SHAREHOLDERS

BOARD OF DIRECTORS

GENERAL MANAGEMENT CHAIRMAN AND GENERAL MANAGER GENERAL MANAGER

Prof. Prof. Wafic Wafic Sinno Sinno Avenue Av enue Chief Financial Officer Assistant General Manager

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Includes proposed modifications to the New General Fouad Chehab Fouad Avenue Chehab Avenue Waterfront District sector plan. TABLEOFCONTENTS 02 introduction

05 consolidated financial highlights

06 chairman’s message in the last year and a half, we continued to...

12 beirut city center the fruit of an ambitious urban regeneration venture...

16 existing city center in reconstructing Beirut city center, Solidere has built on the intrinsic qualities...

25 waterfront district the Waterfront District is taking shape...

34 restoration the restoration of Beirut city center has confirmed the sustainability...

42 real estate strategy a consecration of the city center as a global retail district...

58 sale and rental strategy sales revenues rose, sustained by a substantial sales backlog...

64 developers’ projects a floor area of 2.5 million sq m has been so far the subject of development...

74 corporate funding, treasury and treasury stock the balance sheet at year end shows positions...

76 solidere shares and GDRs Solidere shares started the year...

80 management systems and studies Solidere has added new modules on its Enterprise Resource Planning...

82 solidere international Solidere International Limited (SI) was established...

91 independent auditors’ report

92 consolidated balance sheet

93 consolidated statement of income

94 consolidated statement of changes in shareholders’ equity

95 consolidated statement of cash flows

96 notes to the consolidated financial statements

128 board of directors – general management

01 Solidere Annual Report 2007

AS IT SPEARHEADS AND OVERSEES THIS PROJECT SOLIDERE IS BRINGING LIFE TO BEIRUT’S CENTRAL DISTRICT AND HOPES TO TURN IT INTO THE FINEST CITY CENTER IN THE MIDDLE EAST

AT THE HEART OF The Lebanese Company for the Development and Reconstruction of the Beirut Central LEBANON’S CAPITAL, District s.a.l. (Solidere) is a joint-stock BEIRUT CITY CENTER company established on May 5, 1994. It is based on Law 117 of 1991, which regulates IS AN URBAN AREA Lebanese real estate companies aiming at the THOUSANDS OF reconstruction of war-damaged areas, in accordance with an officially approved master YEARS OLD, plan. Its share capital is US$1.65 billion. TRADITIONALLY The Company issues annual and semi- Furthermore, Solidere International Holdings A FOCUS OF annual reports to its shareholders. Solidere’s s.a.l. (Holding) owns 37.2% of Solidere BUSINESS, FINANCE, activities through the end of 2007 are also International Limited. Solidere International summarized in its fourteenth Annual Report. Limited in turn owns 45% of BREMS GOVERNMENT, International s.a.l. (Offshore); 77.27% of SI Al CULTURE AND This Annual Report includes consolidated Zorah Equity Investments, Inc. (Cayman financial statements, which consolidate Islands); and 5% of Al Zorah Development LEISURE. ITS the accounts of Solidere’s subsidiaries (Private) Company Limited (Private RECONSTRUCTION depending on its shareholdings. Solidere’s Shareholding Company), Ajman Free Zone, shareholdings in subsidiaries as at end UAE, of which SI Al Zorah Equity Investments, CONSTITUTES ONE 2007 were as follows: Beirut Waterfront Inc. also owns 44%. In addition, BREMS OF THE MOST Development s.a.l. 50%; Beirut Real Estate International s.a.l. (Offshore) owns 38% of Management and Services s.a.l. (BREMS) Amman Real Estate Management and AMBITIOUS URBAN 45%; Solidere Management Services s.a.l. Services Limited (AREMS), Amman. REVITALIZATION 99.95%; Solidere Management Services s.a.l. (Offshore) 99.84%; Solidere International The consolidated financial statements are PROJECTS OF Holdings s.a.l. (Holding) 99.47%; Solidere prepared and audited in accordance with OUR TIMES. International Limited, DIFC, 0.4286%. international standards.

02 03 Solidere Annual Report 2007

2007 2006

CONSOLIDATED Summary of Operations in US$ million FINANCIAL Gross land sales 288.5 255.2 HIGHLIGHTS Gross rental income 20.8 20.7 General and administrative expenses 18.1 14.3 Net income 224.2 132.2 Sales backlog 914.1 1,196.0

Stock Data per Share in US$ Earnings 1.445 0.8375 Shareholders' equity 11.81 11.37 Stock price range A shares 25.09-14.99 26.01-15.07 B shares 25.12-15.00 25.89-15.10 GDRs 24.75-15.00 26.30-14.45

Financial Data in US$ million Cash and securities 337.9 114.8 Accounts and notes receivable 318.7 348.9 Properties held for development and sale 1,404.7 1,457.8 Investment properties 150.3 153.8

Retained earnings 263.2 209.7 Legal reserves 75.5 59.9 Treasury stock (168.5) (162.7) Total shareholders' equity 1832 1768.6

Financial Ratios in % Gross profit margin 60.82 55.05 Return (interest income) on liquid assets 5.5 5.86 Debt to equity 0.38 1.57

04 05 Solidere Annual Report 2007

The year 2007 was a turning point in the life of the Company, as our international business came faster than we thought. Our activity had previously been entirely in Beirut where the market was facing a period of stagnation. All of a sudden, we had to tackle abroad a number of projects, some larger than Solidere. So we had to stretch our capabilities to the maximum in order to cater both for the local and new foreign business. Until recently, we were still operating in a domestic environment that was not good for business. While we continued to focus on Beirut city center and aimed at completing our projects in the capital to sustain our role in national reconstruction, the expansion program was deemed to be the best decision at this juncture. The idea was to create a new dimension for Solidere, to seize the opportunities of the fast growing urban development and real estate business in the Middle East and MESSAGE around the Mediterranean Basin.

Another turning point occurred last week, with the resolution of the political situation, the renewed activity in Beirut city center and the CHAIRMAN’S impact of these favorable developments on investment prospects.

In 2007, in spite of the political stalemate, we INTHELASTYEARANDAHALF,WE achieved results that were relatively good CONTINUEDTODEMONSTRATEOUR when compared to 2006, very good in the local DEDICATIONANDPERFORMANCE economic context. The year registered a net INTHEFACEOFTHEECONOMIC profit of US$156 million, US$181 million before UNCERTAINTYTHATHADBESET income tax. This represents an 18% increase LEBANON SINCE THE JULY 2006 over 2006. The consolidated net profit WARANDTHEENSUINGPOLITICAL amounted to US$224 million, reflecting the STALEMATE.THROUGHSOLIDERE gain from setting up Solidere International (SI) INTERNATIONAL,WEINTENSIFIED and the 2007 profits from SI. OUREXPANSIONINTOCITY-MAKING PROJECTSOUTSIDEBEIRUT. ENHANCEDBYDIVERSIFIED ACTIVITIES, OUR 2007 RESULTS WEREGOOD.

WEARENOWREAPINGTHEBENEFITS OFOURRESILIENCE,SOUND THINKING,FLEXIBILITY,PROFESSIONAL EFFICIENCYANDBUSINESSACUMEN, ANDOURRESULTSAREBOUNDTO CONSTANTLYIMPROVE.LOCALLY,A POLITICALSOLUTIONISUNFOLDING ANDTHEIMPROVEDECONOMIC ENVIRONMENTSHOULDQUICKEN THETEMPOOFDEVELOPMENT. ELSEWHERE,THESUCCESSOF OURPROJECTSINALZORAH ANDCAIROISINTENSIFYING OURINTERNATIONALBUSINESS.

06 Solidere Annual Report 2007

A major indicator of our 2007 performance was the 14% increase in The South Souks offer 89,000 sq m of floor land sales revenues over 2006, to which can be added US$391 million in cash inflows space to be delivered at the latest by end 2008. Pre-leasing has from the sales backlog. reached 80% of commercial space in the Souks Core (200 shops, Investors who bought land from Solidere, though having possibly plus a food hall and office space). The North Souks will offer missed deadlines, are moving ahead with their projects, with building permits being 57,000 sq m of floor space. Work on the entertainment complex, obtained and construction starting. After some delays, construction has now picked up. and on the department store redesigned by Zaha Hadid for an The sale of flats has picked up within the city center as well as outside, a factor that is anchor tenant, are scheduled to start in the course of 2008. favorable to our development land sale program. In the Waterfront District, reclamation is A few deals materialized in the first part of 2008, indicating proceeding on a fast-track course for the delivery of the sold sites. continued investors’ appetite for real estate development in the city center. To Infrastructure and public domain design is awaiting ratification by accommodate the requirements of certain investors to lighten their burden, we have government decree of the master plan proposed by Solidere. An extended their payment dates, charging interest on late payments. On the other hand, international competition will then be launched to design the we received in November 2007 the amount of US$220 million that was outstanding at 70,000 sq m waterside park and corniche promenades. end of year 2006 on Phoenician Village. So cash keeps coming in and our cash level is In addition to its yearly performance, the quite comfortable. strength of Solidere is attributed to its strong asset base, minimal Rental revenues amounted to US$21 million. liabilities, its sound financial attributes and its important, varied Due to the increase in sales receivables and cash, and the and growing sources of revenue: land and real estate sales, real significant debt reduction, net interest income continued to estate rentals, and recently Solidere International. increase to a positive US$24.3 million. A new source of income was The Company has a total estimated Net Asset Solidere International (SI), with US$17.5 million (representing Value of US$8.07 billion. The market valuation for the 1.9 million sq m 37.2% of SI’s net income), and US$ 50.5 million (resulting from BUA remaining land inventory, using expected cash inflows at current consolidating the equity of SI), included in the consolidated profit. land prices, is around US$5.2 billion. We have stopped selling finished Our Company expects to receive a growing products in order to build a portfolio of income-generating properties. and more balanced revenue mix in future years. The yearly income The growing portfolio of revenue generating properties, including the stream from Solidere International will continue onward, with the Souks, has an estimated market value of US$1.39 billion. Receivables billing for services rendered to SI expected to partially offset and cash equivalents at year end amounted to US$0.6 billion. Solidere overheads. With the clearing of the political situation, land The Company enjoys minimal liabilities, sale volumes are expected to intensify. Land sales margins are to consisting of US$181 million in bank facilities, and consequently expand in view of increasing selling prices against a constant cost of earns increasing positive net interest income. The liabilities include land, about 90% incurred. Rental income is to increase significantly a put option sale of treasury stock shares for US$170.3 million. with the inauguration of the Beirut Souks, supplemented by Following the annual general meeting to revenues from parking and other property related activities. approve the 2006 results, dividends of US$1 per share were distributed by Solidere in 2007. We intend to honor our commitment to distribute dividends regularly. This, we believe, will have a positive impact on the share value and will be to the advantage of shareholders. Having fluctuated throughout 2007 between a high of US$25 and a low of US$15 in active trading, the shares closed the year more than 40% above 2006, at around US$23. At year end, market capitalization was US$3.9 billion. At end of May 2008, improved business expectations resulting from the political solution led to a sharp increase in share prices to US$35 per share.

08 09 Solidere Annual Report 2007

Solidere International Limited (SI) has a very positive impact on Solidere’s financial position. The company, registered in DIFC in June 2007, was capitalized at US$700 million, raised through a private placement offering. Solidere’s in-kind contribution to SI is valued at US$70 million, representing the premium paid by new shareholders for the value of signed projects. Solidere’s significant shareholding gives the Company a bigger share of the intrinsic value of SI’s underlying projects, which will have a positive impact on the results of Solidere. Solidere had built a portfolio of projects for Solidere International prior to its incorporation. Some projects that were in the pipeline in 2007 have materialized in 2008, and companies were established to pursue the projects in their respective countries. The projects include Al Zorah Project in Ajman, UAE, and two projects, Westown and Eastown, in Cairo, Egypt. Solidere International teamed up with the Government of Ajman to develop Al Zorah Project, with the Government contributing the land and SI preparing the master plan and raising cash capital for the project development. Al Zorah Project covers 12 million sq m of land, partly reclaimed from the sea, and offers real estate facilities with a total BUA of 22.1 million sq m. We raised AED 1.88 billion in cash subscriptions towards the AED 4 billion capital of Al Zorah Development Company, established in December 2007 and benefiting from a Concession agreement with the Government. The Project was successfully launched in May 2008 Our vision for international expansion has and the pre-sales campaign brought in US$2.7 billion in sales to been vindicated by the success of our Al Zorah and Cairo projects Al Zorah Development Company. and our ability to acquire property in Saudi Arabia, a very promising Solidere International partnered with SODIC real estate market. We have leveraged the Solidere brand and (Egypt) for the development of Westown and Eastown Projects, exported our city-making philosophy, know-how and processes. The respectively covering 1.8 million sq m and 0.85 million sq m in the reception to our projects is getting better everyday and we have Sheikh Zayed and Katemeya suburbs of Cairo. SI has land options on become well-known in the world for our capacity to raise capital, to 250,000 sq m in Westown and 50,000 sq m in Eastown. plan and execute large projects, and to market and sell development Among the projects in the making is the land and real estate products. Bodrum Project, Turkey, on 8 million sq m of land area, for which an Starting 2009, we will be concerned about how MOU has been signed. Having been short-listed in partnership with to implement a number of these projects. Therefore, 2009 is expected Vinci (France) for the Monaco Urban Expansion and Development at to be a consolidation year for our international activities. In Beirut, it Sea, we submitted our offer in March 2008. To fund the project, is also the target date for intense activity in the Beirut Souks and for 20 hectares in land area, we secured equity and shareholders’ loans the launching of land development in the waterfront district, a major from a number of investors, plus debt finance from a European bank phase in Solidere’s master plan. consortium, amounting to around Euros 3.5 billion. Judging from our past and new performance, Several opportunities have been identified in and in light of the favorable local and regional climate now Saudi Arabia and in several parts of the Middle East and the prevailing, we expect the near future to be quite favorable to our Mediterranean Basin. activities, both here and globally.

NASSER CHAMMAA Chairman and General Manager May 30, 2008 Solidere Annual Report 2007

Beirut city center enjoys a prime location at the heart of Lebanon’s This phase saw the completion of: infrastructure in the traditional city Phase One capital. Sloping down towards the waterfront, the site commands fine views of the sea with center and the treated part of the original landfill; detailed sector planning of existing and new 1994 – 2004 a surrounding landscape of mountains and hills. It is easily accessible from all parts of Beirut, development areas; landscaping and underground parking design and execution; historic core including port and airport. Major roads converge on it from its east, south and west, and line restoration; renovation of the banking district, Starco and Lazariya commercial centers; northern its 1.5 km seafront to the north. Wadi Abou Jamil, Zokak El Blatt and Saifi neighborhoods redevelopment; Beirut Souks design Continuously inhabited for more than 5,000 years, the site bears the and underground construction. marks of eleven civilizations, ranging from the Canaanite to the Ottoman. Beirut’s maritime New construction included Solidere’s UN House, Saifi Village, embassy and trading legacy dates back to the Phoenicians. Its Roman law school was the most compound, Rue de France multiuse complex; Bank Audi, Medgulf and Bankers’ Association prominent in the Empire. Its urban character and architectural style were formed during the headquarters, Monroe hotel, Al-Bourj and Atrium office buildings, the Consulting Clinics, Block Ottoman period and the French mandate, when it became the seat of public institutions. 24 and Parkview Realty residential buildings.

CENTER Independent Lebanon grew into a booming service economy, thanks Still ongoing real estate projects involved predominantly residential to its inherent assets, educated population and liberal political and economic system. Beirut clusters in Saifi and Wadi Abou Jamil; Beirut Marina facilities; residential and hotel towers facing was a lively, modern, cosmopolitan city, its city center a focus for regional trade, business, Beirut Marina and waterside city park; and inception of other landmarks. Completed on the finance and tourism. Growth was thwarted at the onset of hostilities in 1975. With the return waterfront are: marine works, defense structure, sea promenades and Beirut Marina; major to peace and stability, Lebanon’s economy re-emerged in the 1990’s, sustained by a national advances in land treatment and reclamation. recovery and development program. Massive public investment was coupled with macro- This phase, which started with the launching of the Beirut Souks above Phase Two economic policies designed to stimulate private local and foreign investment. While Beirut ground structures, will finalize the traditional city center by redeveloping the Saifi and Wadi Abou 2005 – 2024 city center benefited from this favorable environment, its entire regeneration is being Jamil urban villages and establishing prime new areas in the Serail corridor, hotel district and achieved without recourse to public funds. In 2005, the country suffered a great loss with the Ghalghoul sector. Its focus on the Martyrs’ Square axis and the New Waterfront District will

BEIRUT CITY assassination of former prime minister Rafic Hariri. Mr. Hariri was the godfather of national intensify the thrust towards making Beirut city center a favored location to global businesses, recovery. To him were owed the vision and inspiration for the rebirth of Beirut. In spite of the financial and other specialized services and institutions, as well as a prime residential area, tragic circumstances, Solidere successfully pursued its efforts to make Beirut city center a tourist destination and cultural hub. sought-after environment of the highest quality. Real estate development includes facilities around Beirut Marina and on the Martyrs’ Square axis; high-density zones comprising the Beirut Trade Center, The Landmark and other gateway towers on the southern edge of the city center; and northeast gateway towers THE FRUIT OF AN THE Drawing on the site’s natural assets and rich heritage, the Master marking the point where the coastal highway terminates in the city center. MASTER Plan is a carefully formulated, detailed, coordinated and phased In the New Waterfront District, this phase involves finalizing master AMBITIOUS URBAN PLAN action plan for the traditional city center and its modern extension REGENERATION on the waterfront. planning; completing land reclamation; infrastructure and landscaping design and The plan subdivides Beirut city center into ten implementation; developing the eastern marina; coordinating with the port authority over the VENTURE AND sectors, each with its own character. Some are previously existing city development of the first basin; and launching real estate developments with a distinct WATERFRONT neighborhoods brought back to life, others are defined by topography architectural style. DEVELOPMENT, or by new boundaries created in the urban fabric. The plan involves the recovery of the public domain, with the installation of a complete A FINE CITY CENTER SOLIDERE Solidere was initially capitalized with US$1.82 billion: US$1.17 billion infrastructure. It also provides an urban design framework for as contributions in kind of property right holders, and US$650 million as cash subscriptions HAS EMERGED IN restoration and new construction. following an oversubscribed initial offering. After the retirement in 1997 of 17,000,129 BEIRUT, DUE The plan reflects the site topography and natural shares, representing recuperated properties, its capital now stands at US$1.65 billion. features, protects views of the sea and mountains and creates public TO ACCOMMODATE Solidere’s duration was extended by decree 13909 of 2005 from 25 years spaces, including gardens, squares, belvederes, promenades and to 35 years, starting from May 10, 1994, the date of its registration at the Commercial Register. A BROAD, SUSTAINABLE trails. Recognizing the city’s heritage, it also unearths layers of its The Company has established a solid base for central Beirut prosperity MIX OF FACILITIES WITH history. It preserves surviving buildings and townscape features and through high value-added land development action, competitive real estate projects and re-establishes the urban fabric and neighborhood structures. It ensures property management services. Real estate projects are implemented directly, in joint 4.69 MILLION SQ M the harmonious integration of old and new, combining tradition with venture with partners, and through or in liaison with other developers. Solidere offers OF FLOOR SPACE. innovation, control with creativity in architectural expression. With the developers services ranging from real estate and architectural concepts to complete prime objective of creating a vibrant city center, it accommodates a development packages. broad mix of land uses, including business, public, residential, hotel, As lead developer and supervisory body, the Company controls the pace, leisure and cultural facilities. components and quality of development. Solidere outsources construction to focus on its core Floor Space sq m percentage The project covers some 191 ha (472 acres) of competencies: managing real estate project development, marketing development land, land: 118 ha (292 acres) as the traditional city center and a 73-ha (180- Offices 1,582,000 33.7 marketing and servicing rental properties. The Company provides management and operation acre) extension reclaimed from the sea. Close to 98 ha (242 acres) will services to public utilities, infrastructure, marinas, car parks and landscaped open areas. Residential 1,959,000 41.8 consist of public space, of which 59 ha (146 acres) in roads and 39 ha Solidere recently expanded the scope of its activities beyond Beirut city Commercial 563,000 12.0 (96 acres) in landscaped open spaces. center, to cover several urban and waterfront projects in the Middle East and around the Government / Cultural 386,000 8.2 Allocated for development are 93 ha (230 acres), Mediterranean Basin region. Services provided to such projects include: master planning, Hotels 200,000 4.3 including 22 ha (54 acres) of retained, public or religious property, with urban design, infrastructure, landscaping and real estate design; project development; legal Maximum Total 4,690,000 100.0 built-up area (BUA) guidelines indicated in the table to the left. and corporate structuring; financial engineering; implementation; marketing and sales.

12 13

Solidere Annual Report 2007

Solidere prepares development sites for investors wishing to develop Solidere implemented civil works, including culverts, relating to power real estate properties in central Beirut. Its activities in this respect involve town planning, supply, and installed the 66 and 220 KV power cables, a 220 KV link between the Beirut pine parceling and urban management, site preparation, archeological investigation, and the forest station and the city center, and a 240 MW substation transforming high-tension power implementation of infrastructure, landscaping, hardscaping and street furniture. The transmitted by Electricité du Liban into medium voltage; local transformers in turn convert it reconstitution of the public domain and the laying of infrastructure and utility networks, to low voltage electricity for domestic use. Most areas of the existing city center were completed in the existing city center, will extend to the new waterfront district. As per its 1994 equipped with duct banks for its medium voltage cables, with Bachoura and north Saifi still agreement with the Council for Development and Reconstruction (CDR), Solidere to follow. implements these works on behalf of the State in return for an allocation of 29 ha of Public lighting was installed throughout, with necessary meters, low- development land in the waterfront district. voltage cabling, lighting fixtures and feeder pillars. Tunnels were equipped with lighting, stand-by generators, control and safety systems. Civil works were also implemented for

CENTER telecommunications networks, with duct banks for low current networks, cable TV and MASTER The initial master plan was amended telephone services. PLANNING several times in the light of necessary changes to the waterfront Solidere obtained in 1998 a build-and-operate license for broadband Broadband Network reclamation, more detailed urban studies and sector plans, distribution of a converged IP network including high speed internet, internet protocol TV reflecting Solidere’s own city-making experience in Beirut and (IPTV), video on demand, video conferencing, data center facilities and virtual private changing trends in market demand. The latest Master Plan updates networking (VPN) for corporate clients. The Company signed in 2006 an agreement with regarding the existing city center were issued in Council of Orange, a member of the France Télécom group, for the building and operation of a fully IP Ministers’ decrees in 2006. network, using advanced telecom technology based on a fiber-optic backbone with dual connection to each building in Beirut city center. Deployment of the Solidere Broadband Network (BBN) was completed INFRASTRUCTURE Beirut city center has a 3.6-km ring road, by end March 2007, after a slowdown due the 2006 summer war and embargo, with further 8.4 km of primary roads, 16.6 km of secondary, tertiary and pedestrian delay caused by ensuing political events. The pilot project started upon receipt of the streets. Expansions to the prewar grid accommodate traffic and bandwidth for testing from the Ministry of Telecommunications. The operation was launched facilitate land parceling for real estate development. Three major axes once the required bandwidth was obtained, allowing the provision of services to start EXISTING CITY form the ring road system: George Haddad street to the east; the everywhere in September 2007, with the exception of the Riad El Solh, UN House and south widened Fakhreddine street to the west; Fouad Chehab avenue to the Martyrs' Square areas, due to the sit-in at the time. south, with a bridge doubled in capacity and new interchange and Solidere, under its unified communication network, is now able to IN RECONSTRUCTING BEIRUT underpasses providing fast access to airport, port, east, west and provide data (internet) and video (TV), operated and monitored from the network operation CITY CENTER, SOLIDERE HAS central Beirut. Avenues cut across the city center from north to south. center (NOC) that is hosting its data center, call center (IPCC) and other equipment and BUILT ON THE INTRINSIC Park avenue links the traditional city center to the hotel and waterfront servers for the different services. Beirut city center is thus being transformed into a 24-hour QUALITIES OF THIS districts. New local streets were created in Wadi Abou Jamil. The IT zone capable of attracting multinational companies and other residents who will benefit Martyrs’ Square axis links Damascus road to three major east-west from the provision of multimedia and broadband communication services. EXCEPTIONAL GEOGRAPHIC boulevards: Weygand, Zeitouneh and Port streets, the latter widened AND HISTORIC SITE AND and extended towards Trieste street. With its western segment GREATLY ENHANCED operational, and connecting directly to the citywide corniche system, HARDSCAPING Hardscaping and street furniture were the city center corniche is to skirt the waterfront district alongside a AND STREET upgraded at Solidere’s expense beyond the agreement with the State. THROUGH SOUND URBAN broad, terraced, pedestrian esplanade. FURNITURE Street and sidewalk paving, as well as streetlights, were designed to PLANNING AND DESIGN, NEW Among the Master Plan amendments of complement the character of each sector. Sidewalks were upgraded INFRASTRUCTURE AND FINE 2006 are two major road improvements. One is the road linking the from concrete to granite tiles and kerbs. LANDSCAPED PUBLIC SPACE, north of Martyrs’ Square to Trieste street. Michel Macary (France), in Solidere undertook the integrated design of coordination with Dar Al-Handasah and Solidere, completed the street furniture, signage and public area lighting, and commissioned MAKING IT A CHOICE concept design for the crossing from Byblos street, which includes public art for the city center. Plaques with new postal codes were LOCATION FOR LIVING AND bridging part of the ancient Tell area in order to preserve archeology. installed on completed buildings. Development controls were WORKING, AS WELL AS A The other is an improvement of the George Haddad - Fouad Chehab generated in a public domain master plan established with the help CULTURAL, TOURIST, LEISURE junction, creating grade separation at the intersection. The project, of Jean-Michel Wilmotte (France) and Ziad Akl. Street furniture being including the tunnel design, awaits CDR committing funds for the installed based on the new designs includes street name signage in AND SHOPPING DESTINATION. project and entrusting Solidere with its implementation. stainless steel, benches, telephone booths, street kiosks, bus In Bechara Al Mouhandess pedestrian street shelters, café seating enclosures and advertising billboards. The east of Maarad, overlooking Hadiqat As-Samah, Solidere had earlier signage manual prepared by Solidere received Municipality of Beirut completed the part along the restaurants and cafés, where half of the approval. Street name plates were erected in the conservation area six-meter space is used as terraces, and the continuation of the and Saifi. Pedestrian way-finding signage, 65 panels in total, was passageway until Amir Assaf mosque. The retaining wall until the installed in all areas. Beyhum street was equipped with new benches, St George Greek-Orthodox and St Elie Greek-Catholic cathedrals was bollards and waste bins. Renovation of the existing street furniture completed by end October 2007. will gradually be implemented according to the new designs, to be The city center water supply network adopted everywhere else. Small advertising billboards for the public consists of 30 km for drinking water and 38 km for irrigation. The water domain were delivered to the Municipality, which leases them out for disposal system comprises a sewage pumping station, 28-km sewage operation. Large advertising billboards operated by Solidere were piping and 26-km storm water drainage. installed on private property.

