Solidere’s ups and downs
Solidere, Lebanon’s largest firm by market capitalization, will be distributing $147 million in dividends to shareholders, as approved at the Ordinary General Assembly held by the real estate company on August 1. Of this, $61 million will be paid out in cash, while the majority, $86 million, will be distributed as shares. This comes after a 19 percent drop in sales through the first half of 2011, with share prices hitting a two-year low of $15.85 in the last week of August. At the same time, Citi Investment Research & Analysis, a division of Citigroup Global Markets, valued Solidere’s target price per share at $31 in August, though it said the company’s shares were “high risk”. They also warned that they may not be able to reach the target price, due to concerns that those planning to build on plots already purchased from Solidere may have trouble securing financing and making payments, given the economic slowdown and tightening of credit in the region. The company currently owns a land bank of 1.9 million square meters, valued at about $7.5 billion based on current market prices. In an August 18 press release, Solidere unveiled their plans for Zeitouneh Square, a public garden behind the Starco building in Beirut Central District, with the company’s master plan stipulating the allocation of 50 percent of the total land area to public spaces and gardens. It plans to complete four other public squares in the near future as part of this overall plan.
Increased construction of the humble abode
While the number of construction permits increased 21.8 percent year-on-year in the first half of 2011, to 9,728, according to figures from the Order of Engineers in Beirut and Tripoli, the actual construction area authorized by permits increased by just 5 percent to 8.77 million square meters (sqm). These numbers indicate that developers are increasingly interested in smaller plots, possibly to deliver buildings with small-sized apartments (less than 250 sqm) to accommodate demand, according to a recent report by real estate advisory RAMCO. Supply indicators in Lebanon have been low through the first half of 2011. Unlike during the first half of 2010 and 2009, when cement deliveries increased 9.2 and 19.8 percent, respectively, deliveries rose just 2.9 percent in the first half of this year, in parallel with the slow progression of construction activity. Tons of cement delivered reached 2,662,000, according to figures from Banque Du Liban, Lebanon’s central bank, and in June cement deliveries increased 18.3 percent year-on-year, putting an end to a downward trend seen earlier in 2011.
Rising up amid an uprising
In an August 2 company statement, Dubai-based mall developer Majid Al Futtaim (MAF) Properties said it had started foundation work the week before on its $1 billion mixed-use project in Syria, its first in the country, which will cover 1.5 million square meters in the Yaafour district west of Damascus. The news is surprising given the uprising against President Bashar al-Assad, which has engulfed Syria and hobbled its economy since March. The first phase of the Khams Shamat project, slated for completion by 2014, will include hotels, residences, offices and commercial space. Peter Walichnowski, chief executive officer of MAF, said that the foundation work is “in preparation for the buildings’ development and the completion of works related to roads, electricity, water, sanitation and public services.” MAF has three other major projects underway in Lebanon, Egypt and the UAE.
Israel’s cynical use of housing crisis
Israel’s Ministry of Interior gave final approval on August 11 to the construction of 1,600 new units in the East Jerusalem settlement of Ramat Shlomo in the occupied West Bank, with an impending approval of 2,700 additional units. Israeli officials claimed the move came in response to protests over soaring real estate prices in Jerusalem, a claim that anti-settlement group Peace Now called a “cynical use” of the housing crisis, according to The New York Times. The settlements were initially proposed in March 2010 during a visit by US Vice President Joe Biden, an apparently deliberate affront to the Obama administration’s calls for a permanent cessation to settlement building. On August 4, 900 new homes were approved in Har Homa, a settlement just north of Bethlehem, also in the West Bank. European Union foreign policy chief Catherine Ashton condemned the settlement approvals, telling Agence France-Presse, “The European Union has repeatedly urged the government of Israel to immediately end all settlement activities in the West Bank, including in East Jerusalem. All settlement activities are illegal under international law.” The area is a point of contention between the Palestinian Authority, which views East Jerusalem as the capital of any future Palestinian state, and the Israeli government, which has insisted on a unified Jerusalem as its capital in the event of a two-state solution. It was originally annexed from Jordan after the 1967 war.
Getting real on land prices
The last quarter was the worst in the past five years for the real estate industry in Lebanon, according to property advisory firm RAMCO’s second-quarter report, citing limited land sales and especially slow sales in the luxury segment of the residential market, where the price per square meter (sqm) is $5,000 or above. The report called the continually rising price of land “worrying”, and said that realistic selling prices would not justify the cost of the plots to land buyers, thus concluding that landowners will eventually re-align their expectations with market realities and lower their prices. Demand mostly exists for smaller apartments, under 250 sqm, at prices ranging between $500,000 and $800,000 each; two projects with a built-up area of nearly 10,000 sqm each “were almost entirely sold out in a very short period of time” because they offered small-sized apartments at a fair market price. In the commercial sector, the report said that Grade A, purpose-built offices are undersupplied in Beirut and are mostly concentrated in the Beirut Central District (BCD). Estimated Rental Values (ERV) in BCD are $325 to $375 per sqm per year in the Park Avenue area, and $275 to $325 per sqm per year in the Beirut Souks area. Other business areas like Tabaris offer some high-end office buildings with ERV between $250 and $275 per sqm per year. It also noted that Verdun and Clemenceau have ERVs of $250 to $275 and $225 to $250 per sqm per year, respectively.
Bringing life to the Dead Sea
On July 28, the Jordanian government, along with the Jordanian Development Zones Company (JDZ), announced a 25-year development plan to create a touristic and commercial area within 12 zones along the northern coast of the Dead Sea. The chief executive officer of JDZ, Taha Zboun, said that the project was openly looking for both local and foreign investors (small and medium sized) to undertake development on the 59 plots up for sale, while also claiming it would create jobs for thousands of locals. Though the vision for the corniche boulevard is to create a string of hotels, malls and restaurants within the touristic zone, the project will also focus on boosting infrastructure, including an investment of $250.5 million in a desalination station. American development firm, Sasaki Associates, has been appointed to lead the consortium for master planning purposes.
$4.08 billion backlog for UAE construction giant
The UAE’s biggest construction company by market value, Arabtec, has posted a 67 percent drop in first-half net profits — hitting just less than $27 million — following a 74 percent drop in second-quarter profit as multiple project delays took their toll on the balance sheet, reported the company in a statement on August 7. Chet Riley, an analyst at Dubai’s Nomura Bank, told Gulf News in an August 8 article that payment transfers from profits also took a toll; “around 35 per cent of Arabtec’s actual profit in the second quarter was actually paid out to minority interests… We are finding revenues are slightly lower across the board due to delays in starting up new projects.” Its current backlog of projects stands at $4.08 billion, of which a third comprises a 5,000-home project to be built in a joint venture with the Saudi Bin Laden Group in Saudi Arabia. On August 17, the builder announced it had won a $76.2 million construction contract from Nakheel to build 523 homes in Dubai’s Jumeirah Village Circle, to be completed by the end of 2012.
