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French Version

Solidere quietly pursues strategy of land sales (Daily Star)

Most holdings will probably be sold in 15 years’ time
By selling blocks of property to third-party developers, the company is able to spread risk and focus on its core investments

Solidere will sell most of the stock of land it currently holds in only 14 to 15 years, according to Ramco Real Estate Advisers.

“Although of volatile nature, land sales by Solidere have produced a pattern indicating an average yearly sale of 150,000 square meters,” said the latest report released by the group this week. Solidere’s original plan is to directly develop 35 percent of all of Beirut Central District (BCD), while the rest would be done either via partnership or through third-party developers.

According to Ramco, the company in charge of reconstructing the BCD still owns around 3.2 million square meters of land for development purposes. The process of disposing of the available stock of land “could be helped by controlled block sales to third-party developers that will be required to work within pre-set urban and architectural guidelines.”

Such a strategy will be tested when Solidere sells the Saifi II project and some other projects in the Wadi Abu Jamil area to third-party developers, rather than take the risk and invest the money to develop it itself. The cost of Saifi II is estimated at $30 million, while the Wadi Abu Jamil developments are expected to cost more than $125 million. “The proposition could be attractive, as 80 percent of the projects have already received strong interest from potential buyers,” said Ramco.

The approach taken by Solidere could prove to be very rewarding since not only would BCD develop more rapidly by attracting more investors, but Solidere would also liquidate its land stock without having to invest huge sums of money, thus generating profits. If the company chooses the option of coordinating with a third-party to develop a project, then the need to raise money is largely reduced ­ another advantage to Solidere. “Solidere seems to be open to the idea of forming a joint venture partnership with investors if and when it can maintain a controlling majority. However, the company will always maintain a pragmatic and creative approach to project financing, including the option of going it alone on some other projects,” said the report.

Such one project is the Souks, on which construction is expected to resume by June 2004 when the final permits would be handed out. The $160 million project is expected “to generate $50 million from the sale of the jewelers’ market and around $25 million a year in rental income from retail units,” said the report.

In any case, Solidere’s future seems to be very bright. The company has already completed its main infrastructure works and projects ­ which required heavy investments with little return. The only works remaining will be money generating, since the new land extension will increase Solidere’s land portfolio; the Souks and some parcels of land will be partly sold and partly retained as income generating assets. “As a result, Solidere is now in a good position to pay off more of its debt until attaining a desirable gearing ratio, improving its cash flows and starting to pay its shareholders cash dividends,” said Ramco.

The general manager of Solidere, Mounir Douaidy, told The Daily Star in November 2003 that the company would “definitely generate profits” for the 2003 financial year. However, Douaidy also indicated that the 2003 profits will not be as high as 2002.

Beirut 16-02-2004
Tark El Zein
The Daily Star

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