17 Solidere Annual Report 2007

PARKING Among the underground public parking FACILITIES facilities provided by Solidere, the Beirut Souks car park, with a final capacity of 2,500 spaces, is currently providing 2,000 spaces to Foch- Allenby users, with the four-level Weygand street car park topped by a garden providing another 108 spaces. The block 93 private car park jointly developed by Solidere and owners of neighboring properties, has become operational in the 320-space section owned by Solidere. Due to serve the north Foch-Allenby area, the car park occupies the space below Harbor Square. Two car parks under public property in Martyrs’ Square and near the Grand Serail, initially tendered out as BOT projects by the Council for Development and Reconstruction (CDR), have not yet been implemented. The winning team of the Martyrs’ Square axis international urban design competition integrated an underground parking structure concept design within the landscape scheme for the square, to re-launch the project on a BOT basis. The Council of Ministers had instructed CDR in 2005 to proceed with the design and construction of the Riad El Solh underground car park, also under public property, in coordination with Solidere. However, the Municipality took the resolution not to execute the project. Pending completion of sufficient space underground, 20 vacant lots assigned for surface parking provide 3,500 car spaces servicing up to 10,000 customers per day. They include a car park in the eastern section of the waterfront district with a free shuttle service to the existing city center. Surface parking moves to new locations to make room for development.

OPERATION AND Solidere operates and maintains the Solidere continually upgrades its MAINTENANCE completed infrastructure and reconstituted public domain until site logistics services: cleaning, pest control, safety, their delivery to the State. These services cover: tunnels and security and traffic management. In a city center image underpasses, roads and sidewalks; street furniture, traffic lights and improvement program, undertaken in collaboration with street lighting; utility ducts and manholes, sewage pumping station participating property owners and users, Solidere is and network, storm water networks; irrigation station and network, implementing the following services, to supplement trees and landscaped open spaces. those provided by the Municipality: surveillance security; As per Law 117 of 1991 and the agreement door-to-door waste collection; street and sidewalk with the State, ratified in decree 5665 of 1994, infrastructure and the washing and street furniture cleaning; pest control; public domain are to be delivered upon completion to CDR, maintenance of open spaces, trees and planters; and street representing the State. All the works above ground have been decorations during holidays. delivered to the public authorities. They include roads, tunnels, Solidere is also installing a traffic sidewalks, street furniture, signage and lighting. Electricity networks control system that, in addition to phasing traffic lights, were delivered everywhere except for north Saifi, Bachoura and monitors drivers violating speed limits. Control panels and Trablous street. However, Solidere continues to operate the control cameras have been installed at two intersections so far, with room in tunnels, and remains in charge of the irrigation network, others to follow. streets and open spaces. Solidere documents damages occurring in The Company is also installing a CCTV Beirut city center, including those due to car accidents or vandalism surveillance system to cover all sectors in the BCD. The first acts. The Company sends reports to the Municipality to that effect, with phase of the system covering the Foch-Allenby and Saifi lists of repairs that need to be done and a mention whether the sectors became operational in 2006. The Zokak El Blatt, damages result from accidents or from wear and tear. Bachoura, Wadi Abou Jamil, Beirut Souks and Beirut Marina Since 2006, the Municipality has been areas were completed in April 2007. The installation of CCTV subcontracting the operation and maintenance of handed over works, under Solidere’s in the Nejmeh, Maarad, Riad El Solh and Lazariya areas, supervision. The storm water network is maintained by the Municipality, with Solidere doing initially scheduled for end May 2007, was delayed in view of quality control on the work done by the contractors and subcontractors. Solidere is still the political situation. Once completed, the CCTV surveillance maintaining the sewage pumping station, and will continue to do so until such time the Beirut and traffic light control systems will be handed over to the Administration (Mohafazat) assigns an operation and maintenance team of its own. concerned public authorities.

18 Solidere Annual Report 2007

ARCHEOLOGY Extensive archeological excavation and Among completed spaces: Gibran Khalil Gibran research of sites throughout the city center has yielded evidence on garden facing UN House, Roman Baths garden and public space, civilizations spanning 5,000 years. Solidere has supported the Fouad Chehab gardens overlooking the city, Riad El Solh Square, rescuing and preservation of this heritage, financed the teams working Debbas Square and Wadi Abou Jamil Square. Adjoining public and under the supervision of the Directorate General of Antiquities, and religious buildings are landscaped spaces in Nejmeh Square, facing prepared plans and a signage system locating all key historic sites on the Municipality, cascading under the Grand Serail with Omar Onsi a 3.5 km Heritage Trail. garden at street level, along the CDR stairs, between the Evangelical Research proceeded in 2007 on eight church and National Music Conservatoire, near St Elie church in Wadi archeological sites in public spaces, development lots, or built lots Abou Jamil. Saifi Square and Omar Daouk Square provide other under restoration. The documentation, digitizing and evaluation of the landscaped areas, to which are added private spaces in Saifi, Zokak El results provide data for a new synthesis of Beirut’s urban history. Blatt and Mina El Hosn near Planet Discovery. Other works involved New discoveries have confirmed the location of upgrading Amir Amin Square in Bachoura by adding a water feature, Roman Beirut’s major porticoed streets. Excavations in the Wadi Abou as per a Vladimir Djurovic Landscape Architecture design; and Jamil area yielded vestiges of the ancient Hippodrome where chariot providing Samir Kassir Square on Weygand street with a sculpture by races took place, and to the large club buildings used by participants Louis Derbré (France); the latter garden received a 2007 Aga Khan in the races. The club buildings were situated north of the track, while Award for Architecture. the seats were situated to the south, built on stepped platforms cut out In Wadi Abou Jamil, the design for block 65 was of the Serail hill rock. The archeologists have uncovered two parts of completed, with a redesign option under way by the Royal Hotel and the Hippodrome’s central median, or spina. The earlier one is part of Resorts. Olivier Vidal (France) was commissioned by Solidere to the program to make ancient Beirut a Roman colony. The later one, of design the Bab Idriss Square. The square will incorporate sculpture by more monumental nature, may have been sponsored by Emperor Xavier Corbero (Spain) to mark the location of Bab Idriss and access to fig.2 Hadrian and built in 130 A.D. Subject to agreement with the Directorate the Roman Hippodrome. General of Antiquities, these artifacts are to be incorporated within Works in other areas include commissioning Wadi Abou Jamil Square. two artists for a concept for the sculpture in the Rafic Hariri garden Solidere continues the integration of designed by Djurovic. Its construction by the contractor, Target, was archeological sites within the city fabric. Elements of the ancient interrupted by inaccessibility to the site due to the political situation at fig.1 Dar Al-Handasah, Square 25 harbor walls are to be incorporated in Khan Antoun Bey Square and in the time. The upgrading of Nejmeh Square and of the CDR open space fig.2 Public space on Harbor Square on block 93. The landscaping of Castle Square in on the Serail hill, for which concept designs were respectively General Fouad Chehab avenue block 94 has started with the conservation of ruins containing major submitted by Djurovic and by Frédéric Francis, were delayed for elements of the local geological and urban memories. A second phase similar considerations. of this project, the Belvedere Garden, is now in design. The main focus The design of Gebran Tuéni memorial garden remains Hadiqat As-Samah and the Heritage Trail. A city history along Weygand street, voluntarily offered by Djurovic, needs to be museum near the ancient Tell, to be the starting and ending point of totally revised to make room for a public transport drop-off at that the Trail, will bring to life Beirut’s 5,000-year heritage and celebrate point, as well as access to Le Gray Hotel. major Beirut finds. Designed by Gustafson-Porter (US-UK), Hadiqat Articles by archeologists of the fourteen teams As-Samah (Garden of Forgiveness) is to be constructed in a 2.3-ha site that worked in Beirut city center continue to be published in scientific on which Solidere has relinquished its development rights. The journals, and a number of young Lebanese and foreign archeologists garden, overlooked by several places of worship and with a design have completed their dissertations attempting to synthesize part of reflecting Lebanon’s varied landscape and numerous historical layers, Beirut’s history. will be a place of calm reflection. The building permit for the garden is about to be issued. Solidere is carrying out all the works that are part of the public LANDSCAPING With green public space covering 39 ha of domain. The western terrace wall was completed. Continuation of the land, the city center, representing 10% of municipal Beirut, will pedestrian street, including the belvedere to the south of St George contain half of the capital’s green areas. Solidere has been cathedral and the passages leading to Amir Assaf mosque, as well as vindicated in its quest for quality and unique integration of public the street between Al Amin mosque and St George cathedral, were domain design accompanied by public art. completed in June 2007. Fine public spaces have exerted a significant Gustafson-Porter also completed the concept impact on development land sales. Encouraged by the Mediterranean design of the garden on municipal land adjoining St Elie Greek- climate and lifestyle, café society and social promenading within Catholic cathedral. The project is to be presented for Municipality public spaces has also made the city center a most active destination approval before proceeding further with the design. for Beirutis as well as for visitors from the rest of the country, from the The winning Greek team included in their entire Arab region and the wider world. presentation to the Martyrs’ Square axis competition a concept design The public domain is designed to comprise 60 for its landscaping. The design will evolve in coordination with parks, gardens, squares, pedestrian areas, quaysides and seafront Solidere and Beirut Gate, developer of eight lots on the southern promenades, the most important of which is the waterside city park; as section of the axis. The consultant completed the preliminary design of well as pedestrianized areas and streets lined with trees or the square together with the concept design of the underlying car park, incorporating planters or wide medians landscaped with trees, shrubs and is about to proceed with the square’s detailed design. To improve and colorful plants. the initial design, Solidere approached Xavier Corbero to propose, in coordination with the Greek team, an artistic treatment of the car park ventilation shafts, comprising a tall sculpture south of the square and a number of small sculptures along the Martyrs’ Square axis. 21 Solidere Annual Report 2007

Gustafson-Porter designed the Old Shoreline Walk, a sequence of connected spaces representing the submerged old shoreline. All Saints’ Square, Shoreline gardens (blocks 11 and 25), Zeitouneh Square and Santiyeh gardens, in Sectors B, C and E (hotel district, Serail corridor and Souks district), are the main components of the first phase of this project. A later phase, starting with Jean-Paul II Square, will prolong this walk into the Ottoman Wall walk in Sector D (Waterfront District). Progress was achieved on the project detailed design. The bid for Zeitouneh Square was launched, with the participation of four contractors: Maroun Abi Ghanem, PEG, Target and Sabeco. Tender packages for All Saints’ Square, Shoreline gardens and Santiyeh promenade and garden were received by mid February 2008. The preliminary design for the Santiyeh promenade, based on a new concept, was approved by Solidere and by the concerned religious authority, the Mufti. The detailed design is currently under process. Gustafson-Porter also worked on the concept design for the hotel district corridor landscaping, the culmination of a series of south-to-north open spaces serving as view corridors, including the elevated Mina El Hosn Square. The part of the square falling between the block 17 eastern and western plots is undergoing detailed design by Djurovic. Machado and Silvetti Associates (US) finalized in 2005 the design of Castle Square on block 94. The design integrates a promontory wall at the citadel level, with pedestrian passages offering fine views of the square and of the port first basin. Solidere completed in 2006 the consolidation and restoration of the citadel. The tender, launched with the participation of Target Engineering, AG Contracting, Nassar Trading and Contracting Company, Khoury Contracting Company and PEG, had resulted in PEG winning the construction contract. fig.3 fig.1

fig.2 Preliminary design is proceeding for the adjacent Belvedere Park, on block 95, which overlooks the ancient Tell and includes a garden with historic remains, following approval of its concept design by the Directorate General of Archeology. The preliminary design for Harbor Square, located on block 93 over part of the ancient harbor, was completed by Gustafson-Porter in July 2007. The detailed design scheduled for completion by mid 2008, includes part of the reconstructed ancient harbor wall, water features, extensive pergola shading and café seating. Work started on the Heritage Trail pedestrian circuit, with information panels under preparation, together with a tourist map of archeological sites and historic buildings. fig.1 Castle Square and Castle Belvedere, Machado and Silvetti Associates Landscaping work planned for the future in the fig.2 Wadi Abou Jamil Square, Thibaud existing city center includes: the next stage of design of Martyrs’ Square, Urbanisme et Paysage / Rafic El Khoury design completion implementation of the Machado Silvetti Belvedere, fig.3 Fouad Chehab gardens landscaping by the Greek team of the northern part of Martyrs’ Square.

23 Solidere Annual Report 2007 DISTRICT WATERFRONT

Destined to be a prime, active, multiuse district with extensive green areas and bold architecture, the Waterfront District commands fine views of the sea, with hills and mountains across the bay to the northeast. As an urban destination, the district comprises the termination and climax of Beirut’s citywide seaside drive, the corniche. When completed, it will contain a city waterside park, two marinas, quayside THE WATERFRONT DISTRICT IS TAKING SHAPE AS promenades and 29 ha of development land. SOLIDERE PROCEEDS WITH ITS TREATMENT AND Altogether some 73 ha of reclaimed land are enclosed within a RECLAMATION, MASTER PLANNING AND LAND terraced sea defense system designed to withstand centennial storms. Its unique caisson DEVELOPMENT, WITH A VIEW TO THE PROMPT structure is limited in height to 5.5 m above sea level to protect sea views from deep within DELIVERY OF THE SITES TO INVESTORS. THE DISTRICT the city’s historic core. The sea defenses provide harbor enclosures for the two marinas. HAS ALREADY ELICITED STRONG INVESTOR INTEREST Beirut Marina is edged by a public town quay, designed to house waterside restaurants and shops, alongside a yacht club and apartments. A pedestrian AND LAND SALES, TOTALING 326,000 SQ M BUA, bridge will link it to the hotel district. Providing an uninterrupted 3.5-km extension of the HERALD ITS REAL ESTATE DEVELOPMENT PLANNED Beirut shoreline, the marina, harbor quaysides and corniche promenades will provide more TO REACH AN AGGREGATE 1.7 MILLION SQ M BUA. than four times the area of seafront public space currently available in the Beirut peninsula.

24 25 Solidere Annual Report 2007

MASTER The Waterfront District consists of Sectors A and D. Sector A SOLIDERE In 2006, Solidere commissioned urban design PLANNING comprises the waterside park, corniche, land, quays and breakwater around Beirut MASTER PLAN consultant Ian Hogan to undertake a planning exercise for the Marina. Sector D comprises the development blocks and public domain extending north PROPOSAL Waterfront District. An intense interest was perceived on the part of of the Souks district to reach the corniche promenade, and east of the waterside park to investors, who were pressing Solidere to buy lots in the district. reach the Beirut port first basin and the planned eastern marina. In response to investors’ The Solidere proposal resulting from this planning exercise early declarations of interest, Solidere has engaged since 2001 in a serious planning addresses its concern about Beirut being turned exclusively into a exercise for Sectors A and D, continually improving this planning and seeking approval resort and residential center, with the disadvantages of extensive from the public authorities for its proposals regarding the district, together with related absentee homeownership. Solidere is keen to counteract this trend general and special regulations of the BCD Master Plan. by encouraging the development of a comprehensive mixed-use The current Waterfront District master plan, ratified in Council of waterfront district. This also falls within the Company’s strategy to Ministers’ decree 15803 of 2005, was a development by urban design consultant Ian market and promote Beirut as a corporate international business Hogan of the 2001 planning study by a consortium of US firms: Skidmore Owings & center, based on the city’s lifestyle assets and skilled human Merrill (SOM) for urban design, Sasaki for landscaping and Parsons Brinckerhoff for resources. Beirut’s competitive edge lies in the qualities of its transport planning. people and services. Discussion is proceeding with the government The plan aims at turning the new waterfront into the destination on providing business incentives within a defined area of the and climax of Beirut’s citywide corniche. Upon completion of the Beirut Marina town waterfront district. Consistent with Solidere’s mixed-use quays, corniche promenade, eastern marina quayside and Beirut port first basin philosophy, the incentives are planned to apply not only to offices, promenade, the city center will provide an uninterrupted extension of the Beirut but also to all supporting uses, including hotels, serviced shoreline. The terraced corniche promenade, over 1.3-km (0.8-mile) long, with a width apartments, retail and other services. Employment generation and varying between 45 and 110 m, will be a socially active pedestrian arena, with views to other effects are expected to have a big impact on the Beirut the sea, Jounieh bay and Mount Sannine. economy. At full build-out, the special business district is planned The street network was designed to accommodate an urban to create some 40,000 new jobs. Formula One Grand Prix circuit. This received FIA’s preliminary technical approval in 2002. The track is to run clockwise along 4.8 km with the starting grid on the coastal The Master Plan amendment for the Waterfront District corniche. Where necessary, particularly at bends and chicanes and over-runs, proposed by Solidere was approved by the Directorate General for Urbanism construction works are to dismantle sidewalks, widen carriageways and install safety in January 2007 and sent to the Municipality and the Council for barriers and debris fences prior to the race event. On the 40-m wide upper corniche Reconstruction and Development. However, it is still awaiting Government promenade, temporary stands are to be installed to accommodate spectators. ratification, to be issued in a Council of Ministers’ decree. In Sector A, leisure, sporting and tourist activities are the dominant The amended Master Plan creates two poles, focused on ones. Decree 15803 of 2005 lists: an outdoor amphitheater in the waterside park; two groups of towers that constitute very dramatic landmarks, within a infrastructure and installations for Formula One racing; buildings for the yacht club and perimeter of buildings conforming to the previous Master Plan’s streetwall related services, hotels, tourism, exhibition centers, sports courts, restaurants and cafés. The vocabulary as well as new skywall controls that condition the profiles of towers Beirut Marina yacht club building was subject to a maximum height of 11 m above corniche within the clusters. level. This stipulation was amended in Council of Minister’s decree 16546 of March 9, 2006, The pedestrian connectivity within the Master Plan which increased the yacht club maximum height to 13 m. No permanent construction is amendment forms a branching spine, which starts from the Souks through a allowed on the marina quays and breakwater, apart from infrastructure or buildings relating footbridge and continues north towards the sea. A special business district, to port management, such as customs, immigration, petrol station or car parks. Restaurants planned to comprise a group of towers with heights ranging from 140 to 220 m, and shops built as temporary structures along the town quay are not to exceed the height of is created on either side of this central boulevard and around the new square to the finished corniche promenade above. its east. Within the spine, the street is to be widened to accommodate a light rail Planned as an exemplar of modern development, Sector D is a train. The detailed alignments of the LRT are under study by the Greek team, multiuse district with a wide range of commerce and retail services, office, tourist and hotel winner of the Martyrs’ Square competition. A new avenue, parallel to the central space, convention centers, exhibition and cultural facilities, together with extensive boulevard and to its east, features arcades providing an architectural link with the residential development. It also includes a part of the Formula One track. The provisions existing Maarad-Allenby axis. relating to developments on the Beirut Marina are also applicable on the eastern marina. A second, easterly cluster of higher towers, centered on Development lots should have the following specified minimum areas: an axis aligned on the view of Mount Sannine, is expected to be mainly 750 sq m subject to encompassing an 18 x 18 m square, in sub-sectors Da, Dc and Dd; residential, with hotel, serviced apartments, supporting retail, and also 1,500 sq m subject to encompassing a 25 x 25 m square, in sub-sectors Db and De. Two possibly some office use. This cluster is carefully controlled to enhance the streetwall controls are applied and view corridors are created to preserve sea and mountain offshore view terminating the Martyrs’ Square axis, with towers leaving space views. SW5 requires a 3 m setback at the 36 m height. SW6 is similar to SW5 with the between them to give glimpses of the sea. additional requirement of a 5.5-m high arcade on the street frontage. Building heights and The proposed amendment involves a transfer to the New

RUE FOCH FOCH envelope controls ensure a careful distribution of floor space. The majority of development Waterfront District of some 110,000 sq m of BUA, equivalent to the areas lost is at medium density (40 or 52 m height), with a limited number of high-rise sites (90, 120 and on the Martyrs’ Square axis, in sector H, as well as in Wadi Abou Jamil

Pro Prof.f. Wafic Wafic Sinno Sinno Avenue Avenue 160 m height) planned in distinctive locations and landmark buildings framing spectacular developments and in 178 Saifi Village, where one floor had to be removed to Mir Majid Majid Arslan AvenueA rslan A

venue

Shawki St

ad

m Ah

Ahmad Shawki St Shawki Ahmad views to the sea and mountains. The road widening and addition of new roads in the sector compensate for higher ceilings destined to improve the residential W Kortas St W Kortas St Kortas W plan result in larger areas dedicated to public domain. The total built-up area remains environment. The principle of BUA transfer between the various sectors is unchanged, with no increase in development areas allocated to Solidere. recognized in the BCD Master Plan and detailed regulations.

27 Solidere Annual Report 2007

BEIRUT MARINA Beirut Marina hosted 136 boats in the last Beirut Marina was put at the disposal of year, having entered its sixth season in April 2007. Its capacity Solidere in 2002, as per a 1997 agreement with the State granting stands at 186 boats, ranging from 5 m to 65 m, with 75% of the the Company the right to operate the marina and below-corniche mooring area accommodating boats of more than 25 m length. car park for a 50-year period. Solidere undertook at its own By end 2007, Solidere had signed medium- or expense, and with the relevant public authorities’ supervision, the long-term leases (three, five or ten years) for 32 boats, and one-year construction of necessary installations, including access and leases for 104 boats. Temporary quayside offices have been circulation roads, surface parking on the breakwater, below provided for harbormaster and public authority activities, pending corniche car park, and on-site development: pontoons, utilities for completion of the marina development based on Steven Holl’s the boats, harbormaster, customs and immigration facilities. It also design. Civil works for the marina were part of important marine issued marina by-laws addressing such matters as general services works delivered in 2002, as per the 1994 agreement with the State, administration, operation, boat traffic, pedestrian and vehicular and also comprising a breakwater and a two-line defense structure circulation, environmental protection and public safety. protecting the marina and the waterfront. The US$298 million Completed works include pontoons, mooring project cost was partly financed with a 10-year US$107.3 million and service bollards, utilities and network ducting, designed by loan concluded in 1996 with BNP Paribas and Banque Indo-Suez, Groupe Camille Rayon (France) together with an additional quay with US$7.3 million COFACE guarantee. Repayment of the loan providing improved shelter in times of northerly winds. The continued in 2007, with no amount outstanding at year end. connecting of utilities: water, electricity, fire line, telecom/internet, cable TV, was delayed by the closure of the north quay access after the explosion of February 2005, which also caused damage to the electricity room and water tank. Only in December 2005 was Solidere allowed to withdraw the damaged standby generator and electric switches for repair. The road access was opened on June 6, 2007. Repairs were later completed for the standby generators, switchgears and Electricité du Liban (EDL) transformer room. A gas station for diesel and fuel was installed, as well as CCTV and safety signs for marina users. In time for the new season, the marina was connected to EDL power by mid-February 2008 and to the Beirut Broadband Network together with IPTV by end April. A new office for the coast guard was installed at Beirut Marina’s southern entrance, which will also feature a green area. Solidere is awaiting the building permit for the 400-space below-corniche car park designed by Dar Al-Handasah. The issuing of the building permit will allow completing the detailed design, launching the tendering process and starting construction works.

29 Solidere Annual Report 2007

LAND Phase Two of land reclamation covers 18 ha of land, plus extensions Solidere had taken measures on the ground to expedite completion of RECLAMATION below sea level, and involves the excavation, sorting and treatment of 5 million cubic meters the project, informing investors about the planned timing of delivery of development land. of debris and waste materials. The design-and-build contract was awarded to Radian A fast track approach was adopted, with Hornagold & Hills International - H2i (UK) as International (US). The works, started in April 1999, were supervised by Fairhurst International construction manager. The project was split into four operations packages, to be executed (UK) until October 2005, and controlled by Bureau Veritas (France). by separate contractors. These include Société Contemporaine de Développement, Assaf & The US$56 million project was financed by means of three bank loans, Coex, Alfarah Co, and Lechbenberg (Germany), which studied the possible options for with a consolidated repayment schedule. A six-year, locally syndicated loan of US$22 million, dealing with the leftover stockpile of plastics. concluded in March 2000, financed its local content. The loan was fully drawn and entirely repaid. The 2006 summer war, added to the legal issues, delayed operations. On its US content in equipment, engineering and construction services, the project benefited But the year 2007 saw the completion of all excavations, the processing of the materials and from US$14.7 million in export credit financing and US$10 million in additional local financing, rapid advances in backfilling, leveling and consolidation of clean material at the end of the concluded in 2001. These amounts were fully drawn, and US$7.04 million was outstanding by reclamation and sorting process. The waterside park site was backfilled with clean and end 2007. processed soil, clearing the view for end-users of the hotel district developments facing the The project was scheduled for completion in April 2004. However, the site and for Beirut Marina boat owners. Clean imported material was used for the main Radian contract was the subject of a dispute which went in 2003 before an international roads, one extending Park avenue along the eastern edge of the park and the other arbitration tribunal under the rules of the International Chamber of Commerce (ICC). The extending Patriarch Hoyek street; as well as in the backfilling of the water basin excavated tribunal award, issued in July 2004, required Radian to remedy the defects in the works at to seabed level, and of the third main road which forms a branching spine due to start no cost to Solidere, cover all arbitration legal costs, and provide Solidere with a plan opposite Khan Antoun Bey Square, in the Beirut Souks, and continue north towards the sea. showing how Radian proposed to continue the works to comply with the contract. The All earthworks originally part of Radian’s contract (excavation, sorting, failure of negotiations was coupled with the contractor’s suspending works in February processing, backfilling) were thus completed by end January 2008. Backfilling works to close 2005, ignoring all instructions to return to work, and refusing to reimburse Solidere's legal the open water channel along the caissons will be completed by end June 2008. The costs. The Company terminated the Radian contract in February 2006. Both Solidere and the backfilling of surface areas is in progress. Works are also under way to backfill the sub-base contractor filed counter arbitrations against each other that were still pending as of layers of streets and roads, as per the detailed master plan. December 31, 2007. The arbitrations are currently in a jurisdictional phase with a partial Ongoing remedial works include monitoring boreholes, venting award relating to jurisdictional issues expected in the very near future. trenches, and gas remediation measures to ensure compliance with international norms and Solidere was recently approached by Radian and its mother company, specifications of backfilled materials. MORES (Lebanon) was assigned as environmental URS, for negotiations on a possible settlement. As a result of these negotiations, a consultant for remediation and treatment, in charge of monitoring the generation of landfill settlement was reached, whereby Radian - URS accepted to pay Solidere an agreed amount gas from 70 bore holes and proposing remedial measures. as final settlement of all Solidere claims. A term sheet was signed to this effect and final Longitudinal venting trenches were executed to help relieve gases arrangements are being prepared for the execution of a settlement agreement and the generated in backfilled materials placed by Radian prior to their contract termination. subsequent cessation of all arbitration proceedings. Radian’s inadequate dealing with the gas issue had been at the heart of the dispute with them. Radian alleged that there was no problem with gas, but Solidere later found problems with gas generation below sea level. They did not have a program for dealing with the gas issue; later, upon Solidere’s insistence, they presented a program ending in 2013, which was unacceptable in view of the commitment made to some investors who bought development land to deliver those sites early in 2011. The sorted plastic stockpile was successfully relocated to a disused quarry site outside Beirut, in accordance with permits issued by concerned public authorities and as per specifications by the Ministry of Environment and the engineering office of Rafic Khoury and Partners. The backfilling of sorted plastics in that disused quarry was fully supervised and monitored by the Ministry of Environment and its appointed consultants. Pending the delivery of all Waterfront District sites for infrastructure, development and public space, an area in the eastern part of the district was leveled, equipped with temporary roads and parking areas, and leased to Beirut International Exhibition and Leisure Center (Biel) until 2013. Activities hosted in temporary structures currently include exhibition halls, conference areas, a banquet pavilion and a seaside restaurant.

