Hayek Group listed among top 5 Lebanese development firms
Ritz Banc Group
Washington D.C. October 24, 2014
JV Ritz Banc Group & Hayek Group
Ritz Banc Group (RBG), Wash. D.C. USA proudly announces a joint venture with Hayek Group, Beirut Lebanon to pursue and invest in US real estate opportunities as a diversification strategy for Middle East investors.
According to the Association of Foreign Investors in Real Estate (AFIRE) 2014 annual survey, the United States remains the most stable and secure country for real estate investments by a wide margin of more than 50 percentage points over the second country, Germany. In addition, the U.S. is the country providing the best opportunity for capital appreciation.
This joint venture offers a unique gateway for Middle East capital to co-invest in U.S. real estate by providing access to vertically integrated investment and property management platform creating an “operator” vs “capital” allocator. Our investors diversify their portfolios and currency hedge by investing in relative low risk assets with current yields. In addition, RBG seasoned legal and tax team makes sure that every transaction is paired with the optimal legal structure through an internally managed tax efficient investment vehicle.
RBG has been very active on the East Coast of the United States and sources deals from Boston all the way down to Texas. Our main asset classes that we currently invest in are Multifamily, Office, Industrial and Hotels. RBG strong relationships with the country’s top operators and capital markets players gives us a competitive edge by implementing a solid internal investment process and hands on asset management approach.
Nasr EL Hage Jr.
Ritz Banc Group
Real estate valuation needs new methodology to accommodate the advanced investment analysis and techniques. In the absence of public sales comparable data and cost analysis depending on investments made to residential projects, Mass Appraisal Systems would be a perfect tool for making a valuation of land and blocks of buildings.
Definition of Mass Appraisal Systems:
Mass appraisal is a systematic appraisal of groups of properties as of given date using standardized procedures and statistical testing, unlike single-property appraisal, it requires the development of a valuation model capable of replicating the forces of supply and demand over a large area where appraisal judgments are related to groups of properties rather than to single properties.
Data collection, analysis and maintenance are the most costly features of mass appraisal systems. Design decisions made in this area will, more than anything else, determine the operating costs of the system. Property characteristic data are used in the valuation system to conduct research and to generate values, and in the sales analysis system to stratify properties for ratio studies and to identify and list comparable sales.
The sales analysis system has components for sales data collection, sales screening and processing, ratio studies, and sales reporting. Ratio studies, the primary product of this system, generally provide the best available measures of appraisal performance and are a valuable tool for monitoring appraisal results, adjusting valuations to the market, and assisting planning and management.
The valuation system consists of mass appraisal applications of the sales comparison, cost, and income approaches to value while the administrative system is composed of a variety of functions and activities subject to varying degrees of automation.
PRINCIPLES OF MASS APPRAISAL
Mass appraisal builds on the same basic principles as single-property appraisal. Because it involves the appraisal of many properties as of a common date, however, mass appraisal techniques emphasize equations, tables, and schedules, collectively called models.
The general model structure in mass appraisal is open, flexible, and reflects the market. However, software that will calibrate the general model structure is just beginning to be widely used. For this reason, model builders often use two simpler structures, additive and multiplicative. A hybrid model is one that incorporates both additive and multiplicative components; this model is similar to the additive model but incorporates multiplicative neighborhood variables. This allows the model builder to hypothesize, for example, that location in a desirable neighborhood will increase the value of a large, well-built house more than that of a smaller and less-well-built one.
Model specification is the first task in building models. The designing of the models must be based on economic and appraisal theory, and market analysis. Models constructed should represent the forces of supply and demand in particular zone. Only accurate and explainable models would provide good bases for defensible values when defining particular investment strategy.
Selection of Property Characteristics Data
Property characteristics to be collected and maintained should be based on the following:
- Factors that influence the market in the locale in question
- Requirements of the valuation methods that will be employed
- Requirements of classification and property tax policy
- Requirements of other governmental and private users
- Marginal benefits and costs of collecting and maintaining each property characteristic.
