July - September 2006 back city to center life the city center resists, overcomes ...... and comes back to life

Beirut city center started the quarter with a program of interesting cultural events and a heightened vibrancy due to the presence of a large number of visitors at the outset of the summer tourist season. The city center reacted with great shock to the attacks on Lebanon. The tourists fled and the Lebanese had no heart for fun or leisure. Shops, restaurants, cafés and art galleries were deserted and closed for most of the war period. All scheduled activities were canceled. However, the national revolt against the war gave rise to demonstrations and to artistic expressions of the war horrors. Most of the offices were closed, except for public institutions, banks and the media. But Solidere maintained a certain level of operations and provided needed help to the community.

1 24 5 Art exhibitions Newcomers Solidere assistance Incentive measures Planet Discovery Other venues Retail Institutional to displaced people to city center tenants exhibition hall Aida Cherfane gallery Deeb since 1930, men’s tailoring Consulate of East Timor Solidere provided 15 prefab Solidere measures 50 Anos del taller de grabado, New collective exhibition, Diamanti jewelry men’s and women’s showers Following a meeting between Joan Barbara engravings, July 1 – September 30. Fly roof restaurant Opening soon and personal, linen washing chairman Nasser Chammaa June 30 – July 22. Junaid perfumes Côté Park restaurant Bariq jewelry and cleaning utensils and and the Beirut city center Just Cavalli boutique Lebanon A-Z , children’s book, Choukrallah Fattouh paintings, Nabil Chehab jewelry detergent to war-displaced traders’ association, the board Matt I; II ladies fashion pictures of Lebanese village scenes from Lebanese Eliva Gioelli, jewelry, watches families staying in Beirut of directors agreed to exempt Pal Zileri men’s boutique and family life by Tatiana villages, July 1-31. Foch Terminus cafe schools and parks, all outside tenants of retail units in Que bar Sabbagh, July and August. Jeweled Watches International the city center. The Company Solidere properties from the On/Off Rytta couture Hassan Maktabi & Sons carpets also organized the cleaning rentals due for the months of No-made urban prototypes, Shawarmazz Quartier des Arts July 1 – August 31. Rotana café of the Sanayeh park. July and August, subject to full Special watches 6 settlement of all their dues as Alwane Beirut Municipality at end June. Collection of Lebanese, Arab Amina Adada paintings, Un Business and services and European talents, moment avec la nature et le Municipality measures September 1 – November 1. Accor, hotel reservation The Beirut municipal council patrimoine libanais, July 3-11. Etalon, veterinary services 1 Aida Cherfane collective extended the period for paying Ceramic Lounge works exhibition. Maarad Street Galaxy travel agent municipal taxes without a Contemporary ceramic studio Hayat Karanouh photographs R E Monitor real estate 2 Joan Barbara exhibition. penalty to the end of the year, and café. from the book, La passion du 78 3 War photo exhibition in as a measure to revive and Chawki Chamoun football, until July 9. Nejmeh Square. support the city center. experimental studio gallery Tamaris - Patchi roof Private collection July 1-31. George Bassil paintings, 3 Epreuve d’Artiste July 6-13. Artistic expression New collective exhibition, of war horrors July - August. Freedom and Life Rochane A symbolic 10-meter tall tree New collective exhibition, was erected near Martyrs’ July - August. Life in the city center is back to Square. It is decorated with normal after a forced closure of 34 days of war. objects collected from the Al fresco dining or a downtown bite rubble of buildings destroyed Souk El Tayeb Shops, galleries, restaurants 4 White. by Isaeli air strikes on Beirut’s 5 Shawarmazz. After a period of absence, Souk and cafés are open again with 6 Fly. southern suburbs. El Tayeb has returned to Saifi customers gradually returning to their favorite places. Home and fashion design Air war against children Village. With luck and will, the 7 Roche-Bobois. Photographs of the war 40 farmers are reconvening With the advent of the holy 8 Milia M. horrors, depicting injured and each Saturday morning with month of Ramadan, city center maimed children, were their organic crops and healthy retail outlets are attracting as displayed around the Nejmeh prepared food attracting a usual a wider Lebanese and clock tower. regular clientele. Arab clientele. 2 3 business & financial news

