Real Estate

The love is gone

by Maya Sioufi
written by Maya Sioufi

The happy marriage between Mr. Bank and Ms. Real Estate seems to have lost some of its luster of late, becoming more of a relationship that both parties are resigned to accept for the sake of keeping the house — Lebanon — together.

On the surface, if we do the math, there is no need for the couple to seek counseling over the current exposure of Lebanese banks to the real estate sector. Out of the $44 billion which was lent to the private sector by Lebanese banks last year, a total of $13 billion was handed to the real estate sector in the form of housing loans or construction loans — that is around 30 percent of the total private sector loan book of banks and 19 percent of the total loan book. By comparison, the Spanish real estate and housing market, which is under severe pressure, accounts for 54 percent of the total loans of their local banks, forcing the banking sector to ask for a hefty bailout. Demand in Lebanon, according to experts Executive spoke with, is also primarily based on end users as opposed to speculation; given this, the banking sector’s exposure may not be worth rattling about. Of the $6 billion the construction sector added to economy last year, according to Bank Audi estimates, developers received $1 billion from banks and had to fund the rest themselves either through presales of flats or their own capital. “The real estate sector relies on around 80 percent of their own financing so it is not highly leveraged and it is not pressured to sell,” says Marwan Barakat, chief economist at Bank Audi. “That’s why there isn’t much pressure on [housing] prices.”

Omar Shantouf, general manager at FFA Real Estate, concurs: “Developers are not that highly leveraged and they can afford to sit on projects. They might sell one or two apartments at lower prices but they won’t advertise this, there is no such thing as a fire sale in Lebanon.”

As for housing loans, 36 percent of total property sales were funded by loans from the banking sector in 2011, up from 9 percent in 2007, and the remainder was funded by homeowners’ capital according to Bank Audi research. “That’s a moderate level even though it increased in past years,” says Barakat. 

The honeymoon is over

Many heated debates at the dinner table, however, have centered on whether Lebanon’s lady of real estate has gotten a little big for her britches in recent years. Indicators of activity within the real estate sector are starting to paint a gloomier picture. Cement deliveries, an indicator of current construction activity, dropped 4 percent in the first quarter of 2012 after increasing 6 percent in 2011. Construction permits, an indicator of future supply, dropped 4 percent in the first quarter after dropping more than 6 percent in 2011.

Economists and financial experts Executive spoke with played down any concerns: “95 percent of our projects are sold to end users, people buying to live in it and not to speculate,” says Ziad Maalouf, chief executive of Capstone, a private investment firm. “Today, there is no risk of seeing a bubble in the market explode.”  In the construction sector, banks have handed out a total of $7 billion in loans, which represents 16 percent of total lending to the private sector. “The share of the construction sector to total loans is similar to the one of the construction sector to GDP so we didn’t over lend to [real estate]” adds Barakat, given that the share of the construction sector to the country’s gross domestic product stood at 15 percent, according to the 2010 National Accounts of Lebanon, the latest official breakdown of figures for GDP available.

While banks may lend according to the economic logic they devise, they are now faced with developers who are finding it more challenging to offload flats, which a few years ago were selling like hotcakes. “Banks are becoming more selective because of the situation in the real estate market today. They are worried about demand and supply,” says Maalouf.  As banks become pickier, they look for trendier projects. Demand has shifted from large-sized apartments, over 200 square meters, to medium-sized apartments, between 100 and 200 square meters, and from Beirut to the suburbs according to Bank Audi research.  “If you go to the bank and ask for financing for a project with flats of 600 square meters in size, no one gives you a loan. You have to go with the right project and the right sizes,” adds Maalouf.  With land prices still increasing and flat prices in tow — albeit at lower levels than in previous years — homebuyers are finding it more and more difficult to pay for a roof over their heads. “Homebuyers can’t afford to buy houses anymore because the prices of land have gone up in the lift and our income is going up the stairs,” says Antoine Chamoun, general manager at Bank of Beirut Invest. 