The following property characteristics are usually important in predicting residential property values:
- Living area
- Construction quality or key components thereof (foundation, exterior
wall type, and the like)
- Effective age or condition
- Building design or style
- Secondary areas including basements, garages, covered porches, and balconies
- Building features such as Bath rooms and AC
- Significant detached structure including guest house, swimming pool, play ground
- Lot size
- Available public utilities (Sewer, Water and Electricity)
- Location Data
- Market area
- Sub-Market area or neighborhood
- Site amenities, special views
- External nuisances, (Heavy traffic, airport noise or proximity to commercial uses)
Collecting property characteristics data is a critical phase of reappraisal. A successful data collection program requires clear and standard coding and careful monitoring through a quality control program, the development and the use of a data collection manual is essential to achieving accurate and consistent data collection.
Mass appraisal analysis begins with assigning properties to use classes or strata based on highest and best use, which normally equates to current use. Zoning and other land use controls normally dictate highest and best use of vacant land. In the absence of such restrictions, the evaluator must determine the highest and best use of the land by analyzing the four components—legally permissible, physically possible, appropriately supported, and financially feasible—thereby resulting in the highest value.
Finally, Local authorities and financial institutes are faced by a deadlock of non-consistent valuations, due to the absence of an up-to-date techniques used in valuation processes. Mass Appraisal Systems could help local authorities and municipalities to analyze sectors or streets as investment guidance.
Abdallah Hayek PE
Hayek Group LLC
Beirut April 1, 2014
– Mass Appraisal of Real Property [Gloudemans1999, chapter 3]
– Fundamentals of Mass Appraisal [Gloudemans and Almy 2011, 178–180].)
– DAIVA BRUKŠTAITIENĖ, Vilnius Gediminas Technical University, Lithuania
A wise Lebanese politician once said during the civil war: “Give us security and peace … and take wonders from us”.
Now in 2006, we are still seeking this long awaited security and peace to come. With the UN resolution 1701 along with sincere Lebanese democratic dialogue, we thought we may achieve our strategic goal: peaceful life and prosperity.
In spite of all the obstacles and political turmoil, wars, etc… which have been moving side by side with our day to day activities, for more than three decades – we are still struggling with nails and teeth to surmount all the evil forces that have been surrounding us from all sides.
Thanks to our economic system based on the entrepreneurship and vitality of the Lebanese private sector; the banking system; the Real Estate; and tourism. Lebanon and once again due to its multiple sound and resilient infrastructure in addition to the unprecedented international community and Arab friends uprise to support Lebanon with generous contributions and donations to finance the reconstruction of the July war destructions – Lebanon will soon be able to stand on its own feet to replay the constructive role it has always played thru history.
1 – Lebanese Banking System:
The bank secrecy is strictly enforced and there are no restrictions on foreign exchange, capital movement, or foreign investment.
The consolidated balance sheet of the banking sector reported total assets equivalent to US$ 73.2 billion at end of July 2006 – and foreign currency deposits out of total deposits increased from 72.8% to 74.8%.
The deposits dollarization in the Lebanese banks had a very positive and resilient impact to absorb the bad effects of July war and a stabilization factor on the national currency.
The International Monetary Fund (IMF) reviewed the economic and financial impact of 12 July 2006 war. The IMF stated that while GDF in Lebanon was previously projected to grow by 5% in 2006, it is now forecasted to shrink to -5% due to the impact of the Israeli sea and air blockade.
The Lebanese banking system is sound by all (International) world banking standards. It enjoys a high capital adequacy ratio of about 22 percent – whilst the ratio set by Basel I is only 8 percent.
The Lebanese banking sector, encouraged by the Central Bank, continues to consolidate over 25 bank mergers which have taken place in the past decade and additional mergers are still anticipated.
This portrait of sound banking sector gives to the local and foreign investor a peace of mind – and encourages others to increase the inflow of capital… which ultimately would lead to more construction, development and economic prosperity.
