DISCLAIMER
The information provided in this presentation is for general informational purposes only and readers should not construe the contents of this presentation as legal, tax, investment or other advice. All prospective investors should make their own inquiries and consult their own advisors as to legal, tax, investment, and related matters concerning an investment in the securities of Solidere and/or any related entity.
The information included in this presentation is provided - for information only.
Solidere and its agents, advisors, directors, officers, employees and shareholders make no representation or warranties, expressed or implied, as to the accuracy of such information and expressly disclaims any and all liability that may be based on such information or errors or omissions thereof.
Additionally, Solidere undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed in this presentation.
This presentation may contain forward looking statements including statements regarding intent, belief or current expectations with respect to its businesses and operations, market conditions and results of operations. Readers are cautioned not to place undue reliance on these forward looking statements. Solidere does not undertake any obligation to publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner.
AT A GLANCE p. 03
STRATEGIC HIGHLIGHTS p. 10
KEY ACTIVITIES p. 16
FINANCIAL HIGHLIGHTS p. 33
INVESTMENT DRIVERS p. 38
2
INVESTOR PRESENTATION July 2018
1. AT A GLANCE
p. 04 HIGHLIGHTS
p. 05
p. 07
p. 09
PROFILE
MASTER PLAN
MILESTONES
HIGHLIGHTS
A briefing on fundamentals and end of year achievements
PROFILE
An overview of
fact sheet and mandate
MASTER PLAN
A detailed breakdown of inventory by type and status and a map of the master plan
A timeline of the
milestones
MILESTONES
3
BY END OF 2017
Over $1.2 Billion in declared dividends since inception Cash & receivables of $428 Million against $529 Million of bank debt Low leverage (28% of Interest Bearing Debt to Equity) $6.2 Billion estimated value of remaining land bank and real estate properties Sustainable operations despite the absence of land sales, leading to $40 Million in net operational revenues About $109 Million provisions and write-offs taken in response to an unfavorable local economic environment
FUNDAMENTALS
Prime land bank Recurring income through the development of a rental portfolio
Sizeable portfolio of receivables Debt kept below 35% of assets book value since inception
4
Highlights
Legal Form
Lebanese Public Joint Stock Company
Listing
BSE
De-listed from LSE as of June 29, 2017
Paid-in Capital
$1.65B
Market Cap
$1.32B (as of December 31st, 2017)
Associates
Solidere International Limited 39.11%
BCD Cinemas SAL 40%
Joint Venture
BWD - 50%
Management Company
SMS - 100%
Maximum Shareholding limit per entity is 10%
Profile 86.9%
LEBANON
6.1% MENA
(excluding Lebanon)
0.7% EUROPE
6.2% THE AMERICAS
0.1% OTHER
60.06% 31.82%
8.12%
Lebanese RetailLebanese Banks & Fiduciary AccountsLebanese Institutions
Breakdown of Type of Shareholders in Lebanon (As of December 31st, 2017)
LEBANON
5
Shareholders by Region
A first of a kind in the region a wholly private company entrusted with rebuilding a city center
To Reconstruct & Develop a Land Bank of Prime Location
To Ensure the Preservation of City Heritage
To Reclaim from the Sea & Develop Land into a Waterfront District with 2 Marinas
Prime geographic location with lines of sight to both sea & mountains
Sate-of-the-art infrastructure
Fiber Optic Broadband Connectivity
Continuous Public Domain Maintenance
Profile (2) o
f tota
l pro
jec
t: pu
blic
&
lan
dsc
ap
ed
op
en
spa
ce
50%
6
Master Plan 49.8%
27.7%
8.5%
3.2%
6.3% 3.8%
0.7%
Master Plan BUA Guidelines
Residential
Offices
Mixed-Use
Retail
Hotels/Furnished Apts.
Government/Cultural
Religious
Guidelines are adaptive to market and town planning needs
47.4%
23.0%
11.9%
4.9%
6.4% 5.4% 1.1%
BUA Breakdown (As of Dec 2017)
Residential
Offices
Mixed-Use
Retail
Hotels/Furnished Apts.
