will be obliged to pay online. For now the larger companies are paying VAT, completed on a quarterly basis, annual tax income and real estate taxes online.

E How significant a difference can online taxes make for both the government and the companies?
I would say it is going to be a win-win situation. For the taxpayer it will be much easier to submit it on the web directly rather than a hard copy to be completed, signed and submitted to LibanPost — with the fees attached. For the Ministry of Finance it will be much easier. In the past they used to get hard copies from the LibanPost, scan it, enter the data into the system — now that won’t be necessary. So on both sides it will be beneficial.
Nevertheless, I am sure the first two years there will be complications — it is new, people don’t know how to do it, and there might be bugs in the system. Many accountants from an older generation are not familiar with IT and the internet. So it might be tough for them in the beginning but later on it will be much easier.

E The government is aiming to get all companies to pay taxes online by 2015. Is that realistic?
It will be feasible as long as the large taxpayers’ scheme is successful this year. There is no reason why it can’t happen.

E How well is the e-taxation system that was launched at the end of last year working?
We cannot judge yet, we don’t have feedback as the first quarter that has been submitted is this quarter. So the first test is now — the deadline was postponed till the end of January. It is too early to know. But what we can say so far is that people, companies and accountants are not well informed about how to proceed with this file.

E So the potential problems are more to do with knowledge than the functioning of the system?
We don’t know yet how efficient the system will be but what we know at this stage is people are not aware how to do it. So we need to have workshops so taxpayers know how to succeed.

E How have you been training your clients to avoid problems?
We carried out a three-hour briefing for over 100 of our clients to give them the knowledge to register online, get an access number, and complete the forms.
We had 140 attendees, all of them from our clients — the chief accountants.

E Is three hours training enough to learn how to submit your tax forms online?
Yes, after three hours they should be able to register, to get online, to get the login and have 80 to 90 percent of the knowledge required to file their tax returns.

E Are some businesses that you work with hesitant to go online?
There is hostility, mainly from the older generation, which has been doing it for decades. For them they don’t want to change but on the other hand it is not an option — this is how things are moving. Now those in big companies cannot do it offline any more, it is compulsory.

E How many years behind is Lebanon in going online?
IT-wise and in terms of internet penetration, compared to Europe we are far behind. Lebanese are not very familiar — if you look at the statistics most of them are into social media but that is it, in terms of using the internet for e-payment, etc. Lebanese are still not used to paying for things online. But compared to other Arabic countries, excluding the UAE, we are not far behind.

E Does auditing online make the system more transparent, thus potentially reducing corruption?
The information will be available much quicker, so as soon as you submit, the information will be available. In the past it was completed manually, then sent to the Ministry of Finance to be processed. All of this process took months but not any more. But the impact on transparency will be indirect.

February 5, 2014 0 comments

The Buzz

Business briefing: 16 Jan 2014

by Executive Staff January 16, 2014

written by Executive Staff

Economics and Policy

Authorities in the UAE and Iran may have reached a tentative agreement to end a long-running dispute over three islands in the Gulf.

Business briefing: 14 Jan 2014

by Executive Staff January 14, 2014

written by Executive Staff

Economics and Policy

An electronic system that warns Saudi men when their female “dependents” are leaving the kingdom will be made optional in an historic move towards greater female independence.

Lebanon’s futile stimulus package

by Joe Dyke January 14, 2014

written by Joe Dyke

When Riad Salameh, the governor of Banque du Liban (BDL), Lebanon’s central bank, announced in November $800 million for a new stimulus package to help the economy grow in 2014 — he was perhaps guilty of overstatement. While there will be $800 million made available, what Salameh neglected to mention was that $468 million of it was actually unused money from 2013’s stimulus package which will be rolled over. As such, just $332 million of purely new money will be extended, less than 1 percent of gross domestic product (GDP).

While Salameh was quick to stress that the primary reason for not releasing more money was fear of inflation, there are other factors that may have caused him to ease off. Put simply, the impact of the first stimulus package remains unclear, while the general weakness in the economy and low levels of confidence mean that the positive effect of any new round of stimulus is likely to be muted. In such a climate, and with the ongoing political impasse showing no signs of easing up, the governor is faced with the unenviable task of again shouldering the burden of moving the economy forward with limited tools.

Assessing success

In January last year BDL announced the details of its first monetary stimulus package since 2009, with a total of $1.47 billion being extended. The mechanism, as with most monetary stimulus packages, was indirect — BDL would extend loans at 1 percent to the country’s commercial banks, providing they lend to their customers at corresponding lower rates. Specific sectors were targeted, with real estate receiving 56 percent of the funds, environmentally-friendly projects 20 percent and the productive sectors just 14 percent. The cumulative effect of the package, it was hoped, would be to boost demand in the economy by helping thousands of Lebanese buy their first homes, open businesses or develop existing projects.

Assessing the efficacy of these policies has proved difficult. The bank has yet to release detailed numbers on the impact and, industry experts say, is unlikely to do so. “We need to see the detailed results of the first stimulus to have the full picture,” Nassib Ghobril, head of research at Byblos Bank, says. “BDL doesn’t publish those but often the governor [Salameh] indicates them through the media.”

So far the main sign Salemeh has given was the seemingly high figure of 96,000 housing loans supported through the package, which he mentioned at a public speech in November. There has, however, been no specific data released on this, and so it is impossible to assess how many of these loans would have been taken out by home buyers anyway without the interest rate subsidy (see real estate article article).

Lebanon’s economic activity grew in total an estimated 1.5 percent in 2013, according to the World Bank and government figures, but how much of that was supported by the stimulus package is unclear. The World Bank has done what its economist Ibrahim Jamali describes as a “small analysis” but has yet to undertake a larger one, partly due to lack of data. “The extent of the impact is still not clear. We will have to wait at least one or two more quarters to have a more elaborate idea [of how it affected the economy].” Ghobril agrees that there are as yet “no reliable estimates” of the impact on GDP, but believes that “without the stimulus growth would probably have been lower.”