Becoming a hub for funds:
Based on the strength of banking system, Beirut can become the bank center of the Middle East. It has all the ingredients: its banks and their impressive fund-raising capabilities, the know how of its expatriates and local specialists and its unique East-West culture.
Funds would also be considered to be the key for the development and diversification of revenues for local banks.
With the Basel II capital regulations to be applied in Lebanon starting in 2008, and which require banks to have healthy and recurrent revenues in order to increase capital through the injection of profits into capital. In this context, the timing of the development of the fund management industry cannot be more appropriate.
2 – Real Estate Sector:
The features and particularities of Lebanon in respect to its geographical, historical and cultural background… its open outlook to all civilizations, education… the human element, the natural warmth and hospitality of the Lebanese…. The service oriented factor… etc… make of Lebanon a UNIQUE destination, where particularly every expatriate and Gulf national dreams and seeks to have a second home in Lebanon.
Though the total Lebanese population is 3.5 million, the future projection for Lebanon should accommodate a big share of the 14 million people of Lebanese descent and a significant share of our ArabGulf friends, expatriates and others.
The Lebanese population is still asked to squeeze itself further to give more room in its limited territory of 10452 km2.
That’s why the prices of land are expected to reach sky high as the time goes by.
For instance, in January 2002, the normal average land prices in Ain Mreisseh were not supposed to exceed US$ 3500/m2 – but in reality and after the Sept. 11, 2001 incident in USA, owners used to ask for more up to US$ 6000/m2 for properties on the sea front.
Nowadays, the prices reached US$ 8000/m2 and the trend towards higher prices still progressing – and apartments are sold for between US$ 4000/m2 and US$ 5400/m2, their high price being the reflection of the expensive land in the area – and the least deluxe flats are sold for US$ 3000/m2.
What steps to be taken in order to win back the investor confidence?
The Real Estate market hinges on an improved political and a relaxed peaceful atmosphere. While buyers are seeking to snatch up, properties at bargain prices, landlords in general are still sticking to their pre-war prices despite the gloomy and uncertainty image of the political situation – hoping that by mid 2007 another miracle will bring back peace and tranquility despite the stubborn and irrational behavior of our politicians.
What are the predictions for a recovery?
The intermingling of conflicting interests of the Big Powers and some of the regional countries, in addition to the Israeli-Palestinian dispute and their direct heavy impact on the various factions of the Lebanese society – are dragging the country into unstable, helpless and out of balance situation.
On the light of the above description of the political convergent attitudes, no one is expecting miracles but at least an understanding or a phase of gradual release of tension so that the normal life will be again resumed.
Since the chain of assassinations of late H.E Harriri in Feb. 2005 and lately with H.E Pierre Gemayel in Nov. 2006; and now with an open strike of the oppositions; the political unrest is building up on the Lebanese arena and hindering the exceptional and promising progress which was much underway prior to the war outbreak; but now is hesitant and nervous following the “wait and see” attitude.
Despite the current moods, nowadays either “optimistic or pessimistic” which are almost equally shared among the investors and Lebanese population -all have the full and strong confidence that Lebanon will survive again as it has always done thru its old and modern history.
Within days from the cessation of the 12 July 2006 Israeli war and hostilities – most Arab and Lebanese investors reaffirmed their interest in properties they were in the process of purchasing before the outbreak of war and the selling prices remained at pre-war levels.
The encouraging factors which are contributing to the revival of the economy in general and the real estate market in particular are:
– The strong demand on real estate and unshaken confidence of the Lebanese and Gulf Arab investors in this country.
– Sound banking system.
– The increasing wealth of Lebanese expatriates.
– The high rise in oil prices, which is translated in the inflow of money and investment.
– The unprecedented care and attention of the International community to protect the tiny Lebanon’s freedom, independence and sovereignty.
Realistically, we should allow about six months more or less from date or
by summer 2007 for a noticeable recovery of the market – hoping by that time the political and security issues will be gradually cleared and stabilized – unless an unpredicted political detoriation might prolong the peaceful settlement a bit further.