Government/Cultural
Religious
4.69 M Allowable
1.72 M Developed
0.25 M Under
Construction/ Restoration
1.01 M Other Phases of Development
1.71 M Remaining BUA
Sqm BUA End of 2017
7
As per its mandate, Solidere has an allowable land bank of 4.69 M sq m BUA geographically limited to Beirut City Center.
It controls the developments in accordance with the master plan guidelines approved by the Council of Ministers
8
Master Plan (2) 2.46 M
Original BUA Traditional
1.57 M
Original BUA Waterfront
0.66 M Exempted & Recuperated
BUA Available Land Bank
As of December 2017
Total surface area is 1.89 M sqm including 0.95 M sqm public domain
FUTURE
Milestones
9
Infra & R.E. Developments
Corporate Actions
2029
Dividend Distribution
• Department Store to be Delivered to Operator
• Expected Completion of Eastern Marina Works
• Waterfront Area Infra. Completed
• Eastern Marina Works Started
• LSE Delisting & Termination of GDR Agreement with BNY Mellon
2017 2018 2019 2020
• End of Co. Lifetime as per Current Mandate
Beginning of waterfront park landscaping expected within this period
2021 2022 2023 2024 2025
• Western Marina
berth
• Restoration of Most Buildings Completed
2014 2008 2006 2003 1998 1999 2000 1995
• L-Building North Souks
2015 2016 2005 1994 1996 1997 2001 2002 2004 2013 2007 2009 2010 2011 2012
• Reclamation Completed
• South Souks
• Inception • BHC
Inception
• Beirut Marina 400 Car-Park
• Zaitunay Bay
• Cineplex North Souks
• Extension of Co. Lifetime to 35 Years
• Stock Split 10:1
• Embassy Complex
• Sea Front Defense Completed
• BCD Cinemas SAL
• Solidere International Incorporation
• BWD-JV
• Saifi Village
• BSE Listing
• LSE Listing
• UN House
• Traditional Area Infra. Completed
• Cosmocity North
Souks
• Yacht Club
• BHC Closure Started
2. STRATEGIC HIGHLIGHTS
p. 11 THE BUSINESS
MODEL
p. 12
p. 14
REVENUE STREAMS
MACRO CHALLENGES
THE BUSINESS MODEL
A description of the different components behind Solidere business model
REVENUE STREAMS
An explanation of
different sources of revenues
MACRO CHALLENGES
An abstract on macro challenges and their impact on company strategy
10
ADAPTATION PLAN
A briefing on Company approach to adapt to current environment
p. 15 ADAPTATION
PLAN
The Business Model
Cost Structure
• Cost of land • Cost of infrastructure • Cost of development • G&A
Value Propositions
• Vibrant City Center
• Historical, cultural, artistic, environment-friendly
• Residential sector, retail shops, and offices welcoming local and international headquarters
• Quality developments
Revenue Streams
• Land and R.E. sales • Rental portfolio • Rendered services • Associates
Channels/
Customers
• A pioneer in the
development and reconstruction of Beirut City Center
• Serving the Lebanese
community at large, real estate developers/architects, tenants, corporates
Partners/Activities
/Resources
• Structured within a mandate with the state
• Land bank in a unique location
• Solid experience of expert engineers and architects
• Collaborating with developers and architects
1994 Year of Inception
2029
35
Year of Termination in case of no
extension
Current Co. Lifetime
in Years
11
Revenue Streams
55% Land Sales Revenue
32% Gross Rental
Revenues
6% Net Revenues from
Associates
5% Gross Revenues from Rendered
Services
Revenues from Land Sales
Revenues from Rendered Services
Revenues from Associates
Revenues from R.E. Sales
Revenues from Rented Properties
2013-2017 Cumulative Breakdown
Land sales represent the main and largest potential of revenue but have an unpredictable fluctuating pattern especially given the instability of the country
Rental revenue has been growing and currently serves as a cushion to cover yearly operating expenses especially in periods of low land sales. It includes: - Real estate portfolio
- Land leases for temporary activities on the waterfront
- Marina - Parkings
Rendered services are essential to providing a city-like quality of life and have an indirect added value. It includes: - Property Management
- Broadband network services
Associates, more specifically Solidere International, are promising sources of revenues as their projects come into completion and their value is unlocked
12
2% Net R.E. Sales
Revenue
Revenue Streams (2)
Rental revenues have shown stability, earning in the range of $ 55 - $ 60 million per year since 2013
While land sales represent about 90% of total revenues in most of the earlier years of the life of the Company, their contribution have been decreasing and was null in 2017. Investors and developers are in a cautious mode causing land sales to take longer to materialize.