Competition on the rise

Homebuyers have also been visiting bankers more regularly in recent years. Housing loans leapt by 33 percent last year — receiving the bulk of the increase in private claims — to reach $6 billion. The central bank had a significant role to play in giving banks incentive to lend their liquidity and in helping the Lebanese folk fund their pads. The central bank’s circular of May 2009 provided an incentive for banks to lend in Lebanese lira by reducing their reserve requirements as long as rates applied to clients are within a certain limit — 40 percent of a one year Lebanese Treasury bill plus 3 percent. “It created a boost in terms of supply and demand,” says Basil Karam, head of retail at BankMed.

“The central bank helped us developers by helping home owners buy flats, helping banks to lend and helping activity in the country,” adds Maalouf. “It is the best thing that happened to the sector.” This has fueled the development of a love-hate relationship between homeowners and bankers. For bankers, it became a lucrative business. Struggling to deploy their excess liquidity — deposits stood at $120 billion, or around three times GDP, in the end of the first quarter — with interest rates globally at record low levels and a dearth of investment opportunities within Lebanon and in the shaken region, extending loans to the housing sector became a thriving business and everyone jumped on the bandwagon. Yet what that also meant was that the central bank indirectly propped up a housing market, where prices were continuously rising and thus impacting the affordability of housing in the country.

“Banks have been under pressure on their interest margins in the past few years because their liquidity is not yielding [returns] anymore both outside and inside Lebanon, so they are having to lend more,” says Barakat. As banks increase their offering for home loans, competition is getting fiercer and along with it, the advertising wings of the banks are becoming more active to lure clients their way. Billboards for home loans seem to be popping up on almost every corner. 

With rates on loans in Lebanese lira being controlled by the central bank, the competition is now on the dollar loans. “Some banks are reaching their allowable limits in extending subsidized loans in Lebanese pounds,” says BankMed’s Karam. “They will have to focus more on dollar-based loans and cut prices to attract more loans. In dollars, there is price competition, big time.” 

Chamoun agrees, saying that, “The competition on loans in Lebanese pounds [subsidized loans with the central bank and with the Public Corporation for Housing] is low because the features of the loan are imposed and there is very little difference among banks on these loans, but on the dollar, banks are putting their own features.”

While there is room to increase lending further to the housing sector, growth is unlikely to be as significant as in previous years given that it was coming off a low base, according to Barakat.  This could lead to continued competition in the sector and “it should be like this and the best offer should win,” adds Chamoun.

Increasing competition would be a welcome respite for homebuyers struggling to keep up with the elevated real estate prices. As for developers who have funded their current projects with low leverage, they are largely sitting on their pile of stock, putting  upcoming projects on hold and staying firm on prices. For developers quick to adapt to the changing dynamics, projects outside Beirut with smaller flat sizes are being developed, and thus those selling homes will likely have to do with transactions that were not as large as they previously enjoyed. 

As BankMed’s Karam points out: “Lebanese will continue to borrow to buy homes but the average ticket size wont be the same.”

 

This article was published as part of a special report in Executive’s July 2012 issue

0 comments
0 FacebookTwitterPinterestEmail
Real Estate

Culture Vultures

by Jeff Neumann
written by Jeff Neumann

The endless struggle over what constitutes a cultural heritage site and what real estate developers can build over continues to spur heated debates in Lebanon. There are many sites at issue. Beirut’s Ottoman and French colonial-style homes, or at least the ones that survived the civil war and reconstruction efforts, are under constant threat. Several remnants of the area’s ancient past as a center for global commerce and culture are also at risk of being lost in the name of profit.

Land scarcity only heightens property developers’ appetite for demolition of sites that may or may not be under protection. Weak government regulations, mostly holdovers from the French mandate-era, have left countless loopholes open for exploitation.

The onus to protect these sites, by protesting against great odds, has fallen on a loose affiliation of activists, archaeologists and everyday citizens. And in many ways, real estate developers are simply taking advantage of rights set aside for them by previous governments, most notably that of former Prime Minister and real estate mogul Rafiq Hariri, although other governments did their part as well.