We repeat that the attractive features and particularities of Lebanon; and natural Lebanese warm, hospitality and way of life make of Lebanon a pleasant and attractive destination and a future second home to most Arab Gulf investors, other nationalities and Lebanese immigrants.
All are welcome to invest and live in Lebanon. “First come, first served” and the combined factors of increasing demand for real estate and profitability of investment, Lebanon is bound to witness a big boom in the real estate sector, touristic projects, etc… in the months to come… despite the crazy mood among the different political factions now prevailing in the region and in the country.
Abdallah Hayek P. E
Hayek Group s.a.r.l
Beirut 0 Dec. 2006
Since December 1, 2006 Lebanon experienced a massive demonstration headed by the opposition in Down Town Beirut. Ever since, most political and economical analysts have been expecting the worse to come.
Worldwide and regional leaders warned of possible devastating events including civil war, bloodshed and economical collapse.
The Seniora Government has been experiencing tremendous pressure from the opposition and serious ludicrous accusations which need to be defended vigorously.
The opposition on the other hand is accelerating the movement and speech to force the government to buckle under the pressure and ultimately implement their demands.
A few days have passed since the beginning of the demonstration with more than 600 tents are camping in Down Town Beirut surrounding the Grand Serail where all cabinet members are present and guarded by security forces.
What an amazing system!!!
Imagine what would have been the consequences and outcomes; if this demonstration took place in Hama (Syria) or in Tiblissi (Georgia) or in Beijing (China) or in Cairo (Egypt).
What an amazing democracy!!!
Lebanon’s democracy is unique in the Arab world and the region. The economy is kept smartly operating outside this gloomy atmosphere – No doubt that Lebanon is in a very critical political and economical situation – but we expect that the Lebanese school of democracy will be an international reference among countries governed by political rivalries.
The past and current political and economical experiences will certainly make Lebanon a democratic model for all countries of multiple minority, and ethnic groups to follow, contradicting the sectarian and religious states; if and only if politicians in Lebanon along with the civil society and religious leaders succeed to resolve the current crisis.
To all esteemed clients and friends who are sending e-mails – expressing their deepest sorrow and heartbreaking feelings – expecting more bad events and even some of them have serious concerns regarding the future of this country.
We urge all of them to regain optimism and faith in a country that survived all kinds of civil wars, invasion by the most barbaric states – in the past 30 years – Lebanon is protected by the amazing system and the wonderful citizens … God bless them all, on Saturday December 2, 2006; when some Lebanese were jammed in the queue to attend Fairouz in Down Town Biel Center, others were stuck with the queue to the Marathon village while others were trying hard to join the demonstration.
Also on Dec. 10th hundreds of thousands demonstrated in Riad El-Solh square while an international conference was held in down town BEIL in remembrance of Gebran Tueni.
Let it be known, that from every crisis a lesson would be learned and in spite of the chaos and turmoil that are governing the political and economic situation in Lebanon, nowadays a compromise for the betterment of the county’s system is in the making.
The temporary shaken confidence will be regained soon and the normal growth will take its path upward despite the short term political issues.
Lebanon is a GREAT survivor.
Abdallah Hayek P.E.
Hayek Group s.a.r.l.
Beirut – Dec. 2006
During the first five months of the year 2004, the areas released for construction reached 3,405,346m2 with an increase of 9.8% of the period of the year 2003.
The Mount of Lebanon received 45.8% of the total licensed area for construction, followed by North of Lebanon 19.9%, South Lebanon 14.8%, Beirut 13.8%, and Bekaa 5.7%
The construction and Real Estate during the first half of the year 2004
The construction and real estate improvements were the most important indications and incentives to the economical growth in the first half of the year 2004. The optimistic forecast and the success of the touristic sector this year plus the export figures (particularly to Iraq) have seriously encouraged the investment and led to increased demand on the residential units of high and International standard.
The supply of residential units still exceeds the demand though the demand of the Gulf citizens has been quite noticeable this Summer and the trend is towards higher demand and rise in prices.