57%
65%
22%
73%
0%
3%
2%
3%
1%
5%
33%
23%
46%
20%
82%
0%
7%
23%
3%
3%
7%
3%
6%
3%
10%
$-
$50
$100
$150
$200
$250
$300
2013 2014 2015 2016 2017
Mill
ion
s
Gross Revenues from Rendered Services Net Revenues from Associates
Gross Rental Revenues Net R.E. Sales Revenue
Land Sales Revenue
13
$ - M
$60 M
$2 M
$8 M
FY 2017
Land Sales Revenue
Gross Rental Revenues
Net Revenues from Associates
Gross Revenues from Rendered
Services
Share result of associates, a non-operating revenue, have been included in the analysis as they are seen as a potential source of revenue in the future
$4 M Net R.E. Sales
Revenue
14
New regulatory requirements
Subdued investment sentiment
Major economic downturn Geopolitical
upheaval & domestic tension
• Streamlining • Cost containment • Delay of R.E. projects • Focus on land sales
COMPANY STRATEGY
The Company is reviewing its strategy to
adapt to existing challenges
Macro Challenges
15
Streamlining
• Downsizing to a more efficient organizational structure as a response to a downturn market
• Improving systems and processes
Cost containment
• Minimize Capex: real estate projects on hold
• Minimize G&A: lower G&A expected to materialize when staff reduction process is complete
Delay of previously planned real estate projects
• Previously planned real estate projects put on hold
• Current active projects: Department store Eastern Marina - infrastructure
Focus on land sales
• Applying prices that meet market conditions: prices vary with location, payment terms, client credit risk, local market
• Flexible payment terms
Adaptation Plan
INFRASTRUCTURE
3. KEY ACTIVITIES
p. 17 INFRASTRUCTURE
p. 18
p. 19
p. 24
LAND SALES
REAL ESTATE DEVELOPMENT
ASSOCIATES/ SUBSIDIARIES
An update of the
and projected infrastructure cost along with its progress status
REAL ESTATE DEVELOPMENT
An overview on completed and planned real estate projects with a breakdown of revenues throughout the years
A list of the
associates/ subsidiaries with a detailed analysis and focus on Solidere International growth potential, objectives and projects
ASSOCIATES/ SUBSIDIARIES
16
LAND SALES
A snapshot of the
land sales and its depleting land inventory
Infrastructure
Solidere was granted development rights in the Waterfront District in exchange for putting in a complete infrastructure within the BCD
Infrastructure in both traditional and reclaimed part is already fully complete
While the 78,000 sq m Waterfront City Park is scheduled for a later delivery date, works on the Eastern Marina started in 2017
0
200
400
600
800
1,000
1994 1997 2000 2003 2006 2009 2012 2015
US
D
Mill
ion
s
Traditional & Reclaimed Areas Infrastructure Cost
Cumulative Reclaimed Infrastructure Cost
Cumulative Traditional Infrastructure Cost
$253 M Cum. Traditional
Infra Cost
$663 M Cum. Waterfront
Infra Cost
$916 M Total Cum. Infra Cost
17
Yearly average for land sales contracted from 1995 to 2017 is 90K sq m BUA. However, nowadays, we are witnessing a lower investment appetite.