An ancient past discarded

One of the most controversial heritage issues of late is the Venus Towers project in downtown Beirut. The original plan calls for three luxury residential towers with the promise of “recapturing the traditional context of Lebanese housing in a new modern style”. After ground was broken what appeared to be an ancient Phoenician-era port was discovered, spanning some 7,000 square meters of prime real estate. The project developer, Venus Real Estate Development Company, says the site’s significance has been overblown. But archaeologists not associated with Venus Real Estate say the alleged port is a cultural heritage site that should have been preserved at all costs.

A fierce public debate over the site ensued, followed by at least five archeological reports, which were submitted last year to then Culture Minister Salim Warde. Last spring, Warde told Executive, “It might be a port, a shipyard, or even a quay, but it is surely something very interesting, and we are seeing how we can work with the owners of the land to save this site.” An official from Venus Real Estate told Executive in late June that the archaeologists and experts contracted by the company had recently finished their assessment and submitted a report to the Minister of Culture Gaby Layoun, and were waiting on a response. “It’s in the minister’s hands now,” the official said.

The next day, Venus Real Estate completely demolished the remnants of the site after gaining approval from Layoun.

Joseph Haddad, founding member and secretary of the Association for the Protection of the Lebanese Heritage, called the action “illegal” and promised to continue with protests. Announcing the decision, Layoun said in a statement, “The entire case involves no proof that points to the presence of a Roman or a Phoenician port and the trenches within the rocks could not have been used as dry docks for ships or their maintenance.” Media reports later stated Layoun had distanced himself from the decision and his office was not avaliable for clarification as Executive went to print. 

A similar dispute has arisen over a Roman-era hippodrome, also in the heart of downtown Beirut. Solidere built luxury homes directly on top of much of the site, one of which is owned by former Prime Minister Saad Hariri. The hippodrome is one of two in Lebanon, out of only five of its kind in the Levant. The second hippodrome in Lebanon is in Sour, and was added to the United Nations Educational, Scientific and Cultural Organization (UNESCO) World Heritage list in 1979, long before the construction craze took hold across the country.

Solidere has proposed moving the remnants of the hippodrome to a site nearby, where a former Roman-era bath was also moved. However, this will do little to appease preservationists. “It is very easy to protect something,” says Jeanine Abdul Massih, professor of archaeology at the Lebanese University, and a proponent of keeping the hippodrome in its original location. “The problem is, it is also very easy to move it.” For its part, the Culture Ministry seems more intent on using the episode to publicly attack Hariri on television than to preserve the site.

Outreach efforts by preservation groups such as the Association for Protecting Natural Sites and Old Buildings in Lebanon (APSAD) have proved moderately successful, at least in attracting awareness. In late May the group held a ‘National Heritage Day’ with assistance from the Ministry of Culture, and with a focus on cultural heritage sites in Sour and Hermel.

Despite its efforts, APSAD says it is up against powerful real estate companies that are tough to counter. “Anything is better than nothing,” says Mona El Hallak, architect and executive committee member of APSAD. “Really it is in that desperate a state. They do everything to make buildings fall apart and then lobby to be able to pull it down.” 

LU’s Massih echoes that sentiment, saying, “We are all used to it. For 25 years we destroyed all of the history. The problem is patrimonial. Maybe the money at stake is too much, I don’t know. There must be something to do because the people cannot enjoy any of these sites.”

Foreign elements

While most preservation efforts are focused on specific buildings and historical sites in Beirut and surrounding areas, the sale of large swaths of land to foreigners across the country is also attracting the ire of activists and citizens. One example is a brewing fight over the sale of some 7,700 square meters of land near the Keserwan village of Dlebta to Saudi Prince Muqrin bin Bdul Aziz, allegedly without consultation with the local municipality. As Executive went to press, repeated attempts to contact the municipality went unanswered. A presidential decree, #7983, approved the sale in April and residents say they only learned of it once an announcement was made in the Official Gazette.

A campaign to revoke the sale has attracted attention, and local residents have mobilized. But some elements involved in protesting the transaction show hints of xenophobia rather than a genuine concern for the land. As it stands, a petition is circulating demanding the revocation of the sale and it appears that this, like other land issues, will not be resolved soon.