31 Solidere Annual Report 2007

INFRASTRUCTURE In 2007, Solidere started the process for the AND PUBLIC concept design for infrastructure, hardscaping and landscaping. In SPACE spite of the delivery of the Waterfront District sites, this process had been delayed, pending the issuing of a Council of Ministers’ decree approving Solidere’s Master Plan proposal for sectors A and D. Once the decree is issued, Solidere will commission the infrastructure design, based on the prepared scope of work. A consultant will be assigned as lead designer, with Wilmotte for street furniture and other consultants for specific tasks. Solidere may benefit from its cooperation with Arup (UK), one of Solidere International’s consultants, to improve its guidelines for infrastructure design in the New Waterfront District. The design is expected to involve potential application of value added services that include provisions for bus-based public transport as well as a tramway or light rail reservation linking with that of the Martyrs’ Square axis. Concerning landscaping, a limited international competition, engaging some of the world’s leading landscape architects, will be launched to design the 70,000 sq m waterside park, and the corniche promenades, that are to constitute the city center’s major contribution to Beirut’s public domain. The brief for this competition is underway. Other green areas will be designed by separate consultants, with the Ottoman wall by Gustafson Porter.

32 Solidere Annual Report 2007 RESTORATION

Beirut historic core has a rich heritage of religious, public, institutional and commercial buildings. Widely recognized as a conservation showpiece, this ‘vieille ville’, with its modern amenities behind beautifully renovated façades, has witnessed a high demand for a broad range of office, retail, cultural and recreational uses. The peripheral neighborhoods of Saifi, Wadi Abou Jamil and Zokak El Blatt, have re-emerged as urban villages.

RESTORATION In the Master Plan, 265 buildings and 27 PROCESS public or religious buildings were retained for preservation. These were carefully restored in accordance with a set of rules established by Solidere, in cooperation with urban planning authorities, and involving sector plans and restoration guidelines. Restoration briefs established for the retained buildings were based on architectural and photogrammetric THE RESTORATION OF surveys, damage assessment and historical research on original BEIRUT CITY CENTER designs and materials. The briefs provide guidelines for articulating the design and restoration strategy to be adopted in each individual HAS CONFIRMED THE case, and are stricter for those buildings deemed of heritage or SUSTAINABILITY OF architectural value. Projects go through preliminary design approval, restoration permit issuance, mobilization of site works, TRADITIONAL façade and material sample approval, site inspection and finally DISTRICTS AND occupancy permit procedure. Solidere has a dedicated team to monitor implementation. HERITAGE BUILDINGS Stone repair was important in the Foch- AND THEIR GREAT Allenby and Nejmeh-Maarad areas, notable for their faithful reconstitution of elaborate façades and their high quality stone POTENTIAL FOR masonry. City center restoration combines authenticity with a CREATING VALUE, progressive outlook. Buildings are rejuvenated through the use of skylight atria, roof gardens or glazed roofs. Interiors are fitted with ONCE THEY ARE modern equipment for functionality, comfort and efficiency. In ADAPTED TO residential neighborhoods, this is allied with a sensitivity to the Mediterranean typology. In office buildings, open plan design THE NEEDS OF allows optimal and flexible use of floor area. Restored buildings are CONTEMPORARY maintained on a regular basis. To that effect, owners provide the Beirut Municipality with a signed commitment to undertake general LIFE AND BUSINESS. cleaning and façade maintenance every five years.

34 Solidere Annual Report 2007

RECUPERATED Solidere has successfully completed the fig.1 Allenby street AND SOLD recuperation process, giving former owners and tenants the fig.2 Lot 702 Mina El Hosn, Army street BUILDINGS opportunity to regain their rights in the buildings retained for fig.3 Lots 671, 1021 and 1144 Zokak El Blatt, restored residential buildings on Army street preservation. Besides fulfilling the requirements that apply to all restoration projects, recuperation contracts outlined the financial rights and responsibilities of involved parties, be they returnee owners or tenants. At the end of the recuperation process, 146 built lots had been recuperated. Of this total, 126 buildings are now fully restored and two are under finishing. In Mina El Hosn, lot 702, designed by Jean Harfouche as a residential building, offers 3,032 sq m of floor space; Star Tower on lot 121, designed by Natcon as a hotel with 4,762 sq m of floor space, is under refurbishment by the new owner. Seven buildings are under renovation. In Marfaa, El Patio hotel, designed by Joe Chehwan on lot 1144, has a floor area of 2,958 sq m; the Municipality Annex on lot 243, designed by Nabil Azar as an office building, offers 5,179 sq m of floor area; and lot 1353 Islamic Wakfs building, designed by Michel Barmaki as an office building, has 2,098 sq m of floor space. In Mina El Hosn, the Besançon School extension on fig.3 lot 1024 is designed by Tony Haddad with 7,015 sq m of floor space; a private residence on lot 771, designed by Pierre El Khoury Architect, covers 2,054 sq m of floor space. Two recuperated SOLIDERE Solidere took the lead in the restoration buildings were brought by Solidere and sold to investors as new BUILDINGS process, undertaking showcase work in its properties and closely developments. Finally, four lots are under permitting at the monitoring other parties' projects. Municipality of Beirut, while one is under design and six are The 44 built lots retained by Solidere were stopped for various legal problems. regrouped into 41 lots, including five co-owned buildings. Of these, Of the retained built lots whose ownership 37 lots were the object of restoration by the Company. The other devolved to Solidere, 37 original lots, regrouped into 31 lots, were four are being restored by third parties, respectively co-owners and sold 'as is', while one was leased 'as is' to be restored by its user. leaseholder, with lot 164 Saifi completed, lot 1042 Mina El Hosn Restoration is proceeding on the part of buyers / users, with 29 built under restoration, lot 1261 Mina el Hosn under permitting at Beirut lots ready, one under renovation and one under permitting at Municipality, and lot 996 Mina El Hosn on hold for legal problems. Beirut Municipality. In addition, Solidere undertook the restoration of two lots on behalf of the Islamic Wakfs, with lot 141 Marfaa completed and lot 1353 Marfaa under renovation. By year end, 26 buildings had been restored fig.1 fig.2 by Solidere: 13 residential buildings in Saifi, Wadi Abou Jamil and Zokak El Blatt; and 13 for office use with retail at street level in the Maarad and Foch-Allenby areas, which include five built lots (six buildings) serving as Company premises. Restoration is proceeding in 11 Solidere built lots, with five at the construction stage, one under permitting at Beirut Municipality, and five demolished for structural reasons. Solidere leases space in its restored buildings: 72 agreements relating to commercial buildings or sections thereof, and 129 agreements relating to residential properties, had been signed by end 2006. This had resulted in the occupation of around 19,266 sq m of commercial space and 23,751 sq m of residential space.

36 37 Solidere Annual Report 2007

In Saifi Village, two projects designed by Erga Group have been completed: a building of four floors with one apartment each, all leased, on lot 332, with ground floor retail units leased as part of Quartier des Arts; and four buildings on lot 741 around an internal garden over a 50-space car park, with three restored buildings plus a four-story infill building completed and occupied. In Zokak El Blatt, lot 670, designed by Fouad Menem, is under construction, having obtained building permit for its four floors. Parking spaces for the building are provided in adjacent lot 1144, a six-story infill building with 128 car spaces on six basement levels. RELIGIOUS Nineteen places of worship attest to the In Wadi Abou Jamil, Mina El Hosn cadastral zone, BUILDINGS spiritual value of central Beirut. Solidere has assisted in the gradual two residential buildings were completed. Designed by Fouad Menem, restoration of 18 of them, with 13 now in use and drawing lot 799 is a seven-story building including one- to three-bedroom flats increasing numbers of people. The new Mohamad Al Amin mosque and two duplex apartments with roof gardens; while lot 995 is a seven- took on a profound meaning when the late PM Rafic Hariri was laid story building with two apartments per floor. to rest near it.

Solidere Annual Report 2007 STRATEGY REAL ESTATE

A CONSECRATION OF THE CITY CENTER AS A GLOBAL RETAIL DISTRICT AND A MAJOR STEP TOWARDS COMPLETING A CRITICAL MASS THERE, BEIRUT SOUKS HAVE EVOLVED IN A SIGNIFICANT WAY. THE NEW SOUKS, SOLIDERE’S MOST The reconstruction of the Beirut Souks has afforded the opportunity of bringing the traditional souks form of IMPORTANT REAL building into the 21st century. The Souks follow contemporary ESTATE PROJECT, standards for retail space, offering the convenience and comfort associated with malls within a structure of open and shaded WILL OFFER A MODERN streets, interrupted by pleasant open landscaped spaces. On the SHOPPING AND LEISURE other hand, Beirut Marina development is an example of joint venture between Solidere and third-party developers. EXPERIENCE THAT The range of quality space earlier put on the PRESERVES THE market by Solidere spans such new construction as UN House, Saifi Village, the embassy compound and the Rue de France complex. INTRICATE SPATIAL Alongside its own projects, the Company continues to develop and RELATIONSHIPS OF share with interested investors real estate and architectural concepts for residential clusters in Saifi and Wadi Abou Jamil, and AN URBAN MARKET. commercial, tourist, entertainment or multiuse projects elsewhere.

42 43 Solidere Annual Report 2007

fig.1 fig.2

fig.4

BEIRUT SOUKS Beirut Souks are re-emerging as a lively shopping and entertainment center, a regional retail destination and a magnet both for local residents and visitors. Located at the heart of Beirut, they are integrated within the city's historic core, close to the hotel district and the new waterfront. With direct links to the port, airport and metropolitan transport network, they enjoy easy car and pedestrian access from up-market hotel, residential and office areas. Designed in five separate commissions by international and Lebanese architects, the 146,000 sq m of floor space will be interspersed among 60,000 sq m of landscaped pedestrian areas. As they follow the ancient street grid implanted since pre-Roman times, integrating archeological features and gardens, the Souks consecrate the historic value of the place while using the state-of-the-art technology of modern commercial centers. Visitors can stroll along the souks, some covered with skylights and a natural aeration system, such as Tawila, Jamil and Arwam, others open to the sky, such as Ayyas, Bustros and Sayyour, and enjoy shopping and entertainment in a wide variety of shops, restaurants and cafés.

Solidere launched in 2005 the South Souks, first phase of the Beirut Souks South Souks superstructures, having previously completed the now operational southern part of the 2500-space underground car park, as well as the design, building permit and tendering process. The project involves the Souks Core, with 75,700 sq m of floor space, designed by Rafael Moneo (Spain) and Samir Khairallah and Partners; the Jewelers' Area, designed by Kevin Dash (UK) and Rafik Khoury, with 13,300 sq m of floor space; and the underlying streets and other public spaces, for which Olivier Vidal (France) is landscape architect. Dimitri Alatzas Asociados (Spain) was management system consultant for the car park. The South Souks site incorporates the Mamluk shrine Zawiyat Ibn Iraq. fig.3 Remains of the medieval city wall, Byzantine shops and late Phoenico-Persian harborside settlements were also unearthed. Works on the US$50.6 million contract were awarded to Société d'Entreprises A.R. Hourié, started in July 2005, stopped in July 2006, but were soon resumed. Delays due to the situation then prevailing in the country extended the completion date of the project to the end of 2008. Internal partitioning and fit-out works tailored to fig.1 Corbels in Souk Tawila specific units will gradually be delivered to users. The official opening of the South Souks is fig.2 Skylights in Souk Tawila scheduled for early 2009. fig.3,4 Chevron pattern cladding

44 45 Solidere Annual Report 2007

Beirut Souks are a design signature for Souks Core The main entrance to the Souks is on Weygand street, a few meters fig.1 Solidere, reviving the mood and atmosphere of the old Souks from east of Riad El Solh street. The space constitutes a plaza: to its left is block M, to its right is which they derive their name, identity, urban plan and architectural the Jewelers’ Area designed by Kevin Dash, with the Ibn Iraq shrine being renovated by character. Inspired by such urban spatial relationships and Yousef Haidar. historical layers, a unique experience will be offered there, quite Block M accommodates a food hall at a lower level, 6,500 sq m, different from that of a commercial mall. Beirut Souks are to be an accessed from Tawila and Sayyour souks, and fine retail outlets at street level in Weygand, open bazaar, affording a modern shopping and leisure experience, 9,500 sq m, with outside restaurants seating on Bab Idriss Square and at the main entrances while preserving the rich historicity of the site in a seminal and to Jamil and Arwam souks. contemporary interpretation. To experience Beirut Souks is to feel Around 200 retail units of various sizes and volumes, 41,000 sq m in that one is moving within patterns inspired by medieval city total, are aligned along streets and around squares, with shops, cafés or restaurants on one planning, with its gates and meanders. Street alignment is indented ground floor, one ground floor with mezzanine or two full floors, and provision for a future in Arwam, Bustros and Arwad, and squares and plazas are not Children’s Center including a nursery. The site topography, with streets situated at different centered. The walk, however, is no longer conducted on one plane, levels, has been exploited advantageously. Thus, Souks Jamil, Arwam and Tawila start but rather as an intricate three-dimensional promenade, with multi- practically on the same street level. But Arwam, falling in between the other two souks, rises directional spatial and visual links. above them by midway, becoming an upper-level souk. Consequently, ground floor shops The dramatic vertical linearity of the Souks on the west side of Souk Tawila can also have frontage on Souk Jamil; while from Arwam themselves, and in particular Tawila and Jamil, provides unusual shops, one can have views of either Tawila or Jamil. and exciting connectivity with the rest of the project. While the mall Souk Ayyas is a narrower souk, fully open to the sky. At its crossing experience is self-contained in a limited and closed space, Beirut with Souk Bustros is Intabli Square, featuring a water fountain. The east side shops on Ayyas Souks can be experienced in a transversal way, extending or lying have views on the beautiful, restored Art Deco building in Fakhry Bey street. across at right angles to the long axes of the main souks and Ajami Square, at the convergence of the north-south souks, is a grand connecting with the fabric of the city center. The layout creates a plaza with restaurants, sidewalk cafés, designed to house large events and concerts. The network that provides a labyrinthine yet rich experience fully covered plaza has an 18 m high ceiling with massive drop beams, equipped with roof vents fig.1 Zawiyat Ibn Irak shrine integrated with the city. and skylights to protect from direct sunlight, heat and rain. The walls and large opening on and block M prayer hall Spanish Pritzker-Award winner architect Trablous street form a huge northern portal to the South Souks. fig.2 Ajami Square covered plaza Rafael Moneo does not conceive the project as one, or several, buildings, but rather as a non-building composition of a series of structures creating a network of internal streets, dramatic vistas, covered bazaars and various plazas. As the South Souks take shape, one can begin to grasp the powerful idea behind this iconic project. The design responds to the historical site and city layering through the creation of exposed structural and architectural layers, showing visitors and retailers what they are made of. Moneo’s layering stategy provides an atrium at the intersection of Arwam, Tawila and Sayyour streets. This sunken, landscaped courtyard provides light and ventilation to the underground parking levels and reaches up to the open plaza. In fig.2 architecturally exposing the modern construction method used, it creates a poetic statement for the successful integration between new buildings and city layers. The archeological site in the middle of the Souks, with remains going as far back as the Phoenico-Persian era, is preserved through a carefully proportioned void with archeological exposure, equivalent in area and volume to Nejmeh Square, which Moneo stresses, at both city and Souks levels, in a studied urban gesture. Within the Souks, this void is balanced at the northern end by Ajami Square, an 18-meter high, covered plaza leading to Trablous street. Another example of Moneo’s combination of historicity and invention is evident as one approaches the site along Souk Tawila from the south. A new prayer hall, covered by a small dome, is integrated within block M, a four-floor complex with 5,500 sq m of intelligent offices and 16,000 sq m commercial space, close to the Mamluk Ibn Iraq shrine. It creates a gateway effect in its symmetry, shows a modern approach to a religious dome and offers a virtual portal to the bazaar leading to the major north-south Souks axis: Tawila, the longest of the Souks, with Ayyas to its east, Jamil and Arwam to its west. They converge north in Ajami Square, off Trablous street. The main east-west axis is Sayyour street, with Bustros and Arwad as secondary streets. Moneo’s approach enhances both the urban and the human scale of the project to ensure a harmonious relationship with the surroundings, attentive at the foreground to the details: colors, textures, joints, details; at the background, to the urban scale: urban portals, framed views. The height considerations and the massing all take their cues from existing neighboring structures and infrastructure. The choice of materials brings unity across the entire city block. However, the ubiquity and consistency in this surface treatment recedes into the background as it anticipates the arrival of the middle ground, to be taken up and filled by the day-to-day activities of retailers, shoppers and by the people of the city.

46 Solidere Annual Report 2007

On the corner of Weygand and Allenby Streets, Jewelers' Area the Jewelers’ Area, initially called the Gold Souk, connects the whole of the Beirut Souks to the restored pedestrianized heart of the city. The buildings on both street frontages have shops at street level sheltered by deep arcades which form a natural extension of those of Maarad street and provide covered access to the three primary entrances of the Souks. The corner entrance is emphasized naturally by the way the run of buildings on Allenby turns and folds into it, marking its importance from all directions. Jewel-like overscaled chandeliers furnish the 10 m high entrance arcade and announce the Gold Souk beyond. The two other entrances are from Ibn Iraq Square, the primary entrance to the Souks from Weygand street, and from the Fakhry Bey steps which lead directly to Allenby street. The buildings are designed as a natural extension of the restored conservation area. The façades are yellow limestone with simple punched windows, the rhythm and proportion of which change to effect a gradual transition from the ornate, restored buildings on Fakhry Bey street to the modern simplicity of Moneo's design on Weygand street. High specification modern aluminum windows are faced externally with timber, typical of the conservation area, and set in honed reveals which suggest in a subtle way the more elaborate window surrounds of its restored neighbors. Buildings on the street frontages form a protecting wall enclosing pavilions of only two floors linked by, and forming, human scale pedestrian passages and squares, lined with tiny shops typical of jewelry markets. The scale and detail of the buildings is small and precious and provides a level of intimacy and delicacy appropriate to a concentrated group of jewelry shops. The shopfronts are set between paired, honed, yellow limestone columns with display cabinets suspended at eye level. The shops are sheltered by arcades or black fabric awnings and are discreetly signed and lit. The four blocks accommodate around 80 jewelry boutiques on the ground floors totaling 5,600 sq m. Block W has three floors, D and E four, with 7,700 sq m of office space on the upper floors. Block F, with façades on Tawila and Sayyour streets, has a ground floor for jewelry shops. The walkways are covered with wood and stainless steel. The enclosed space is considered as an extension of Zawiyat Ibn Iraq Square and the low scale pavilion contained within it is split by the extension of Souk Tawila. This part of the Souks is made up of small units with a major restaurant space with terraces overlooking and animating the trading level. The Jewelers’ Area accommodates an entrance to the underground parking and the entrance to the servicing area which lies directly below. Access from the car park is from the landscaped court in the Souks Core.

Beirut Souks are equipped with ATM machines, public phones, Facilities broadband internet provisions, information screens and desks and a CCTV system for security.

48 49 Solidere Annual Report 2007

The next phase of the Beirut Souks development covers the North Souks, North Souks which offer 56,000 sq m of floor space. These consist of: a 27,000 sq m department store (blocks S and T), initially designed by Nabil Tabbarah but being redesigned by UK-Iraqi Pritzker-Award winner architect Zaha Hadid on behalf of an important anchor tenant; an entertainment complex and another multiuse building (blocks V and U), totaling 30,000 sq m of floor space, designed by Valode et Pistre (France) and Annabel Karim Kassar. This phase will allow the finalization of leasing and management agreements with anchor tenants and operators. The building permit for the department store was issued in November 2006. The redesigning by Zaha Hadid will not require a new building permit as the built-up area remains unchanged. A landscaped square with a fountain faces the department store and the restored Majidiya mosque. The entertainment complex (block V) comprises 14 modern cinemas above ground with generous lounges and concession areas, a retail / entertainment magnet, restaurants, a multimedia store, games arcades and retail extending to Khan Antoun Bey Square. The project was redesigned by Valode et Pistre in line with up-to-date norms and standards, featuring more commercial space and introducing a pedestrian link between Allenby and Trablous streets. The architects designed the project as a mega entertainment destination and as an architecturally avant-garde structure. The final design was delivered in March 2007 and Solidere expects the building permit to be issued soon. Construction would then start within the course of 2008, allowing for the tendering process. Work on the concept design for the cinemas internal circulation and interior design is proceeding under Solidere’s supervision, in coordination between the architects, Valode et Pistre, the interior designer, Nabil Dada, and the cinema consultant, Hamad Atassi. The multiuse building (block U) comprises a food court with garden and retail at ground level, retail or offices on the first and media-related offices on the second floor. At the time of the South Souks opening, by early 2009, it is expected that the entertainment center will be in an advanced stage of construction and the department store at the detailed design stage, within a few months of tendering.

Beirut Real Estate Management and Services (BREMS) was established Beirut Real Estate by Solidere and Aswaq Management and Services s.a.l., subsidiary of Société des Centres Management Commerciaux (France), a leader in shopping mall management in Europe. and Services Its object is to implement the tenant mix strategy designed by a number of consultants, leasing activities, shop fitting, property and facility management, rental management and marketing management. An assistance agreement was signed with BREMS for the Beirut Souks. Solidere has laid down for the Souks tenants design specifications for the shopfronts and guidelines to direct interior construction works, and is conducting site supervision for quality control.

Zaha Hadid, North Souks department store preliminary design

50 51 Solidere Annual Report 2007

BEIRUT In November 2002, Solidere commissioned Steven Holl Architects OTHER Solidere's strategy is to stimulate high quality real estate development MARINA (US), in joint venture with Nabil Gholam, to design public space together with real estate REAL ESTATE in the city center. Its support to investors has expanded in the last two years to cover project DEVELOPMENT facilities totaling 20,000 sq m of mixed-use floor area around Beirut Marina. The facilities PROJECTS design and development. In addition to the development briefs, based on sector plans and include a town quay of waterside restaurants, cafés and shops, and a yacht club with adapted to project sites, the Company engaged in consultancy with Lebanese and apartments on upper floors. In addition, a harbormaster, customs and immigration building international architects to prepare concept designs for a number of lots, with obvious will be erected on public domain. benefits for prospective buyers, to whom Solidere sometimes sells land with a real estate The project is undertaken by Beirut Waterfront Development s.a.l. program, architectural design and even a development package. (BWD), established in 2004 as a 50-50 joint venture between Solidere and Stow Waterfront Development s.a.l. (Stow). BWD was capitalized with Solidere contributing in kind In Wadi Abou Jamil, Solidere initiated the design and implementation Lot 800 20,000 sq m BUA on 22,341 sq m of land, and Stow contributing in cash US$31.6 million. of predominantly residential clusters of various sizes, involving restoration and infill Mina El Hosn The design submitted by Holl in August 2004 was gradually amended construction. The use of this typology on the city scale, in combination with detailed and following BWD and Solidere comments. The project is integrated into the city center through individual residential buildings, is meant to reinforce urban integration. International and direct access to the corniche promenade to the north, waterside city park to the east, and a Lebanese architects, with experience in Mediterranean and Middle Eastern countries, pedestrian bridge over the corniche to the south providing access to the town quay contributed design concepts reflecting responsiveness to local context, culture and climate, restaurants and shops. Landscape designs were developed for the entry plaza, the quayside and the market interest led to the sale of practically all the properties with cluster concepts. and the extension of the corniche sidewalk above, creating open-air terraces in the form of Still held by Solidere, lot 800 Mina El Hosn is a triplet designed by a ‘stone beach’ over the restaurants and shops. Ayman Senyora, combining restoration and new construction. The 4,234 sq m floor area BWD commissioned restaurant consultant Ulysses (France) to conduct comprises two twin restored Levantine houses plus an infill building, with four floors each, a market study for selecting an optimal type and size mix, as well as establishing a typical located between two streets, a lower entrance street and Rue de France. The infill building, rental agreement for the quayside restaurants. designed in a similar style but with two basement floors linking the three buildings and The project covers two plots. On Plot One, the development consists of providing parking space to serve the entire triplet, has obtained a building permit and is now four floors plus three basements, accommodating 57 apartments and a yacht club. On Plot completing the earthworks, with civil works expected to start by end July 2008. Two, the development consists of 26 quayside restaurants and shops, along a one-floor level fig.1 stretching from the western limit of the Marina development site to the yacht club building. The success of Saifi Village led Solidere to initiate concepts for its extension. 178 Saifi Village 178 Saifi Village is a residential cluster, designed by Nabil Gholam on 2,937 sq m of land to offer about 11,225 sq m of residential and The building permit for the apartment building and yacht club on Plot Apartment 1,066 sq m of commercial floor space. The cluster is formed by six elegant buildings with clean modern façades One was secured for the basements until ground floor, and execution works are in progress. building and along surrounding streets, set around a landscaped courtyard. The design offers a range of spacious apartments to The contractor, Hourié - Profond joint venture, winner of the design- yacht club include lofts with 5.75 m high ceilings, mini lofts with work live space, ground floor maisonettes with private and-build tender for underground structural work and construction of three basement floors, gardens, central hall apartments and a variety of penthouses with generous terraces, while the building opening on started enabling works in 2006, based on the design endorsed by Solétanche Bachy group the ring road offers modular office platforms, with a restaurant on the ground floor and mezzanine. The scheme (France). Profond are in charge of the shoring diaphragm wall, piling and dewatering; Hourié focuses on a contemporary lifestyle, bringing a blend of services, convenience and a discreet sense of luxury. Space, of excavations and construction of slabs and columns. A fast track approach was adopted, light, calm and comfort characterize the townhouse-like residential units, combining the advantage of a great urban using up down construction based on a technology specific to underground construction location with the pleasure of a quiet green haven in the heart of Beirut. The development is to be sold with its below sea level, which may be applied throughout the waterfront district. concept to an investor. The building diaphragm wall was completed in March 2007. The ongoing excavation and basement-level construction works are expected to be completed by end March 2009. The permit for the upper floors is still under study at Beirut Municipality. Once issued, it will allow Holl, teaming up with Nabil Gholam, to finalize the detailed design. Beginning 2007, Nabil Dada was commissioned to undertake the interior fig.2 design of the project. The Plot One development is expected to be completed in May 2010.