0
100,000
200,000
300,000
400,000
1994 1997 2000 2003 2006 2009 2012 2015
Yearly Land Sales
Land sales contracted(sqm BUA)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
1994 1997 2000 2003 2006 2009 2012 2015
Depleting local inventory
Remaining landinventory (sqm BUA)
Land Sales
2.08 M Cumulative
Land & R.E. Sold
0.23 M Real Estate
Owned
1.71 M Land Available
for Sale
18
Given the size of land sale transactions, the Company offers payment facilities to developers:
- A minimum of 25% of the sale amount is paid upfront - Up to 75% is financed through promissory notes
over 5 years with up to 3 years of grace period
Sqm BUA As of end 2017
XX% - USD
XX% - SQM
Residential
XX% - USD
XX% - SQM
Offices
XX% - USD
XX% - SQM
Retail
Includes one time backed revenue from UN House rental
FY 2016
As of end 2017, total leasable space of real estate rental portfolio stands at about 160K sq m
19
0
10
20
30
40
50
60
70
1997 2000 2003 2006 2009 2012 2015
Mill
ion
s
Revenues from rented properties
The development of real estate projects ensures sustainability of income and adds value to the area
magnet projects: - Beirut Souks - UN House - Embassy Complex - Saifi Village
Given current macro challenges, the Company is witnessing a deceleration/stabilization of rental income growth rate
Real Estate Development
Real Estate Development (2)
BEIRUT SOUKS
South Beirut Souks consists of about 54K m2 of
leasable floor with about 200 outlets
A state of the art architecture, a blend of
innovative contemporary design and historic
preservation
A connecting bond between the pre-existing
city center and the newly created waterfront
A semi open-air structure with consistent shop
front design specifications and guidelines for a
harmonious blend
A regional destination for a redefined shopping
and leisure experience
20
132 Number of
Rented Shops
16 Number of
Rented Offices
1 Fitness Center
23 Number of
Rented Cafes & Restaurants
Real Estate Development (3)
North Beirut Souks - cinema &
entertainment complex using cutting edge
technology with special visuals and
exceptional vibrancy consists of:
- Cinemacity 12K sq m with 12 regular
theaters and 2 VIP screening rooms
delivered end 2013
- Retail space six ground floor
boutiques with an area of 856 sq m
delivered in 2014
- Food Court hosting four leading
restaurants around a common seating
area and circular ceiling, which evokes a
giant carousel delivered in 2014
- Cosmocity a family entertainment
center, hub for the latest in gaming
technology with an area of 1,470 sq m
delivered in 2015
- L-shaped building accommodating
three restaurants with an area of 3,722
sq m delivered in 2016
22
684,972 Number of
Cinema entries FY 2017
14 Number of
Theaters
2,079 Number of Seats
770 Food Court Area
in SQM Department store designed by the late
renowned architect Zaha Hadid
expected delivery in 2019
Associates/ Subsidiaries
Through partnering with associates and exchanging expertise, Solidere enters into attractive projects to diversify its revenues while leveraging its know-how
Key partnerships:
- Solidere International (SI)
- Beirut Waterfront Development (BWD)
- BCD Cinemas SAL
24
39.11% Solidere
International
50%
Beirut Waterfront Development
40% BCD Cinemas
SAL
Associates - BWD
An all year destination at the heart of Beirut ZAITUNAY BAY
Private Space
Quayside strip - accessible through seven pedestrian access points with underground public parking facilities
Restaurants and cafés along the marina, with roofs at corniche level forming a continuation to the corniche promenade
Exclusive retail outlets
Club & Furnished and Serviced Apartments building
39 apartments for sale remaining (of which 9 are leased as suites) out of 54 in total
Yacht club
Public Space
Beautifully landscaped public areas featuring
A boardwalk along the length and adjacent to the Western Marina
50-50 J.V. Solidere/
Stow
14,000 Sq m BUA
Quayside Strip
6,000 Sq m BUA
Club & Apartments
25
Associates - SI
Place & date of incorporation
DIFC, 7 June 2007
Legal Form
Company limited by shares
Paid-in-Capital
$700 million raised through a private
placement offering
Solidere Share Ownership
39.11%
Management Control
Retained by Solidere
investment at cost
$238 million (as of end 2017)
current share at book
$390 million (as of end 2017)
SI creates a growth potential for Solidere through: increasing income from rendered services future dividend income
Business Activities
Master Development
Real Estate Development
Land Development
Development Management
Property Management
Value-Added Services
Scope of existing projects
United Arab Emirates
The Kingdom of Saudi Arabia
Lebanon
27
54.02% Lebanese
Individuals & Institutions
17.11% MENA Institutions
14.66% International
Funds & Institutions
www.solidereinternational.com
3.89% MENA
Individuals
Shareholders Breakdown
Al Zorah Development Ajman, UAE www.alzorah.ae
A REFINED COASTAL LIVING DESTINATION THAT CAPITALIZES
ON ITS GEOGRAPHIC POSITION AND RICH EXISTING
ECOSYSTEM
Tourist destination & mixed use developments 30 min drive
from Dubai airport
39% partnership with Government of Ajman & local
developers
About 5.4 million sq m of lush coastal land
Al Zorah projects delivered include:
Golf Club comprised of a golf course and a golf club house.
