Controversy was heating up last month over a murky plan to allow construction of additional floors at real estate projects in exchange for higher taxes. Prime Minister Najib Mikati’s office has been circulating the plan since autumn as part of the government’s despairing efforts to find money for paying higher public sector salaries. In December, influential Druze politician Walid Joumblatt and the Higher Council for Urban Planning both voiced opposition to the proposal on grounds that it would negatively impact the environment and heritage buildings, according to The Daily Star. The so-called “Mikati floor” proposes allowing a higher development coefficient on building permits, a scheme that supposedly could generate up to $800 million annually in fiscal income through extra building permit fees. According to data cited by Bank Audi in November, the total property taxes generated in Lebanon in the first nine months of the year amounted to $439 million. Lebanese real estate experts maintain that hundreds of millions of dollars are not collected in annual fees due to corruption and inefficiency of the system for registering property transactions.
Another tower in Sursock
A new residential tower in the Sursock neighborhood of Beirut’s Ashrafieh district will be developed over the next four years, said Capstone Investment Group, a Lebanese financial firm with a real estate development arm. The company acquired the 2,400 square meters (sqm) plot in autumn of 2012 in a transaction twice over-subscribed by domestic high-net-worth investors. Apartments in the project will be around 300 sqm in size, Capstone said, without disclosing the project’s planned total built-up area. The company said an existing Ottoman-era Lebanese house will be preserved and incorporated into the overall plan.
Dubai resurrects mega plan to build a city within a city
Just when we thought it was safe to talk of Dubai as a principality of predictable projects in easily manageable sizes, the emirate unveiled drawings for a mega real estate development, the master-planned Mohammad Bin Rashid City. The package, for which no cost estimates and implementation timelines were stated at its announcement by the ruler of Dubai, Prince Mohammed Bin Rashid al-Maktoum in November, will entail a shopping mall labeled as the world’s largest, extensive hotel and leisure facilities including a theme park in collaboration with Universal Studios, a district teeming with art galleries and a section designed to foster entrepreneurship. The key numbers made available at the announcement of Mohammad Bin Rashid City were that the shopping mall would have a capacity of 80 million annual visitors and that a super-sized park in the leisure zone could accommodate 35 million visitors. Officials in the United Arab Emirates and economic stakeholders immediately praised the project. Investment bank Shuaa Capital said in a research note that the project is expected “to have a positive impact on all economic sectors [of Dubai], specifically tourism, trade and aviation.” The new city, which entails many elements of a project that had been under discussion before the 2008 crisis, will be located near Downtown Dubai and will be developed as a joint venture of state-owned Dubai Holding and Emaar Properties. Shuaa added that a portion of funds needed for the project will likely need to be sourced from debt markets, describing land and unit sales alone “unlikely to be sufficient to fund the entire project.”
Egyptian Real Estate could be looking up, couldn’t it?
New funds the International Monetary Fund has earmarked for release to Egypt, involving a $4.8 billion loan agreement, could help lift activity in the real estate sector in 2013, said a report on the website of Dubai-based publisher CPI Financial. The preliminary agreement on the IMF loan marked an important step in the return of confidence to the Egyptian economy, said Ayman Sami, the head of the Cairo office of international real estate consultancy Jones Lang Lasalle (JLL), speaking with CPI Financial. “Many investors and corporate occupiers have been postponing real estate decisions over the past 18 months. As clarity and confidence return, we expect an increase in both market activity and performance in 2013,” said Sami. A JLL review of the third quarter real estate performance in Cairo put the residential and office rental markets at close to bottoming out and called it evident that the government of President Mohammed Morsi is “pro-investment”. However, the caveat for a better real estate climate in 2013 was that the government would be able to maintain stability, JLL noted. The Egyptian government, however, last month then asked for a postponement of the IMF loan agreement — now 22 months in the making — after further mass protests in the lead up to a referendum on the country’s new constitution.
Step two for Saudi mortgage consultations
Saudi Arabia’s central bank, the Saudi Arabian Monetary Agency (SAMA), moved the kingdom’s new mortgage law a step closer to reality as it published a draft of “Implementing Regulations”, and invited comments and observations from the public on November 19. Key stipulations of the new document say that SAMA will have the sole authority to license real estate finance companies and supervise and develop the mortgage sector. Lending contracts will have to be transparent and clear, according to the draft, which covers rights and duties of mortgage lenders and borrowers in a major section of the document. In another important provision, the central bank outlined the avenue for creating a “Saudi Real Estate Refinancing Corporation” as a joint stock corporation via the kingdom’s Public Investment Fund. This entity, designed to establish a secondary market for mortgage contracts and give it stability and liquidity, will have a minimum capital of $533 million, with the option for a partial initial public offering down the road. The public discussion of the draft regulations, for which 30 days are the set period, is an integral requirement for implementation of the Saudi mortgage law that was posted on the SAMA website on August 27. Saudi developers have already been preparing for an anticipated demand boom after the mortgage law comes into effect in the foreseeable future.
Prince al-Walid settles N.Y. Plaza Hotel stake
Kingdom Holding, the investment firm owned by Saudi Prince al-Walid bin Talal, made a $33 million gain in a financial transaction under which the 105-year-old New York Plaza Hotel was acquired by Sahara India Pariwar, an Indian conglomerate. Kingdom still retains 25 percent ownership in the hotel, which overlooks Central Park, with Sahara now owning the 75 percent majority acquired for $575 million. Back in July, Sahara acquired 60 percent of the hotel from Elad Properties, an Israeli-owned real estate company run by Israeli businessman Yitzhak Tshuva, for $400 million. Hotel management company Fairmont Hotels & Resorts, in which Kingdom Holding is a shareholder, has been managing the Plaza Hotel since 1999 and will continue on doing so according to Elad. The business holdings of Prince Walid include real estate stakes in several high-profile hotels alongside stakes in hotel management companies such as Four Seasons and Moevenpick.
