Lebanon Real Estate Newsletter Vol. 3, Issue 7 - July, 2007

BEIRUT: Lebanon's largest construction and development company defended its regional expansion drive against criticism from a coalition of shareholders who originally owned property in downtown Beirut. Solidere Lebanon dismissed allegations made by the "committee of downtown property owners" last week that the management violated corporate by-laws by establishing Solidere International (SI) in June, insisting their accusations "lack evidence, are without legal basis, and have no relation to reality."
"This strategy comes at a time when the real estate and economy in the country is declining due to instability," said a statement released Friday by Solidere's press officer, Nabil Rached.
"The decision to expand abroad absolutely does not mean [Solidere Lebanon] will abandon its projects in central Beirut especially when local operations are what gave Solidere access to foreign markets ... In contrast to what they claimed this expansion of activities abroad ... will use Lebanese assets to strengthen [Solidere's] presence in international markets and its balance sheet," he added.
In November an amendment to company regulations allowing Solidere to operate outside of Lebanon was approved at an extraordinary meeting of its board of directors, attended by investors controlling 80 percent of the company capital.
Solidere Lebanon's purchase of 11 million shares of SI when it registered in the Dubai Financial Center last month financed 37.2 percent of the international branch's $700 million share capital.
Original downtown property owners - who received stock in Solidere in exchange for their land when the company was founded by the late former Premier Rafik Hariri to reconstruct the battered center of the capital after the Civil War - claim local shareholders will now be exposed to commercial risks stemming from SI's regional projects.
But Rached insisted that SI is a "different company," with a "separate identity from Solidere Lebanon."
"There is no legal connection that could make Solidere Leba-non face bankruptcy," he said.
Indeed additional revenues from SI operations will be positively reflected in financial
returns and consequently on the stockholders themselves, Rached contended.
According to the managing director of the Beirut real estate development firm, the Hayek Group, the committee of original property owners-cum-Solidere shareholders are not interested in revenues.
"The problem is they come from two opposing perspectives, but each of them is right. Property owners should know exactly what Solidere's operations are ... they were not consulted on board's vote in November because this is the legal structure of Solidere. On the other hand no one could ever blame Solidere for expanding overseas due to the stagnation in this country," Abdullah Hayek told The Daily Star Monday.
Hayek said Solidere's management should use the experience gained from the reconstruction of downtown to break into Gulf markets and win development contracts in other countries that have gone through "similar experiences" as Lebanon, but urged the board to keep all shareholders in the loop.
"But in the end if they [committee of property owners] are not interested in any gains, they will oppose anything," he concluded. "If I told you 'I'm going to give you an apartment for free' and you don't like the apartment, you won't take it."

 

By Lysandra Ohrstrom
Daily Star staff