Producing growth

One area of criticism, however, has come from the focus of the stimulus package. The decision to put over half of the available funds into real estate has certainly helped boost parts of that sector, but the knock-on effects for the rest of the economy have perhaps been more muted than if investments had been made elsewhere.

The issue is that real estate in Lebanon already suffers from oversupply — half-built or already empty buildings scatter the country. As such, a measure that helps people invest in their first homes has limited multiplier effects for the overall economy. “New mortgages are not generating the construction of new buildings, so it doesn’t generate economic growth and new jobs,” Ghobril says.

While BDL has yet to release in-depth details of where the second round of stimulus will go, Salameh has indicated the focus will not fundamentally differ from its predecessor. “This new package is similar to the one we launched this year,” he said in November, singling out real estate and technology as targeted areas.

There are fears that the continued focus on housing in the second package will do even less than the first one to help stimulate the real economy. The World Bank estimates that only 6 percent of loans made possible by the stimulus package went to the productive sectors, where multiplier effects are higher. “The real estate sector has already benefited from the first stimulus package,” the Bank’s Jamali says. “It should not be omitted in the second one but maybe more funds should be allocated toward the productive sectors.” Ghobril concurs that a shift in emphasis is necessary. “Personally I would shift it toward companies and sectors rather than real estate and mortgages.”

Roger Melki, senior adviser to the Ministry of Economy and Trade, sees nothing wrong in support for the real estate sector but adds that small businesses are suffering and need support. “What we have observed in the last 12 months is that the small and medium sized companies are refraining from taking loans, but not the large ones, they are investing.” A key indication, he adds, is the loans made by Kafalat — the government sponsored loan-guarantee company which supports small and medium-sized businesses — have fallen, with companies wary of expansion. “If you look at Kafalat loan guarantees they are 16 percent lower in 2013.”

Deck chairs on the Titanic

While debates about the focus of the package are relevant, more fundamental problems look set to undermine the impact of Salameh’s plans. One reason to doubt the impact of any stimulus package is the desperately low levels of confidence in the economy.

In the first six months of 2013, the Byblos Bank/AUB Consumer Confidence Index dropped to its lowest level since the index was founded in 2007. In total there was an average monthly reading of 29.4, down 14.1 percent from the second half of 2012. The primary reason is the country’s political turmoil, with the impact of the Syria crisis a major factor. Effectively, confidence in the economy is so low that even if loans are cheap, customers may be hesitant to invest.

In the face of such a difficult challenge policy makers need as many options as possible, but Salameh’s hands are tied. The central bank can only carry out a monetary stimulus — lending to the banks cheaply on the basis that the interest subsidy will feed into the economy — but such a funding mechanism is flawed in a static economy. If, as was the case with 2013’s package, confidence is so low that there is not enough demand, then the money goes unused. The alternative would be a fiscal stimulus — direct government spending in key sectors to boost demand.

“A fiscal stimulus would have a more direct impact. In terms of monetary policy you talk about channels of transmission — there is a stimulus package but unless people are willing to borrow the money and do something with it, it is not that useful,” the World Bank’s Jamali says. “With a fiscal stimulus the government is spending that money, so there is no question whether people will borrow it or do something with it that is not useful. A fiscal stimulus would be more immediate and this might be desirable at this time, given the state of the economy.”

Fiscal stimuli such as a hearty infrastructure development package might benefit Lebanon in more than one way. Applying this Keynesian methodology would be the responsibility of the government and this, unfortunately, is outside the realm of options for Salameh. Since the resignation of Prime Minister Najib Mikati in March 2013, Lebanon has been without a government of any kind, and there are few prospects of forming one in the coming months. For this reason, a fiscal stimulus package is impossible. In effect, the complete failure of the country’s political class to work together has crippled the country’s economic options for countering the impact of the downturn and forced Salameh into action. “BDL is taking on the role the executive branch should be doing. It is the government that should find ways for growth not the central bank having to bear this burden again,” Ghobril says.

As Lebanon looks for economic hope in 2014, the stimulus package is one area of positivity. Salameh has long been the driving force behind the economy, filling the role the politicians have failed to. But a combination of a severe lack of confidence, odd choices of focus and a lack of alternative options mean the real economy will likely be numb to the stimulus.

January 14, 2014 0 comments

Real Estate

A twofold investment opportunity

by Thomas Schellen January 10, 2014

written by Thomas Schellen

While the current slump in the domestic real estate market is largely seen as temporary rather than structural, some astute real estate players are turning to international markets for revenues. Intermediaries have been advertising home buying opportunities in Cyprus or jumping into promotion of properties in Spain to well-heeled clientele. Now, developers with a bent for regional activities have a new iron in the fire that looks ever hotter as local demand is cooling; Erbil, the capital city of Iraqi Kurdistan and the latest boomtown of the Middle East.

Geographic diversification has long been a natural path for Lebanese real estate players seeking to mitigate domestic risks or expand beyond the confines of a small territory. In 2013, this became extra relevant as business potentials in southern European property sales and Kurdish developments expanded while local demand kept contracting.

Recent examples are Lebanese intermediaries Plus Properties, with a Cypriot venture, and Prime Consult, whose owner Massaad Fares told Executive that he has reactivated an operation in Spain where he has an experience base.

Investment-grade properties in Spain turned up as an important new opportunity in October, after the Spanish Parliament in September adopted legislation that grants residency privileges to investors with a commitment of half a million euros, (around $675,000).

Overseas nationals with clean personal records and the prerequisite wealth can look forward to the right of free movement in the Schengen Area and later to European citizenship for themselves and their immediate family members, if they spend more than half of each year at their Spanish residency during the multi-year process.