Balance Sheet June 30,2006 Dec. 31,2005 Statement of Income June 30, 2006 June 30, 2005 Financial Highlights June 30, 2006 June 30, 2005 US$ US$ US$ US$

Consolidated Financial Statements ASSETS Revenues from land and real estate sales 149,742,675 70,051,961 SUMMARY OF OPERATIONS 6-month period ending June 30, 2006 Cash and banks 113,210,290 111,535,548 Revenue from rented properties 9,774,473 10,821,479 (in million US$) Prepayments and other debit balances 28,937,061 25,771,367 Cost of land and real estate sales (64,619,406) (34,939,611) Revenues from land sales 149.7 70.0 Accounts and notes receivable, net 345,038,835 272,820,638 Charges on rented properties (3,147,835) (3,855,450) Backlog of land sales 1,086.3 190.0 Investments in securities 9,559,024 9,579,440 Gain on sale of investment properties - 31,244 Revenues from rented properties 9.8 10.0 Inventory of land and projects in progress 1,475,787,975 1,527,484,124 Other income 57,773 - Investment properties, net 152,272,365 153,757,985 Net revenues from operations 91,807,680 42,109,623 Fixed assets, net 25,716,206 26,206,813 FINANCIAL RATIOS (%) General and administrative expenses (7,055,340) (6,010,516) Average yield on liquid assets 4.88 2.45 Total Assets 2,150,521,756 2,127,155,915 Depreciation (793,021) (588,304) Debt to equity 2.10 10.51 Provision for doubtful receivables & write-offs - (173,363) Solidere published its unaudited consolidated LIABILITIES Impairment loss on inventory of land financial statements for the six-month period ending Bank overdrafts 15,258,933 10,020,182 and projects in progress (1,104,791) - June 30, 2006. Accounts payable and other liabilities 66,091,370 73,312,685 Interest income 12,281,359 6,951,290 Dividends payable 99,772,012 10,266,707 Interest expense (4,465,123) (9,011,715) The results achieved during the first six months of Deferred revenues and other credit balances 172,924,717 55,099,426 Provision for unusual contributions - (1,010,000) the year do not reflect the land sales deals that are Deferred credits - 3,900,000 Net income for the period before income tax 90,670,764 32,267,015 expected to be recognized during the whole year. Loans from banks and financial institutions 37,073,469 129,399,059 Accrued income tax (12,865,729) (4,220,485) Lebanese financial markets witnessed an unfavorable mood during the third quarter, in view of the Israeli In this regard, the total income generated from the Total Liabilities 391,120,501 281,998,059 Net income for the period 77,805,035 28,046,530 assault on the country that lasted for about a month, land sales operations relative to development between July and August. Solidere shares were severely projects amounted to US$150 million during the first SHAREHOLDERS’ EQUITY Basic/diluted earnings per share 0.4882 0.1784 hit, along with all other issues listed on the Beirut Stock half of 2006. These revenues are the result of a large Issued capital at par value US$10 per share: Exchange. Market participants opted to cash in on some number of land sales contracts signed during 2005 100,000,000 class (A) shares 1,000,000,000 1,000,000,000 of their profits, waiting for the end of hostilities to figure and part of other land sales contracts signed during 65,000,000 class (B) shares 650,000,000 650,000,000 out the effects on the Lebanese economy as a whole. the first quarter of 2006. 1,650,000,000 1,650,000,000 Beirut Stock Exchange took exceptional measures to Legal reserve 46,717,354 46,717,354 Share performance during the 3rd quarter weather the prevailing situation, including the closing of As of June 30, 2006, the Company’s backlog of Retained earnings 90,736,571 87,892,299 trading activity between July 17 and August 1. previously signed land sales contracts amounted to Cumulative change in fair value of interest Share A - Daily Closing Prices around US$1.09 billion, most of which are expected to rate swap agreement - (861,982) Around beginning August, pressures on the Lebanese be recognized within the next two years. Volume Cumulative change in fair value of financial markets lessened, despite the ascending of military activity in the south of the country. Contributing available-for-sale securities (338,835) (233,180) 681,175 Surplus on sale of treasury shares 11,587,772 2,508,180 $23.0 480,000 factors included financial engineering tools adopted by Net income for the period/ year 77,805,035 97,675,378 the Central Bank, full coordination between monetary $21.0 360,000 Less: Treasury shares (117,106,642) (38,540,193) authorities and the banking sector, commercial banks’ Dividend distribution strictness in dealing with the financial markets, and $19.0 240,000 economic support from countries like and Total Shareholders' Equity 1,759,401,255 1,845,157,856 e