Regarding the quayside restaurants on Plot Two, a shoring permit is Quayside currently being sought from the Municipality. Contractors are ready to start enabling works, restaurants on which require nine months. It is hoped that during that period, the building permit will be Plot Two secured to continue construction. Completion of the development is targeted for 2010.

The intention is to deliver Plot One and Plot Two together, in time for Development the entire Beirut Marina Development inauguration. It is also important to ensure that Phasing Issues delivery of the below-corniche car park and of the pedestrian bridge linking to the hotel district should precede the inauguration. (See section on Waterfront District.)

Steven Holl Architects / Nabil Gholam, Beirut Waterfront Development fig.1 The master plan fig.2 The yacht club with apartments, town quay with restaurants and shops

52 Solidere Annual Report 2007

fig.1

fig.2 Solidere commissioned Vincent Van Duysen Office building (Belgium) to present a concept for an office building on lot 1493 Mina El Hosn. The design is an architecturally strong sculpture with a light colored appearance, addressing the landscaped hotel district corridor overlooking Beirut Marina. The provision of a mixed-use program with public, semi-public and private functions, allows for a very vivid and diverse character. It is intended to sell the development with its concept to an investor.

This multiuse complex on lot 1338 Mina Le Passage El Hosn, located on a 3,740-sq m island plot near Beirut Souks, de Hoyek combines commercial space, entertainment activities and a 100-room luxury hotel with a total floor area of 21,400 sq m, together with basement parking levels. The project, as conceived fig.1 Bernard Khoury, Solidere is developing around the Grand Theatre Grand Theatre by Bernard Khoury, presents itself as a crystalline organic mass, an Le Passage de Hoyek an integrated project on the 2,370-sq m lot 891 Bachoura, which urban event that does not comply with surrounding streetwall multiuse complex, regrouped the former lot 891 historic building, lot 870 building and controls. The project was submitted to the DGU for approval. lot 1338 Mina El Hosn fig.2 Vincent Van Duysen, vacant lot 1521. The concept design by Architecture Studio (France) The commercial base aligns with the plot office building, obtained approval from the Directorate General of Urbanism in April perimeter, forming a pedestal to the body of the building above. lot 1493 Mina El Hosn 2005. The project offers a total floor area of 11,850 sq m over four Pedestrian entrances, the culmination of existing pedestrian flows, floors and five basements. The main use is a boutique hotel enjoying a connect in all directions to the various levels of surrounding streets, roof swimming pool, restaurants and bars offering artistic while leading to a central internal piazza, a circular void, 32 m in performances. Shops are located at street level below the arcades. All diameter, 30 m in height, open to a skylight. On top of the base is the the restoration work was done and the theater is to be preserved. The ‘sky lobby’, a suspended, 9-m high internal garden with a peripheral building permit file obtained the Ministry of Tourism approval and is terrace. It is conceived as an exceptional entertainment destination, still under study at the Municipality of Beirut. where leisure activities intersect to create a programmatic synergy. This is where the hotel reception, restaurants, Implemented by Solidere, the car park jointly Block 93 cafés, terraces and bars are located. The hotel is built above the sky developed with owners of blocks 93 and 87 properties, provides 700 lobby, on a succession of five floor plates that recess at the higher spaces on four underground levels totaling 31,200 sq m of floor area, levels, mutating in plan from a circular base to become an ovoid. with two main access ramps on Foch and Allenby streets. Vertical glass louvers / sun breakers, placed at varying distances, Underground construction was completed for all projects. One of the create a pattern across the hotel floors, in an arrangement that buildings was completed, two are under finishing, one is under blurs the reading of the consecutive levels and renders it as one. construction and one is still under study at the Municipality of Beirut. On the roof, a panoramic terrace with an Now open to the public, the 320-space section owned by Solidere will open-air restaurant and bar enjoys 360 degrees views over the be topped by the landscaped Harbor Square. Mediterranean Sea and Mount Lebanon in the background.

54 55

Solidere Annual Report 2007

SALES REVENUES ROSE, SUSTAINED BY A SUBSTANTIAL SALES BACKLOG. MANY PROJECTS, SOME OF IMPORTANT PROPORTIONS, WERE PURSUED, REGIONAL INVESTORS CONTINUING TO GIVE STRONG INDICATIONS OF INTEREST IN BEIRUT CITY CENTER. THIS WAS EVIDENCED BY A STRONG PICK-UP OF NEGOTIATING ACTIVITY AT THE END OF THE YEAR. RENTAL ACTIVITY MAINTAINED ITS HEALTHY PACE DUE TO CONTINUING DEMAND FOR QUALITY SPACE AND SERVICES.

As land bank with a considerable property portfolio, Solidere markets a wide range of land and built space for residential, office, hotel, retail and other REAL ESTATE Solidere’s portfolio of income-generating specialized uses. In the early years, sales mainly involved un-built lots and existing LEASING properties includes UN House and lot 1 Zokak El Blatt, each leased buildings sold 'as is' for renovation or development. The delivery of Solidere real estate to a single institutional tenant, and a compound dedicated for projects led to a growing volume of sale and leasing operations involving finished embassy use. The Company also leases space in its buildings, in products, new or preserved buildings or parts thereof. car parks and mooring spaces in Beirut Marina. At end 2007, the Since 2005, the Company has been holding on to its portfolio of value of leased properties was US$170.5 million (US$150 million STRATEGY finished products, leasing space in it to generate income flows, and will continue to do after depreciation): US$124 million in buildings, US$42 million in so in the foreseeable future as part of its revenue diversification strategy. Solidere land and US$4.5 million in other assets. actively supports developers and monitors the demand and supply of real estate in the Gross rental income from leased space, city center, to the benefit of all. including parking spaces and marina berths, was US$20.8 million, In any given year, the sales recognized in the against US$7.5 million, US$10.2 million, US$14.1 million and income statement consist of closed deals negotiated in that year US$15.4 million in 2000 to 2003; US$18.6 million, US$20.8 million and in preceding ones. On the other hand, the deals negotiated up and US$20.7 million in 2004 to 2006. Downpayments received on to that year and not closed during the year make up the sales lease agreements are treated as deferred revenues and not backlog at year end. Aggregate sales of US$1.67 billion have been recognized as income. Residential leases relate to new and restored recognized from inception to end 2007 (1,456,609 sq m of floor flats in Saifi, Zokak El Blatt and Wadi Abou Jamil. Leased office space), of which US$288.5 million (224,500 sq m) in 2007. space relates to UN House, lot 1 Zokak El Blatt and the embassy compound. Other commercial space relates to offices and shops in restored buildings, as well as shops in Saifi Village. SALES RESULTS Gross land sales of US$288.5 million were recognized during the year 2007 (US$255.2 million in 2006). Solidere

SALE AND RENTAL has stopped selling finished products in order to build a portfolio of SALES A sale agreement which includes pre- income-generating properties. However, such deals closed in previous PROCEDURE development and construction standards and timetables, as well as years and recognized in 2007 amount to US$7.7 million representing PAYMENT payment conditions, is signed upfront. Sales are expressed in 3,979 sq m of floor area (US$0.96 million, 499 sq m in 2006). SCHEMES terms of floor or built-up area (net development rights). At end 2007, the backlog of closed sales not Property transfer is registered before the Real recognized during the year amounted to US$914.1 million (443,000 sq m Estate Registrar upon signing the final sale deed, following BUA). Also in the backlog are US$8.82 million (4,532 sq m BUA) of fulfillment of technical and legal conditions, together with the apartments for which title transfer is awaiting occupancy permits as mortgage contract in case of finance. Solidere pursued in 2007 its the lots need final parceling, plus commitments of US$8.5 million policy of offering buyers the possibility to either pay cash or defer relating to the pre-sales of units in the Beirut Souks Jewelers' Area, part of the sale price payment, thus enabling them to better plan concluded a number of years ago. the financing of their investments. Downpayments received on signed deals as at Concomitant with the property transfer end 2007 amount to US$124.2 million: US$120 million from land sales registration, the buyer / developer provides Solidere with a first- and US$4.2 million from the sale of residential space. Downpayments degree mortgage on the sold property as a guarantee against any are treated as deferred revenues, to be recognized as part of revenues outstanding payments. A bank guarantee also provides security for only upon sales realization. proper and timely execution of all construction works. Solidere Annual Report 2007

PROPERTY The Company has been successful in marketing its residential, MARKETING commercial and institutional space, new and restored. As alternatives to a simple lease, schemes such as lease with option to buy or outright sale were offered for residential space until 2002 and 2004 respectively. Buyers could also benefit from payment facilities. From 2005, property sales or options to buy were discontinued, with only leases continuing to generate income flows, and no outstanding options to buy at end 2007. From the 136 Saifi Village apartments, totaling 29,707 sq m of floor area, 134 apartments had been marketed by end 2007, of which 38 (6,980 sq m) are leased and 96 (22,558 sq m) were sold, 61 (13,279 sq m) after exercising options to buy, while two apartments (169 sq m) are available for rent. Concurrently, from 40 restored houses or flats in Saifi, totaling 8,604 sq m in floor space, 37 agreements had been signed at year end. They represent 3,779 sq m of leases and 4,684 sq m of sales, of which 4,024 sq m as a result of exercising options to buy, with three apartments (141 sq m) available for rent. Lease agreements had also been signed for a nursery (240 sq m) and for 34 shops (3,612 sq m), as part of Quartier des Arts. In Zokak El Blatt, 87 apartments, with 12,951 sq m of floor space, had been the subject of agreements at year end. They represent 9,664 sq m of leases and 2,854 sq m of sales, of which 979 sq m as a result of exercising options to buy, with 12 apartments available for rent. In Mina El Hosn, nine agreements for 3,432 sq m of residential floor space had been signed: 372 sq m as leases and 3,060 sq m as sales, of which 1,971 sq m as a result of exercising options to buy. Also at year end, the Company had five lease agreements totaling 33,630 sq m of floor space in new office buildings: UN House, lot 1 Zokak El Blatt and most of the embassy compound. In the Maarad and Foch-Allenby restored office buildings, 19 lease agreements for 9,710 sq m, as well as 16 lease agreements relating to 3,575 sq m of retail space, had been signed.

PROPERTY Solidere provides complete full-time property management, MANAGEMENT operation and maintenance services for all its properties. These include the new and restored buildings, the Souks, Weygand street and block 93 car parks. In UN House, electro-mechanical and civil works are provided as per an operation agreement with ESCWA. Extending its services to other property owners, Solidere signed agreements for the marketing of several third-party properties, prior to undertaking their management and maintenance. The Company is currently offering such buildings the following services: technical maintenance, cleaning, safety, security and the maintenance of landscaped areas; marketing, lease management, including drawing up budgets, arranging insurance, collecting rents, preparing assets inventories, subscribing to utilities, tackling co-ownership issues, and paying real estate and municipal taxes. Solidere expects to derive increasing revenues from property management services in the coming years. fig.1

fig.2

fig.1 Dar Al-Handasah, Four Seasons Hotel, lot 1418 FUTURE Solidere is firmly relying on growth in its rental Mina El Hosn and Kohn Pedersen Fox Associates / Dar PROSPECTS income as it steps up the delivery of new and restored buildings. Rental Al-Handasah, Marina Towers complex, lot 1354 Mina El Hosn revenues are expected to be strongly boosted, upon delivery of the fig.2 Wimberley Allison Tong & Goo / Samir Khairallah, Beirut Beirut Souks, by far the most important Solidere real estate project and Tower, lot 1401 Mina El Hosn, and Ricardo Bofill / Nabil gholam, Platinum Tower, lot 1421 Mina El Hosn, Samir Khairallah, its flagship commercial development. Rentals are then expected to Monroe Hotel, lot 1400 Mina El Hosn reach close to US$65 million from 2010.

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Solidere Annual Report 2007

In Saifi, Saifi Khan is being restored as per Elias Issa’s design on On the Martyrs’ Square axis northeast section, the Merit lots 749 and 752, respectevely offering 783 sq m and 3,467 sq m. The lot 752 component, Corporation headquarters building, designed by Nabil Gholam on lot 1536 Marfaa, is five floors with retail on ground floor, has been completed. Two residential under construction with 7,234 sq m of floor space over six floors. developments are under finishing. Saifi Village Two, designed by Nabil Gholam on lot The Phoenician Village is a landmark high-density, mixed-use 146 Saifi, offers 22,350 sq m distributed over four buildings of 11 floors each, 74 flats in project under development by the Kuwaiti Investors Group led by Al Sayer Group and total. Al Dalal residential building, designed by Ateliers des Architectes Associés (AAA) Al Dhow Investment Company. Spread over lots 1501, 1502, 1503 and 1081 Marfaa, it on lot 1077, offers 4,750 sq m over six floors, six flats and a duplex. offers 206,000 sq m of floor area, thus constituting the city center’s largest real estate Under study at Beirut Municipality are a private residence, three development to date. The urban design for the site, as adopted in the Beirut city center residential developments and an office building. The lot 749 component of Saifi Khan has master plan, is based on the Koetter Kim (US) planning study, updated according to new 783 sq m over three floors with retail on ground floor. Saifi Square and Al Mada, envelope controls incorporated in the master plan amendment for Sector H. The designed by Nabil Gholam on lots 1059 and 1069, offer 5,114 sq m and 6,350 sq m development contains four towers, stepping in height to a 160 m maximum, and distributed over seven floors, 16 flats and 17 flats respectively. The Selwan building, comprises visitor attractions and cultural facilities, upscale residential, hotel and major designed by Nabil Azar on lot 1056, offers 2,350 sq m distributed over five floors, 14 flats. corporate office opportunities around a central active plaza, with retail on ground level. Al Mashrek Insurance Company building also designed by Nabil Azar on lot 1080 offers A pedestrian bridge across Rue de Trieste will connect the towers to the waterfront 2,301 sq m distributed over seven floors. 1079 Real Estate residential building on lot 1079 component of the project on the Beirut port first basin quayside. The development is

PROJECTS is under design by Youssef Haidar with 3,358 sq m of floor space. planned to create an important visitor destination. In the Martyrs’ Square northwestern section, Marfaa cadastral At the city center southern gateway, The Landmark multiuse zone, three residential developments overlooking the Tell archeological site are under development, designed by Jean Nouvel (France) on lot 1520 Bachoura, is still under design. Marfaa 94, designed by Machado and Silvetti Associates (US) and Charles design. The project offers 74,500 sq m distributed over a thirty-seven floor hotel and Hadifeh on lot 1538, covers 12,700 sq m of floor area. Marfaa 1474, designed by Axel apartment tower overlooking Riad El Solh Square, and two ten- and eleven-floor buildings Schultes (Germany) and Kamal Homsi Architects on lot 1474, offers 8,270 sq m of floor

DEVELOPERS’ containing offices, retail, and a cinema entertainment complex at basement levels. area. Park Side on lot 1475 is to be designed by Axel Schultes, to offer 6,500 sq m of floor space. In Foch-Allenby, Marfaa cadastral zone, two buildings were In the mid section, Le Gray hotel, under finishing, was designed by completed. Foch 126 office building, designed by Nabil Gholam on lot 126, has Kevin Dash (UK-Australia) and Hani Murad on lot 1489 Marfaa, to offer 17,635 sq m over 2,190 sq m over five floors. Foch Residence, designed by Batimat Architects on lot 1466, eight floors, 85 suites in total with retail on ground floor. The Beirut Gardens residential has 5,012 sq m over nine floors, 10 flats and two duplexes. Four residential development, designed by Arata Isozaki (Japan) and Erga Group on lot 1524 Marfaa, is developments are under finishing. Fochville, designed by R & K Consultants on lot 1497, under study at Beirut Municipality. It offers 18,325 sq m over 12 floors, consisting of has 5,841 sq m over nine floors, 12 apartments and one duplex. Starway, designed by 59 flats and six duplexes, 65 units in all. The façades overlooking the Garden of Nachaat Owaida on lot 1440, has 3,000 sq m over six floors, 26 flats in total. Lot 108, Forgiveness and Martyrs’ Square are covered by a white marble skin treated as a screen A FLOOR AREA OF developed by Banque du Crédit Libanais and designed by Erga Group, has 3,005 sq m with a computer-generated geometric pattern, giving a three-dimensional impression. 2.5 MILLION SQ M over five floors, five flats in total. Foch 94 residential development, designed by Vincent In the southern section of the Martyrs’ Square axis is the Beirut Van Duyssen (Belgium) and Nabil Gholam on lot 1498, has 7,320 sq m over nine floors, Gate landmark development covering 21,448 sq m of land area and spreading over lots HAS BEEN SO FAR 29 flats in total. 1523, 1525, 1542, 1544, 987, 1526, 1477 Bachoura and lot 901 Saifi. Several world-class THE SUBJECT OF Two developments are under construction. Bank of Kuwait and the architects worked in tandem to design the project components for ADIH, Abu Dhabi Arab World, designed by Abdel Wahed Al Wakeel (Egypt-UK) and Arc Group on lot 1470, Investment House, as development manager. Out of a 178,506 sq m total floor space, the DEVELOPMENT has 8,300 sq m over eight floors. Radium office building, designed by R & K Consultants residential use represents 78%, offices 6%, retail and cultural activities 16%. BY THIRD-PARTY on lot 114, has 2,600 sq m over five floors. Under study at Beirut Municipality, lots 1525, 1542 and 1544 Under study at Beirut Municipality is Mokhtara residential building, Bachoura are designed by Architectonica (US) and Erga Group. Lot 1525, sold by Beirut DEVELOPERS, designed by Erga Group on lot 1468 with 7,467 sq m over nine floors, 26 flats in total. Gate to Star Property and Tourism Development, offers 13,600 sq m over 13 floors with OF WHICH retail on street level. Lot 1542 offers 14,200 sq m over 12 floors. Lot 1544 offers 15,000 sq m over 13 floors. Lot 1523 Bachoura, designed by Nabil Gholam, offers 1.8 MILLION SQ M 37,000 sq m over 13 floors, 153 flats in total. ARE IN NEW Still under design are lots 987, 1526 and 1477 Bachoura, designed by Christian de Portzamparc (France). Lot 987, former Dome City Center site, offers CONSTRUCTION. 39,000 sq m over three towers with up to 21 floors, and is planned to incorporate OF THAT TOTAL, a contemporary cultural use within the partly preserved Dome. Lot 1526 offers 26,000 sq m over 10 floors. Lot 1477 offers 22,400 sq m over 25 floors. Also under design 998,519 SQ M is lot 901 Saifi, designed by Erga Group with 11,200 sq m over 13 floors. ARE COMPLETED, The Greek partnership Agorastidou, Babalou-Noukaki, Ioannidou and Noukakis, winners of the Martyrs’ Square axis urban design competition, are the 240,229 SQ M Beirut Gate landscape architects. ARE UNDER Two other developments are under design. Immediately north of Beirut Gate, the Canadian Bank headquarters, designed by Axel Schultes on lot 1524 CONSTRUCTION AND Bachoura, has 7,800 sq m of floor space over eight floors, with retail on the ground floor. THE BALANCE IS IN VARIOUS STAGES OF DEVELOPMENT.

64 65 Solidere Annual Report 2007

Near the Beirut Souks, Mina El Hosn cadastral zone, two residential buildings, a hotel and three office buildings were completed. The Capital Garden on lot 1327, designed by Erga Group, offers 5,659 sq m over eight floors, 24 flats in total. 1330 Park Avenue, designed by Abdallah Hajj Ali on lot 1330, has 4,700 sq m over eight floors, 11 flats in total. The Hilton Hotel on lot 129, designed by Butec and AAA, has 11,137 sq m distributed over nine floors, 158 rooms in total. Berytus Parks on lot 1344, designed by Pierre El Khoury Architect, offers 12,227 sq m over nine floors. The second Medgulf building, designed by Nachaat Owaida on lot 1348, has 2,903 sq m over seven floors. Périmètre Immobilier, designed by Elie-Pierre Sabbagh on lot 1459, offers 3,360 sq m over seven floors. Also completed, Sémiramis mixed-use development on lot 1458 Marfaa, designed by Robert Adam (UK) and Fouad Hanna / Fadlallah Dagher, offers 7,750 sq m distributed over eight floors, 11 flats in total. One mixed-use and two residential developments are under construction. Mina Two mixed-use building, designed by Kevin Dash and R & K Consultant on lot 2, offers 14,000 sq m over seven floors, 15 flats in total. 45 Park Avenue, designed by Laceco on lot 1337, offers 7,150 sq m, distributed over 12 floors, 12 flats in total. Luna One, designed by Diyar Consultants on lot 1331, has 2,723 sq m over seven floors, 10 flats in total. Under study at Beirut Municipality is the Park Palace residential building, designed by Fouad Menem on lot 1339, with 12,790 sq m over 10 floors, 24 flats in total. Under design are three residential developments. Media Fan, designed by Joe Geitani on lot 1347, has 6,403 sq m of floor space. Avenue Venture, designed by LAB Architecture Studio (Australia) and Elie-Pierre Sabbagh on lot 1450, has 7,300 sq m. Block 42 development, designed by Victor Legorreta (Mexico) and Fadlallah Dagher on lot 1495 Marfaa, has 13,493 sq m.

66 67 Solidere Annual Report 2007

In Wadi Abou Jamil, cadastral zone Mina El Hosn, two projects are under finishing: Mina El Hosn 1466 residential development designed by Fouad Menem on lot 1466, offering 1,788 sq m of floor space over five floors, two duplexes and a penthouse; and a private residence on lot 855, designed by Nabil Gholam with 1,250 sq m of floor space. Under construction are two residential developments, one private residence and two office buildings. The Courtyard, designed by Maha Nasrallah on lot 1371, offers 5,280 sq m distributed around an internal courtyard over three buildings of seven floors each, 19 flats in total; the works were delayed because of the Roman Hippodrome archeological remains found on the site. Phoenix building, designed by Porphyrios Associates (UK-Greece) and Samir Khairallah and Partners on lot 1440, has 4,117 sq m over seven floors: six apartments and one duplex. The private residence on lot 911, designed by Abdel Wahed Al Wakeel (UK-Egypt) and ARC Group has, 1,595 sq m of floor space. Cedar House and Pine House on lot 1133 were redesigned by Youssef Haidar as an office building with 1,939 sq m over three floors. Greenline Real Estate building, designed by Batimat Architects on lot 1393, has 2,750 sq m over seven floors: two for retail, three for offices and a duplex on the top two floors. Under study at Beirut Municipality are four residential developments, two private residences and a hotel with serviced apartments. Wadi Gardens, designed by Dar al Omran (Jordan) and Hani Murad on lot 1392, has 25,768 sq m distributed around an internal garden over six buildings of eight floors each, 68 flats in total; the underground permit was granted and basement floors are under construction. Stow Wadi, designed by Porphyrios Associates on lot 1407, has seven apartments and two duplexes totaling

3,750 sq m over seven floors. Wadi Hills on lot 1388, designed by Agence d’Architecture fig.2 Antoine Bechu (France) and Nabih Sinno, offers 22,000 sq m of floor space distributed around an internal garden over seven buildings of six floors each, 68 flats in total. Mira Immobilière on lot 1478, designed by Erga Group offers 3,581 sq m distributed over six floors, three apartments and one duplex. The private residences are lot 771, designed and restored by Pierre El Khoury Architect, with 2,093 sq m of floor space; and lot 1375, designed by Charles In Zokak El Blatt, The Pavilions residential Hadifeh with 1,278 sq m of floor space. Designed by Ziad Akl in collaboration with Philippe complex, designed by R & K Consultants on lot 1128 and offering Starck (France) on lots 834, 1430 and 1410, the Royal Hotel and Resorts boutique hotel with 10,312 sq m of floor space, is under finishing. The concept 77 rooms and 50 suites has a floor space of 14,856 sq m, distributed over 12 buildings of two, combines a three-floor private villa on Rue de France with a nine- three or four floors. floor modern infill on Rue de l’Armée, consisting of 23 units: 16 fig.1 Giancarlo De Carlo & Associates / Rafic Still under design are a bank and a residential apartments, five duplexes and two triplexes. Under restoration are El Khoury, Beirut Village residential cluster, building. Al Mawared Bank headquarters, designed by Zaha Hadid two private residences: The Doghmosh, designed by Zahi Cardahi lot 1370 Mina El Hosn (UK-Iraq) and Raed Abillama on lot 1383, has 7,580 sq m of floor on lot 122 with 1,336 sq m of floor space, and Les Gradins, designed fig.2 Porphyrios Associates / Malek space. 1442 Mina Company on lot 1442, designed by Porphyrios by Ziad Akl on lot 73 with 734 sq m of floor space. Under design by Mahmassani, DBA 1, DBA 2, DBA 3 residential Associates, offers 4,200 sq m of floor space. cluster, lots 1365, 1439 and 1395 Mina El Hosn Elie-Pierre Sabbagh is Périmètre Rue de France, a residential fig.3 Fouad Menem / Ayman Senyora, complex on lot 59, with a 4,200 sq m BUA. No architect has yet Mina El Hosn 1466, lot 800 Mina El Hosn been assigned for City Hill residential development on lot 1137 with residential developments 3,090 sq m BUA.

fig.1 fig.3

69 Solidere Annual Report 2007

In the hotel district, at the city center northwest gateway, Mina El Hosn cadastral zone, an international hotel and eight high-rise luxury residential developments overlook Beirut Marina. Three are under finishing. The Four Seasons Hotel, designed by Dar Al-Handasah on lot 1418, has 27,761 sq m over 25 floors, 243 rooms and suites in total. Designed by Ricardo Bofill (Spain) and Nabil Gholam on lot 1421, Platinum Tower offers 53,887 sq m over 34 floors, 70 flats in total. Beirut Tower, designed by Wimberley Allison Tong & Goo (US) and Samir Khairallah and Partners on lot 1401, offers 42,638 sq m over 27 floors, 63 apartments, four duplexes and two penthouses. On lot 1354, the Marina Towers complex, designed by Kohn Pedersen Fox Associates (US) and Dar Al-Handasah, includes: the completed Marina Tower and Marina Gardens, with respectively 27,343 sq m and 8,427 sq m; and Marina Courts, under construction to offer 9,079 sq m over 10 floors, with a total of 41 flats ranging from 100 to 250 sq m. Also under construction, The Dana of CCC, designed by Kevin Dash and Al Salam Architects on lot 1353, offers 13,856 sq m over 10 floors, 15 flats in total. Bay Tower on lot 1422, with the same developer and designers as Beirut Tower, offers 34,760 sq m over 30 floors, 92 flats in total. Under study at Beirut Municipality, DIB Tower and Town Tower on lots 1494 and 1399, both designed by Michael Graves (US) and Ayman Senyora, respectively offer 26,700 sq m and 26,500 sq m. La Residence by Ivana Trump on lot 1396 is still under design by Valode et Pistre (France) with 28,741 sq m of floor space. Four other luxury residential developments, two international hotels and two office buildings are in progress within walking distance from Bay Tower. Under construction are Garden View on lot 1368, designed by Nabil Gholam to offer 13,778 sq m over 11 floors, 34 flats in total; and Grand Hyatt Hotel on lot 111, designed by Michael Graves and Dar Al-Handasah, with 32,122 sq m over 17 floors, 286 rooms and suites in total. Under study at Beirut Municipality: Capital Plaza residential building on lot 1464, designed by Machado & Silvetti Associates and Nabil Azar, with 14,102 sq m over 12 floors, 36 flats in total; Cibico residential building, designed by Joe Geitani on lot 1488, with 4,333 sq m over 11 floors, 14 flats in total; and Stratum residential and furnished apartments building, designed by R & K Consultants on lot 1364 with 11,200 sq m over 10 floors, 71 flats in total. Still under design, the Rotana Hotel, designed by Architecture Studio (France) and Erga Group on lot 1369, has 21,155 sq m of floor space. Trust Construction residential building on lot 1358, designed by Bolles and Wilson (Germany) and Arc Group to offer 17,800 sq m of floor space; and Mika Real Estate office building on lots 1363 and 1487, with 19,697 sq m of floor space designed by Joe Geitani.