Money to be made

Portugal, which has had a similar law in place for about a year, reported in November that it has issued 318 such investor visas, with estimates that the number might increase to 400 by the end of the year. Adopters consist mainly of wealthy Chinese and Russian families, who acquired 78 percent and 5 percent of the visas respectively.

Prime Consult’s Fares suggested that interested foreigners should jump on the new real estate opportunity because the visa wagon might only be accessible for a short time. However, the number of European countries that offer similar options has been increasing in recent years, and there seems to be no great risk of a policy reversal as the investor visa is unlikely to impact the population balance in countries as large as Spain.

While investor visas are unlikely to rescue the Spanish economy in 2014, providing brokerage services to willing investors can be a good business. As Fares put it, “there is money to be made in each market,” which he expects in the case of Spain’s new investor visa option will come, not from the Lebanese, but rather via Dubai from an Indian and other Asian client base.

Aimed at flush Lebanese property buyers, the Cypriot concept of Plus Brokers is a unit in Beirut-based Plus Group. According to Amanda Hajjar, the group’s marketing manager, Plus Brokers dashed into the action in May 2013, based on a spur-of-the-moment inspiration from group chairman Georges Chehwane.

The rationale was again to exploit the opportunity where a cash-strapped European Union country offers non-Europeans a road to residency in exchange for a substantial property investment; in the case of Cyprus the financial threshold is lower than in Spain or Portugal. “For a property investment of 300,000 euros plus VAT you can get access to your permanent visa and you can apply starting two months after you settle a minimum amount of 200,000 euros,” Hajjar told Executive.

Cyprus was an easy choice for Plus Brokers, due to its geographic and cultural proximity, and also because many Lebanese have experience with relocating to the island during past domestic crises. “We went to Cyprus and chose trustworthy developers with no financial problems, and we figured it was a really good investment opportunity for Lebanese who are looking to get their permanent resident visa outside of the country, considering the circumstances here,” she said.

Since launching its first promotions of Cypriot properties in the middle of 2013, Plus Properties has moved around 20 units, although not all in the residency-giving price range of above 300,000 euros. According to Hajjar, commissions on the deals are less than 5 percent per transaction and paid by the developer in Cyprus, not by the Lebanese client.

But before too long, the company found a domestic fly in the ointment as it was confronted with competitors who were making even bigger promises for supposedly much lower cost. In the case of residence options these competitors, clearly untrustworthy in Hajjar’s eyes, advertised that their clients could get permanent Cypriot residency visas along with the purchase of an 80,000 euro apartment.

“This is a very false statement,” Hajjar said. “For 80,000 euros you can buy an apartment but you get only a renewable multiple-entry visa, not a residency visa.”

Plus Brokers and other reputable intermediaries take active roles in any transaction they arrange in Cyprus, following the documents and providing on-the-ground assistance. As to the prospective market size of the Cypriot and other brokerage opportunities, Hajjar said that people are not yet accustomed to and comfortable with the idea but called the potential “not bad”, adding that “whenever anything bad happens, like a bomb, you get more clients.”

The seesaw effect of unfortunate events in Lebanon pushing up business outside constitutes an element of unease for Plus Brokers, but a bearable one. In the big picture of intermediation, after all, the Spanish and Cypriot ventures of Prime Consult and Plus Brokers appear to be focused on the short term. “It is not a strategic long-term move, because we expect that the crisis [in Lebanon] will be fixed within three to five years. It is a tactical approach,” Hajjar said.

Boom in erbil

Benefitting from the boom of Erbil when compounded with the immediacy of the brokerage business, the current engagement of Lebanese developers in Iraqi Kurdistan will endure for at least the next five years. Given the sizes of the three largest Lebanese developments in Erbil, it could even last longer, as the economic and social growth of the Kurdistan region has many needs that Lebanon can meet.

According to reports citing the Lebanese-Kurdish Friendship Association, close to 100 Lebanese companies are registered with the Kurdish authorities, and real estate companies contribute the largest share of an estimated Lebanese investment activity of over $3 billion in the region. The city of Erbil, the Arab tourism capital of 2014, is a sure bet to claim a significant share of regional business and investment in the near future.

In October last year the global Dubai based developer Emaar Properties unveiled a $3 billion masterplan for a new 134-acre “Downtown Erbil” at the Project Iraq construction fair, which was organized in the Kurdish city by Beirut based company, International Fairs and Promotions.

With some 15,000 planned residential units, three luxury hotels, a big shopping mall and significant office space, the mixed-use development aims to bring Dubai-type urban lifestyle to Erbil. Another extra-large project under the moniker “Empire World” is also under progress with local ownership involving Falcon Group, an Iraqi conglomerate. Projected at $2.3 billion, the 185-acre Empire World will entail 88 towers and 300 villas, one luxury hotel complex and value-added facilities ranging from a medical clinic to a mosque.

These mega-projects, with designs based on optimistic economic growth projections by the Kurdistan Regional Government (KRG), are each several times larger than the projects which Lebanese companies are developing in Erbil. However, the underlying ambitious thinking suggests a bright future for the Lebanese projects in the city, according to Makram Zard. Zard is chief executive of Beirut-based developer Zardman, itself working on a $200 million mixed-use project named Aura and located not far from Empire World.

“Even though there are very big projects happening now in Erbil, it still is not enough to meet the government’s demand forecast for 2020. This is good for our project since its timing coincides with the timing of the expected need,” Zard said, citing KRG-sponsored studies that Erbil will need 80,000 to 100,000 units by the end of the decade.

Zardman entered negotiations on the project two years ago and was waiting for its final building permit at the time of the interview with Executive. Having obtained the deed for the plot in February 2013, the company has done all the work, including part of the excavations, which it was able to execute without the final permits.

Some changes to the project were made necessary by a change in road planning and resultant redrawing of the project’s property line. However, by Zard’s assessment, the KRG is very supportive and professional and has streamlined the permit procedures in the two years since his company came to Erbil.

