Investors return to Lebanon

Marketplace Staff Sep 27, 2006

KAI RYSSDAL: President Bush wants you to invest in Lebanon. ‘Least, that’s what he said earlier this week. The actual phrase was that the U.S. wants Lebanon “not only to recover but to flourish.” The President put taxpayers’ money where his mouth is. He promised $230 million in reconstruction assistance. And he urged American companies to get back into Lebanon as soon as possible. They’ve been there before. Beirut had billions of dollars in U.S. capital flowing in before the bombing started this summer. Ben Gilbert reports now on what it might take to get them to go back.

BEN GILBERT: Investing in a recently pacified warzone may not be your idea of smart business, but to Salah Al-Mayhyal, it was an opportunity.

SALAH AL-MAYHYAL:“I’m serious. There is no joke about it. Grab it now because prices will shoot up very soon.

Al Mayhyl is the Kuwaiti Manager of Levant Holdings, which is already managing one of the largest projects in Beirut at the moment: a $1.3 billion luxury apartment block, hotel and mall right in the city center on Beirut’s Martyr’s Square. Before the war, property retail prices were topping out at around $600 and $700 per square-foot. They’re down to $300 and $400 per square-foot now. And Mayhyl was back in town last week, looking for deals.

AL-MAYHYAL:“Lebanon is still very attractive for investors. So, we are studying other projects, and even bigger than this project that we are developing now. So we’re definitely very bullish toward investing in Lebanon.”

When the war began in July, the hundreds of construction projects fueled by oil-rich Gulf investors stopped. The jackhammers fell silent, and the largely Syrian construction crews fled home. Levant Holdings returned millions of dollars in cash to its shareholders as a precaution. But now, Mayhyl says the shareholders are calling him, asking when the project will begin again. He says the investors will meet in October to make a final decision on the project, but he has no doubt it will continue.

AL-MAYHYAL:“Even after what’s happening here we are still very optimistic. The peace has to come, and what happened between the Israelis and the latest conflict is not going to happen again.”

Most project managers interviewed for this story are very optimistic about the future. It’s their job. But despite his positive attitude, Mayhayl’s development is still on hold. And so are 10 of the largest projects in Beirut’s downtown area. Many investors are understandably nervous about Lebanon’s instability.

Michael Dunn is an investment advisor in Lebanon. His firm was about to finalize the contract on a $350 million project just south of the capital, anchored by a well-known European retail company and funded by a Saudi firm. If you drive by it, he says you’ll see . . .

MICHAEL DUNN: Absolutely nothing. That’s what worries me. It was all due for signature in the last week of July and I’m afraid it’s probably not going to happen in the next six months. It’s probably not going to happen in the next year. But we haven’t given up and I’ll be over to Kuwait to see what we can salvage in the next two weeks.”

Dunn expects most of his European and American clients will wait for the dust to settle before moving forward on projects.

DUNN: “The Arab investors, on the other hand, are slightly more used to these type of events, and already we are working with people who are looking to invest in this country.”

Economist Marwan Iskander says there’s hope in the fact that many companies already have a major stake in completing the projects they’ve started:

MARWAN ISKANDER:“You have to take into consideration that these are projects where the properties have been bought, so a major part of the investment has been already dispensed with. And you don’t go into a final stage, so to speak, of a property you have bought for tens of millions of dollars.”

Iskander points out that no company has cancelled a project yet. And the Four Seasons, the Hilton and other hundred-million-dollar projects by international firms continue as scheduled.

Even as Lebanon’s stability remains in question, many investors are still gunning to create the biggest shopping district in the Middle East.

In Beirut, I’m Ben Gilbert for Marketplace.

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