THE HIGHER GRADE

Lebanon 2012 | REAL ESTATE & CONSTRUCTION | INTERVIEW

TBY talks to Houssam Batal, CEO of Premium Projects, on house prices, housing loans, and the company's projects.

Houssam Batal
BIOGRAPHY
With a background in business administration and finance, Houssam Batal began his professional career in real estate investment and later founded Premium Projects.

What is the state of the real estate sector in Lebanon?

It's maturing and developing. We're reaching a high sophistication level in terms of clients. They like and appreciate our products, because we bring them only the best projects. We prefer quality projects rather than bigger, riskier ones. The Lebanese are very informed buyers.

There's been a 25% increase in prices from 2006 to 2008. Do you see growth slowing down in the sector?

That 25% figure is deceptive, because that's only limited to very unique properties. After 2008, the growth slowed by 15%, and that should decrease further. I think there will be a stabilization of prices. Real estate is a science; there is a growth cycle. I think the cycle is reaching its peak. In Lebanon the challenging part is that it's not a controlled or regular cycle. Here it's like a wave with different fluctuations. There are so many variables to factor in, like the political situation, the effect of the diaspora, regional dynamics, the global economy, and so on. The diaspora is a big factor. There are millions of Lebanese with serious funds throughout the world, and a lot of them invest in Lebanon. In fact, they were investing even during the rise in prices in the real estate market. How much they influence things is not known, however, and we have no reliable figures on that.

What projects do you specialize in?

We specialize in high-end projects. We focus on unique, grade-A locations, distinguished, and luxury architecture, at relatively affordable prices. We don't try to follow market trends—we stay focused on luxury.

“There are millions of Lebanese with serious funds throughout the world, and a lot of them invest in Lebanon."

How does the company define grade-A projects?

They are defined by location, accessibility, visibility, and the surroundings. It should be a developed neighborhood. That's where we try to locate our projects after vigorous market analysis. I do a lot of research and analysis to determine a grade-A location. It's not always just about having a sea view and the common elements. These types of places range between $4,500 and $10,000 in price per sqm. For offices, there isn't much grade-A but mostly grade-B capacity, which has good parking and amenities, ranging from anywhere between $3,000 and $5,000 per sqm. Grade-A office spaces go from $5,000 to $8,000 per sqm, but these developments are very rare. That being said, people's perception and expectation of luxury real estate has also been changing. Whereas before people would've looked for a 600 sqm place, that expectation fell down to 500 sqm, then 400, and now to 300 sqm. In that regard, people's expectations are decreasing rapidly. Soon it will be down to a two-bedroom place with an open kitchen, and so on. This shows maturity. We are a small city and it's very cramped, resources are scarce, and it's expensive. We were among the first to offer 180- to 260-sqm flats. Clients want three bedrooms, a closed kitchen, and a helper's room.

How has the availability of housing loans had an effect on the real estate market?

It's been very encouraging and a great new option for everyone, and it is expanding the clientele base. This system has only been this widespread since 2009. It's very controlled and regulated. Not everyone can get a loan. It involves a significant down payment, and you have to prove stability of income. The Banque du Liban is doing a great job to make sure everybody can afford a home loan. That has been very encouraging. Approximately 50% of loans have gone to locals, 40% to diaspora members, and 10% to Gulf clients.

How much do you rely on pre-sales?

It's a very common trend, and I don't think there are any companies that don't depend to some extent on pre-sales. However, we try to limit it to 50% of our business.

Can you tell us about some of your projects?

We are developing a grade-A office project right in the heart of downtown Beirut called Stratum. It's accessible and close to all the big corporate clients, hotels, restaurants, and big office spaces, and has good amenities and parking. It's almost complete. We have another grade-A residential project, the One Oak Residence, located right on the waterfront downtown, with a full sea and mountain view. It's a very exclusive complex, not your standard tower structure. Everyone feels they have unique apartments; everyone has separate entrances, and so forth. We have another project in the Ashrafieh neighborhood. It's one building with three different entrances, ample parking spaces, and a sense of exclusivity. All our projects are also smart buildings. You can control your flat from your iPad or laptop, be it utilities or electrical appliances. We are introducing these new amenities with our sister company, an IT firm.

What about future projects?

We have two new projects, one in Beirut and another outside of Beirut, both of them are again very exclusive. Outside of real estate, we are also in the process of setting up a private equity firm that invests in other fields, like restaurants, and will focus on venture capital, like joint ventures, and so on. We will develop a private equity real estate fund. It has already acquired property in California and New York, and is also looking at opportunities in Europe.

What is the size of your company?

We have around 50 employees. We focus on different departments. We have our own in-house development management, investment management, and interior architecture units.

How do you see Lebanon's potential for foreign investment?

Lebanon has a lot of high-risk/high-reward opportunities. Therefore, it depends on the appetite of the investor. However, there are safe investments to be found mainly in the banking and real estate sectors. Those still yield higher profits than in Europe. Everyone wants to be in Lebanon, and it's a great place for investors. There's also very strong human capital present, which is very adaptable and entrepreneurial. You need to get involved, you need to do your research, and you can find out who you should work with. Lebanon is very transparent. In two months you can get all the information you need just from talking with people, it's not that big a place.