Solidere implemented this quarter the resolution c i

r Kuwait. With the cease-fire taking effect, the renewed of the annual general meeting regarding distribution P $17.0 120,000

e demand for all listed securities made them recuperate of US$99 million in dividends in the form of US$0.60 Total Liabilities and Shareholders' Equity 2,150,521,756 2,127,155,915 r a most of their lost territory. As the quarter came to an per share held (US$0.57 after deducting the h

S $15.0 end, all listed securities traded sideways, consolidating compulsory 5% tax on Company profit distributions), 3 Jul 06 14 Aug 06 6 Sept 06 29 Sept 06 as per the shareholders’ register at the general Financial statements reviewed by Deloitte & Touche and Ernst & Young at their new lower levels. meeting date. Share B - Daily Closing Prices Along with all other securities in the local market, the The distribution to holders of less than 10,000 Solidere shares traded lower, then adjusted upwards Volume shares started on August 21, instead of August 15, after the end of hostilities as their prospects remained the delay being due to the war disruption. 633,817 extremely positive. Share A traded between a low of The distribution to holders of 10,000 shares or more $23.0 480,000 US$15.43 and a high of US$22.04, closing the quarter started on September 11. Payment is being effected at US$18.24, a decrease of about 17.2%. Share B traded by check at the Solidere headquarters, or as bank $21.0 360,000 between a low of US$15.33 and a high of US$22.19, transfers upon request for foreign institutional closing the quarter at US$18.13, a decrease of about $19.0 240,000

shareholders or those established abroad. e 18.3%. Trading activity stabilized at around 7.5 million c i

r shares of both classes in the local market, 7% above the

As at September 29, dividends amounting to more P $17.0 120,000

e previous quarter. The shares traded in the Kuwait Stock than US$50 million had been distributed to around r a

h Exchange followed the trends in the local market, along 10,000 shareholders. $15.0 S 3 Jul 06 14 Aug 06 6 Sept 06 29 Sept 06 with the GDRs traded in the London Stock Exchange, closing the quarter at around US$18, a decrease of 17.6% compared to the previous quarter closing level. Share price (US dollars) Trading volume 4 5 development news