The plans for Aura were also internally updated during this period, to adjust apartment sizes downward by about 20 percent to 160, 200, and 240 square meters (sqm) for three available unit types. The design for the commercial areas was changed from an underground shopping mall to a concept with an emphasis on open-air features.

Construction costs for developments in Erbil have an economies-of-scale advantage over those in Lebanon, Zard said, due to the larger project sizes. End user prices of apartments are affordable when compared with cramped conditions between Beirut and the Metn region. Units in a new project in the low-to-middle quality range would be offered at $1,000 to $1,300 per sqm, reflecting price increases in the recent years.

“Erbil today has mainly middle to low class units and we are putting Aura on the map as middle to high. We are thus a bit more expensive than the actual market, aiming to position ourselves at $1,300 to $1,700 [per sqm],” Zard said.

“Prices are developing exactly as per our expectation but the market change is also a change in demand where higher quality is demanded. Generally, the market used to be oriented toward villas and is now moving more toward apartments,” he said.

Lebanese forays into the Erbil real estate market were pioneered by industralist Jacques Sarraf’s Malia Group, which demonstrated the Kurdish city’s strong potential with two projects.

Newer projects currently under development with Lebanese involvement are the Lebanese Village by Hariri Construction and Contracting Compay (Harco), headed by Mohammed Hariri, and Mass City, a joint venture between Mass Group Holding (MGH) — an Iraqi industrial group — and Beirut-based developer Trillium Holding.

According to Harco, the Lebanese Village is being constructed on a 55 acre plot and comprises three office buildings, a 17,000 sqm mall and a 200 room low-rise motel and chalets complex next to 55 residential towers and 140 villas.

The Mass City project was announced in June 2013 by MGH and Trillium. Project images and models show it as a greenfield development on a sprawling expanse of land, and material on both companies’ websites says it will consist of around 1,750 villas and town houses and also include commercial, retail, hospitality, religious, social and recreational spaces.

No information on the project’s targeted total value and the size of Trillium’s stake in the joint venture were provided on their corporate website.

Synergies

Erbil is a center of economic potential in the recovery of Iraq but it is not for everyone. Several real estate players in Beirut told Executive that they had inquired about venturing into Kurdistan but decided against it because of factors ranging from business risk, to an immature marketing culture and not wanting to develop projects in a city where they themselves would not be excited to live.

On the other hand, the Lebanese involvement in Erbil developments, and the activity of real estate intermediaries in Cyprus, creates follow-on business opportunities for Beirut-based banks and companies.

In providing brokerage services and consulting to Lebanese people who purchase units in Cyprus either as entry points to European residency or simply as second homes, Plus Brokers have been talking to Lebanese banks about extending their home finance to such properties, Hajjar said. Zardman is looking to base Lebanese retail and hospitality outlets in the Aura development. The company also has strong expectations that Lebanese banks with affiliates or subsidiaries in Iraq will play a positive role in advancing the ease of home finance, as the market for such loans from Iraqi banks is rather restrictive, Zard said. “We are seeing a lot of interest from Lebanese banks and we are hoping that two to three years onward we will have the financing options available that we have in Lebanon.”

January 10, 2014 0 comments

Finance

Credit Agricole Suisse

by Yasser Akkaoui January 10, 2014

written by Yasser Akkaoui

Paul Wetterwald is the chief economist of Crédit Agricole Suisse, and was chief investment officer of Crédit Lyonnais Suisse from 1991 to 2005. Carine Hermon is head of private equity investor relations for Crédit Agricole Suisse. Executive sat with them to gain their perspective on developments in the global market.

E How can we make sense of the macroeconomic situation in the world today?

PW: I think that there are two points, one of which is that global growth is staying more or less at the same level, which is positive growth but at a lower level than before the big crisis of 2008. Now, we have various regional situations. Europe is back into positive territory in terms of growth but it’s lagging. We don’t have a figure but maybe we’ll have a weak figure. But what we expect is to still have low positive growth for next year with differences between Germany and southern countries.

In the United States we expect growth to stay slightly above 2 percent, which means slight acceleration. And in China we think that we have bottomed out. The new rule for China is very likely 7 percent growth which is in terms of new money, new wealth — as much as when they had 12 percent on a lower basis. Something we have to keep in mind is that China is so large right now that 7.5 is a lot and maybe enough to supply the rest of the world.

So positively, moderate growth and no inflation or risk in the mature economies, some inflation issues in the emerging markets. And in this context we have some central banks of mature economies that are maintaining very low interest rates. This is the main engine of growth for the financial markets and much more important than the rate of growth of gross domestic product (GDP) because when there is higher growth of the GDP we will have less accommodating central banks and this will be bad for the market. Next year, we still expect interest rates by the mature economies’ central banks to stay very close to 0 percent.

It’s true that in the US the market is sometimes worried about tapering. What I would say is that tapering does not mean a narrower balance sheet of the Federal Reserve. This just means that the rate of expansion of the balance sheet will be lower. So it’s still expanding the balance sheet, but at a lower rate. And when they do this the Japanese central bank will print a lot of money at the same time. The European Central Bank (ECB) will likely restart long-term refinancing operations — maybe next January; the balance sheet of the ECB has been shrinking, so they cannot keep it like this. Economic growth in Europe is not strong enough for this. In the coming year you will have the asset quality review for the European banks and the stress test. And you know the stress test will be the first one that will really be supervised by the ECB, but I don’t think they will be the nice guys. They will try to find some bad banks and to compensate for this they will give a lot of financing at the beginning of next year.

Globally, a lot of liquidity will still be flowing into the market. That’s the point. Then of course if you think that 0 percent is not enough for short-term deposits you have to find other assets. This is the global picture.

E In France, there’s a big question mark about President François Hollande’s policies. What can we say about this?