Boom time is underway
Since the end of the war, the real estate market has provided a playground for many investors. For once though, the familiar complaints of previous years of falling prices, stalling demand and over supply are given way to positive prediction and signs. The reasons for this were many but the re-emergence of the Beirut Central District played a pivotal role, providing a destination for tourists with overall security atmosphere; the withdrawal of the Arab investment from the western banks into Lebanese banks; and promising market.
Achrafieh and Ras Beirut for example were affected by the shift of interest and attractive to the “Beirut City” due to their geographical location and had their residential unit prices increase from US$ 1000/m2 to US$ 1500/m2 and even more; areas in the South were similarly affected due to the improved accessibility to the Southern region via International Standard highways. This makes it more attractive to clients, causing demand and prices to rise. Last year, the price of land there ranged between US$ 100/m2 and US$ 120/m2. Today it has increased to US$ 150/m2 and 175/m2.
The mountain areas – always a favorite for Gulf citizens – witnessed their own revival too.
More five star hotels, furnished apartments needed
The proof of this is being witnessed by the full occupancy of Beirut Hotels this summer.
Further construction of five star hotels should be focused in Beirut as well in the mountain areas.
With regards to organized firms for furnished apartments, there is a shortage of good quality ones in and outside Beirut and Arab visitors are willing to pay rental for furnished apartments for a whole year.
Luxury apartments in Wadi Abu Jmil and Saifi
– Wadi Abu Jmil is currently in high demand for luxury apartments due to its vicinity to Solidere (Beirut Central District).
An eight-storey development consisting of two luxury duplexes, two luxury triplexes, four terrace and 16 standard apartments, as well as a penthouse will be completed by the end of 2006, but about 10 percent has been sold so far at this construction stage.
Prices range between US$ 3000/m2 and US$ 4000/m2.
– Saifi Pearl is another real estate development on the Gemmayzeh/Saifi border. The residence will offer 11 floors containing four luxury duplexes, 28 standard apartments, and a penthouse.
The price tag varies between US$ 1500/m2 to US$ 2800/m2. The apartments completion is set for early 2007.
Abdallah Hayek P.E
Hayek Group s.a.r.l
Beirut – Sept 2004
(An article in Al Bayan Economical Magazine, Beirut – Sept. 2004)
Engineer Abdallah Hayek The Chairman and General Manager of Hayek Group s.a.r.l, Engineering and Real Estate Consulting firm, commented on the above topic as follows: “The economic stagnation in Lebanon since 1996 had exceeded in gravity, the similar cases in the most advanced countries in the world – especially after Sept. 11, 2001 event, and the sharp rise of the Euro and oil prices.”
The most important factors that had positive impact on the development of the Real Estate sector in Lebanon are:
1 – The increase in investment volume.
2 – The improvement of the touristic season.
3 – The increase in G.D.P and the percentage increase of non-Lebanese owners.
4 – The relatively peaceful and security atmosphere despite the
Military and political unrest in the region.
The total Arab investments since 1997 has exceeded US$ 3.7 billion and Lebanon was ranked the first among all Arab countries in 2003; which reached the amount of US$ 850 million representing 22.7% of total Arab investments.
In the last 12 months, the total investment in Lebanon has exceeded US$ 4.0 billion mostly in the touristic and Real Estate Sectors and it is expected that the total Arab investment will reach US$ 1.3 billion by the end of 2004 in the real estate sector after the involvement of major Arab and Islamic funds. As to the touristic improvement it has recorded an increase of 35% in the number of visitors for the first 6 months of 2004, and it is expected to exceed 1.5 million visitors this year for the first time since 30 years.
It is expected to have more capital investment in the touristic sector during the year 2004-2005 an amount exceeding US$ 4.0 billion mainly in Beirut and Mount Lebanon.
Regarding the increase in the rate of growth and on the macro economic level, Lebanon has witnessed a National Growth Rate of 2.9%, which is ranked below the average Arabic growth rate of 4.5% though it has recorded a significant improvement from last year of 2%. In the last report by IMF Lebanon is forecasted to record a 5% growth thus overcoming the negative influence of the current economy resulting from the increase of public debt and political stagnation.