Development projects suffered Beirut Waterfront some delay, first because of Development war stoppage and later due to labor shortages. Beirut Waterfront Development is a joint venture between Stow Construction went slowly for Waterfront Development s.a.l. some time, yet progress was and Solidere. registered in a large number of real estate projects. Some Based on Steven Holl’s design, are under development by it offers 20,000 sq m of mixed- Solidere, others by investors use floor area around the with the Company’s support. marina, including quayside restaurants, cafés and shops, In addition, new land sales and a yacht club building with agreements are announcing apartments on upper floors. development amounting to 348,400 sq m of floor area. In May, the Hourié - Profond joint venture started enabling 1 General view of Beirut Souks. 1 Around Beirut Souks works for the yacht club 2 Weygand street, between Beirut building and three level Souks and Sémiramis residential The area around Beirut Souks development. witnessed a major evolution in basements. The design was the last few months endorsed by Solétanche Bachy 3 Weygand street taking shape: group (France). High-Point Bab Idriss perspective showing Five projects were completed: façade of Beirut Souks’ block M Rendel are the engineers. office buildings and Jewelers’ block. two residential developments, Beirut Souks 1330 Park Avenue by Imad Hajj The building permit files for the quayside development and Beirut Souks are the largest Ali and The Capital Garden by apartments are under study at Solidere real estate project, 3 Erga Group; and three office Beirut Municipality. with 110,000 sq m of floor buildings, Medgulf by Nachaat space interspersed among Owaida, Berytus Parks by In addition, a harbor master, 60,000 sq m of landscaped Pierre El Khoury Architects, customs and immigration pedestrian areas, designed and Two Park Avenue by building will be erected on by Olivier Vidal. Samir Khairallah. public domain. In the South Souks, Société The marketing effort was d’Entreprises A.R. Hourié pursued during the war period. resumed work as soon as An encouraging sign was the Development land sales it could. One can see the confirmation of reservations March 28 to October 2, 2006 emergence of the jewelers’ relating to some large spaces. block designed by Kevin Dash The second stage of the Beirut and Rafik El Khoury; and in Souks development is the North Developer Location Land area BUA Land use the Souks core, designed by Souks. The building permit for sq m sq m Rafael Moneo and Samir that project was issued for the Khairallah, the alignment of department store and multiuse 2 901 Saifi co. 901 Saifi * 1,371 11,200 mixed use Souks Jamil, Arwam, Ayyas building, both designed by Nabil 1477 Bashoura co. 1477 Bashoura * 3,322 22,400 mixed use and Tawila shopping streets. Tabbarah. Solidere will soon 987 Bashoura co. 987 Bashoura * 4,627 39,000 mixed use The entire structure is to be start the tendering process for completed by end 2006, to be construction works. 1523 Bashoura co. 1523 Bashoura * 4,681 37,000 mixed use 1525 Bashoura co. 1525 Bashoura * 1,350 13,600 mixed use followed by electromechanical The entertainment center was 1526 Bashoura co. 1526 Bashoura * 2,495 26,000 mixed use and finishing works. Delivery redesigned by Valode et Pistre is scheduled for end (instead and Annabel Karim Kassar, in 1542 Bashoura co. 1542 Bashoura * 1,992 14,200 mixed use of summer) 2007. order to conform with the new 1544 Bashoura co. 1544 Bashoura * 1,610 15,000 mixed use cinema multiplex norms and Beirut Bay s.a.l. Block 159 plot 1 ** 7,158 65,000 residential standards, introduce more Town Tower II s.a.l. Block 159 plot 2 ** 5,992 62,000 residential commercial space and create Belair Real Estate s.a.l. Block 157 plot 6 ** 5,890 30,000 residential a link between Allenby and Al Shu’la Saudi Lebanese co. Block 156 plot 3 ** 2,553 13,000 residential Trablous streets. Architecturally, this results Total 43,041 348,400 in a very interesting structure, for which the building permit * Part of Beirut Gate application was submitted to ** Sector D the Municipality by end September.

6 7 Beirut Souks are taking shape

department store

khan antoun bey square mixed-use bldg

majidiya mosque

multi-use bldg

1 entertainment complex 1 Zawiyat Ibn Iraq and the Jewelers’ trablous street block, with the restaurant building left, offices and shops in the ajami so background. uk square arw ad souk arwad 2 Jewelers’ block right, along Souk Tawila.

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w bu r s st ou rao 3 The corner of Souks Sayour and k l s bu st i ro s s m a Ayyas, left, will be fitted with wide t a

a y e l e j bu y r i stros t a stairs and a fountain. s w souks core t k

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o h y 4 Inside the Jewelers’ block. c s r s e a k b i s

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a s o h a m p ysquoare k a s ur a f 5 Panoramic view of Beirut Souks, w r a atrium looking north from block M, with

k the Jewelers’ block right. u so uk t o sa your e s e r

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a bab idriss square jewelers’ zawiyat block ibn irak 2 3 we ygan d st reet

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5 developers’ projects

Conservation area Martyrs’ Square axis Under construction are two Bab El Saray hotel development residential developments, by Kevin Dash / Hani Murad is Fochville by R & K Consultants, under construction. and Sémiramis by Robert Adam Beirut Gardens residential with Fouad Hanna and Fadlo development by Arata Isozaki / Dagher; and the Radium office Erga Group was submitted to building by R&K Consultants. Beirut Municipality. Two residential buildings are under study: Marfaa 94 by Ghalghoul sector Machado & Silvetti Associates / The Landmark project is under Charles Hadifé, and 1474 detailed design after ratification Marfaa by Axel Schultes / of requested derogations in Kamal Homsi. decree 16184 / 2006.