I think that the first point is that a lot of French companies are doing business outside of France. What is happening in France is not that important for the big companies.

The second point is that because of the structure of the involvement of the state in the French economy, consumption has always been very resilient. So it has given a cushion to European growth. Maybe you could say it’s not very healthy, but still it’s helping the consumers in France to stay afloat. And I don’t see that this can change very soon. So the short term in terms of the business cycle is not bad.

Longer term, in terms of public finance, it’s still an issue. But we don’t see politics taking care of this. They are trying, but you see that every time they try to raise taxes on someone somewhere the people say, ‘Not us, [tax] the others.’ I think people have to learn that you cannot spend more than what you earn. There has to be a balance.

Europe is making progress because if you remember 18 months ago with the collapse of the euro, we said Greece could go out, and still Europe is here, the euro is still here, and it’s actually strong. So I think we have to keep this in mind. There is a deficit of politics with respect to economics and this has to be filled out. It’s a slow process but we are not too pessimistic about this. What is true is that [the European economy] will remain low-growth rate — wealthy, but with low growth. Maybe [this will last] 2 to 3 years because of all the excess of debt that has been transferred to public finance. The only answer to the debt issue is you have to have time. You cannot expect debt to be resolved in two years.

E Switzerland has been under fire from the international community and is reassessing its own corporate culture. How is this affecting the banking and finance ecosystem?

Well I think it’s a new model that needs to be reinvented. You can compare it with the watch industry in the 70s when they missed the electronic watch and now the watch industry is doing well, but with way fewer people involved in the industry. So it could be the same for private banking in Switzerland. It’s very important for places like Geneva, but it’s much less important in other locations in Switzerland. It’s not like bankers are very popular people and everyone in Switzerland wants to save the banks. They saved the banks once in 2008 and now banks have to adapt. And specifically they will have higher costs in terms of legal and compliance work, so I guess the margins of the business will be lower. The Swiss economy globally is doing well despite the strength of the Swiss franc. Labor costs are high, but they are not getting higher. Whereas in other countries, the labor costs are increasing. In relative terms we are getting a bit more competitive.

E How careful should banks be around the frontier markets, especially when alternatives have become very few around the world?

We have invested a small part of the equities into frontier markets through funds in order to get good diversification. But it’s difficult, and you have to know that it’s less liquid. When you look at the performance of those kinds of investments it looks like it’s less volatile. But those markets actually lack liquidity. So you have to stay in it for a longer period of time than usual. So, yes, we have a part invested in it, but it can only be a small part of the investment world.

E Now In 2013 it seems that private equity strategies are back. How did this image of private equity change and how did Crédit Agricole Suisse adapt to it?

CH: Now to create value you have to transform the company. To have good performance in a private equity fund, you have to choose the team that can transform the company. So that is very important for us. Currently, at Crédit Agricole, we have deep due diligence on around 200 different general partnerships (GPs) and funds every year. And we choose only 10 per year to advise to our clients. And so that’s the first thing. We are concentrated on the team. That is most important. Because you don’t know where, or in which company, they will invest. So you have to be sure that the team will be able to invest in the good company.

We are looking for different points. The first is the capacity to raise the target commitment. The second is the capacity to invest the raised money. After that what’s important is the capacity of the team to transform the company — sometimes change the management team, or sometimes the internal processes, and with external growth, so there are a lot of different possibilities to do that. At the end [of the process] it’s the capacity of the team to exit the company.

To do that it’s important that the team have a realistic projection for the company and to say, ‘In 4 to 5 years I see the company to be like this and that.’ At the beginning, when they buy the company they have to know what they want to do with it.

E What is your approach when it comes to identifying target investments in the Middle East?

It’s a shame but currently the Middle East is not a real area for private equity. Why? Because there is so much local capital that there is no opportunity for private equity. So currently there is no real opportunity in private equity. We can’t find any. There is no deal flow.

E So the Middle East is perceived as a market where you pull money out from as opposed to investing in?

It’s not because we don’t want to. It’s just that there are no opportunities. Some private equity firms have few opportunities to invest in Africa and the Middle East, a little bit, but not a lot. The amount here is very low. The biggest place to do private equity is in the US, of course, but there are a lot of opportunities in Europe. I’m sure that we can find current opportunities in Europe, even if the market is not [experiencing] very big growth, and there are also opportunities in Asia. But in the Middle East, maybe in a few years we can find some opportunities, but currently there are none.

E What are the expectations of your limited partnerships, and how have they changed in the past five years? Tell us more about your strategy.

CH: When you have inflation on a growth of 3 percent, if you have only 5 percent of return it’s not good. But if you have 5 percent of return when there is no growth, it’s quite good. This is the same for private equity but on a different level. Currently, our goal is to have a return for our investor of more than 12 percent per annum. That is our goal. We select around 10 private equity funds each year. To do that we decided to invest in different geographic regions to diversify the portfolio: in the US, Asia and Europe. There are still some opportunities in Europe.

PW: I think that the strategy is really an opportunistic one. I can name the companies I know, but Carine can give examples of companies in Northern Europe, Germany and Scandinavia. She can also give examples of companies in Thailand. So it’s more a case-by-case approach than telling you that they are focusing on you know, Italy. You have cases all over the world and it’s difficult to say we like this region more than that one.

E What’s the process? You have your offices all over the world, and they will recommend GPs that are promising, is there a pre-selection?

CH: In fact, private equity work is quite small. Everybody knows everybody. So currently at the end of each year you know which new funds you will have in the next year. So you can expect that…you say, ‘Okay, I need to choose 10 different funds,’ after which you have different sets of due diligence, and then you say, ‘I will need some private equity fund invested in the US, one invested in Asia, one in Europe, we want some private equity in private equity debt, in private equity in capital, in equity, on real estate also.’ You have different debt like that.

E For the Middle East, have you been successful in identifying GPs that satisfy your ambitions?

