TBY talks to Nabil Sawabini, Chairman & CEO of MENA Capital, on regional expansion, the Sky Gate development, and his company's support for SMEs.

Nabil Sawabini
Nabil Sawabini founded MENA Capital in 2004 and became its Chairman and CEO. Prior to this, he was involved in the foundation of Middle East Capital Group in 1996, a regional investment and merchant banking firm headquartered in Beirut. He previously worked with JP Morgan, spending 20 years in the US, Europe, and the Middle East in various positions including Managing Director and Head of Global Asset Services, Head of International Securities Sales and Trading, Senior Vice-President in Investment Banking and Specialized Finance, as well as Treasury and Foreign Exchange.

As a financial institution specializing in real estate development and private equity investment, what markets is MENA Capital looking at regionally?

As of 2010 we have been expanding into markets such as Iraq, where we have been buying properties in select areas, which we plan to develop later. In the future we envisage the company having activities in more markets in the region.

What are the main development projects MENA Capital is currently involved with?

We are working on four high-rise buildings in Lebanon and we are looking to do more toward the later half of 2011 and early 2012. We try to sequence our projects and plan to deliver three of them in 2011 so that we will have the capacity to grow into other areas.

What is your outlook for the Sky Gate development?

Sky Gate is really the hallmark project for MENA Capital and the country. It will be the most luxurious building in the region, not just in Lebanon.

“This country has an abundance of quality human capital and a tremendously resourceful and loyal diaspora."

How does the Sky Gate project differ from a typical building design in Beirut?

The building is unique because of its location, being at the highest point in Beirut. We have worked hard especially on the design, quality finishing, and amenities for the building. The development contains around 3,000 sqm of landscaping and is the only building that has indoor and outdoor amenities and a running track stretching one-third of a kilometer around the gardens of the building. Finally, the project will be adopting eco-friendly standards.

How do you finance your projects?

We normally have several sources of financing, primarily supplied by our investors. We create investment vehicles and use the money to develop our projects. We also partner with landowners, thereby not sinking all of our capital into the land itself. Another important source of finance is the buyers in our projects, who allow us to become more self-sufficient in terms of financing. We like to limit our use of bank financing to the extent we deem prudent.

What does Lebanon have to offer as a place to do business?

This country has an abundance of quality human capital and a tremendously resourceful and loyal diaspora. In order to survive and grow, the businesses that operate here have to serve their resident and non-resident clients as well as the region, as it is a relatively small market to be confined to. As soon as a company grows to a certain size and develops a solid organization with the talent base to help it expand, it must grow beyond the country's borders.

What projects does MENA Capital have in the pipeline?

The one project that we are hoping to get started on soon is a residential gated community targeted at professionals, executives, and young families. Although we will continue to differentiate our projects in terms of design, quality, and amenities, the living spaces will be smaller and we will be emphasizing quality of life at more affordable prices.

What is your outlook for the luxury apartments sector?

I see the price remaining stable for the next year or so until demand matches supply. Land prices became more speculative in the past couple of years because of its scarcity, and they went up to the point where it became uneconomic to develop. This is why, slowly but surely, we are seeing a growing trend toward development in accessible areas around Beirut.

How did you move into the food and beverages business as private equity specialists?

When we started, we looked at what things we could do in private equity and found that most of the “hot" companies were technology-based or telecoms related, and were largely over priced, so we shied away from them. We then looked at where would be the next best area to move into, and found it to be food and beverages.

How are you looking to expand in the restaurant business?

The transaction that we have pursued thus far is a joint venture with Kabab-ji to develop the franchise in the US, starting in Washington, DC with a flagship outlet. Once we prove the concept and make sure that the operation is running smoothly and profitably, we will expand into more owned outlets, followed by franchising.

What can you tell us about your support for small businesses in Lebanon?

When I came back from the US in the late 1990s I realized there was a definite need to assist the under privileged youth of the country to build small businesses. Vast urbanization was seeing many move into the bigger cities or leave the country altogether. The idea, therefore, was to have those people create businesses that are needed in their local communities. Entrepreneurship is innate in Lebanon, but people need tools and capital. We have worked to provide them with the needed tools and helped them finance their startups. In recent years, we expanded the activities of the Entrepreneurial Development Foundation (EDF) into micro credits, extending the support from startups to the expansion of existing small businesses. In this regard, we have been supported by various businesses and foundations, both local and international, but mostly by local banks. Due to our extensive knowledge of the regions within the country, we can easily identify potential business startups and small businesses that are ripe for expansion. Through our network, we are now approached by banks to lend to small businesses. We are currently lending about LBP4 billion to LBP5 billion a year to between 900 and 1,000 small businesses around the country. Despite all the country's difficulties, we have experienced a high repayment record of almost 98%.

What are the main challenges that are facing the market today?

The poor political climate, coupled with the unsettled regional situation and global economic slowdown have slowed demand, especially for larger, high-end properties. However, given the growing flight away from financial assets and currencies that are losing their purchasing power, I foresee a return to strong demand for real estate in the not too distant future.