Past attempts at historical and cultural preservation have shown mixed results. A senior advisor to Minister Layoun, Michel de Chadarevian, touts the Sour hippodrome as a preservation success story. “The hippodrome in Tyre has been handled with great care and this is something that Lebanese should be proud of,” he says. But that effort was undertaken more than 30 years ago, and nothing approaching the level of UNESCO protection has happened since.

 

This article was published as part of a special report in Executive's July 2012 issue

0 comments
0 FacebookTwitterPinterestEmail
Real Estate

Facing a squeeze

by Jeff Neumann
written by Jeff Neumann

Reading through our special report, you probably have a good idea of the challenges faced by the real estate sector over the past year. Data shows that demand for residential property is weakening across Lebanon and developers are coping with higher operating costs than before. How they adapt will determine how well they weather what some expect to be a prolonged downturn.

Overall construction costs in Lebanon were up in the first few months of 2012, due in part to the mandatory wage increase approved by the government in March. However, material costs have for the most part stayed at the same levels through the first five months of 2012. For instance, steel in Lebanon has remained at $750 per ton through June; Portland cement cost $102 per ton over the same time period.

permits


Shaving the fat

When asked about what is being done to cut costs, most developers declined to go into detail. The one exception, Karim Bassil, founder of BREI Real Estate Investment, offered a brief insight into his company’s operations. “The main thing is we’re reducing our overhead, we’re reducing our margins. We have already reduced our margins by 50 percent this year,” he says, describing the return generated from new income on a project. “We’re just not making the same kind of money that we were making before,” adds Bassil. “In Lebanon, when you plan something for, let’s say, 30 percent ARR (average rate of return), you end up with 20 percent of 70 percent ARR.”

Cement deliveries are also down this year by 4.2 percent — another obvious indicator of a slowdown in construction. This stings developers even more due to the fact that between 2005 and 2010, average annual deliveries increased by 11.2 percent. As an example of the many factors listed coming to a head, Bassil says that “on one of my projects in Beirut, instead of putting it around 20 percent ARR, we put it at 8 percent. This is because of politics, war and project delays — they all play a role in [reducing ARR].”

Through May, the total number of construction permits issued in Lebanon was down 9.3 percent from May 2011, according to data compiled by InfoPro. Also of note, construction area authorized by permits were down 12.5 percent from the same time last year.

Indeed, times are tight for the sector, forcing developers and contractors to consider all options. As Bassil puts it, “Personally, we’re doing everything to keep our business alive for better days to come.”

 

construction cost

 
This article was published as part of a special report in Executive's July 2012 issue

 

0 comments
0 FacebookTwitterPinterestEmail
Real Estate

Q&A – Solidere’s Mounir Douaidy

by Maya Sioufi
written by Maya Sioufi
The company the Lebanese love to hate is Solidere, Lebanon’s largest developer tasked with rebuilding the Beirut Central District (BCD) after the civil war. While many enjoy sipping coffee by the yachts in Zaitunay Bay, Lebanon’s Porto Fino, and walking around in the Souks, still undergoing further expansion, and even jogging by the newly built marina, there are fears the company has gone beyond its mandate and is now competing with, instead of supporting, businesses and developers. For a better understanding of how the BCD operates, Executive sat with Mounir Douaidy, the general manager of Solidere. 
Solidere has signed contracts for several projects on the Waterfront district, among which are KidzMania and The One. These have been criticized as being illegal as they do not seem to be temporary structures as per the law? 

For 10 years, there was only BIEL (Beirut International Exhibition and Leisure center). A few years ago, we looked at one particular area starting from the entrance of BIEL all the way to the sea. We started with the Beirut Exhibition Center and along the same line, there will be The One (a night club owned by Skybar’s Sky management) and KidzMania (indoor theme park for children). These are temporary activities with seven-to eight-year contracts to create movement and attract people. We only receive rental income and have not taken stakes in the projects. Down the line, all these areas will be sold and developed. 

What will the waterfront district look like once permanent structures start being implemented? 

