Building a new Beirut (page 1 of 2)

By Gareth Smyth BEIRUT
During the Lebanese civil war, a regular break in the fighting allowed garbage trucks into the wrecked no-man's land of Beirut's central district (BCD) to dump their contents into the sea. The garbage accumulated, and today the landfill is a huge, earthed-over eyesore clearly visible from the swish Phoenicia Hotel. It is a sign of the times that planners for Solidere, the company charged with redeveloping BCD, are now turning their attention to the landfill's future.

Angus Gavin, the planning adviser to Solidere chairman Nasser Chamaa, has suggested a 42-story tower on the landfill's northeast tip. Although construction would not start until 2010, the idea is for a convention center - and on a far bigger scale than the Phoenicia, Beirut's most successful conference venue so far. Solidere is also reviving plans to host Formula 1 in Beirut, which would be the only in-city Grand Prix outside Monaco.

Solidere got a shot in the arm when the cabinet passed a revised master plan for BCD in June. This, the company believes, will end a period of over two years in which delayed construction permits have stymied land sales, slowed down development and left Solidere with losses of $31.8 million in 2000, its first year in the red. Solidere claims that blocked building permits prevented $38.6 million in land sales between April 1999 and the end of 2000.

Hard times. Not for the first time, the murkiness of Lebanese politics harmed the country's economy. Solidere paid the price for its close association with Rafik Hariri, its largest shareholder and prime minister when the company was established in 1994 with the power to develop or sell 1.8 million square meters of prime land. For Solidere, all went well until 1998, when Hariri lost power following conflicts with President Emile Lahoud. At the same time, Solidere annoyed Michel Murr, the minister of the interior and a relative by marriage of President Lahoud, by refusing to sell him back the 48,000 square meter Beirut Trade Tower. (Murr had earlier sold it to Solidere in return for shares that subsequently lost value.)
Under the new government, in which Murr was a powerful figure, there were sudden delays in construction permits, especially at the Beirut municipality. Solidere can sell land only for development and not speculation, so sales plummeted. Even Hariri's return as prime minister last November did not immediately put an end to the problem.

But the passage of the master plan, the company believes, clears the way for permits to be granted. "The revisions address all the technical issues raised by the municipality when it objected to construction permits," said Angus Gavin. These included technicalities like parking underneath public space, fire codes and the size of buildings relative to the size of plots.

The good news led Chamaa to claim in July that Solidere will make a profit in 2001 after much improved land sales during the rest of the year. His claim boldly contradicted predictions from analysts - HSBC, for example, has suggested that the company will lose $20 million.

If sales do pick up, Solidere's pricing strategy may face increasing scrutiny. Beirut property prices have fallen about 30 percent since 1996, but Solidere has kept its land prices constant at an average $1,000 per square meter of built-up area. The figures apply regardless of land use. Consultants have criticized this price as unrealistically high and have suggested that Solidere should adopt a more flexible approach that recognizes the role of land use and location in affecting demand.