Golf course inaugurated in 2015, crafted by Nicklaus Design
and managed by Troon Golf
Golf Villas Phase I an exclusive collection of villas and
townhouses
Hotels and Resorts Oberoi Hotel already operational
Marinas Marina 1 opened in 2017
Various activities through land leases
28
Associates - SI
The Oberoi
29
Associates - SI
Qortuba Oasis Riyadh , KSA www.wadiqortuba.com
A LIVABLE AND SUSTAINABLE DEVELOPMENT
Residential compound for expats with retail operations
to the north east of Riyadh
85% ownership
270,350 sq m of land area
Adjacent commercial strip of 30,000 sq m BUA
30
Golden Tower Jeddah, KSA www.goldentower.com.sa
A UNIQUE LIVING EXPERIENCE IN APARTMENTS WITH
REFINED INTERIORS, FLEXIBLE SPACE CONFIGURATION, AND
A WIDE VARIETY OF LAYOUTS
50% Joint Venture with local partner
48 floors, 71 apartments, 2000 sq m landscaped gardens
Unit sizes range between 315 sq m to 813 sq m
Advanced stage of construction Associates - SI
Park Lane Riyadh, KSA
AN EXCLUSIVE RESIDENTIAL COMMUNITY OF 30 VILLAS IN
THE UPSCALE DISTRICT OF HITTIN
Park Lane targets young Saudi executives seeking
affordable modern luxury
Land area of 14,811 sq m
22 courtyard villas, 8 grand villas
Golden Tower
Rayat Obhur Jeddah, KSA
A PRIME RESIDENTIAL NEIGHBORHOOD IN EMERGING OBHUR
50% ownership in a real estate fund
500,000 sq m total land area
212,000 sq m Residential
108,000 sq m Commercial
180,000 sq m Public Domain 31
Al Malga Riyadh, KSA
A DISTINCT CONTEMPORARY COMMUNITY EMPHASIZING
CALM AND TRANQUILITY AND AMPLE OPPORTUNITIES FOR
INDOOR-OUTDOOR LIVING
50% ownership in a real estate fund
1 million sq m total land area
398,000 sq m Residential
193,000 sq m Commercial
409,000 sq m Public Domain
LAND DEVELOPMENT PROJECTS
Execution of infrastructure
Land sales for residential and retail use
Associates - SI
Al Malga
Uptown Park Hazmieh, Lebanon
A UNIFIED SCHEME TO ADD VALUE AND PRESERVE HARMONY
Mixed use development to the south east of Beirut
35% partnership with local investors
90,921 sq m of land area in addition to 15,826 sq m of
adjacent land for sale
625 sq m to 10,000 sq m size of plots for development
32
Associates - SI
Uptown Park
Tilal Obhur Jeddah, KSA
A SEMI-GATED COMMUNITY IN A BEAUTIFUL LANDSCAPE
An upscale residential neighborhood for young Saudi
professionals
56% ownership in a real estate fund
184,500 sq m total land area
86,000 sq m Residential
27,100 sq m Commercial
71,400 sq m Public Domain
4. FINANCIAL HIGHLIGHTS
p. 34 CONSOLIDATED
EXTRACTS
p. 36 SELECTED RATIOS
CONSOLIDATED EXTRACTS
A comparative overview on the
consolidated financial status
SELECTED RATIOS
An overview on historical key financial ratios
NAV CALCULATION
An internal analysis
net asset value
A snapshot on
historical stock performance
STOCK PERFORMANCE
p. 37
p. 38
NAV CALCULATION
STOCK PERFORMANCE
33
Consolidated Extracts Consolidated Balance Sheet Extracts
2017 USD M
2016 USD M
2015 USD M
2014 USD M
2013 USD M
Cash & bank balances 40 112 136 159 177
Receivables & asset-backed securities
387 555 536 625 516
All other assets 2,285* 2,211 2,246 2,180 2,181
Total Assets 2, 712 2, 878 2,918 2,964 2,874
Current bank facilities 231 310 556 548 553
Long term bank debt 298 299 132 110 133
Other liabilities 283 254 272 241 237
Total Equity 1,900 2,016 1,957 2,064 1,951
Equity 2,712 2,878 2,918 2,964 2,874
In 2016, the Company started settling part of its short term bank debt and converted a major part to long term as a measure to balance and spread short term maturities over a longer period, with no major interest rate increases.