No. not yet.

E Although the private equity space is quite developed?

I know that, but for the moment at the beginning it’s critical to only focus on Europe because we are a French bank. After that we now have a team in Asia and so we will begin to invest there, and also we invest in the US because it is the biggest market now for private equity. We want to develop our investments worldwide, but for the moment we are more focused on these three areas. We have some GP who invest in emerging markets. And when I say emerging market it can be Asia or it can be Africa too. But we don’t select for the moment funds exclusively located in the Middle East or in Africa because it’s too selective. Maybe when we become bigger we will have more opportunities to propose to our clients and in that case we could have Middle East private equity funds. But for the moment it’s difficult to have something so specialized.

We have a lot of our clients who come from Middle East and they would like to diversify their portfolio. So it’s simple for us to invest in Europe or in the US. They don’t want to have another fund in Middle East because they know it.

E We know that sovereign money or government money is the biggest source in the Middle East. What about individuals? How much do you focus your strategies of raising funds from governments as per other type of sources?

PW: This is a private banking business. We are not looking for institutional money.

CH: Yes, they can invest by themselves so they don’t need our advice to do that. In fact we are more focused on private people so we are not really [working] on an institutional level. Maybe if they need some help we can help them. But this is very rare because they have the knowledge.

PW: What is true is that the largest clients are pretty close to institutional. If you work with a big family for example you will have requirements that are really close to the investment authority. But basically in principle we don’t chase money from institutions.

January 10, 2014 1 comment

Business

Ambitious creativity

by Livia Murray January 10, 2014

written by Livia Murray

Through a sliding glass door and up a white spiral staircase, the entrance to Innovo’s two-man office in the Beirut Digital District is guarded by a miniature army truck alongside a satellite dish. Though they look like toys, they were actually designed in the office’s small lab as side projects that Innovo’s founder Jad Berro and colleague Ihab Hajj developed when they weren’t toiling on projects for the clients of their hardware and electronics company.

The creative process

The Innovo team use solutions devised through their more playful projects to give a creative edge to problem-solving in their contracted work, which includes work for Touch, Kidzmondo and Emirati telecom company Du.

“Most of the time the stuff I do for fun is related to the stuff I do for work,” says Berro. Spending roughly 70-80 percent of their time on contract work, they can then turn to their own projects the rest of the time. And it seems they might be onto something with their model since their creative projects often go on to inspire subsequent solutions for clients, demonstrating that playfulness can fuel creativity in business.

Some of Innovo’s side projects have obvious practical applications, some less so, and some remain purely in the domain of fun — although which category each fits into usually transpires late in the process. The satellite dish by the entrance is one project that began as pure fun, but later proved useful in developing products for clients. The dish tracks satellites and planes, providing information on their position, and can also pick up international TV stations. Latterly some of its algorithms and design elements were incorporated into client projects.

Although non-disclosure agreements stop Innovo from discussing the specifics of current clients, ongoing projects include robots, infrared sensors and receivers, and photographic drones. For previous customers it has designed products ranging from interactive vending machines to amusement park flying saucers.

Berro launched the company in 2009, at the time delivering technology products to just a few clients. But, as he worked on more and more projects, he gradually gained in reputation until clients began approaching him. “I don’t even have a business card, it’s just people telling people,” he says.

The company’s work really took off two months ago, when Berro was approached by Tarek Dajani, chairman and chief operating officer of digital media umbrella group DNY, to work on a project whose content Berro could not disclose at the time of the interview. Since then they have moved to their current offices, joining the rest of the companies under the DNY Group umbrella. DNY delivers clients to Innovo, while Innovo brings a degree of technological know-how to the group. So far Innovo has two staff members but, by Dajani’s calculations, it’s likely to grow to 10-15 employees by the end of 2014.

The DNY culture

As far as creative thinking goes, Innovo’s recent integration into the DNY offices is in line with the work culture within the group. Experimentation “has been very much part of the DNA across the board in the companies,” explains Dajani. “You find yourself in a discussion with the client and a problem arises, or a constraint, and you would dig into what you’ve done for fun.” DNY has been experimenting for some time with various technologies. Its work with radio-frequency identification, a wireless data-transferring technology, dates back to around 2004-2005. “We’ve done a lot of projects. If I show you the list of things that worked, things that didn’t, things that made sense, things that didn’t, you’d be shocked,” says Dajani.

Dajani received his first degree in architecture at the American University of Beirut, and often likens DNY’s creative business approach to the process of architectural projects. Business and product development, like architecture, can be approached from a design perspective wherein the outcome of the product is not based on pure numbers but on a creative approach. “In design, you can have the same brief for a [piece of] land for architecture, and you end up with millions of permutations and designs addressing all the same constraints. That applies to business,” says Dajani.

The DNY Beirut office, where the majority of its 80 employees work (the rest are stationed in Dubai), is designed to offer tools that stimulate communication and new ideas among its employees. Glass walls delineating different spaces give it an open feel and act as a note board, covered in scribbled plans from brainstorming sessions. The offices also contain a room of products that were previously designed for clients, and which stay in the building so staff can continue to work on improving them. “It’s a tough culture here because we’re demanding — no one settles for the obvious. We’re irrational sometimes in our expectations, very ambitious in terms of what we’d like to see and very rarely satisfied with the end product,” says Dajani.

Design thinking

Creativity has always played a large role in the technology industry, with innovation most obviously necessary in the research and development phase of product development. “But I think innovation is not just a tech thing — it’s a way of looking at things,” says Dajani. “There’s this design thinking approach to everything, this kind of philosophy, looking at business and designing across different disciplines. That’s becoming more the norm in terms of how you look at the business model and financial challenges.”