All the buildings on the frontline facing the park and the sea will be 40 meters high. There will be one or two towers there similar to the ones on the Corniche, such as the Four Seasons or the Platinum Tower. Heights on every lot will be different: some with heights of 52 meters, some with 75 meters and others even a little higher. Concentrations of high-rise buildings will be mainly in the central part of the reclaimed area and not the outside edges, which will be composed of low-rise buildings to catch the views. 

In a context of regional turmoil and lack of domestic stability, Solidere’s recently reported 2011 results saw revenues drop by 23 percent year-on-year to $296 million. How is 2012 looking so far?  

Last year, we did not sign a land sale deal until the fourth quarter when we signed four deals for $220 million, which constituted the main part of our revenues. So for 2012, I don’t know yet because we still have six months. All I can tell you is we are on the right track for sales because there is demand.

What changes have you seen in terms of demand? 

The negotiations to materialize a transaction are taking longer than usual. We have also had to break up bigger blocks into smaller units so that it becomes easier to sell these units. Finally, most of the investors looking to acquire land are, more and more, coming from Lebanon as opposed to the region. 

Solidere’s strategy has been to reduce its reliance on land sales by increasing rental income. Where do you stand on this? 

Our rental income, which stood at $50 million in 2011 up from $42 million 2010, is expected to reach $65 million by 2015 after the completion of several projects, namely the remaining component of the Souks with a cinema complex by the end of the year and a department store by 2015. Land sales will continue to be the main source of revenue over the next 10 to 15 years because we still have a significant inventory of land, mainly on the waterfront, valued at $7 billion at today’s prices. 

Given Solidere International (SI)’s exposure to countries in turmoil, where do you stand with your expansion plans outside of Lebanon? 

We were not impacted [by the turmoil] as we had not spent on anything yet because of the financial crisis. All we had to do was to restructure the projects. For example, Al Zorah project in the United Arab Emirates was reduced in size and changed from a mix used development to a touristic project. SI is now concentrating on identifying new markets and we think there are lucrative opportunities in Saudi Arabia where we already started one project for a tower in Jeddah and we have two to three projects in the making in Riyadh. 

Solidere is venturing into the restaurant business. Is this another way to reduce your reliance on land sales?

Any revenue from the restaurant business is immaterial relative to our activities. The whole idea [behind venturing into this line of business] is to allow the creation of outlets and restaurants of a certain caliber that we felt did not exist and would support the overall real estate development activity. We did it with Stay (fine dining restaurant) and Momo’s (Moroccan restaurant and bar). We brought in an operator and created an entity — a cooperation between Solidere and the operator — that would rent out the space and pay us rent. The operator runs the concept and Solidere co-manages with the operator. Solidere is not in hospitality: We don’t know how to do restaurants. We also did this with The Venue, the 1,000 square meter space used for exhibitions.

Your critics say that you are competing with the restaurant business. 

People keep saying Solidere is competing. We created these two ‘unique’ concepts that didn’t exist before so they will not compete with anything else that exists. Our intention is not to expand into this and step into the shoes of people doing this kind of business. We did this to give a push to the area, attract more people and promote cultural and artistic activities, and these restaurants came as part of this objective. If you look at the city center, there are tens of restaurants and outlets that have nothing to do with us. 

Are you also co-managing outlets in Zaitunay Bay? 

No. Zaitunay Bay is a little bit different. It is a joint venture with Stow Waterfront Development. Together we are executing Zaitunay Bay as a project made up of two parts. First is the restaurant part, only for lease, and the other part is a building composed of fully furnished small-to-medium sized apartments, which will be up for sale. 

Doesn’t this divert from Solidere’s strategy of focusing on rental income only?  

All the properties in our real estate portfolio so far were up for lease because the idea was to generate rental income and keep increasing it over the years. For this building, it was agreed with the partners that the apartments would be put up for sale as there would be higher ownership demand given the high prices, and we also wanted to recuperate our investment in the project and keep the restaurant leases to generate rental income. The building will also host a members club like the Automobile et Touring Club du Liban [ATCL] or the Golf Club, which will generate annual income.

Are you considering moving into the sale of apartments going forward? 