1.16 B in land inventory and $0.59 B of investment properties that are booked at cost. Market values are estimated at $4.9 B and $1.2 B as of end 2017 respectively. 34
Consolidated Extracts (2)
Consolidated Income Statement Extracts
2017 USD M
2016 USD M
2015 USD M
2014 USD M
2013 USD M
Gross revenue 67 266 91 239 162
Gross margin 15.05% 70.87% 60.64% 75.56% 69.51%
G&A (35) (35) (34) (34) (31)
Operating Margin 7.02% 64.24% 37.65% 66.00% 56.07%
Provisions and write offs* (109)** (30) (118)** (7) (7)
Net interest income (expense) (12) (17) (15) (14) (13)
Share result (associates & JVs) 2 10 28 19 0.3
EBT (121) 93 (88) 131 48
Net Profit (116) 75 (87) 114 42
35
* Provisions are taken mainly for land receivable portfolio balances; as well as for tax assessments, among others
** In 2015, a provision of about $88 M was exceptionally taken for the cancellation of two sales contracts. In 2017 provision for land sales receivable includes provision taken for discounts that would be given to clients against early maturities settlements.
Selected Ratios
2017 2016 2015 2014 2013
EPS [USD] (0.73) 0.46 -0.53 0.71 0.26
Dividends Payout Ratio - - NA 46.50% -
DPS - - 0.22 0.33 -
P/NAV 0.22 0.27 0.25 0.24 0.22
P/BV 0.69 0.85 0.92 0.88 0.91
ROAE NA 3.79% NA 5.66% 2.21%
ROAA NA 2.60% NA 3.90% 1.49%
Debt Indicators
Capitalization Ratio (Interest Bearing Debt to Capital Ratio)
21.78% 23.18% 26.02% 24.19% 26.02%
LT Debt to Equity Ratio 15.69% 14.81% 6.76% 5.33% 6.83%
Total Liabilities to Equity Ratio 42.73% 42.77% 49.04% 43.57% 47.30%
Total Liabilities to Assets Ratio 29.94% 29.96% 32.91% 30.35% 32.11%
36
NAV Calculation
$ Billion
Land Inventory 1.71 million sq m BUA 4.76
Real Estate Portfolio
Existing Buildings 0.53
Beirut Souks (including land plot for Department Store) 0.87
Total Real Estate Portfolio 1.40
Cash and bank balances 0.03
Prepayments and other debit balances 0.06
Receivables and asset-backed securities 0.39
Investment in Associates and Joint Ventures 0.29
Liabilities -0.81
NET ASSET VALUE 6.11
Number of shares outstanding (as of July 31st, 2018) NAV/share (July 31st, 2018) July 31st, 2018 closing price
165 million
$ 37.06 $ 7.32
This analysis needs to be adjusted for the NPV related to the timing of sales and cash inflow from sales backlog. In addition, the valuation of SI in this table is based only on
underlying projects at present time
37
June-08 $37.17
June-17 $7.74
$-
$5
$10
$15
$20
$25
$30
$35
$40
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
End of month SOL_A closing
Stock Performance
Since 2007, SOL_A registered a daily-closing record high of $39.80 (July 7, 2008), its all time high, and a daily-closing record low of $7.70 (June 30, 2017), noting its all time low was in Sep 2001 and again in Oct 2002, at $4.00
38
5. INVESTMENT DRIVERS
MACRO
A look at the
economic health through key indicators
REAL ESTATE MARKET
A detailed summary of the Lebanese real estate market performance
MICRO
key investment drivers
Highlights on the key opportunities and risks facing the Company
OPPORTUNITIES & RISKS
p. 40 MACRO
p. 41
p. 43
p. 44
REAL ESTATE MARKET
MICRO
OPPORTUNITIES & RISKS
39
Macro
40
- Local community strained by the Syrian refugees representing about ¼ of the Lebanese population --> resolution of Syrian conflict would return Lebanon GDP to its potential growth of 4%, as per IMF