Popularized by big names such as Apple co-founder Steve Jobs, and David Kelly, founder of international design and innovation consulting firm IDEO, design thinking dates back to the first Apple mouse. It’s the idea that maintaining a healthy, creative culture among employees in a company will lead to more disruptive innovations. This entails changing the process by which you think in order to innovate. Adults tend to self-censor their own ideas, inhibiting creativity, so playfulness is positively encouraged to help counteract this process.

Why make the case for design thinking? One can cut costs with a smart fiscal strategy, gain a greater market share through smart advertising tactics and marketing, and continue to test new products to keep up with the changing world. These are all important elements in the routine of a successful company. But companies that have really stood out are those which are able to incorporate revolutionary ideas into their products. These are the companies that made a mark, that disrupted markets.

January 10, 2014 0 comments

Business

The startup upstart

by Tara Nehme January 10, 2014

written by Tara Nehme

When you live in Lebanon and the startup you created, or work, for is taking you to France — you know you’re doing something right. That was the recurring thought running through my mind as I and 11 other unique startup founders headed to Paris in December, to showcase the achievements of the Middle East startup scene at the Arab Pavilion at LeWeb 2013.

LeWeb, as described by its creators, is “an international conference for startups and all web entrepreneurs looking to kick-start and accelerate their business, reach global media or discover the next great idea,” and we were there to sell our souls. This might seem like an extreme move. But when you’re paying obscene amounts of money to enter a massive room with Guy Kawasaki on stage, and representatives from every media and investment powerhouse floating among crowds trying to seek out the next big thing, soul-selling seems like the best plan to set yourself apart from the entrepreneurial herd.

From hardware to health, matchmaking to crowdfunding and online entertainment to retail, the 12 of us successfully seized the attention of everyone that mattered. A euronews journalist said it best when he titled his article ‘Middle Eastern startups the talk of LeWeb 2013’.

Let’s talk about conferences. Conferences, in general, are not the most thrilling concept and are usually associated with monotonous speakers, bad coffee and sleep-inducing boredom. For me, that misconception was cleared up as soon as I began my startup life, and even more so after LeWeb; an unparalleled experience to say the least.

layers of opportunity

High powered, large-scale events such as LeWeb offer four essential layers of opportunity. First comes the networking, the toughest yet most valuable part. My business cards were my arsenal; I just needed to figure out whom to hand them out to and how I could speak to the important people that initially seemed inaccessible. A proper alignment of teamwork and hustling was the key. You will never get to everyone, so referring people whose interests better suited other startups to them and having them do the same worked like a charm. During our three days there many of us set the basis for potential partnerships that could catapult our startup out of the Middle East and onto the global market.

LeWeb was graced by Google and their mini kingdom of powerful workshops — the second opportunity — which addressed topics such as measuring the impact of effective brand campaigns to monetizing video traffic. Third were the startup pitches, where early stage companies presented to an array of investors, a process that has been proven successful at these types of events worldwide, and specifically in the Middle East. Winning second place at ArabNet in Riyadh at the end of last year, for example, provided Presella.com with the opportunity to go to Silicon Valley for a month as part of a mentorship program by Progress in Technology Middle East.

Fourth come the speakers: international success stories and panelists. Hala Fadel, chair of the MIT Enterprise Forum for the Pan Arab Region, challenged the many misconceptions of the Middle East and discussed — with Instabeat founder Hind Hobeika as an example — how the many hurdles faced by startups in the region have actually proved beneficial as they have forced companies to come up with innovative, bulletproof solutions, making startups more immune to future setbacks.

I left LeWeb having met hundreds of cool people and one major contact; the potential for that one key relationship is what makes conferences useful. The real question is whether you are going to do whatever it takes to find it and grab it.

Our presence at LeWeb marked a monumental achievement for the Middle Eastern startup scene. We were all people that were a part of or created companies from nothing more than an idea on a napkin. Somehow, we turned these ideas into real companies and found ourselves in France talking to international press, investors and potential partners, ending 2013 on a high note. LeWeb’s tagline reads “Where revolutionaries gather to the plot the future” and that’s exactly what we did. I don’t think the term “revolutionary” is more suited to anyone than us Arabs because, where we come from, being revolutionary is the only thing that works.

January 10, 2014 0 comments

Society

In with the old

by Nathalie Rosa Bucher January 10, 2014

written by Nathalie Rosa Bucher

While the bulk of Lebanese would not hesitate before buying a secondhand car, most frown upon the idea of purchasing, let alone wearing, secondhand or vintage clothes. Deeply engrained as this attitude may be, secondhand and vintage fashion is on the rise in Beirut.

“I wanted to open a vintage store as I knew that in Europe it was [all] the rage but didn’t exist here,” Yasmeen Borro, owner of Vintage Story, says. Borro opened her boutique, the first of its kind in the Middle East, in Kantari in 2008. Initially, she had vintage clothes as well as accessories in store but quickly came to realize that while her clientele was open to buying and wearing previously used earrings or handbags, most drew the line with garments or dresses.

“The thought of it being old, that it may have been fished out of an old suitcase or been found on a flea market or thrift store — I go to and find things everywhere, across Europe but also at Souk el-Ahad, in Tripoli and Sabra — is unbearable to most,” Borro says.

Once she realized that previously owned dresses wouldn’t work, she concentrated on her own original creations, under the label Vintage Story, while also selling actual vintage earrings, brooches, necklaces, armbands, handbags, headgear and some clothes.

“The old inspires the new and that works,” she says of her label, which she classifies as “high end.” She describes her clientele as mixed, consisting of Arab women; half foreign, mainly from the Gulf, and half Lebanese.

“Initially, I was convinced that you could find many things in Beirut,” she says of her sourcing process. “However, Lebanese women don’t keep much… people move, much has been given away. I sometimes get calls, and people offering me things at exorbitant rates. They offer me something for $80 that I can find in Europe for €20.” Consequently very few of the vintage items she sells are from Lebanon; most come from Berlin, Paris and Belgium. “I have a big purveyor in Brussels who manufactured classy leather handbags all his life. Every time I’m there I take some of his stock.”