SOLIDERE A number of developers’ residential projects in Wadi Abou Jamil, MANAGEMENT cadastral zone Mina El Hosn, are managed by Solidere Management Services (SMS), a SERVICES subsidiary of Solidere. In addition to construction management, SMS provides a broad scope of services associated with real estate development: program definition, marketing, design control, client representation, financial management, sales and post-construction operation and maintenance. Lot 1380, designed by Tripod Architecture was sold by the initial owner to third party developers. Now under construction, it offers four flats over five floors with a total of 2,300 sq m. Shoring and excavation works have already started on seven projects while they are under study at Beirut Municipality. Designed by Giancarlo De Carlo and Associates (Italy) and Rafic El Khoury are Beirut Village, on lot 1370, offers 12,236 sq m of floor space over three buildings of six floors each, with 38 flats in total, set around a private garden facing the Wadi Abou Jamil public garden; and Beirut Square, on lot 1379, to offer 15,260 sq m of floor space over four buildings of six floors, 49 flats in total, aligned along the streets and arranged around an interior space divided into one common and several private gardens. The DBA 1, DBA 2, DBA 3 cluster on lots 1365, 1439 and 1395, designed by Porphyrios Associates and Malek Mahmassani Architects, respectively have floor areas of 4,369 sq m, 4,520 sq m and 3,438 sq m over seven floors, 25 flats in total, with ground floors dedicated for retail use. New Zone Real Estate designed by Tripod Architecture on lots 1477 offer 3,616 sq m of floor space over nine floors, 13 flats in total. Property 709 Mina, designed by Antoine Skaf on lot 709, to offer 2,663 sq m of floor space over seven floors, seven apartments and one duplex in total. In the Serail corridor, on lot 1333 Mina El Hosn, Park Venture is under design by Donald Bates (Australia) from LAB Architecture Studio / Batimat, with 6,164 sq m of floor space.

70 fig.4

fig.1 fig.2

fig.3 fig.1 Jean Nouvel, The Landmark, multiuse fig.5 fig.6 development, lot 1520 Bachoura fig.2 Koetter Kim, Phoenician Village, mixed-use development, lot 1501 Marfaa fig.3 Agence d’Architecture Antoine Bechu / Nabih Sinno, Wadi Hills residential complex, lot 1388 Mina El Hosn fig.4 Donald Bates / Batimat, Park Venture residential building, lot 1333 Mina El Hosn fig.5 Machado and Silvetti Associates / Charles Hadifeh, Marfaa 94 residential building, lot 1538 Marfaa fig.6 Axel Schultes / Kamal Homsi Architects, Marfaa 1474 residential building, lot 1474 Marfaa

72 Solidere Annual Report 2007

TREASURY The balance sheet at year end shows positions of US$313.4 million for cash, US$181.2 million for bank overdrafts and US$10.1 million for investments in securities. The Company maintained its previous policy of investing its liquid funds in assets presenting minimum risk, and with top-ranking banking and financial institutions in the domestic and international markets, including some structural products that carry high returns with guaranteed capital. For efficient cash management, Solidere also arranged with local banks certain revolving current overdraft facilities, utilized and refunded according to cash needs and availability. During 2007, Solidere made 357 cash investments totaling US$1,100 million. These figures include investments made in 2007, which matured in the same year or will mature in a later year. The Company pursued again this year a strategy of short-term cash investments, with a weighted average holding period of about 38 days. Around 92 basis points were secured on average over the median 2007 three-month LIBOR rate. Interest income earned during the year on the aggregate cash investments was equivalent to an annualized interest rate of about 5.5%. TREASURY AND

CORPORATE The strategy to reduce borrowing levels was FUNDING again pursued in 2007, utilizing growing levels of liquidity generated from land sales. Consequently, the bank debt level

TREASURY STOCK was substantially reduced, from US$27.1 million in 2006 to US$7 million in 2007, representing 0.4 % in debt to equity ratio. In 2007, the Company pursued the practice of resorting to flexible short-term credit arrangements, mainly temporary overdrafts at competitive interest rates. Several short term bank facilities were signed with various local banks, and drawdowns of approximately US$250 million were used to help finance the Company’s

CORPORATE FUNDING expansion program and local commitments. Repayments were made until year end, resulting in a balance of US$181.1 million. Solidere intends to close this balance in the second half of 2008. The cash position at year end was mainly due to collections of maturing receivables from several previously signed land sale deals, and particularly the full settlement of a major developer’s remaining balance. Solidere completed repayment of the US$107.3 million, ten-year marine works COFACE guaranteed loan, concluded in 1996 with BNP Paribas and Banque Indo-Suez. Half- yearly payments of US$7.7 million in principal repayment and TREASURY The share buyback program, launched early in interest at 7.39% per annum had started in 2001. The last STOCK the year and targeting to acquire A and B shares equivalent to up to repayment was made in August 2007. 10% of the issued capital, with a view to retire these shares and reduce The Company continued repayment in 2007 capital accordingly, was temporarily put on hold by the Company in of the three loans used to finance land reclamation works: the favor of international expansion and local developments. US$22 million locally syndicated loan and the two parallel facilities The 10.7 million treasury shares, with a book from Citibank N.A. totaling US$24.7 million (US$14.7 million in value of US$168.5 million, served as a temporary financing export credit financing with guarantee from the US Export-Import instrument, using a put and a call option with two local financial Bank, and US$10 million as local facility from Citibank Beirut), institutions to generate US$170.3 million for meeting financing with respectively US$4.04 million and US$3 million outstanding at needs. These shares are due back to the Company by August 2008 year end. at a price of US$182.1 million.

74 75 Solidere Annual Report 2007 SHARES SOLIDERE

AND GDRS A Shares - Daily Trades

Share Price US$ Volume

1,036,143 733,329 5,937,880 $26.0 600,000

EXCHANGE Beirut Stock Exchange $23.0 450,000 LISTINGS AND Solidere A shares TICKER SYMBOLS Solidere B shares $20.0 300,000

London Stock Exchange GDRs SOLAq.L $17.0 150,000

$14.0 0 ANALYSIS OF Solidere shares started the year on a weak 2 Jan 07 4 May 07 3 Sept 07 31 Dec 07 SHARE PRICES note under the weight of the July 2006 war and its aftermath. The political sit-in that ensued in the following months in the Riad El Solh area has added to an already lethargic situation, and is still Share Price – in US$ affecting the surrounding parts of Beirut city center to this day. Volume of Shares Traded The shares remained under pressure throughout most of 2007, trading within a tight band between US$15 and US$17 until September, when news of a political solution to the crisis circulated in the country. Then both classes of shares started moving decisively higher, as investors’ mood was turned around by optimism on the nearing of the presidential B Shares - Daily Trades election, coupled with positive news about Solidere International securing mega projects in the UAE and Egypt. The year ended with Share Price US$ Volume disappointment regarding the presidential election, but the shares remained strong, as most market participants believed in the value 4,039,403 of the company and of its international arm. $26.0 600,000 Share A closed the year at US$23.03, representing a 44% increase over the previous year closing price. $23.0 450,000 Share B closed at US$22.70, representing a 42% increase over the 2006 closing level. The GDRs, which are traded in the London Stock Exchange, also moved up and closed the year at US$23.85, a 48% $20.0 300,000 increase compared to the previous year. Both classes of shares fluctuated between a $17.0 150,000 high of US$25 and a low of US$15. Trading was active, with a total of around 36.5 million shares changing hands, for a cumulative value of about US$647 million. This represents around 22% of the $14.0 0 Company capital changing hands. The average daily volume was 2 Jan 07 4 May 07 3 Sept 07 31 Dec 07 about 145,000 shares with a value of around US$2.5 million. The

average price for the year consequently was about US$17.84, a Share Price – in US$ 16.9% decrease compared to the previous year. Volume of Shares Traded

76 77 Solidere Annual Report 2007

DIVIDEND The annual general meeting of shareholders DISTRIBUTION held in June 2007 confirmed the recommendation of the Board of Directors to distribute dividends from the 2006 net profits and prior years’ retained earnings. This was translated into a dividend of US$1.00 (US$0.95 after deducting the compulsory 5% tax on profit distributions) per share held, as per the shareholders’ register at the general meeting date. The total declared dividends amounted to US$155.1 million, with the balance of the 165 million shares being treasury shares held by the Company.

RESEARCH The Company pursued its investor relations AND INVESTOR efforts in 2007, participating in several financial, investment, RELATIONS business and real estate conferences. Solidere attended the Merrill Lynch MENA One-on-One Forum held February 10-13 at El Gouna, Egypt, and the EFG Hermes Investors roadshow held March 4-7 at Sharm El Sheikh, Egypt. One-on-one meetings held with a large number of fund managers outlined the Company’s strong fundamentals, its performance, international expansion and future plans. At the Urban Planning Conference held February 19-20 by the Municipality of Ajman, UAE, Beirut city center reconstruction was presented as a successful model of a public-private partnership. The Solidere roadshow for the private placement of the Solidere International capital issue, carried out in June 2007, included a large number of one-on-one meetings with key potential individual and institutional investors in the Gulf region. Presentations were also made for the Lebanese banking community, individual investors and various interested international funds. Solidere and its international expansion were presented at the Beirut Cosmopolitan Rotary Club on June 12, 2007. At the Merrill Lynch Emerging Europe, Middle East and Africa Midcap One-on-One forum, held in July-August 2007 and focusing on real estate and construction, Solidere held a large number of meetings with investment funds. In London and New York, the General Manager held 24 meetings, of which one was a collective meeting attended by 21 funds. Solidere participated in the Confex Businessmen Conference on investment opportunities in the Arab world, held in Beirut on December 5, 2007. The Solidere intervention focused on its know-how, brand name and networking capabilities. The reasons behind the regional expansion of Lebanese companies, such as Solidere, were presented, as well as the rationale for establishing Solidere International with a brief description of the company and its portfolio of projects. Several other presentations on Solidere’s fundamentals and strategies that have led to the success of Beirut City Center were also made on different occasions. The Company continued to receive at its premises numerous visitors with diverse profiles.

78 Solidere Annual Report 2007

MANAGEMENT Solidere has added new modules on its The need for implementing a public transport strategy was brought INFORMATION Enterprise Resource Planning system (JDEdwards) to into focus in the detailed design of the Martyrs’ Square corridor. As required in their SYSTEMS accommodate lease cycle and property management for the Souks project brief, the Greek consultant team included transport planners, and the scheme Project, as well as the automated billing for the Company's new design features a dedicated public transport right-of-way on the west side of Martyrs’ services, such as Broadband among other services. Square continuing southwards through the Beirut Gate development. Increases in The JDEdwards system was also enhanced to density and employment uses in the new waterfront district also confirmed the necessity accommodate the new expansion in external projects. The for mass transit in the near future. In particular, it will not be possible to service the new expertise accumulated by Solidere allowed a quick launch of concentration of employment in the ‘special business district’ without tram, light rail or internal systems within the subsidiaries of Solidere International. bus rapid transit into the city center and connecting onward to a Beirut-wide network. A A complete IT infrastructure was set up for the proposal was received from the Greek consultants to work in association with SITRAM entire Solidere group, reducing time and effort needed to build this and Arup, Solidere’s strategic advisors, on such a study, long programmed for Beirut city urgently needed infrastructure. center within its city-wide context. A web-based document and project

SYSTEMS management system, ‘Conject’, was introduced to facilitate the Having submitted a Master Plan amendment Land storage, retrieval and approval of technical drawings over the for the new waterfront district, Solidere began preparations for development internet, allowing consultants, engineers and managers monitor launching infrastructure contracts for the reclaimed area. A strategy and process drawings wherever they are in the world. proposal was received from Arup (UK) to undertake an The document management model that was infrastructure audit, designed to modernize infrastructure developed for Solidere was also tuned to be used for Solidere provisions on the new lands and precede the work of Laceco on International and the external companies. their detailed design. New video conferencing setup was put in place to facilitate the communication and enable virtual meeting An in-house study was carried out to Project definition AND STUDIES with Solidere members abroad. formulate a mixed-use residential, hotel, office and retail and development destination on block 21 in the hotel district. Following the studies MANAGEMENT development of a new office strategy and marketing campaign, URBAN AND As institutional investors Land use strategy architects were selected to undertake the design of three new office STRATEGIC began to make acquisitions in the city center, buildings: Vincent van Duysen (Belgium), 3XN (Denmark) and STUDIES Solidere took a more proactive role in guiding Mario Botta (Switzerland). The concept design was completed by the land use mix within development projects. Vincent Van Duysen for a building in lot 1493 Mina El Hosn. A successful example is the high density block 118 at the northeast corner of the Martyrs’ Square axis, where residential, hotel, office and retail will combine to form a mixed-use destination in the Phoenician Village project. Through a series of in-house workshops, Solidere also developed a strategy for promoting Beirut city center and particularly the new waterfront district as an international corporate office location. A ‘special business district’ was defined within the New Waterfront District, work began with the Ministry of Finance on a package of incentives for this zone and an office marketing campaign was launched. Finally, with cultural consultants Gaia Heritage, Solidere developed a cultural strategy focused on the Martyrs’ Square axis.

A 5-year parking strategy was completed by Transportation local transportation consultants SITRAM, to resolve parking strategy shortfalls arising from the sale of land previously allocated to temporary parking. This is now satisfied by new parking provision on the reclaimed area, connected to the historic and business center by shuttle bus service. The study indicated the need for implementation of the Martyrs’ Square car park by 2009. A parking meter study was carried out in coordination with the Municipality, identifying demand and allocating specific streets. Meters have now been installed.

80 81 Solidere Annual Report 2007

The object of Solidere International is to identify, promote, purchase, invest in, develop, market and manage real estate projects in the Middle East and the Mediterranean Basin (the Target Area). By leveraging the brand name, know-how and established development processes of Solidere, SI aims to take advantage of a booming real estate market in the Target Area by developing on a global/holistic basis urban areas where it can create and add value. Solidere International benefits from the Solidere city-making philosophy which involves: designing and implementing a landscaped public domain; creating a self-sustainable environment through sound urban planning and energy conservation in infrastructure and building design; developing a high-quality, vibrant and attractive mixed-use environment comprising retail, office, residential, leisure and tourist facilities; arts districts and cultural activities; quality real estate development and the creation of poles of excellence; and property management and maintenance, as a key to preserve and add value. Solidere signed in June 2007 with Solidere International a Trade Mark License agreement, a Professional Services agreement, and a Master Transfer agreement whereby Solidere transferred its rights in the identified projects. Solidere International draws on the city-making skills of the Solidere core team, and for specific, detailed and technical aspects, on the expertise, systems and procedures within the company’s divisional structure. The latter includes: finance, tendering, procurement and contracting, management information systems, corporate reporting and publications, human resources, legal, sales and marketing, investor relations, communications and events organization. Solidere and Solidere International also use an extensive specialist consultant network, including architectural, urban design, urban planning, civil engineering, infrastructure engineering, traffic planning and management, property marketing and valuation, environmental landscaping and financial services. Together with some of these consultants, a number of sites were identified and preliminary studies launched for their development. Solidere International has a multiple role in the projects identified for SOLIDERE development, fulfilling such activities as: master planning, urban design, infrastructure, project development, legal and corporate structuring, financial engineering, marketing and sales. Solidere and SI were able to mobilize important amounts for the funding of the SOLIDERE INTERNATIONAL LIMITED identified projects. (SI) WAS ESTABLISHED IN THE Solidere has built a portfolio of projects for Solidere International. Some DUBAI INTERNATIONAL FINANCIAL projects that were in the pipeline in 2007 have materialized in 2008, and companies were established to pursue the projects in their respective countries. CENTER (DIFC) ON JUNE 7, 2007. The contracted projects include Al Zorah Project, Ajman, UAE, covering IT WAS CAPITALIZED AT 12 million sq m of land area; Eastown Project, Cairo, Egypt, with 1.8 million sq m; and Westown US$700 MILLION THROUGH A Project, Cairo, Egypt, with 0.85 million sq m. PRIVATE PLACEMENT OFFERING. Among the projects in the making is the Bodrum Project, Turkey, on SOLIDERE INTERNATIONAL 8 million sq m of land area, and several projects in Saudi Arabia, for which MOUs were signed. HOLDINGS S.A.L. (99.5% OWNED Having been short-listed for the Monaco Urban Expansion and BY SOLIDERE) HAS SUBSCRIBED development at Sea, the Solidere International - Vinci partnership presented their joint offer in TO 37.19% OF THE SI SHARE CAPITAL. March 2008. OTHER SHAREHOLDERS ARE ELITE Several opportunities have been identified in Saudi Arabia, a very INDIVIDUAL AND INSTITUTIONAL promising real estate market, and Solidere expects to have two or three projects there by end INVESTORS FROM THE MIDDLE 2008. Other opportunities are being assessed in Algeria, Qatar and Montenegro. Starting 2009, EAST AND EUROPE, INCLUDING the Company will be concerned about how to implement a number of these projects. So the SEVERAL INTERNATIONAL year 2009 will be a consolidation year. Solidere International has signed with each of the INVESTMENT FUNDS. established companies a Professional Services agreement. INTERNATIONAL THE PROJECT Al Zorah, in Ajman, United Arab Emirates, is Solidere International’s flagship project and marks SI’s official debut into the region’s real estate market. The Project consists in the planning and development of 12 million square meters of coastal and sea-reclaimed land, with an extended waterfront of AL ZORAH PROJECT, AJMAN 12 kilometers. The design process responds directly to the LAND 12 MILLION SQ M site itself and includes sustainable development and energy BUA 22 MILLION SQ M conservation. The urban model objectives are to preserve the natural context and create a high-value environment for residents and visitors; promote tourism and eco-tourism; create a new business hub responding to demand for office and business parks; AL ZORAH enhance roads and bridges serving Al Zorah and connecting it to the rest of Ajman and to the national highway grid. Quality mixed-use real estate products totaling around 22 million sq m of built-up space are to be DEVELOPMENT developed, with almost all the properties enjoying water and mangroves views. They include world-class beachfront resorts and hotels, several residential zones, office buildings of different COMPANY heights and sizes, an important mall, and institutional facilities. THE COMPANY Al Zorah Development (Private) Company Limited P.S.C. was PROFESSIONAL Solidere International and the Company signed a Professional incorporated in October 2007 as a Free Zone Company under the laws of Ajman, United AGREEMENTS Services Agreement in March 2008. Arab Emirates. Its object is “to carry on all business relevant to the development of The Company also hired the services of the following consultants Al Zorah area, acquire lands and properties and market, manage and lease the same for in their respective capacities: Ian Hogan, Urban Design/Conceptual Master Plan/Master the Company’s or other parties’ accounts, including real estate brokerage services”. Plan Development; Ove Arup and Partners Ltd, Strategic Advisory Services on Transport The Company’s life is 99 years. Its capital is AED 4 billion, Infrastructure and Sustainability; COWI A/S of Denmark, Environmental Impact consisting of 40 million shares with a par value of AED 100, of which AED 2.12 billion Assessment (EIA) Study, Hydraulic Modeling Studies and Reclamation Works; Dar Al- were contributed in kind by the Ajman Government and Solidere International (the Handasah (Shair & Partners), Infrastructure Design. Al Zorah land); and AED 1.88 billion were a cash contribution by SI Al Zorah Equity Investments, Inc. The latter amount was raised, with Solidere International Limited owning 77.27% of shares in SI Al Zorah Equity Investments. PROJECT LAUNCH The Project launch on May 1, 2008 was quite successful, supported In December 2007, the land ownership was transferred to the AND MARKETING by a global communications campaign and a pre-sales campaign that brought in Company, which started operation, signed with the Government of Ajman the US$2.7 billion in revenues to Al Zorah Development Company. The exceptional investor Concession Agreement and held its first general meeting at which the Board of Directors reception for the Project is expected to continue. The benefits of this success have not approved the master plan, implementation and phasing program and appointed Sheikh only reflected positively on Al Zorah, but also on Solidere International’s brand, Rashid bin Humaid Al Noaimi as Chairman and Mr. Imad Mohamed Amin Dana as CEO. reputation and growth prospects.

86 87 CAIRO PROJECTS, EGYPT BODRUM, TURKEY WESTOWN, SHEIKH LAND 8,000,000 SQ M ZAYED CITY BUA 960,000 SQ M LAND 1.2 MILLION SQ M ABOVE GRADE LEVEL PROPERTY OF SODIC SOLIDERE INTERNATIONAL The project site is in the Turkish TERRA MARIS PURCHASE OPTION vacation region of Yali Ciflik Bay, MONACO URBAN Bodrum, approximately 20 kilometers ON 250,000 SQ M east of Bodrum town center. EXPANSION AND BUA 2.44 MILLION SQ M DEVELOPMENT AT SEA Solidere International signed an MOU LAND 100,000 SQ M EASTOWN, KATEMEYA with partners for the development of BUA 275,000 SQ M OF LAND 860,000 SQ M a resort town aimed at the top income WHICH 250,000 SQ M PROPERTY OF SOREAL level international clientele. PRIVATE SOLIDERE INTERNATIONAL It is the intention that this project PURCHASE OPTION should be an example of ecological The Monegasque Government launched a consciousness and sustainability. A prequalification bid for this model project ON 50,000 SQ M conceptual master plan was prepared in an exceptional location, that extends BUA 1.62 MILLION SQ M to that effect by Oktay Nayman (Turkey) 20 ha out into the sea from the heart of with the help of Solidere International. Monte Carlo. Solidere and Vinci (France) Solidere International entered into The objective of protecting this unique were selected as one of the five short- agreements with the Egyptian company site is translated in real estate clusters listed consortia from 20 international Six October Development and Investment forming typical hillside Mediterranean bidders. Solidere transferred all its rights Company (SODIC) to master plan, design, villages respectful of the site topography to Solidere International. develop, build, invest, market and property and separated by broad bands of natural manage two projects in Cairo’s western landscape. The overriding intention is The project, as presented by SI and Vinci, and eastern suburbs. In both cases, the to limit intervention to the natural seeks to reinforce Monaco’s strong land is owned by the Egyptian partner, landscape, to preserve and enhance Mediterranean identity, maritime heritage with SI having land purchase options. the ecological balance of the site with and glamorous past. While creating a replantation where necessary. The project new city quarter and public arena for the The master planning by SI of the two is to use green, intelligent and ecological Monegasque community, it will projects, named Westown and Eastown, friendly (low density) concepts and reposition Monaco as a major destination aims at offering mixed-use urban processes in terms of energy for European and international visitors. destinations; different types of residential consumption and recycling. options; state-of-the-art office buildings SI secured equity and debt finance to and landmark head offices; hotels and fund the project. Together with Vinci, SI furnished apartments; outdoor and indoor commissioned studies for the project. retail and entertainment; and various The SI – Vinci partnership presented in amenities (schools and public facilities). March 2007 their bid through Terra Maris, a newly formed company in Monaco. The In February 2008, the master plans for final results are expected in the second the two projects were submitted to the half of 2008. Egyptian authorities for final approval.