- Oil & gas sector present a genuine long-term opportunity for the local economy as exploration and production licenses were finally awarded mid December 2017
- Presidential election at end of 2017 and prime minister appointment along with parliamentary
elections in Q2 2018 potentially leading to: - - needed reforms and adjustments
1.2%
2.2%
1.0% 1.5%
6.7% 6.8%
1.5%
3.2% 2.3%
1.7%
7.3%
6.5%
0%
2%
4%
6%
8%
Lebanon MENA Brazil Russia India China
Real GDP Growth
2017 2018e
19.44 18.60
15.60
27.83
7.18
16.66
19.99 19.24
16.20
28.96
7.78
18.07
0
5
10
15
20
25
30
35
Lebanon MENA Brazil Russia India China
USD
Th
ou
san
ds
Per Capita GDP (PPP)
2017 2018
Gold Reserves Billion USD
134.75% Net Debt/GDP
1.2% Real GDP Growth
-1.38 Trade Balance
Billion USD
18.03
Lebanon Dec 2017
Source: IMF
Source: IMF
0%
5%
10%
15%
20%
25%
0
2
3
5
6
8
9
11
12
14
15
1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17
Tho
usa
nd
s
Housing Loans
Housing Loans % of Total Credit
Investment-friendly environment Property tax amongst the lowest in the region Sound legal framework with equal rights to both local and foreign investors Non-speculative sustainable demand
Real Estate Market
Credit Facilities
Bank lending to R.E. sector is well regulated by the Lebanese Central Bank (thus preventing a R.E. bubble)
Local developers mostly rely on their own equity and off-plan sales more than on debt financing
A good chunk of presale funds adds to this financing especially in upper end of the R.E. market
Source: Central Bank
41
Demand for R.E. mirrored by the value & number of R.E. sales transactions:
CAGR (2013-2017)
YoY Growth
2017/2016
Q1 2018/ Q1 2017 Growth
Number of R.E. Sales Transactions
1.53% 14.46% -16.98%
Value of R.E. Sales Transactions
3.40% 18.48% -14.03%
The value of R.E. sales transactions picked up in 2016 and increases its upward trend in 2017, following the significant drop in 2015
7,000
8,000
9,000
10,000
50,000
60,000
70,000
80,000
2013 2014 2015 2016 2017
Va
lue
($
M)
Number of R.E. sales transactions
Value of R.E. sales transactions ($ Mn)
Real Estate Market (2)
Investment in the R.E. market reflected by cement deliveries, the coincident indicator for construction activities
The negative growth of construction area permits (a leading construction indicator) in Q1 2018 reflects a potential slowdown in the future activity of real estate projects
CAGR (2013-2017)
YoY Growth
2017/2016
Q1 2018/ Q1 2017 Growth
Construction Area Permits
-2.39% -4.12% -14.95%
Cement Deliveries -3.06% 2.69% -1.37%
4.0
4.5
5.0
5.5
6.0
-
5
10
15
2013 2014 2015 2016 2017
CA
P (
M
SQ
M)
Construction area permits (Mn sqm) Cement deliveries (Mn Tons)
Based on latest publicly available data 42
Prime land bank in the heart of the capital
Highly competitive as one of very few proven city makers
Strong Brand Name
Healthy Balance Sheet
Sizeable receivables portfolio
Sustainable growth potential through diversifying revenue streams
Relative minimal cash outlays foreseen to finish the infrastructure
Commitment to dividend distributions subject to level of profits and liquidity
Flexible and sound financial and operational strategies
Adaptability to fluctuating market conditions and economic climate
43
Micro
Opportunities & Risks
Opportunities:
Anticipated appetite to buy lots in reclaimed area now that infra works are completed
High value of remaining land bank
Minimal remaining capex
SI potential
Risks:
Geopolitical risk
Local economic downturn
Local instability
Illiquid stock market
44