While jewelry requires little work before being ready for re-sale, clothes need to be carefully inspected, dry cleaned, stains removed and any damage repaired.

Once a year, Borro takes part in an expo, usually in the Gulf. “Women there love individual pieces. They try and outdo each other and are bold in their choices. They buy massive amounts of [vintage] jewelry!”

a new concept for beirut

Similar to Vintage Story, about half the items for sale at Naela Nammour’s Pink Henna are vintage and the other half new creations. Her Mar Mikhael boutique also specializes in vintage accessories, including handbags, jewelry and homeware.

Nammour classifies an item as vintage when it is 25 years old or more. She has bags going back to 1900 and 1910 and almost every decade of the 20th century is represented, up to the 1980s. Over decades of collecting, buying and selling vintage items, she has become a vintage expert.

“To me, secondhand is more recent, vintage is older. Vintage may be secondhand, but not necessarily as you sometimes find items that have never been used,” Nammour says. “I lived in Paris for 20 years and travelled around the world, and have collected a lot.” While she dearly holds on to many items found in various parts of the world, some of her own collectables constituted the initial stock for Pink Henna, opened four years ago. Her customers are mostly locals. “Locals have discovered vintage, they often come to look for a present. [Then] the person who received the present often comes to look for the place where it came from,” she says.

Nammour recently started a Facebook page and has relied on word of mouth. “We’re listed in the Zawarib [Beirut city map] and sometimes magazines or production companies come to take items on consignment for ads or shoots.” Vintage Story’s Borro, who has also relied on word of mouth, is setting up a website for her clothing label but otherwise prefers to remain niche and not advertise.

To stock up, Nammour travels once or twice a year to comb through some of Europe’s flea markets, and works with a few professional buyers in various places, including France, the United Kingdom and the United States, from whom she gets most of her stock.

Despite its rising popularity, a stigma still remains around vintage pieces. “The concept is new, Lebanese are used to the word but not everybody understands the concept. Many think that it’s never worn — not quite,” says Maya Kaddoura, founder of Washed and Found, an online buyers and sellers marketplace for vintage and luxury items.

“When I used to live in Europe there were so many dépot-vente [boutiques where high-end brands are sold at seriously slashed prices], you would have to beg to sell your things. Here it is the other way,” she says.

“In France it’s more valuable to have an item that has history. Here, people are starting to get into it, often though not because of the idea, but because it’s less expensive. If they could buy something new they would. Things that work well here are handbags.”

Her mother and grandmother’s beautiful garments sparked the idea for a vintage business. “I tried to come up with a project with limited investment. Initially, I considered a blog, but eventually opted for the e-commerce route,” Kaddoura says. She set up a slick website with high quality images and tried to do much herself, including retouching the pictures and finding the items to sell. “Setting up a payment gateway costs between $4,000 and $10,000 and, especially in Lebanon, many people are still getting used to the idea of buying online,” she says.

After a soft launch in August 2013, Kaddoura did an official launch in November. “At the beginning friends of friends and friends of my mom’s were my customers, that’s how I also got my first items — word of mouth worked. Many people wanted to sell initially but the situation has changed somewhat as now there are a bit more people who want to buy. Things I sell now are more interesting as I know what people like and will buy…I have everything from fashion to accessories to shoes. I’m looking for jewelry, and I’ve just uploaded the first bridal pictures to the site. A Chanel bag is the item to have!”

unique treasures

Kaddoura takes items on consignment and, once sold, 30 percent of the cost goes to Washed and Found, which covers the photo shoot, social media, retouching and handling fees.

Those who want to view something need to do so by appointment. The 350 items in stock are stored in an empty office, cheaper in rent than a boutique.

“My customers mostly consist of women aged between 18 and 40, people who want to sell are older. They have been holding on to their old clothes. Women aged between 18 and 26 are the youngest and largest group — they go for secondhand. A 19-year-old girl bought the first Louis Vuitton vintage piece I had.” Men don’t really feature, although a few have shown interest.

Washed and Found, which employs one part-time assistant, ships internationally using DHL for international shipments and LibanPost in Lebanon.

When the bounty of years of collecting claimed too much space in her house, Nawal Akl looked for a place to store some of it. “I got this flat in Mar Mikhael,” she says. “I rented it at first, and stored some of the many things I have here. The ‘untouchables’ are still at home.”

Eventually Akl bought the flat and started to sell secondhand and vintage clothes, jewelry, accessories and shoes in 2011, to surprising success. “I thought I would have to make it work but it worked by itself. It pleases me when I see these items looking good on someone else.”

The small flat on Badawi Street, named Depot-Vente, is the ultimate treasure trove, full of spectacular, ridiculous, chic and everyday items, where one can find genuine near-new leather boots for LL20,000, designer pieces, real fur coats or a 1970s bathing costume. “I often find things during my travels,” Akl says. “And I go through cupboards… I also find contemporary stuff. I buy everything, and sell much at LL3,000. Everything that is well made, made longer ago or is handmade is priced differently, as are Italian and French brands. Items made in China — even Ralph Lauren or Donna Karan — are sold at LL3,000 because that is the production cost. When people now see something at H&M for LL80,000 they know it’s worth LL3,000. I do a sort of consumer education.”

“This place allows people to find unique pieces. It allows for individualism and goes against conformity. We’re tired of H&M, Mango and Zara — everywhere in the world you see the same dresses and fashion.”

It looks like secondhand is here to stay. Next year will see the launch of the e-commerce website, Garage Luxe, specializing in luxury brands. So far operating only on Facebook and Instagram, the store has a vast array of classics that could make it a game-changer on the scene.

What matters to Borro is the fact that an old garment is given a second life. “Maybe with the crisis we’re experiencing, Lebanese will come to accept it more,” she says.

January 10, 2014 1 comment