88 89

INDEPENDENT AUDITORS’ REPORT

To the shareholders The Lebanese Company for the Development and Reconstruction of Beirut Central District s.a.l. Beirut - Lebanon

We have audited the accompanying consolidated financial statements of The Lebanese Company for the Development and Reconstruction of Beirut Central District s.a.l. and its Subsidiaries (the Group), which comprise the consolidated balance sheet as at December 31, 2007, and the consolidated income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management and Directors’ Responsibility for the Financial Statements Management and Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards.This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with International Standards on Auditing.Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of The Lebanese Company for the Development and Reconstruction of Beirut Central District s.a.l. and its Subsidiaries (the Group) as of December 31, 2007, and of its consolidated financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Beirut, Lebanon March 31, 2008 Deloitte & Touche Ernst & Young

91 Solidere Annual Report 2007

CONSOLIDATED December 31, 2007 2006 CONSOLIDATED December 31, 2007 2006 BALANCE SHEET Notes US$ US$ INCOME Notes US$ US$ STATEMENT

Assets Revenues from land and real estate sales 288,467,975 253,344,014 Cash and bank balances 7 327,847,633 106,202,604 Revenues from rented properties 20,775,368 20,719,451 Prepayments and other debit balances 8 34,449,004 28,253,397 Revenues from project management Accounts and notes receivable, net 9 318,734,724 348,942,550 and consulting services 690,845 2,066,977 Investment securities 10 10,063,020 8,610,673 Cost of land and real estate sales (114,089,596) (114,584,398) Inventory of land and projects in progress 11 1,404,710,655 1,457,804,977 Charges on rented properties 24 (7,070,296) (6,457,583) Investment properties, net 12 150,349,040 150,651,813 Cost related to project management Investment in an associate 13 287,458,659 - and consulting services (86,127) (1,831,969) Fixed assets, net 14 35,641,877 26,115,483 (Loss)/gain on sale of investment properties 12 (824,099) 264,974 Total Assets 2,569,254,612 2,126,581,497 Net revenues from operations 187,864,070 153,521,466

Share result from an associate 13 68,030,929 - Liabilities General and administrative expenses 25 (18,086,723) (14,304,800) Bank overdrafts and short term facilities 15 181,186,491 48,362,001 Depreciation of fixed assets 14 (1,494,267) (1,699,106) Accounts payable and other liabilities 16 99,357,927 83,323,709 Provision against land development cost 11 (7,882,327) (3,036,061) Dividends payable 17 46,212,797 30,877,712 Other taxes 16 (670,059) (1,319,859) Deferred revenues and other credit balances 18 233,147,452 168,305,793 Provision for doubtful receivables 9 (314,962) - Deferred credits under structured contracts 19 170,280,000 - Other expense, net 26 (1,854,289) - Loans from banks and financial institutions 20 7,041,163 27,062,700 Interest income 27 40,151,525 27,211,687 Total Liabilities 737,225,830 357,931,915 Interest expense (15,885,954) (7,173,307) Profit before tax 249,857,943 153,200,020 Equity Income tax expense 16 (25,666,091) (21,033,071) Issued capital at par value US$10 per share: 21 100,000,000 class (A) shares 1,000,000,000 1,000,000,000 Profit for the year 224,191,852 132,166,949 65,000,000 class (B) shares 650,000,000 650,000,000 1,650,000,000 1,650,000,000 Basic/diluted earnings per share 28 1.4450 0.8375

Legal reserve 22 75,543,036 59,935,830 Retained earnings 263,175,988 209,685,044 Cumulative changes in fair value of available-for-sale securities 10 147,492 38,760 Surplus on sale of treasury shares 11,653,751 11,653,751 Less: Treasury shares 23 (168,491,485) (162,663,803) Total Equity 1,832,028,782 1,768,649,582 Total Liabilities and Equity 2,569,254,612 2,126,581,497

the accompanying notes form an integral part of these consolidated financial statements the accompanying notes form an integral part of these consolidated financial statements 92 93 Solidere Annual Report 2007

CONSOLIDATED December 31, 2007 2006 CASH FLOW Notes US$ US$ - - STATEMENT 271,940 108,732 861,982 US$ Total

(5,827,682) Cash flows from operating activities (94,831,106) 132,166,949 224,191,852 133,300,871 224,300,584 Profit for the year before income tax 249,857,943 153,200,020 Adjustments to reconcile income to net cash provided by operating activities: - - - (155,093,702) ------

- 29 - (124,123,610) - Depreciation 4,340,875 4,577,012 US$ Loss/(gain) on sale of investment properties 12 824,099 (264,974) 9,145,571 9,145,571 Loss on sale of fixed assets 120,882 - Provision for doubtful receivables 9 314,962 - Provision for contingencies and other charges 16(d) 2,876,491 837,921 Share result from an associate 13 (68,030,929) ------US$ 38,760 11,653,751 1,768,649,582 Interest income 27 (40,151,525) (27,211,687) 147,492 11,653,751 1,832,028,782 271,940 108,732 108,732 Interest expense 29 16,524,567 8,153,514 Changes in fair value of interest rate swap agreement - 1,012,279 - - - - -

US$ Changes in working capital: 861,982 Changes in Changes in Cumulative Cumulative 8(b)

Fair Value of Fair Value of Surplus on Sale Prepayments and other debit balances 3,234,418 5,660,430 Accounts and notes receivable 29 29,829,496 (76,482,211) Inventory of land and projects in progress 29 35,649,881 70,497,438 Accounts payable and other liabilities 29 (3,160,065) 4,166,342 - - - -

US$ Deferred revenues and other credit balances 8(b) 64,841,659 113,206,367

Earnings Swap Agreement Securities Shares Interest received 30,721,497 18,877,780 Income tax paid (21,156,116) (17,159,028) Net cash provided by operating activities 306,638,135 259,071,203 - 132,166,949- - - (94,831,106)- - - (155,093,702) - - - 224,191,852 - -- 132,166,949 861,982 271,940 - 224,191,852 - - (15,607,206) - - (13,218,476) - Cash flows from investing activities US$ Shares

Treasury Retained Interest Rate Available-for-sale of Treasury Pledged term deposits with banks 18,434,911 3,865,440 (5,827,682) - Investment securities 29 (1,324,427) 1,288,697 Receivable from recuperated properties 29 217,008 413,000 Acquisition of fixed assets 14&29 (4,633,587) (2,426,067) ------(124,123,610) - Acquisition of investment properties 12 (378,731) (467,206) US$ Legal

Reserve Proceeds from sale of fixed assets 250,001 - 15,607,206 13,218,476 Proceeds from sale of investment properties 12 7,697,283 960,446 Investment in an associate 13 (219,427,730) - Net cash (used in)/provided by investing activities (199,165,272) 3,634,310 ------US$ Share

Capital Cash flows from financing activities Bank loans (settlement) (20,021,537) (102,336,359) Dividends paid 17 (132,003,932) (74,220,101) Deferred credits under structured contracts 19 170,280,000 - Treasury shares (5,981,322) (136,294,710) Proceeds from sales of treasury shares - 17,714,145 Interest paid (12,490,622) (7,377,811) Net cash used in financing activities (217,413) (302,514,836)

Net change in cash and cash equivalents 107,255,450 (39,809,323) Cash and cash equivalents — Beginning of the year 32,220,220 72,029,543 Cash and cash equivalents — End of the year 29 139,475,670 32,220,220 Balance at December 31, 2005 1,650,000,000Profit for the year - 2006 46,717,354 (38,540,193)available-for-sale securities 185,567,677 (861,982) (233,180)Dividends 2,508,180 – Note 17 1,845,157,856 available-for-sale securities Dividends – Note 17 Balance at December 31, 2007 1,650,000,000 75,543,036the accompanying notes form an (168,491,485) integral part of these consolidated financial statements 263,175,988 - Change in fair value ofrate interest swap agreement Balance at December 31, 2006Profit for the year - 1,650,000,000 2007 59,935,830 (162,663,803) 209,685,044 - Total result of the year Total result of the year Change in fair value of Change in fair value of Surplus on sale of treasury shares - Allocation to legal reserve from 2007 profit Treasury shares trade Allocation to legal reserve from 2006 profit Treasury shares trade

the accompanying notes form an integral part of these consolidated financial statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 94 95 Solidere Annual Report 2007

2. ADOPTION The accounting policies adopted in the preparation of the financial statements are consistent OF NEW AND with those followed in the preparation of the financial statements for the year ended December REVISED 31, 2006, except for the adoption of new standards and interpretations noted below. Adoption INTERNATIONAL of these standards and interpretations did not have any effect on the financial position or FINANCIAL performance of the Group. They did, however, give rise to additional disclosures. REPORTING DECEMBER 31, 2007 STANDARDS IAS 1, “Amendment – Capital disclosure” effective from January 1, 2007 requires the Group to make new disclosures to enable the users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital.

IFRS 7, “Financial instruments: Disclosures”, effective for annual periods beginning on or after January 1, 2007, requires disclosures that enable the users of the financial statements to evaluate the significance of the Group’s financial instruments and the nature and extent of risks arising from those financial instruments. The new disclosures are included throughout the financial statements. While there has been no effect on the financial position or results, comparative information has been revised where needed.

Standards, Interpretations and Amendments to Published Standards that are issued but not yet effective

Up to the date of approval of the financial statements, certain new standards, interpretations and amendments to existing standards have been published but are not yet effective for the

FINANCIAL STATEMENTS current reporting period and which the Group has not early adopted, as follows:

IFRIC 11, “Group and Treasury Share Transactions” is effective for annual periods beginning on or after March 1, 2007 and requires arrangements whereby an employee is granted options to buy equity shares, to be accounted for as equity-settled schemes by an entity even if the entity chooses or is required to buy those equity shares from another party, or the shareholders of the entity provide the equity instruments granted. NOTES TO THE CONSOLIDATED 1. FORMATION The Lebanese Company for the Development and Reconstruction of Beirut Central District AND OBJECTIVE s.a.l. (SOLIDERE) (the Company) was established as a Lebanese joint stock company on May Amendment to IAS 23 “Borrowing costs” (effective for annual periods beginning on or after OF THE 5, 1994 based on Law No. 117/91, and was registered on May 10, 1994 under Commercial January 1, 2009) eliminates the benchmark treatment of expensing all borrowing costs in the COMPANY Registration No. 67000.The articles of incorporation of the Company were approved by case of qualifying assets to the income statement. All borrowing costs that are directly Decree No. 2537 dated July 22, 1992. attributable to the acquisition or construction of a qualifying asset must be capitalized. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready The objective of the Company, is to acquire real estate properties, to finance and ensure the for its intended use or sale. execution of all infrastructure works in the Beirut Central District (BCD) area, to prepare and reconstruct the BCD area, to reconstruct or restore the existing buildings, to erect buildings Amendments to IAS 1 (effective for annual periods beginning on or after January 1, 2009) which and sell, lease or exploit such buildings and lots and to develop the landfill on the seaside. has been revised to enhance the usefulness of information presented in the financial statements.Of the main revisions are the requirement that the statement of changes in equity The duration of the Company is 25 years, beginning from the date of establishment.An includes only transactions with shareholders; the introduction of a new statement of extraordinary general assembly dated June 29, 1998 resolved to amend the duration of the comprehensive income that combines all items of income and expense recognized in profit or Company to be 75 years beginning from the date of establishment.During 2005, the Council loss together with “other comprehensive income”; and the statement of financial position as at of Ministers approved the extension of the duration of the Company for 10 years. the beginning of the earliest comparative period, i.e. a third column on the balance sheet when the entity applies an accounting policy retrospectively or makes retrospective restatement. The Company, based on law No.117/91 mentioned above, was exempt from income tax for a period of ten years beginning on the date of formation.As such beginning May 10, 2004, the Company became subject to income tax. 3. SUMMARY The consolidated financial statements have been prepared in accordance with International OF SIGNIFICANT Financial Reporting Standards. An extraordinary general assembly dated November 13, 2006 resolved to amend the ACCOUNTING objective of the Company to include providing services and consultancy in real estate POLICIES The financial statements are presented in U.S. Dollars. development for projects outside the BCD area and all over the world. The financial statements are prepared under the historical cost convention as modified for the During 2007, the Company granted Solidere International Limited (an associate) the right to measurement at fair value of available-for-sale financial assets and derivatives, as applicable. use the “Solidere” brand in the execution of real estate projects outside the Beirut Central District area of Lebanon. The consolidated financial statements incorporate the financial statements of The Lebanese Company for the Development and Reconstruction of Beirut Central District s.a.l. and its The Company’s shares are listed on the Beirut stock exchange and Global Depository controlled subsidiaries drawn up to December 31 of each year.Control is achieved where the Receipts (GDR) are listed on the London stock exchange (International Trading Group has the power to govern the financial and operating policies of an entity so as to List).Furthermore, the Company’s shares were listed on the Kuwait stock exchange during obtain benefits from its activities. the year 2005 and were de-listed during the first quarter of the year 2007.

96 97 Solidere Annual Report 2007

Where necessary, adjustments are made to the financial statements of subsidiaries to bring E. Financial Instruments their accounting policies in line with those used by other members of the Group. Financial assets and financial liabilities are recognized on the Group balance sheet when the Group becomes a party to the contractual provisions of the instrument. All intra-Group balances, transactions, income and expenses and profits and losses resulting from intra-Group transactions are eliminated in full. When a financial instrument gives rise to a contractual obligation on the part of the Group to deliver cash or another financial asset or to exchange another financial instrument under Group entities comprise the following: conditions that are potentially unfavorable, it is classified as a financial liability.The instrument is an equity instrument if, and only if, both conditions (a) and (b) below are met: Ownership Date of Company Share Establishment a. The instrument includes no contractual obligation to deliver cash or another financial asset to another entity; or to exchange financial assets or financial liabilities with another Beirut Water Front Development s.a.l. entity under conditions that are potentially unfavorable to the issuer. (Joint Venture) (Proportionate consolidation) 50 April 2004 b. If the instrument will or may be settled from the Group’s own equity instruments; it is a Beirut Real Estate Management and non-derivative that includes no contractual obligation for the Group to deliver a variable Services s.a.l. (Joint Venture), number of its own equity instruments; or a derivative that will be settled only by the (Proportionate consolidation) 45 September 2005 Group exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments. Solidere Management Services s.a.l. 100 June 2006 Financial assets within the scope of IAS 39 are classified as financial assets at fair value Solidere Management Services (Offshore) s.a.l 100 March 2007 through profit or loss, loans and receivables, held-to-maturity investments or available-for- sale financial assets, as appropriate.When financial assets are recognized initially, they are Solidere International Holding s.a.l. 100 May 2007 measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The significant accounting policies adopted are set here below: The Group determines the classification of its financial assets on initial recognition and, A. Basis of Presentation where allowed and appropriate, re-evaluates this designation at each financial year end. In view of the long term nature and particulars of the Group’s operations, the financial statements are presented on the basis that the operations have realization and liquidation All regular way purchases and sales of financial assets are recognised on the trade date, periods spread over the duration of the Group and which are subject to market conditions and which is the date that the Group commits to purchase the asset.Regular way purchases or other factors commonly associated with development projects; as such, the balance sheet is sales are purchases or sales of financial assets that require delivery of assets within the shown as “unclassified” without distinction between current and long-term components. period generally established by regulation or convention in the marketplace.

B. Foreign Currencies Held-to-Maturity Securities The functional and presentation currency is the U.S. Dollars, in accordance with the Held-to-maturity securities, which have fixed or determinable payments and which are applicable law, which reflects the economic substance of the underlying events and intended to be held to maturity, are subsequently measured at amortized cost, less provision circumstances of the Group.Transactions denominated in other currencies are translated for impairment in value.This cost is computed as the amount initially recognized minus into U.S. Dollars at the exchange rates prevailing at the dates of the transactions.Monetary principal repayments, plus or minus the cumulative amortization using the effective interest assets and liabilities stated in currencies other than the U.S. Dollar are translated at the rates method of any difference between the initially recognized amount and the maturity amount. of exchange prevailing at the end of the year.The resulting exchange gain or loss which is Amortized cost is calculated by taking into account any discount or premium on acquisition. not material is reflected in the income statement. Impairment loss on such investments is recognized in the income statement. C. Impairment and Uncollectibility of Financial Assets An assessment is made at each balance sheet date to determine whether there is objective Loans and Receivables evidence that a financial asset or group of financial assets may be impaired.If such evidence Loans and receivables are non-derivative financial assets with fixed or determinable payments exists, the estimated recoverable amount of that asset and any impairment loss are that are not quoted in an active market.After initial measurement, loans and receivables are determined based on the present value of expected future cash flows.Impairment losses are carried at amortized cost using the effective interest method less any allowance for recognized in the income statement. impairment.Gains and losses are recognized in profit and or loss when the loans and receivables are derecognized or impaired as well as through the amortization process. D. Accounts and Notes Receivable Accounts and notes receivable which are originated by the Group are stated at amortized Available-for-Sale Securities cost less any amount written off and provisions for impairment. An assessment is made at Available-for-sale securities are those non-derivative financial assets that are designated as each balance sheet date to determine whether there is objective evidence that accounts or available-for-sale or are not classified in any other category.After initial recognition available- notes receivable may be impaired. If such evidence exists, the estimated recoverable for-sale financial assets are measured at fair value with gains or losses being recognized net amount of that asset is determined and any impairment loss, based on the net present value of deferred tax as a separate component of equity until the investment is derecognized or of future anticipated cash flows discounted at original effective interest rates, is included in until the investment is determined to be impaired at which time the cumulative gain or loss the income statement. previously reported in equity is included in the consolidated income statement.

The carrying amount of the asset is adjusted through the use of an allowance account. Fair Value The fair value of investments that are actively traded in organized financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using 98 99 Solidere Annual Report 2007

valuation techniques. Such techniques include using recent arm’s length market G. Investment Properties transactions, reference to the current market value of another instrument, which is Investment properties which represent properties held to earn rent and/or for capital substantially the same, discounted cash flow analysis and other pricing models. appreciation are measured initially at cost and subsequent to initial recognition are stated at their cost less accumulated depreciation and any impairment in value. Derecognition Financial assets Depreciation is computed using the straight-line method over the estimated useful lives of A financial asset (or where applicable, a part of a financial asset or part of a group of similar the properties, excluding the cost of land, based on the following annual rates: financial assets) is derecognized where: Buildings 2% • The rights to receive cash flows from the asset have expired, or Furniture, fixtures, equipment and other assets 9%-15% • The Group has transferred its rights to receive cash flows from the asset, or has assumed an obligation to pay the received cash flow in The carrying amount includes the cost of replacing part of an existing investment property full without material delay to a third party under a ‘pass through’ at the time that cost is incurred if the recognition criteria are met. Other subsequent arrangement, and expenditure is capitalized only when it increases future economic benefits of the related item • Either (a) the Group has transferred substantially all the risks and of investment properties. All other expenditure is recognized in the income statement as the rewards of the asset, or (b) the Group has neither transferred nor expense is incurred. retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Transfers are made to investment properties when, and only when, there is a change in use, evidenced by the end of owner occupation, commencement of an operating lease to another When the Group has transferred its rights to receive cash flows from an asset and has party or completion of construction or development. neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is derecognized to the extent of the Group’s Transfers are made from investment properties when, and only when, there is a change in continuing involvement in the asset. Continuing involvement that takes the form of a use, evidenced by commencement of owner occupation or commencement of development guarantee over the transferred asset is measured at the lower of the original carrying with a view to sell. amount of the asset and the maximum amount of consideration that the Group could be required to repay. H. Interest in Joint Ventures The Group has interests in joint ventures. A joint venture is a contractual arrangement whereby When continuing involvement takes the form of a written and/or purchased option two or more parties undertake an economic activity that is subject to joint control. The Group (including a cash settled option or similar provision) on the transferred asset, the extent of recognizes its share in joint ventures by using the proportionate consolidation method. the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash settled Investments in joint ventures are accounted for in the standalone financial statements using option or similar provision) on an asset measured at fair value, the extent of the Group’s historical cost net of any impairment loss. Impairment loss is recognized in the income continuing involvement is limited to the lower of the fair value of the transferred asset and statement. the option exercise price. The Group consolidates its share in assets, liabilities, revenues and expenses with related Financial liabilities captions in the consolidated financial statements. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the Financial statements of joint ventures are prepared for the same fiscal year, using the same same lender on substantially different terms, or the terms of an existing liability are accounting policies. substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability and the difference in the respective When the Group contributes or sells assets to the joint venture, any portion of gain or loss carrying amount is recognized in profit or loss. from the transaction is recognized based on the substance of the transaction. When the Group sells assets to the joint venture, the Group does not recognize its share of the profits Offsetting from the transaction until the joint venture resells the assets to an independent party. Financial assets and financial liabilities are only offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set-off the recognized amounts The joint venture is proportionately consolidated until the date on which the Group ceases and the Group intends to either settle on a net basis, or to realize the asset and the liability to have joint control over the joint venture. simultaneously. I. Investments in Associates F. Inventory of Land and Projects in Progress The Group’s investments in associates are accounted for under the equity method of Inventory of land and projects in progress are stated at the lower of cost and estimated net accounting. These are entities over which the Group exercises significant influence and realizable value.Costs include appraisal values of real estate plots constituting the which are neither subsidiaries nor joint ventures. contributions in kind to capital (A shares), in addition to capitalized costs. Capitalized costs comprise the following: Under the equity method of accounting, the interest in the associate is carried in the balance • Project direct costs and overheads related to the properties sheet at cost as adjusted for post acquisition changes in the Group’s share of the net assets development, construction and project management as a whole, as of the associate, less any impairment in the value of the individual investment. well as acquisition, zoning, and eviction costs. • Indirect costs, such as overheads, which were partially allocated to J. Fixed Assets inventory of land and projects in progress. Fixed assets are stated at cost net of accumulated depreciation and any impairment in value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets based on the following annual rates:

100 101 Solidere Annual Report 2007

Buildings 2% Financial assets (including treasury shares) received in return for the sale of land and real Marina 2% estate are valued at fair market value. Furniture and fixtures 9% Freehold improvements 9% Rental income from operating leases is recognized on a straight-line basis over the term of Plant 10% the relevant lease. Machines and equipment 15%-20% Interest income is recognized as interest accrues using the effective interest method, by Expenditure incurred to replace a component of an item of fixed assets that is accounted for reference to the principal outstanding and the applicable interest rate. separately is capitalized and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalized only when it increases future Revenue from rendering of services is recognized when the outcome of the transaction can economic benefits of the related item of fixed assets. All other expenditure is recognized in be estimated reliably, by reference to the stage of completion of the transaction at the the income statement as the expense is incurred. balance sheet date.

K. Impairment N. Cost of Sales At each balance sheet date, the carrying amounts of tangible assets (investment properties Cost of properties sold is determined on the basis of the built up area (BUA) - permitted right and fixed assets) are reviewed to determine whether there is any indication that these assets to build in square meters - on the sold plots based on the terms of the sales agreements. The have suffered an impairment loss. If any such indication exists, the recoverable amount of cost of one square meter of BUA is arrived at by dividing, total estimated cost of the land the asset is estimated in order to determine the extent of the impairment loss, if any. development project over total available BUA after deduction of the BUA relating to recuperated properties and those relating to the religious and public administrations. Recoverable amount is defined as the higher of: O. Deferred Credits under Structured Contracts • Fair value that reflects market conditions at the balance sheet date Treasury shares sold where the buyer has the option to put back to the Group the shares at less cost to sell, if any. a predetermined price and the Group has the option to buy back these shares at the same • Value in use assessed as the present value of estimated future cash price, are treated as deferred credits under structured contracts. The difference between the flows expected to arise from the continuing use of the asset and from original sales proceeds and option strike price is treated as interest which is accrued using its disposal at the end of its useful life, only for applicable assets with the effective interest rate method. cash generation units, as applicable. P. Borrowing Costs Where an impairment loss subsequently reverses, the carrying amount of the asset is Borrowing costs directly attributable to the acquisition, construction or production of increased to the revised estimate of its recoverable amount, but so that the increased qualifying assets, which are assets that necessarily take a substantial period of time to be carrying amount does not exceed the carrying amount that would have been determined ready for their intended use, are added to the cost of those assets, until such time that the had no impairment loss been recognized for the asset in prior years. A reversal of an assets are substantially ready for their intended use. impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as All other borrowing costs are reflected in the income statement in the period in which they a revaluation increase. are incurred. The impairment loss is recognized in the income statement. Q. Bank Borrowings Interest-bearing bank loans and overdrafts are initially measured at the fair value of the L. Treasury Shares consideration received, less directly attributable costs and are subsequently measured at Own equity instruments which are reacquired (treasury shares) are deducted from equity. amortized cost, using the effective interest rate method. Any difference between the No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of proceeds (net of transaction costs) and the settlement or redemption of borrowings is the Group’s own equity instruments. recognized in profit or loss over the term of the borrowings through the amortization process, using the effective interest rate method. The fair value of borrowings for disclosure Gains on sale of treasury shares are recorded under a reserve account in equity. Losses in purposes is estimated by discounting the future contractual cash flows at the current market excess of previously recognized gains are charged to retained earnings. interest rate that is available to the Group for similar financial instruments. M. Revenue Recognition R. Trade and other payables Revenue on land and real estate sales transactions is recognized on the basis of the full Trade and other payables are initially measured at fair value. Due to their short-term nature, accrual method as and when the following conditions are met: the carrying amount of trade and other payables approximates their fair values as of • A sale is consummated and contracts are signed. December 31, 2007 and 2006. Average maturity dates of trade payables range between 30- •The buyer’s initial (in principle over 25% of sales price) and 90 days. Short duration payables with no stated interest rate are measured at original continuing investments are adequate to demonstrate a commitment invoice amount unless the effect of imputing interest is significant. to pay for the property. • The Group’s receivable is not subject to future subordination. S. Derivative Financial Instruments • The Group has transferred to the buyer the usual risks and rewards of Derivative financial instruments are initially recognized at fair value on the date on which a ownership in a transaction that is in substance a sale and the Group derivative contract is entered into and are subsequently remeasured at fair value. does not have a substantial continuing involvement with the property. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. If any of the above conditions is not met, the initial payments received from buyers are recorded under deferred revenues and other credit balances. Amounts are released to Fair values are generally obtained by reference to quoted market prices, discounted cash revenue as and when the above conditions are fulfilled. flow models and pricing models as appropriate. 102 103 Solidere Annual Report 2007

Cash flow hedges are a hedge of the exposure to variability in cash flows that is attributable U. Provisions to a particular risk associated with a recognized asset or liability or a highly probable Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past forecast transaction and could affect profit or loss. event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while the ineffective portion is recognized in profit or loss. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Amounts taken to equity are transferred to the income statement when the hedged Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying transaction affects profit or loss, such as when hedged financial income or financial expense amount is the present value of these cash flows. is recognized or when a forecast sale or purchase occurs. Where the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial V. Employees’ End-of-Service Benefits carrying amount of the non-financial asset or liability. The Group provides end-of-service benefits to its employees. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The T. Taxation expected costs of these benefits are accrued over the period of employment. Current Tax In accordance with law No. 117/91, the Company was exempt from corporate income tax on profit for a period of 10 years from the date of establishment, ending on May 10, 2004. 4. CRITICAL In the application of the accounting policies described in Note 3 above, management is ACCOUNTING required to make judgments, estimates and assumptions about the carrying amounts of Effective May 10, 2004, income tax is determined and provided for in accordance with the JUDGMENTS assets and liabilities that are not readily apparent from other sources. The estimates and Lebanese tax laws. Income tax expense is calculated based on the taxable profit for the year. AND USE OF associated assumptions are based on historical experience and other factors that are Taxable profit differs from net profit as reported in the income statement because it excludes ESTIMATES considered to be relevant. Actual results may differ from these estimates. items of income or expense that are taxable or deductible in future years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to is calculated using tax rates enacted at the balance sheet date. Provision for income tax is accounting estimates are recognized in the period in which the estimate is revised if the reflected in the balance sheet net of taxes previously settled in the form of withholding tax. revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Rental income is subject to the built property tax in accordance with the Lebanese tax law. The most significant estimate made by the Group is the determination of the aggregate cost Deferred tax of the Beirut Central District Project. Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts. Impairment of accounts and notes receivable An estimate of the collectible amount of accounts and notes receivable is made when Deferred income tax assets and liabilities are measured at the tax rates that are expected to collection of the full amount is no longer probable. For individually significant amounts, this apply to the period when the asset is realized or the liability is settled, based on laws that estimation is performed on an individual basis. Amounts which are not individually have been enacted at the balance sheet date. significant, but which are past due, are assessed collectively and a provision is set up according to the length of time past due, based on historical recovery rates. Deferred income tax assets are recognized for all deductible temporary differences and carry-forward of unused tax assets and unused tax losses to the extent that it is probable At the balance sheet date, accounts and notes receivable amounted to US$68,961,930 and that taxable profit will be available against which the deductible temporary differences and US$289,075,956 respectively, and the provision for doubtful debts amounted to US$451,320 the carry-forward of unused tax assets and unused tax losses can be utilized. as of the balance sheet date. Any difference between the amounts actually collected in future periods and the amounts expected will be recognized in the income statement. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be Useful lives of fixed assets available to allow all or part of the deferred income tax asset to be utilized. The Group’s management determines the estimated useful lives of its fixed assets for calculating depreciation. The estimate is determined after considering the expected usage of Taxes payable on unrealized revenues are deferred until the revenue is realized. the assets or physical wear and tear. Management reviews the residual value and useful lives annually and future depreciation charge would be adjusted where the management Current tax and deferred tax relating to items that are credited or charged directly to equity believes the useful lives differ from previous estimates. are recognized directly in equity.