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Hotel district Ghalghoul sector 1 Four Seasons hotel, Marina Towers. 5 The Landmark site. 2 Monroe hotel, Platinum Tower, Beirut Tower, Marina Gardens. Martyrs’ Square axis 6 View of Bab El Saray hotel Saifi Village residential projects from Weygand street. Hotel district 3 Saifi Khan. 7 Beirut Garden site. residential developments 4 Saifi Village Two under construction. Wadi Abou Jamil Five projects are in progress. 8 Private residences, with Wadi Residence site in the foreground. Under construction are Dana of CCC by Kevin Dash and Al Salam, and Garden View by Nabil Gholam. 3 Permit files were submitted to the Municipality for Capital Plaza by Machado & Silvetti 6 7 Associates / Nabil Azar, Mina Two by Axel Schultes / R & K Consultants, and Bay Tower by Wadi Abou Jamil W.A.T.G and Samir Khairallah. residential developments Lot 77 Zokak El Blatt private residence Saifi Village by Farouk El Sheikh is completed. residential developments The Courtyard by Maha Nasrallah is under construction. In Saifi Khan, lot 752 is under construction, while lot 749 is Five permit files were submitted to awaiting building permit. Beirut Municipality for the residential cluster designed by Porphyrios Associates The Saifi Village Two residential and comprising Med Invest, DBA 1, DBA 2, cluster is being redesigned by DBA 3 and STOW Wadi. Nabil Gholam. Permit files for the Beirut Village One Elie Selwan residential building residential cluster by Giancarlo De Carlo on lot 1056 Saifi is under study & Associates, and the New Zone Real by Nabil Azar, after some delay Estate building by Tripod Architecture, that was due to regrouping and were also submitted to the Municipality. parceling issues. Lot 1388 Mina El Hosn was sold for a residential cluster, Wadi Hills, under study by Agence d’Architecture Antoine Bechu. 4 8

10 11

in and about the city center

Visitors Below is a list of visitors who ambassador in Khartoum came to the city center out of Charbel Stephan; Iraq former interest in the reconstruction minister of municipalities project and in its investment Barzan Dizyee. opportunities, and or met with Business Solidere to that effect. Business group director Eric Official visitors Smit, Royal Haskoning maritime Paris mayor Bertrand Delanoë consultants architects heading a delegation of five engineers, Holland. visited Beirut and its city center, Academics/Professionals accompanied by Municipality Dr. Sofia Shwayri, New York president Abdel Monem Ariss. university faculty; 60 students The visit led to the signing of attending summer school at the a number of agreements with American University of Beirut. the Beirut Municipality. Other official visitors include Sudan foreign minister Lam Akol Ajawin, with a delegation including Sudan ambassador Ahmad al Bakhit and Lebanon Paris mayor Bertrand Delanoë with Solidere general manager Mounir Douaidy.

Beirut city center is the political heart of the country, the seat of Parliament, Prime Minister’s Supporting Lebanon’s office, UN agencies, and the temporary meeting place for the resistance and love of peace Council of Ministers. In this capacity, the city center Beirut International Marathon received this summer many This year’s marathon, to take place November 26, has high-ranking Arab and foreign chosen as its motto: For the Love of Lebanon. officials, as well as an exceptional set of local and international La Route d’Elissa media correspondents. Meetings and media shows were held, La Route d’Elissa is an all-women themed Mediterranean which by itself generated a hive regatta reviving the legend of Elissa, also known as Dido. of activity during the quarter. This Phoenician princess, who sailed from the city-state of Tyre on our shores, was the founder of Carthage, in today’s Tunisia, in 864 BC. The event was inaugurated on August 29, 2004, when regatta boats set out from Beirut Marina and sailed along the Lebanese coast to Tyre, passing through Sidon, another city-state in ancient times, on their way to the Tunisian coastal towns of Sidi-Bou-Said and Hammamet, close to the ancient Carthage. This year’s regatta was to start on the National Day of the Tunisian woman, August 13, as a symbolic return voyage from Carthage to Tyre. Because of the war, the skippers knew they could not reach Lebanon. Putting the competition The Lebanese Company for the Development and Reconstruction aside, they decided to carry the motto A Path to Peace, The of , s.a.l. way to Peace across the Mediterranean, each crew going to P.O.Box 119493 a specific destination: the Tunisian to Naples, the Lebanese Beirut 2012 7305, Lebanon to Monaco, the Portuguese to Marseille, the French to Valencia, and the English to Athens. Tel. 01 980650/980660 Fax 01 980661/980662 [email protected] www.solidere.com 12