Finally, the acquisition of properties by non-Lebanese has increased tremendously in the first half of 2004; the number of construction permits issued has proved this.
The Lebanese Government is still issuing decrees for non-Lebanese to own properties according to the law 11614 where the areas purchased in 15 days only exceeded 60,000 m2 for UAE, Kuwaiti & Saudi citizens, this phenomena represents the extent of improvement of the Real Estate private sector for Gulf citizens especially in the Summer resorts.
17,000 properties have been recorded as purchased by Lebanese and others by the end of May 2004 with a total value of L.P. 1300 billion”.
Al – Bayan Magazine by Asking Mr. Hayek about Sannine Zenith project and how does such project affect the local economy. Mr. Hayek answered:
“The increase in confidence in the Real Estate investment in Lebanon has been developed straight after the war by the rehabilitation project of the Capital Beirut (Solidere).
After 10 years, Marina City & Sannine Zenith and other major projects, have added confidence – not only in Beirut and its marina front but also in the suburbs and upper mountains.
Currently major investment projects are under development in Beirut suburbs by very reputable consulting & Real Estate funds, others are under study and will become public by the end of 2004.
According to the last report by IMF, Lebanon has managed to maintain the trust and confidence of Arab and foreign investors in the Real Estate sector.
Add to this the continuous improvement of the reserve in foreign currencies and the cash balance by more than 12%, which proves the continuous inflow of Capital funds.
The methods of financing have been developed for large projects thru public bond issuing instead of direct banking loans, this has produced legal problems regarding the ownership of Sannine Zenith project, which has been resolved at a later stage.
In Marina City the time-share system will be implemented as it has already been applied in the Western countries for similar projects”.
Al – Bayan Magazine – Sept. 2004
Reported by Bechara Abi Rached
1 – Rise in Property Taxes collected:
In the first seven months of the year 2004, collected property taxes rose by 31.3 percent on the same period last year to reach LL 155.1 billion. In the month of July alone, according to figures issued by the directorate of Real Estate Registry, property taxes amounted LL25.4 billion, up 7.6 percent from the corresponding month of 2003.
The proportion of collected taxes by region in the first seven months of the year indicated that Beirut was the highest with 38.3 percent, followed by Baabda 20.8 percent, Metn 15.4 percent, Kesrouan 7.9 percent and Bekaa with 4.6 percent.
2 – Slight rise in permits in first seven months:
Construction permits issued for the first seven months of 2004 covered a total area of 5,106,420m2, 3.2 percent rise from the same period in 2003, according to figures from the Order of Engineers of Beirut and Tripoli. Almost half of the construction permits issued were for Mount Lebanon with 46.7 percent. Approximately 20 percent were issued for North Lebanon, 14.7 percent in South Lebanon, 12.9 percent for Beirut and 5.8 percent for the Bekaa.
3 – UN report: FDI on the rise:
According to World Investment Report issued by the UN Conference on Trade and Development (UNCTAD), Foreign Direct Investment (FDI) in Lebanon rose to $358 million in 2003, up from $257 million in 2002, a jump of 12.1 percent in one year. This brought total accumulated investment for the past 10 years (up to the end of 2003), to $1.981 billion.
Lebanese investments abroad also rose in 2003 to $97 million from $74 million in 2002.The report puts Lebanon in 90th position worldwide In 2003 in terms of FDI.
Foreign investments in Lebanon have risen considerably since September 11, 2001. Most of these investments came from Arab Gulf companies, focusing on real estate and touristic projects and hotels.
Overall investment in Lebanon and other Arab countries has surpassed other years, but is still lower than countries in Asia, Europe and the U.S. Total FDI in the Arab countries in 2003 stood at $7.3 billion. Bankers and analysts who participated in several investment conferences in Beirut say “Arab states could attract more investment if they liberalize their economies and give more tax incentives”.
Abdallah Hayek P.E
Hayek Group s.a.r.l
Beirut – Nov. 2004