Until last year, the decision was not to sell any assets but going forward we are considering to slowly sell some assets. We started selling some of the Saifi apartments that were leased for the past 12 years. We are eventually offloading some of the stock of apartments as we have other apartments in Zokak El Blatt and Wadi Abou Jamil that are leased. Our new projects will come to replace some assets that we are selling. 

So the new projects will only be for lease? 

We recently got the permit to start another 20,000 square meter project in Saifi consisting of three small residential and one office building. We intend to sell the apartments of this project. We will not start offloading a huge quantity of assets. 

With demand moving to smaller sized apartments, aren’t developers having to adapt and provide smaller sized apartments too? 

All the stock on the market came from developments that started a few years ago. Future developers will be looking to smaller sized apartments but this will come after Solidere has finished selling these apartments. 

Wouldn’t the sale of apartments place you in competition with developers? 

We are not doing anything to compete with anybody in the market. We want to support other developers, complement their activities and not go in competition with them. We want developers to do well and become repeat developers. We are doing this on a very small scale and the size of the apartments we have been putting up for sale are small to medium sized, whereas developers have been selling medium- to-large sized apartments, so we are not competing with them.

 

This article was published as part of a special report in Executive's July 2012 issue

0 comments
0 FacebookTwitterPinterestEmail
Comment

The formula to fill football seats

by Thomas Schellen
written by Thomas Schellen

The Lebanese love for football warms my heart. The colors flying from windows, cars and street-corner stands during big tournaments like the Euro 2012 give me an emotional lift. The friendly coexistence of so many football allegiances — from England to Italy, France, Spain, Portugal and my native Germany — displayed this summer has a great pull on me. And what makes it even better is if you sit in a pub in Hamra, or a mall café in Ashrafieh, and fever with the action of your team while on the next table someone roots for the Dutch or Danes with the same enthusiasm. Great fun, happy competition.

But why do the public and private sector in Lebanon get the football economy so wrong?  By football economy, let it not mean the exploitation of the occasion by marketers with buy-this, win-that strategies. I am talking about the primary needs of the fan: A totem (flag, scarf) and a place to watch and eat.

Now, in a small redemption for the Lebanese private sector one has to say that today it is no problem to find a big screen — unlike the days when the over-sized Sports Café in Burj Al Ghazal was about the only place that sported them (and was unhealthily empty except during big games, which is likely why it eventually closed down). The supply of Beiruti venues where you can watch Euro 2012 today ranges from 10-foot screens in comfortable restaurants to a plasma in your nearest pasta joint.

Regrettably, these choices are not all real deals. When I sat with my black-red-gold-wearing son in one cozy restaurant on the day before the Euro opener, the friendly waitress volunteered an invitation to come back for the Euro, “but there is a LL25,000 cover charge.”

Then there was the eatery on the corner near my abode. They had hired a few 24-inch screens and had the place decked out by stringing up little flags. Pity that their stroke of decorative genius was marred by hanging the German flag upside-down, but they showed even greater foolishness when they demanded a minimum bill of LL20,000 per person. Fifty bucks for munching manakeesh while bearing with a case of football culture callowness?

So I stomped my German family fan legion of four up to the rooftop of ABC and hunkered down at a restaurant that had a giant screen, sharp-enough resolution, a fair crowd, and perfectly regular prices. Guess what? At the end of the first win by unserer Nationalmannschaft, or ‘our National Team’ as the Al Jazeera commentator yelled several times, I (expectedly) not only spent more than $50, I also decided to come back for the next two games — and happily consumed more as the German game kept improving.

What’s the moral of this musing? Simply, for you restauateurs, freedom stimulates consumption. Especially at a time when the insane cost-of-living spiral forcibly converts hordes of us average Joes into penny pinchers. Learn from the football economy that fair offers and a good atmosphere open up the most paranoid of pockets.

Now to the Lebanese football public sector economy. If the country ever wants to host a big tournament, it needs to invest now. No, not into refurbishing the stadia built for the Asian Cup finals that somehow happened here in 2000. Invest in the Lebanese team and in the national sports infrastructure of training and developing youngsters — and invest in building a culture of fair competitiveness through sports. It will do wonders for the economy overall.