Value added tax (VAT) 5. INTEREST The Company has interest in joint ventures as follows: Revenues, expenses and assets are recognized net of the amount of VAT except: IN JOINT a. The Group entered into a joint venture agreement on February 11, 2004, with Stow VENTURES Waterfront s.a.l. (Holding) to establish Beirut Waterfront Development s.a.l. with a 50% • Where the VAT incurred on a purchase of assets or services is not stake in the joint venture’s total capital amounting to US$19,900. During the year 2006, the recoverable from the taxation authority, in which case the VAT is capital of the joint venture was increased to US$12,819,900 without changing the Group’s recognized as part of the cost of acquisition of the asset or as part of share in the capital. The main activity of the joint venture is to develop, operate, manage, the expense item as applicable; and exploit and sell real estate properties in the Marina area in Beirut Central District. • Receivables and payables that are stated with the amount of VAT included. As per the terms of the agreement, on December 31, 2005, the Group sold properties with an aggregate cost of US$10,100,000 from properties held for development and sale, to the The net amount of VAT recoverable from, or payable to, the taxation authority is included as joint venture for a total consideration of US$31,600,000. The other venturer contributed in part of receivables or payables in the balance sheet. cash an amount of US$31,600,000 to the joint venture. 104 105 Solidere Annual Report 2007

b. The Group entered into a joint venture agreement on December 23, 2005, with Aswaq 7. CASH Cash and bank balances are composed of the following: Management and Services L.L.C. to establish Beirut Real Estate Management and AND BANK Services s.a.l., with a 45% stake in the joint venture’s capital amounting to US$19,900. The BALANCES December 31, 2007 2006 main activity of the joint venture is to manage and market Aswaq Beirut Project (under US$ US$ construction) which is owned by the Lebanese Company for the Development and Cash on hand 85,026 98,749 Reconstruction of Beirut Central District s.a.l. Current accounts 11,064,074 19,515,034 Short term deposits 309,513,061 60,968,438 The Group’s share of the assets, liabilities, income and expenses of the jointly controlled 320,662,161 80,582,221 entities at December 31, 2007 and 2006, included in the consolidated financial statements, Pledged term deposits 7,185,472 25,620,383 are as follows: 327,847,633 106,202,604

December 31, 2007 2006 Short term deposits mature in January 2008 (December 31, 2006: Short term deposits US$ US$ mature in January 2007). The average yield on the term deposits as of December 31, 2007 Assets was approximately 5.5% (5.86% for the year ended December 31, 2006). Cash and bank balances 11,435,184 13,498,710 Prepayments and other debit balances 257,593 559,967 Pledged term deposits include an amount of US$16.7million as of December 31, 2006 Inventory of land and projects in progress 10,850,050 7,933,467 pledged against the loan provided to the Group and guaranteed by “COFACE” as explained Fixed assets, net 70,503 81,085 in Note 20. The loan was fully settled during 2007. Pledged term deposits also include 22,613,330 22,073,229 deposits of US$7million as of December 31, 2007 (US$8.9million as of December 31, 2006) pledged against a stand-by letter of credit to the extent of about US$3.5million (US$3.5million Liabilities as of December 31, 2006) and against a local bank’s loan to the extent of US$3million Accounts payable and other liabilities 3,980,398 716,140 (US$5million as of December 31, 2006) as explained under Note 20 and Note 31(h). Deferred revenues and other credit balances - 168,565 3,980,398 884,705 8. PREPAYMENTS Prepayments and other debit balances are composed of the following: Income and expenses AND OTHER DEBIT December 31, 2007 2006 US$ US$ 2007 2006 BALANCES US$ US$ Advance payments to contractors (a) 8,880,279 8,417,396 Revenues from consulting services 482,544 24,747 Advances to employees 2,006,704 1,656,325 General and administrative expenses (275,492) (417,482) Accrued interest income (b) 9,430,026 8,333,907 Depreciation (14,468) (15,220) Prepaid expenses 2,278,275 2,482,895 Interest income 656,582 583,279 Deferred tax assets (c) 2,277,120 1,945,160 Interest expense (429,668) - Due from related parties (d) 3,808,163 - Income for the year before income tax 419,498 175,324 Other debit balances (e) 5,768,437 5,417,714 34,449,004 28,253,397 Income tax (60,382) (41,346) Income for the year 359,116 133,978 a. Advance payments to contractors include an amount of US$7,030,531 as of December 31, 2007 (US$5,788,093 as of December 31, 2006) relating to a contractor involved in the 6. SEGMENT The business segments’ reporting is determined as the Group’s risk and rates of return are execution of the “Aswaq Beirut” project. REPORTING affected predominantly by differences in the products and services. The geographical operating segment offers products and services through a specific economic environment b. Accrued interest income consists of the following: and is subject to risks and returns that differ from other economic environments and is considered the primary segment. The Group has no secondary segment. December 31, 2007 2006 US$ US$

The Group operates in two geographic markets, the Lebanese market and the Middle East Interest on bank deposits 1,993,894 157,118 market consisting primarily of the United Arab Emirates (UAE). The following table shows Interest on notes and accounts receivables 7,436,132 8,176,789 the distribution of the Group’s revenues, profit for the year, total assets and total liabilities 9,430,026 8,333,907 by geographical segment.

Lebanon Middle East Total c. Deferred tax assets caption consists of the following: US$ US$ US$

Revenues 288,467,975 - 288,467,975 December 31, 2007 2006 US$ US$

Profit for the year 156,160,923 68,030,930 224,191,853 Deferred tax assets on unrealized profits from sales to a joint venture – Note 5 (a) 1,612,500 1,612,500 Total assets 2,281,795,954 287,458,659 2,569,254,613 Deferred tax assets on cost of land sold – Note 16 (c) 664,620 332,660 Total liabilities 737,225,830 - 737,225,830 2,277,120 1,945,160

106 107 Solidere Annual Report 2007

d. Due from related parties caption consists of the following: The average yield on accounts and notes receivable is mainly dependant on the Libor rate and was 9.97% as of December 31, 2007 (7.12% as of December 31, 2006). December 31, 2007 2006 US$ US$ In previous years, provision for problematic receivables has been established to meet Solidere International Limited 3,801,413 - probable defaults of certain clients whose notes receivable aggregated to US$470,605 as of Brems International s.a.l. (Offshore) 6,750 - December 31, 2007 (US$365,935 as of December 31, 2006). 3,808,163 - The movement in the provision for problematic receivables during the year was as follows: The above balances are interest free. 2007 2006 US$ US$ e. Other debit balances include an amount of US$2,358,000 as of December 31, 2007 and 2006 representing a claim receivable in connection with an arbitration regarding a dispute Balance at the beginning of the year 351,320 351,320 with one of the Group’s contractors as explained under Note 31 (j). Additions 314,962 - Write-offs (214,962) - Balance at the end of the year 451,320 351,320 9. ACCOUNTS Accounts and notes receivable are composed of the following: AND NOTES Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. RECEIVABLE, December 31, 2007 2006 NET US$ US$ Notes receivable 289,075,956 342,970,140 10. INVESTMENT During 2006 and 2007, the Group purchased several investments in capital guaranteed Accounts receivable 68,961,930 63,709,387 SECURITIES structured products, issued by foreign financial institutions, whereby a considerable part of Receivables from tenants 6,539,940 5,945,936 the price was financed by a loan from the issuing foreign bank. The financial assets and the Interest receivable on discounted notes 801,730 825,954 financial liabilities resulting from these transactions are offset and the net amount is Less: Unearned interest (46,193,512) (64,157,547) reported in the balance sheet since the Group has a legally enforceable right of set-off and Less: Provision for problematic receivables (451,320) (351,320) the Group intends to settle them on a net basis at maturity. Coupon rates depend on certain 318,734,724 348,942,550 conditions being satisfied which vary depending on the instrument, but mainly are related to the Libor rate. The average yield on these investment securities amounted to 6.12% in The Group’s credit risk exposure is spread over 118 counter-parties; 6 customers constitute 2007 (6.12% during the year 2006). 54% of the total exposure and 101 customers constitute the remaining 46% as of December 31, 2007 (as of December 31, 2006, 107 counter-parties; 6 customers constitute 48% of the The details of the above investments are as follows: total exposure and 101 customers constitute the remaining 52%).

Notes receivable, which resulted mainly from sales, carry the following maturities:

December 31, 2007 2006 US$ US$

Doubtful balances 470,605 365,935 Overdue 66,860,055 878,141 2007 - 180,001,959 2008 95,993,211 60,421,455 2009 61,247,873 51,433,966 2010 36,640,650 29,958,591 2011 27,863,562 19,910,093 289,075,956 342,970,140

As at December 31, the ageing analyses of notes receivable is as follows:

December 31, 2007 2006 US$ US$

Doubtful balances 470,605 365,935 Past due but not impaired: <30 days 1,209,669 878,141 30-60 days 1,584,752 - >120 days 64,065,634 - 66,860,055 878,141

Neither past due nor impaired 221,745,296 341,726,064 289,075,956 342,970,140

108 109 Solidere Annual Report 2007

The change in fair market value of the available-for-sale securities is recorded under “Cumulative changes in fair value of available-for-sale securities” in equity net of deferred 2006 tax liability in the amount of US$26,028 as of December 31, 2007 (net of deferred tax liability Net US$ 45,600 in the amount of US$6,840 as of December 31, 2006). 8,565,073 8,610,673

11. INVENTORY Inventory of land and projects in progress consists of the following: OF LAND AND US$ PROJECTS IN December 31, 2007 2006 Leverage PROGRESS US$ US$ Land and land development works, net (a) 1,190,541,499 1,270,422,013 Real estate development projects, net (b) 214,169,156 187,382,964 1,404,710,655 1,457,804,977 US$ Value of set-off Value Land and land development works include the following cost items:

December 31, 2007 2006 2007 US$ US$ US$ Value Acquired properties (a.1) 959,007,209 959,007,209 5,861,520 5,688,000 1,543,711 4,144,289 16,887,220 15,683,500 7,118,427 11,025,700 9,995,500 5,574,716 4,420,784 Pre-acquisition costs (a.2) 9,412,802 9,412,802 Infrastructure costs (a.3) 672,458,067 638,602,752 Eviction costs (a.4) 259,741,166 260,068,716 Capitalized costs (a.5) 64,456,116 62,289,085 Cumulative costs 1,965,075,360 1,929,380,564 Less Cost of land sold, net (689,047,866) (575,666,777) Cost of land transferred to real estate development projects (79,132,874) (76,938,653) %

Rate Leverage Cost of infrastructure transferred to Coupon Interest on Fair Market Book with right

Conditional real estate development projects (6,353,121) (6,353,121) 1,190,541,499 1,270,422,013

a.1 Acquired properties consist mainly of the aggregate initial appraised value attributed to

US$ the plots included in the BCD area of US$1,170,001,290 net of the recuperated properties. 173,520

9,889,500 The aggregate appraised value is determined in accordance with Decree No. 2236 (dated 10,063,020 February 19, 1992 based on the decision of the Higher Appraisal Committee, which was established in accordance with Law No. 117/91). Acquired properties include the value of - 2,688,000 6.20 3ML + 0.5% 2,877,600 2,688,000 740,000 1,948,000 purchased and exchanged properties as well. US$ of set-off Value Leverage

with right Net Law No. 117/91 stated the requirements for property recuperation and exemption. In this respect properties appraised at US$255million were recuperated by original owners and properties appraised at US$133million were not claimed for recuperation.

a.2 Pre-acquisition costs include technical and master plan studies incurred during the set US$

Value up period of the Group. 5,688,000 750,000 4,938,000 9,995,500 5,044,000 4,951,500 15,683,500 5,794,000 a.3 Infrastructure costs as at December 31, 2007 include an amount of US$280.55million (US$279.4million as of December 31, 2006) relating to the sea front defense and marina works, an amount of US$146million (US$145million as of December 31, 2006) relating to

Date infrastructure works executed in the traditional BCD area, and an amount of Maturity Book 29/03/2012 3,000,00025/04/2016 2,688,000 750,000 2,250,000 5.60 3ML + 0.5% 2,983,920 3,000,000 803,711 2,196,289 23/02/2014 5,000,000 1,450,000 3,550,000 6.10 3ML + 0.75% 4,766,500 5,000,000 1,990,000 3,010,000 26/03/2008 2,000,000 2,194,000 (194,000) 6.00 1YL + 0.75% 3,457,200 2,000,000 2,075,000 (75,000) US$107million (US$78million as of December 31, 2006) relating to the cost of land reclamation and treatment. It also includes the cost of an electricity power station in the amount of US$42million (US$42million as of December 31, 2006), and other costs which relate mainly to demolition and archeology. This caption includes capitalized borrowing 1 costs totaling US$40.8million up to December 31, 2007 (US$40.2million up to December 31, 2006). During the year ended December 31, 2007, borrowing costs of US$0.64million were capitalized (US$0.98million for the year ended December 31, 2006).

a.4 Eviction costs represent the costs of relocating previous settlers out of the BCD area which were mainly paid through the Central Fund for the Displaced (a public authority). 1 This caption is stated net of US$22.2million as of December 31, 2007 (US$21.8million as Total investments in securities at net book value December 31, Held-to-Maturity USD Spread Callable Range Accrual Note Available-for-sale 7-year Non-Call 3 months Knock-out Callable Range Note 1The Company has a put option to sell back the notes to the issuer at 100% provided certain conditions are met. 7-year USD Callable Range Accrual Puttable Note Add/(Less): Change in fair value of available-for -sale securities Investment securities 4 year CPU MULTIPLUS on Asian Indices 10-year USD “Momentum” Callable Range Accrual Note 16/03/2015 2,995,500 1,400,000 1,595,500 6.65 3ML + 0.5% 2,802,000 2,995,500 1,509,716 1,485,784 110 111 Solidere Annual Report 2007

of December 31, 2006) representing a 10% charge on recuperated properties appraised Investment properties include rented and available for rent properties. These represent values collected from original owners other than religious and governmental mainly a property leased out to the Ministry of Foreign Affairs and Emigrants, for use by an recuperated properties. international agency. It also includes residential complexes, an embassy complex, and other restored buildings. a.5 Capitalized costs represent allocation of direct overheads. Costs capitalized during the year ended December 31, 2007 amounted to US$2.8million (US$3.9million for the year During the year ended December 31, 2007, the Group sold property having an aggregate net ended December 31, 2006). book value of US$8,521,382 for total proceeds of US$7,697,283 which resulted in a loss of US$824,099 recorded in the income statement (net book value of US$695,472, total proceeds An impairment loss of US$7,882,327 was recognized in the income statement during the of US$960,446 and gain of US$264,974 for the year ended December 31, 2006). year 2007 (US$3,036,061 during the year 2006) that represents non-recoverable charges included in the cost of some of these properties relating to the impairment of the value of During the year ended December 31, 2007, the Group transferred US$10,580,812 from real an asset due to an arbitration with a contractor. estate development projects to investment properties.

Real estate development projects include the following: The fair value of the investment properties is estimated by management at around US$320million based on current market prices (US$248million as of December 31, 2006). December 31, 2007 2006 There has been no valuation of these properties by an independent valuer. US$ US$

Construction and rehabilitation of buildings 390,244,030 347,067,525 Depreciation for investment properties in the amount of US$2,740,934 for the year 2007 Cost of land 79,521,156 77,326,934 (US$2,877,906 for the year 2006) is recorded under “Charges on rented properties” caption Cumulative costs 469,765,186 424,394,459 in the income statement (Note 24). Less Cost transferred to investment properties, net (185,286,091) (174,705,279) 13. INVESTMENT Details of the Group’s associate are as follows: Cost transferred to fixed assets (26,145,684) (18,141,961) IN AN Cost of real estate sold (44,164,255) (44,164,255) ASSOCIATE Country of Ownership Group’s Share 214,169,156 187,382,964 Incorporation Interest Cost of Equity % US$ US$ The net cost of real estate development projects includes cost incurred in connection with Solidere International Limited UAE 37.62 219,427,730 287,458,659 the construction of a shopping mall in the amount of US$106.3million as of December 31, 2007 (US$81.83million as of December 31, 2006). Summarized financial information in respect of the Group’s associate is set out below:

12. INVESTMENT Investment properties are composed of the following: December 31,2007 US$ PROPERTIES, NET Balance as at December 31, 2006 Additions Transfers Disposals & Sales 2007 Total assets 878,335,751 US$ US$ US$ US$ US$ Total liabilities (5,672,721) Cost Less: Minority interest (108,523,324) Land 42,001,922 - 2,194,225 (2,105,519) 42,090,628 Net assets 764,139,706 Buildings 122,702,684 300,443 8,386,587 (7,108,236) 124,281,478 Group’s share of net assets of an associate 287,458,659 Other assets 4,507,171 78,288 --4,585,459 Initial price of investment 219,427,730 169,211,777 378,731 10,580,812 (9,213,755) 170,957,565 Group’s share of results of an associate 68,030,929

Accumulated Depreciation Carrying amount of the investment 287,458,659 Buildings 15,911,771 2,424,794 - (692,373) 17,644,192 Other assets 2,648,193 316,140 --2,964,333 On June 7, 2007, the Group subscribed into the capital of Solidere International Limited for 18,559,964 2,740,934 - (692,373) 20,608,525 an amount of US$3,000,060 representing a 0.4286% equity stake. Net Book Value 150,651,813 150,349,040 During the first half of the year 2007, Solidere established Solidere International Holdings s.a.l. (SIH) which in turn established Solidere International Limited (SI) in the Dubai International

Balance as at December 31, 2005 Additions Transfers Disposals & Sales 2006 Financial Center (DIFC) with an initial capital of US$50,000. The main activity of SI is to US$ US$ US$ US$ US$ promote, invest in, develop, market and manage, as well as provide consulting services with respect to real estate projects outside the Beirut Central District area of Lebanon. Cost Land 42,265,974 - (53,135) (210,917) 42,001,922 In the same year, SIH raised additional funds for SI through a private placement. Buildings 122,923,983 268,977 53,135 (543,411) 122,702,684 Other assets 4,308,942 198,229 --4,507,171 As a result of the private placement SI’s share capital and share premium amounted to 169,498,899 467,206 - (754,328) 169,211,777 US$700,050,000 out of which SIH settled US$219,427,060 against an ownership percentage of 37.19%. Accumulated Depreciation Buildings 13,539,952 2,430,675 - (58,856) 15,911,771 The private placement memorandum and other signed agreements between Solidere and SI Other assets 2,200,962 447,231 --2,648,193 stipulate that Solidere and Solidere Management Services s.a.l. will transfer to SI all the projects 15,740,914 2,877,906 - (58,856) 18,559,964 that they currently have outside the Lebanese territories. In addition, Solidere will grant SI the Net Book Value 153,757,985 150,651,813 right to use the Solidere brand name through a license agreement and a none compete right. 112 113 Solidere Annual Report 2007

14. FIXED Fixed assets are composed of the following: 15. BANK Bank overdrafts and short term facilities consist of the following: ASSETS, NET OVERDRAFTS Balance as at December 31, 2006 Additions Transfers Disposals & Sales 2007 AND SHORT December 31, 2007 2006 US$ US$ US$ US$ US$ TERM US$ US$ Cost FACILITIES Bank overdrafts 1,290,555 48,362,001 Land 5,080,192 ---5,080,192 Short term facilities 179,895,936 - Buildings 11,507,802 217,727 --11,725,529 181,186,491 48,362,001 Marina 6,934,100 ---6,934,100 Furniture and fixtures 2,396,602 151,102 --2,547,704 On August 2, 2007, the Group signed two credit facility agreements with a local bank for Freehold improvements 3,332,025 282,433 --3,614,458 US$75million and US$35million. These facilities are subject to an interest rate of one year Plant 1,853,266 --(1,853,266) - Libor plus 1.7% and one year Libor plus 1.5% respectively. These facilities mature on August Machines and equipment 12,543,972 3,982,325 8,003,723 - 24,530,020 3, 2008. The covenants of the agreements stipulate that the Group maintain a maximum 43,647,959 4,633,587 8,003,723 (1,853,266) 54,432,003 debt to equity ratio of 1:4 and a minimum equity balance of US$1billion.

Accumulated Depreciation On June 22, 2007, the Group signed a US$50million one year credit facility with a local bank. Buildings 1,785,510 208,533 --1,994,043 This facility is subject to an interest rate that varies between one month Libor plus 1.75% and Marina 374,110 138,682 --512,792 three-months Libor plus 1.25%. Furniture and fixtures 1,938,764 215,504 --2,154,268 Freehold improvements 2,090,482 312,980 --2,403,462 On June 18, 2007, the Group signed a US$40million one year credit facility with a local bank. Plant 1,297,058 185,326 - (1,482,384) - This facility is subject to an interest rate of three-months Libor plus 1.25% but not less than Machines and equipment 10,046,552 1,679,009 --11,725,561 6%. The covenants of the agreements stipulate that the Group maintain a maximum debt to 17,532,476 2,740,034 - (1,482,384) 18,790,126 equity ratio of 1:4 and a minimum equity balance of US$1billion.

Net Book Value 26,115,483 35,641,877 16. ACCOUNTS Accounts payable and other liabilities consist of the following: PAYABLE AND OTHER December 31, 2007 2006 Balance as at December 31, 2005 Additions 2006 LIABILITIES US$ US$ US$ US$ US$ Accounts payable (a) 39,683,157 39,433,181 Cost Accrued charges and other credit balances (b) 18,310,542 14,332,919 Land 5,080,192 - 5,080,192 Taxes payable (c) 29,850,507 24,311,807 Buildings 11,237,020 270,782 11,507,802 Provision for end-of-service indemnity Marina 6,934,100 - 6,934,100 and other charges (d) 6,890,576 4,463,259 Furniture and fixtures 2,299,931 96,671 2,396,602 Due to an associate and related party 563,172 - Freehold improvements 2,962,826 369,199 3,332,025 Deferred tax liability – Note 10 26,028 6,840 Plant 1,853,266 - 1,853,266 Accrued interest payable 4,033,945 775,703 Machines and equipment 10,854,557 1,689,415 12,543,972 99,357,927 83,323,709 41,221,892 2,426,067 43,647,959 a. Accounts payable as of December 31, 2007 and 2006 include balances in the aggregate Accumulated Depreciation amount of US$13.8million due to the Lebanese Government in consideration of the Buildings 1,569,910 215,600 1,785,510 exchange of assets agreement explained in Note 31(f). Marina 235,428 138,682 374,110 Furniture and fixtures 1,739,886 198,878 1,938,764 b. Accrued charges and other credit balances as of December 31, 2007 and 2006 include an Freehold improvements 1,793,497 296,985 2,090,482 amount of US$8.5million representing proceeds received in respect of a performance Plant 1,111,731 185,327 1,297,058 bond executed against a contractor for improper performance of contracted works under Machines and equipment 8,564,627 1,481,925 10,046,552 arbitration. The Group recognized a liability against the cash proceeds since the outcome 15,015,079 2,517,397 17,532,476 of the subject arbitration is not yet certain Note 31(j).

Net Book Value 26,206,813 26,115,483 c. Taxes payable consist of the following:

December 31, 2007 2006 During the year ended December 31, 2007 the Group transferred computer equipment and US$ US$ installations (Broad Band Network) amounting to US$8,003,723 from real estate Accrued income tax 25,652,763 21,188,055 development projects to fixed assets. VAT Payable 22,232 - Taxes withheld 1,437,522 962,182 The depreciation for the year ended December 31, 2007 was split between an allocation to Property tax payable 2,067,931 2,161,570 inventory of land and projects in progress and a charge to the income statement of VAT additional tax assessment 670,059 - US$1,245,767 and US$1,494,267, respectively (US$818,291 and US$1,699,106 respectively, 29,850,507 24,311,807 for the year ended December 31, 2006).