Lebanon made it to the fourth round of the 2014 World Cup qualifiers, proving that the country has football talents, and the team can still claw farther. And being die schoenste Nebensache der Welt, roughly translated as ‘the nicest unimportant thing in the world’, football is an opportunity to think the unthinkable.

Poland and Ukraine have co-hosted Euro 2012, despite the challenges each of them faced. Half a century before the 2002 World Cup, it was exactly unthinkable for Japan and Korea to ever co-host a dinner party, let alone the world’s greatest spectator event.

It is unthinkable so think: If Lebanon were ever to succeed in co-hosting the World Cup in this century, it will not only make bigger history than even Qatar. It will absolutely need a team that is a result of long-term public sector investment in a competitive culture and great sports. Invest in the National Team today, yallah, government. Because nothing could be more embarrassing than hosting a World Cup and not make it, at least, to the second round.

 

THOMAS SCHELLEN is Executive’s MENA business editor

0 comments
0 FacebookTwitterPinterestEmail
Finance

Iraqi intrigue in Lebanon

by Mohanad Hage Ali
written by Mohanad Hage Ali

Lebanon’s propensity to host political, media and financial players from around the region and beyond is well know. Its weak government, strict banking secrecy laws, open media landscape and plethora of rival political movements provide a welcome embrace for all and sundry. Among those to have set up shop here recently is an Iraqi outfit with an intriguing network of connections trailing back into the quagmire of Iraq’s troubled contemporary history.

The operations in question are a nascent TV station, Asia TV, and Al Bilad Islamic Bank, which opened a branch in Hamra in recent years. The lynchpin that joins the two enterprises is one Mr. Aras Karim Habib who is the chairman of the TV station and sits on the board of the bank (and was responsible for the opening of its Beirut branch). 


A shady past

Habib was chief intelligence officer for the Iraqi National Congress (INC) — the umbrella organization of opposition groups set up with American assistance after the 1991 Gulf War — as is documented in investigative journalist Aram Roston’s book, “Ahmad Chalabi; The Man Who Pushed America to War.” Roston also outlines how Habib was one of three principals for Boxswood Inc, a company established in the US by Chalabi through which the INC received funding from the American Defense Intelligence Agency.

It didn’t take long for Chalabi and Habib to fall from grace among certain elements of the US establishment after the 2003 invasion of Iraq, with a US intelligence official accusing Habib of passing intelligence to Iran, as was reported by the British daily the Guardian. In 2004 an arrest warrant was issued for Habib relating to his intelligence activities with the INC. Habib was not available for comment despite numerous requests by Executive.

Habib is now living in Beirut, and his connection to the Chalabi family continues; Al Bilad Islamic Bank was incorporated in Iraq in 2006 with Chalabi’s nephew, Issam al-Uzri as chairman. Issam’s son, Hussein al-Uzri, was the former chairman of the government-owned Trade Bank of Iraq (TBI), which was accused of corruption by the Iraqi government in June 2011, leading to the former chairman to flee the country, while his father left his position as chairman of Al Bilad two years ago.

The link between the two banks came to the fore following the award for “deal of the year” given by a trade magazine to Al Bilad in 2008 for being allocated a $100 million letter of credit by TBI. 
Habib set up the Beirut branch for Al Bilad, the bank’s 15th branch and the only one outside of Iraq, in Hamra in December 2010. “Habib was involved directly in establishing the bank in Lebanon and he is the coordinator between Iraq and Lebanon,” says Talal Kaissi, head of the Al Bilad’s Beirut branch.

The bank is set on expanding its operations in Lebanon, according to Kaissi, it has acquired a building in downtown Beirut facing Starco for $32.5 million. The building, which is still under construction, will be the new bank headquarters and the Hamra office will remain as a retail branch.