114 115 Solidere Annual Report 2007

The accrued income tax for the years 2007 and 2006 was estimated as follows: The General Assembly of Shareholders in their meeting held on June 12, 2006 decided to distribute dividends at an average of 60 US cents for every share. Accordingly dividends 2007 2006 payable in the amount of US$90.09million were recorded after deducting dividends US$ US$ distribution tax in the amount of US$4.74million. An amount of approximately US$84million Profit before tax 249,857,943 153,200,020 was settled up to December 31, 2007 (US$73million up to December 31, 2006). Less: income/(losses) of subsidiaries (68,028,316) (369,257) Add: Non deductible provisions and charges 4,806,251 3,217,563 In addition, the General Assembly held on June 22, 2007 resolved to distribute dividends on Less: Non taxable revenues (13,954,898) (13,997,186) the basis of US$1 per share. Accordingly, the Group recorded dividends payable in the Taxable income 172,680,980 142,051,140 amount of US$147.3million net of distribution tax in the amount of US$7.75million. An Applicable tax rate 15% 15% amount of approximately US$128million was settled up to December 31, 2007. Accrued income tax 25,902,147 21,307,671 Add: Income tax provision subsidiaries 95,904 58,060 The outstanding balance of unpaid dividends relates mostly to unclaimed dividends and Total accrued income tax 25,998,051 21,365,731 dividends pertaining to undelivered class (A) shares. Less: Tax on interest previously settled (345,288) (177,676) Accrued income tax payable 25,652,763 21,188,055 18. DEFERRED Deferred revenues and other credit balances consist of the following: REVENUES Total accrued income tax 25,998,051 21,365,731 AND OTHER December 31, 2007 2006 Less: Deferred tax assets – Note 8(c) (331,960) (332,660) CREDIT US$ US$ Income tax expense 25,666,091 21,033,071 BALANCES Cash down payments and commitments The applicable tax rate in Lebanon is 15% according to the Lebanese tax laws. The tax returns on sale contracts 222,328,962 154,763,757 for the years from 2004 till 2007 are still subject to examination and final tax assessment by Deferred rental revenue and related deposits 10,818,490 13,542,036 the tax authorities. Any additional tax liability is subject to the results of this review. 233,147,452 168,305,793

Property tax payable in the amount of US$2.07million as at December 31, 2007 is included Cash down payments and commitments on sale contracts include balances aggregating to under the caption “Charges on rented properties” in the income statement (US$2.16million approximately US$211million that relate to 13 sale contracts with an aggregate potential as at December 31, 2006). The Group has provided for additional tax related to previous gross sales value of US$826.5million as of December 31, 2007 (US$143.5million relating to years in the amount of US$1,319,859 during the year ended December 31, 2006. 15 sale contracts with an aggregate potential gross sale value of US$1,034million as of December 31, 2006). During 2007, the Group’s VAT declarations were subject to review and final assessment by the tax authorities. As a result of this review an additional tax liability in the amount of Deferred rental revenue and related deposits represent down payments on lease and rental US$670,059 was accrued for and charged to the income statement under “Other taxes”. agreements and reservation deposits for the rental of real estate properties.

d. The movement of provision for end-of-service indemnity and other charges is as follows: 19. DEFERRED Deferred credits under structured contracts represent contracts executed with banks and CREDITS involving put and call options on treasury shares which are classified as interest bearing 2007 2006 US$ US$ UNDER liabilities. STRUCTURED Balance at the beginning of the year 4,463,259 3,658,217 CONTRACTS a. The Group sold on September 7, 2007 to a local bank, 4,360,000 shares (2,585,000 “A” Additions 2,876,491 837,921 shares and 1,775,000 “B” shares) from treasury shares with a sale back option to the bank Settlements (449,174) (32,879) and a buy back option to the Group for a total consideration of US$74,992,000 at US$17.2 Balance at the end of the year 6,890,576 4,463,259 per share. The sale back and buy back option can be exercised at a strike price of US$18.39 per share in the period starting on March 10, 2008 and ending on September 10, 2008. The settlement is to be paid at the latest on September 10, 2008, subject to certain conditions 17. DIVIDENDS The breakdown of dividends payable is summarized as follows: specified in the contract. The strike price represents the selling price plus accumulated PAYABLE interest. General Assembly Dividend Settled up to Dec 31, 2007 Dec 31, 2006 Date per Share Declared Dec 31, 2007 Payable Payable US$ US$ US$ US$ US$ b. The Group sold on September 7, 2007 to a local bank, 5,540,000 shares (3,290,000 “A” shares and 2,250,000 “B” shares) from treasury shares with a sale back option to the bank June 29, 1996 0.20 30,918,413 29,101,605 1,816,808 1,920,969 and a buy back option to the Group for a total consideration of US$95,288,000 at US$17.2 June 30, 1997 0.25 40,367,172 37,190,157 3,177,015 3,334,353 per share. The sale back and buy back option can be exercised at a strike price of June 29, 1998 0.25 39,351,753 35,558,350 3,793,403 4,113,745 US$18.39 per share in the period starting on March 10, 2008 and ending on September 10, June 23, 2003 Stock dividend --27,485 27,485 2008. The settlement is to be paid at the latest on September 10, 2008, subject to certain June 12, 2006 0.6 94,831,106 84,027,957 10,803,149 21,481,160 conditions specified in the sale contract. The strike price represents the selling price plus June 22, 2007 1 155,093,702 128,498,765 26,594,937 - accumulated interest. 46,212,797 30,877,712 Interest in the amount of US$3,605,115 has been accrued on the above deferred credits under structured contracts up to December 31, 2007 and recorded under “Accounts payable and other liabilities” in the balance sheet.

116 117 Solidere Annual Report 2007

20. LOANS FROM This caption consists of the following: 21. CAPITAL Capital consists of 165,000,000 shares of US$10 par value, authorized and fully paid and BANKS AND divided in accordance with Law 117/91 into the following: FINANCIAL December 31, 2007 2006 • Class “A”, amounting to 100,000,000 shares represented contribution INSTITUTIONS US$ US$ in kind of properties in the BCD, based on the resolutions of the High “COFACE” guaranteed loan - 15,327,428 Appraisal Committee. All Class A shares were deemed to have been Local bank loan 3,000,000 5,000,000 issued and outstanding since the establishment of the Company. Loan guaranteed by Export - Import Bank • Class “B”, amounting to 65,000,000 shares represented capital of the United States 4,041,163 6,735,272 subscription in cash and are all issued and fully paid at the 7,041,163 27,062,700 establishment of the Company.

Maturities of the loans from banks and financial institutions are as follows: Class “A” and Class “B” shares have the same rights and obligations.

December 31, 2007 2006 As of December 31, 2007, the Company had 14,476,898 “A” shares listed on the London US$ US$ Stock Exchange in the form of Global Depository Receipts (GDR) (12,926,898 “A” shares as 2007 - 20,021,537 of December 31, 2006). 2008 4,694,109 4,694,109 2009 2,347,054 2,347,054 22. LEGAL In conformity with the Company’s articles of incorporation and the Lebanese Code of 7,041,163 27,062,700 RESERVE Commerce, 10 % of the annual net income is required to be transferred to legal reserve until “COFACE” Guaranteed Loan this reserve equals one third of capital. This reserve is not available for dividend distribution. For the purpose of partially financing the sea front defense works, the Group signed in 1996 a 10 year “COFACE” guaranteed loan agreement for an amount of US$107.3million of which 23. TREASURY This caption includes 9,906,298 shares class (A) and (B) as of December 31, 2007 (9,533,318 US$7.3million represents a guarantee premium. This loan, which was fully drawn, was SHARES shares as of December 31, 2006), of which 9,900,000 shares are subject to specific structured scheduled for settlement starting February 2001 through 14 semi annual payments in the contracts (Note 19). amount of US$7.66million each. The loan was subject to an interest rate of 7.39% per annum, payable semi annually starting August 1998. The Group settled the loan in full as at The treasury shares outstanding as of December 31, 2007 and December 31, 2006 are stated December 31, 2007 (US$91.98million were settled up to December 31, 2006). at the weighted average cost.

Local Bank Loan According to its articles of incorporation, the Company may purchase up to 10% of its share In July 2001, a complementary loan agreement in the amount of US$10million was signed capital without the existence of free reserves, provided that it shall resell these shares within with a resident foreign bank. The total amount of the loan was withdrawn up to December a period not exceeding eighteen months. 31, 2004. This loan shall be paid in 10 equal semi-annual installments starting October 25, 2004 and ending April 27, 2009. An installment of US$2million was made during 2007 in As of December 31, 2007, this caption includes 3,685,000 shares that were acquired from addition to settlements aggregating to US$5million from 2004 till 2006 and thus the balance sale of properties (3,685,000 shares as of December 31, 2006). of the loan decreased to US$3million as of December 31, 2007. The loan is subject to an annual interest rate of 3 months Libor plus 1%. The Company shall maintain a pledged fund of not less than 102% of all outstanding principal and interest amounts, and should maintain 24. CHARGES Charges on rented properties includes the following: a debt to equity ratio not exceeding 25% and total tangible net assets should not be less than ON RENTED US$1billion free from any liens including permitted liens. PROPERTIES December 31, 2007 2006 US$ US$ Loan Guaranteed by Export - Import Bank of the United States Depreciation expense (Note 12) 2,740,934 2,877,906 In July 2001, the Group signed an “Export Financing Credit Agreement” for the amount of Property taxes 2,262,480 2,165,750 US$14.71million to support the purchase of engineering and construction services and Maintenance and other related expenses, net 2,066,882 1,413,927 equipment from the United States for the waste treatment project. This loan is guaranteed 7,070,296 6,457,583 by the Export-Import Bank of the United States and is financed by a resident foreign bank. An amount of US$13.47million had been drawn up to December 31, 2004. Subsequent to that date, the Group made no withdrawals. This loan shall be paid by 10 equal successive 25.GENERAL AND General and administrative expenses is composed of the following: semi-annual installments, the first of which shall be due and payable on October 25, 2004. ADMINISTRATIVE An installment of US$2.7million was made during 2007 in addition to installments EXPENSES December 31, 2007 2006 amounting to US$6.75million from 2004 till 2006 and thus the balance of the loan decreased US$ US$ to US$4.04million as at December 31, 2007. This loan is subject to an interest rate of 0.25% per annum above Libor. According to the contract terms, an irrevocable stand-by letter of Salaries, benefits and related charges 12,787,089 9,408,373 credit in the amount of US$3.57million was submitted to the Export - Import Bank of the Board of directors’ remuneration 144,000 144,000 United States. Moreover, the Group is required to maintain a minimum balance of cash and Administrative expenses 5,155,634 4,752,427 cash equivalents of US$30million and the treasury shares should not exceed 10,131,829 18,086,723 14,304,800 shares or the equivalent of US$76million in aggregate value. In this respect, the number of treasury shares amounted to 9,906,298 shares with an aggregate value of US$168,491,485 as at December 31, 2007 (9,533,318 shares with an aggregate value of US$162,663,803 as at The Group reallocated salaries, benefits and related charges and administrative expenses December 31, 2006). amounting to US$2.8million to construction cost during the year ended December 31, 2007 (US$3.9million during the year ended December 31, 2006).

118 119 Solidere Annual Report 2007

26. OTHER Other expense consists of the following: c. Interest expense consists of the following: EXPENSE, NET December 31, 2007 2006 December 31, 2007 2006 US$ US$ US$ US$

Business development and services expenses 4,319,285 - Interest charged as period cost 15,885,954 7,173,307 Business development and services Interest expense allocated to inventory of land expenses recovered (2,262,480) - and projects in progress – Note 11 638,613 980,207 Gain on exchange (143,221) - Total interest expense 16,524,567 8,153,514 Other income (59,295) - 1,854,289 - d. Non-cash transactions in operating and investing activities include transfers from inventory of land and projects in progress to investment properties in the amount of US$10,580,812 for the year ended December 31, 2007. Business development and services expenses represent total costs incurred on projects outside Lebanon transferred to Solidere International Limited borne by the Company. An e. Non-cash transactions in operating and investing activities include transfers from amount of US$2.26million was charged to Solidere International Limited. inventory of land and projects in progress to fixed assets in the amount of US$8,003,723 for the year ended December 31, 2007.

27. INTEREST Interest income is comprised of the following: f. Non-cash transactions in investing activities include the effect of change in fair value of INCOME available-for-sale securities in the amount of US$173,520 offset against “Cumulative December 31, 2007 2006 change in fair value of available-for-sale securities” and “Accounts payable and other US$ US$ liabilities” in the amount of US$147,492 and US$26,028, respectively, for the year ended Interest income from notes and December 31, 2007 (US$45,600 offset against “Cumulative change in fair value of accounts receivable 31,612,508 22,355,270 available-for-sale securities” and “Accounts payable and other liabilities” in the amount of Interest income from banks 8,539,017 4,856,417 US$38,760 and US$6,840, respectively for the year ended December 31, 2006). 40,151,525 27,211,687 g. Cash and cash equivalents comprise of the following:

28. BASIC/DILUTED The computation of earnings per share is based on net income for the period and the December 31, 2007 2006 EARNINGS PER weighted average number of outstanding class (A) and (B) shares during each period net of US$ US$ SHARE treasury shares held by the Group. Cash 85,026 98,749 Current accounts 11,064,074 19,515,034 The weighted average number of shares to compute basic and diluted earnings per share is Short term deposits 309,513,061 60,968,438 155,147,918 shares for the year 2007 (157,817,134 shares for the year 2006). Bank overdrafts (181,186,491) (48,362,001) 139,475,670 32,220,220 29. NOTES TO THE a. Non-cash transactions in the operating and investing activities related to the proceeds CASH FLOW from recuperated properties are detailed as follows: 30.RELATED These represent transactions with related parties, i.e. significant shareholders, directors and STATEMENT PARTY senior management of the Group, and companies of which they are principal owners and December 31, 2007 2006 TRANSACTIONS entities controlled, jointly controlled or significantly influenced by such parties. Pricing US$ US$ policies and terms of these transactions are approved by the Group’s management. Non-cash transfer of shares against recuperated properties (153,640) (52,701) Cash and bank balances include US$4,647,108 as of December 31, 2007 (US$2,025,167 as of Decrease in receivables from December 31, 2006) representing current bank accounts with a local bank who is a recuperated properties (63,368) (360,299) significant but minority shareholder of the Group. (217,008) (413,000) Certain directors are members of the boards of directors of banks with whom the Group has b. Depreciation was applied as follows: various banking activities.

December 31, 2007 2006 General and administrative expenses include legal fees in the amount of US$120,000 for the year US$ US$ ended December 31, 2007 related to one of the firm’s legal counselors who is also a member in Depreciation of fixed assets - Note 14 2,740,034 2,517,397 the Company’s board of directors (US$120,000 for the year ended December 31, 2006). Depreciation of investment properties - Note 12 2,740,934 2,877,906 Less: Depreciation allocated to inventory The Group incurred various expenses on behalf of its related parties whose total balances of land and projects in progress – Note 11 (1,140,093) (818,291) due amounted to US$3,808,163 as of December 31, 2007. Depreciation charge for the year 4,340,875 4,577,012 Aswaq Management and Services LLC provided consultancy services to Beirut Real Estate Management and Services s.a.l. (BREMS) for the amount of US$27,344 for the year ended December 31, 2007 (US$79,076 for the year ended December 31, 2006)

120 121 Solidere Annual Report 2007

During 2007, the Group charged Solidere International Limited, an associate, administrative h. The Company has as a stand-by letter of credit in the amount of US$3,566,993 to be expenses amounting to US$2,262,480, in addition to an amount of US$322,470 representing gradually decreased starting June 2007 to reach US$3,035,622 in June 2011. This payments on its behalf. instrument is issued in guarantee of the US$14.7million US Export Import Bank of the United States facility amounting to US$4.04million as of December 31, 2007 Total benefits paid to executives and members of the Board of Directors (including salary, (US$6.74million as of December 31, 2006). Throughout its life, this stand-by letter of credit bonus and others), included within “General and administrative expenses”, for the year shall be fully covered by a cash collateral (Note 7). ended December 31, 2007 amounted to US$2,865,545 (US$1,969,922 for the year ended December 31, 2006). i. For the purpose of enhancing and improving land value in Zokak Al Blat area and to settle the recuperation of a lot in that area, the Company signed in 2002 an agreement with the Income arising and expenses incurred from the Group’s transactions with other related Armenian Orthodox prelacy to demolish the building on the recuperated lot and to transfer parties, other than those disclosed in the financial statements, do not form a significant corresponding building rights to another adjacent lot with minimum building rights of portion of the Group’s operations. 4,900m² against ceding of owners’ shares from both lots. Additionally, a built up area of 5,335m² (US$2,700,000) remains as a contingent loss to the Company in case the prelacy decides to build this area within the next 10 years following this agreement. 31. COMMITMENTS a. An agreement between the Company and the Council for Development and AND Reconstruction (“CDR”) was promulgated through Decree No. 5665 dated September 21, j. During 2003, the Company entered into a dispute with one of its contractors regarding CONTINGENCIES 1994, duly approved by the Council of Ministers. By virtue of this agreement, the what the Company considered to be a defect in the land remediation works performed by Company was granted 291,800m² of the reclaimed land surface (totaling 608,000 sqm) the contractor. The contractor denied this issue and commenced an arbitration in relation against the execution by the Company of the sea landfill and infrastructure works. to this matter on May 19, 2003. In the request for arbitration, the contractor sought a non- monetary relief that there is no defect in the works performed, and made monetary claims b. The total projected cost for completion of the BCD project has been estimated by against the Company in the total amount of US$1,079,533, in addition to claiming for the management to be approximately US$2billion. This amount is used as a base for the payment of its legal and other costs incurred in connection with the arbitration for an determination of cost of sales. amount of US$2,226,569. The Company made counter claims for non-monetary relief that there exists a defect in the works performed by the contractor and claimed for the payment c. Commitments for contracted works not executed as of December 31, 2007 amounted to of its legal and other costs incurred in connection with the arbitration for an amount of approximately US$88.5million (US$118.3million as of December 31, 2006). US$3,004,711. In 2004, the Company collected the performance bond amounting to US$8.5million. On July 12, 2004, the International Court of Arbitration ruled that the d. A lawsuit was raised in 1999 against the Company by the “CDR” claiming reimbursement contractor pay the Company the sum of US$2,188,000 in respect of the Company’s cost of of an amount of LL5.4billion (US$3.6million) plus interest. This balance represents arbitration, and additional costs incurred in the amount of US$170,000, in addition to the payments previously made by the “CDR” in connection with the appraisal of the execution of remedial works at the contractor’s own cost. As a result, the Company properties in the BCD area and other tender documents. No provision was set up against recorded a receivable in the amount of US$2,358,000 in the accompanying financial this claim since, on the basis of the advice received from the Company’s legal advisor, the statements which remains uncollected - Note 8(e). directors are of the opinion that this claim is not based on sound legal grounds. On June 21, 2004, the contractor requested arbitration in a second case against the The Company has submitted to the “CDR” claims aggregating US$13.6million Company to confirm the right to extend the project’s execution period and increase the representing mainly change orders to infrastructure works in the traditional BCD which cost of works. The total claims by the contractor in this arbitration amounted to were incurred by the Company on behalf of the Government. These claims were neither US$32million representing the increase in the cost of works, other unpaid amounts and approved nor confirmed by the concerned party nor recorded as receivables in the amounts the contractor alleged to have been illegally withdrawn by the Company from the accompanying financial statements. performance bond mentioned above.

e. The Group is a defendant in various legal proceedings and has litigations pending before During 2005 and early 2006, both the Company and the contractor filed counter arbitrations the courts and faces several claims raised by contractors. On the basis of advice received against each other that are still pending as at December 31, 2007. These arbitrations are from the external legal counsel and the Company’s technical department, the directors are currently in a jurisdictional phase. On January 30, 2008, the parties exchanged post-hearing of the opinion that any negative outcome thereof, if any, would not have a material written pleadings summarizing their respective positions. A jurisdictional award is expected adverse effect on the financial condition of the Company. to be issued by the Arbitral Tribunal during the second quarter of 2008.

f. On June 7, 1997, the Company signed an exchange agreement with the Lebanese No provision was set up against these claims as the legal counsel representing the Government. By virtue of this agreement, the Company acquired additional built up area Company in the arbitration is of the opinion that the Company has strong defenses against of approximately 58,000m² and 556,340 Class A shares in exchange for approximately all allegations made by the contractor. 15,000m² and the payment of US$38.7million to restore governmental buildings. US$25million has already been paid and accounted for and the balance of US$13.8million continues to be included under accounts payable. According to the terms of the 32. CAPITAL The primary objective of the Group’s capital management is to ensure that it maintains a agreement, the Company undertook to build a governmental building and to conclude ten MANAGEMENT strong credit rating and healthy capital ratios in order to support its business and maximize finance leases over seven years for certain buildings belonging to the Lebanese shareholder value. Government. In 1999, the government canceled the exchange and finance lease agreement. The implementation and the effect of cancellation is not yet determined and The Group manages its capital structure and makes adjustments to it in light of changes in has not been reflected in the accompanying financial statements. economic conditions. No changes were made in the objectives, policies or processes during the years ended December 31, 2007 and December 31, 2006. g. In prior periods, the Company submitted to the Ministry of Culture and Higher Education claims totaling US$17.7millions representing compensation for delays that resulted from The capital structure of the company consists of debt and equity. Debt consists of total excavation works. These claims were not yet approved nor confirmed by the concerned liabilities less cash and bank balances. Equity comprises capital, reserves, retained earnings, authorities nor recorded as receivables in the accompanying financial statements. cumulative change in fair value and surplus on sale of treasury shares less treasury shares. 122 123 Solidere Annual Report 2007

The Group monitors capital on the basis of the debt-to-capital ratio (gearing ratio). The The Group’s assets and liabilities are segregated by geographical area as follows: gearing ratio as at December 31, 2007 and 2006 was as follows: December 31, 2007 Lebanon Middle East Europe Total December 31, 2007 2006 USD USD USD USD US$ US$ Total assets 2,267,994,768 290,043,609 11,216,235 2,569,254,612 Total consolidated liabilities 737,225,830 357,931,915 Total liabilities 737,225,830 --737,225,830 Less: Cash and bank balances (327,847,633) (106,202,604) Total debt 409,378,197 251,729,311 Net assets 1,530,768,938 290,043,609 11,216,235 1,832,028,782

Total equity 1,832,028,785 1,768,649,582 Gearing ratio 22% 14% December 31, 2006 Lebanon Middle East Europe Total USD USD USD USD

33. RISK The Group’s principal financial liabilities, other than derivatives, comprise bank loans and Total assets 2,116,501,491 - 10,080,006 2,126,581,497 MANAGEMENT overdrafts, deferred credits under structured contracts, deferred revenues and other credit Total liabilities 342,604,487 - 15,327,428 357,931,915 balances, dividends payable and accounts payable and other liabilities. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has Net assets 1,773,897,004 - (5,247,422) 1,768,649,582 various assets such as accounts and notes receivable and cash and bank balances, which arise directly from its operations. The main risks arising from the Group’s financial d. Liquidity Risk instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Liquidity risk is the risk that an institution will be unable to meet its net funding Board of Directors reviews and agrees policies for managing each of these risks which are requirements. Liquidity risk can be caused by market disruptions or credit downgrades, summarized bellow: which may cause certain sources of funding to dry up immediately. a. Interest Rate Risk The Group’s objective is to maintain a balance between continuity of funding and flexibility The Group’s exposure to the risk of changes in market interest rates relates primarily to the through the use of bank overdrafts and bank loans. Group’s long-term debt obligations with floating interest rates. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other The table below summarizes the maturity profile of the Group’s financial liabilities as of conditions held constant, of the Group’s profit before tax. December 31, based on contractual undiscounted liabilities:

Increase/decrease Effect on profit

in basis points before tax December 31, 2007 Less than 3-12 1 to 5 USD On Demand 3 Months Months Years Total USD USD USD USD USD 2007 US Dollars +20 596,105 Bank overdrafts 1,290,555 3,241,841 183,724,799 - 188,257,195 US Dollars -15 447,079 Accounts payable and 2006 other liabilities 95,323,982 ---95,323,982 US Dollars +20 728,465 Dividends payable 46,212,797 ---46,212,797 US Dollars -15 546,348 Deferred revenues and other credit balances 233,147,452 ---233,147,452 b. Foreign Currency Risk Deferred credits under Currency risk is the risk that the value of a financial instrument will fluctuate due to changes structured contracts --182,061,000 - 182,061,000 in foreign exchange rates. The Group is not materially exposed to currency risk since the Loans from banks and majority of its financial assets and liabilities are denominated in U.S. Dollars or in currencies financial institutions - 51,367 5,016,748 2,421,446 7,489,561 pegged to the U.S. Dollar. 375,974,786 3,293,208 370,802,547 2,421,446 752,491,987

c. Credit Risk The Group’s credit risk is primarily attributable to its liquid funds receivables, other debit balances and investments in securities. The amounts presented in the balance sheet are December 31, 2006 Less than 3-12 1 to 5 stated at net realizable value, estimated by the Group’s management based on prior On Demand 3 Months Months Years Total experience and the current economic conditions. USD USD USD USD USD Bank overdrafts 48,362,001 ---48,362,001 The Group’s liquid funds are placed with prime banks. Investments in securities are not covered Accounts payable and by collaterals. Other debit balances consist mainly of amounts due from related parties. other liabilities 82,548,006 ---82,548,006 Dividends payable 30,877,712 ---30,877,712 The Group trades mostly with recognized, credit worthy third parties and monitors Deferred revenues and receivable balances and collection on an ongoing basis. other credit balances 168,305,793 ---168,305,793 Loans from banks and The Group’s credit risk exposure is spread over 107 counter-parties; 6 customers constitute financial institutions - 8,320,984 13,217,424 7,489,561 29,027,969 48% of the total exposure and 101 customers constitute the remaining 52%. The maximum 330,093,512 8,320,984 13,217,424 7,489,561 359,121,481 exposure is the carrying amount as disclosed in Note 8.

124 125 Solidere Annual Report 2007

34. FAIR VALUE The fair values of financial instruments are not materially different from their carrying values. OF FINANCIAL INSTRUMENTS Market value has been used to determine the fair value of listed available-for-sale assets. The fair values of loans, notes and other financial assets, and borrowings and other financial liabilities have been calculated by discounting the expected future cash flows at prevailing market interest rates.

35. APPROVAL The Board of Directors approved the financial statements for the year ended December 31, OF FINANCIAL 2007, on February 4, 2008. STATEMENTS Chairman and General Manager Nasser Chammaa

Vice-Chairmen Nabil Boustani Maher Beydoun BOARD OF DIRECTORS GENERAL MANAGEMENT

General Manager Mounir Douaidy Members of the Board

Raphael Sabbagha Joseph Asseily Sarkis Demerdjian

Fouad Al Khazen Sami Nahas Mosbah Kanafani

Basile Yared Abdulhafiz Mansour Maher Daouk

128 SHAREHOLDERS

BOARD OF DIRECTORS

GENERAL MANAGEMENT CHAIRMAN AND GENERAL MANAGER GENERAL MANAGER

Prof. Prof. Wafic Wafic Sinno Sinno Avenue Av enue Chief Financial Officer Assistant General Manager

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Includes proposed modifications to the New General Fouad Chehab Fouad Avenue Chehab Avenue Waterfront District sector plan.