From banking to television

More recently Habib has ventured into Lebanon’s media mosaic with the establishment of Asia TV, which according to Kaissi “is a private business” of Habib’s (which Executive confirmed banks with Al Bilad). Entifadh Qanbar, Asia TV’s general manager, goes further saying Aras Karim Habib is the chairman of the station and explains, “I run the day to day operations and [Habib] sets the general direction.” Asia TV started broadcasting on March 5 and Qanbar says, “We are a pan-Arab TV station. We cover the Arab, Muslim world with an Iraqi taste. I want English, Persian, Turkish and perhaps Kurdish news broadcasts.”

The station is one of several new media enterprises in Lebanon that endeavour, in the words of Qanbar, “to counter the Gulf invasion in the region.” The coverage of the Arab uprisings, and in particular the Syrian crisis, has severely polarized the journalistic community in the region and the coverage from outlets that enjoy support from the seemingly bottomless pockets of the Gulf, such as Al Arabiya, Al Jazeera, Al Mustaqbal, Asharq Al Awsat, Al Hayat, An Nahar and many more has created a backlash. 

Among those providing an alternative discourse are several new TV stations such as Al Etejah, Al Maseera, Al Mayadeen, Iran’s Press TV and Asia TV. However, with the schisms running throughout the Middle East increasingly characterized by the rivalry between the Sunni monarchies in the Gulf and the Shia theocracy in Iran, charges have been made that these new outlets are nothing more than an Iranian-backed push into the Lebanese media landscape, thus further exacerbating tensions. 

The hand of Tehran?

Aletejah and Asia TV are members of the Tehran-based Islamic Radio and Television Union, Aletejah is connected to an Iraqi military outfit call the Hezbollah Brigades (not linked to the Lebanese militia-cum-political party), Almaseera is connected to the Shia Houthi rebels in Yemen and a recent report on France 24 created waves by bringing into question the independence of Al Mayadeen from the interests of the Iranian and the Syrian regimes. Asia TV’s Qanbar says that his station receives no support from Iran and asserts further, “We have never been told what to say on our station.”

The station’s output is guided by a particular Iraqi vision of the Middle East that is perhaps best encapsulated by one of their flagship shows, Qalb al Aalam, or Heart of the World. The program focuses on the historical, cultural, political and economic relationships between Turkey, Syria, Iraq and Iran. Qanbar expands on the relationship with Iran saying, “We are in the camp of the Iraqi’s. The Iraqi establishment, including Sunnis, Shias and Kurds, now all have good relations with Iran. What’s more, we have a strategic relationship with the United States. That is very disturbing to the countries of the Gulf.”


The ties that bind

The relationship between Habib and Qanbar is a long one and is entwined with their involvement with the INC and Ahmad Chalabi. Qanbar says that, “[Chalabi] is a good friend and I ask him for advice on some issues and he will give me very good advice that I will consider but I will not follow in the steps of Chalabi.” However, Qanbar has served as his long-term spokesman and his personal account on LinkedIn, the professional networking Internet site, lists his current status as “Advisor to Dr. Ahmad Chalabi.”

With the long-standing links between the three men it begs to be asked if Chalabi has any involvement in either the bank or the TV station. The Wall Street Journal recently quoted Chalabi as saying that he is considering joining the editorial board of Asia TV but Qanbar denies he has any role at the station, saying, “We get our funding from Iraq, from a group of businessmen and a group of individuals that want to counter the Gulf invasion of Iraq but Ahmad Chalabi is not one of them.” Furthermore Kaissi at Al Bilad also denies Ahmad Chalabi has any direct involvement in the bank’s affairs.

In any case as the media war in the region intensifies the Iraqi challenge to the “Gulf Invasion” has set up shop in Lebanon and looks set to stay.

1 comment
0 FacebookTwitterPinterestEmail
Finance

INSEAD’s Professor Theo Vermaele

by Executive Staff
written by Executive Staff

Professor Theo Vermaelen, the Schroders Chaired Professor of International Finance and Asset Management at the INSEAD business school discusses with Executive how the ‘small people’ caused the 2008 financial crises, Facebook’s IPO flop and Lebanon’s conservative stance on derivatives trading on the sidelines of a recent conference titled ‘Challenges of the New World Economy: Are we in a Post Globalization Era?, at the Phoenicia in Beirut.

0 comments
0 FacebookTwitterPinterestEmail