Prof. Wafic Sin no Avenue

Mir Majid Arslan Av

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Fawzi Daouk Street St ek ch Hoy ch

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W Kortas St Kortas W Pat Adnan El Hakim Street St Adnan El Hakim Street Avenue des Francais Tripoli St

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Fak Khan El Chou ek St ne

Street Dabbagha Mos

St Hoy Abdallah Beyhum St

Tijara St Fakhry Bey St Bey Fakhry

Chateaubriand St Chateaubriand enby El Sadeq George Shehade St George que St Street All

ch Malak Rafic Salloum St Rafic Salloum Moutrane S St riar Omar Daouk t Street Pat Azmi St Bey S t

Abdel Weygand Saad Zaghloul St h

Foc Abdel H. KadiUruguay The Master Plan St Argentine St St You Hamid ssef Rami St

Wey Byblos St gand St i Abou Jamil St St Wad Z Kaddour Prewar shoreline Karame St Bazerkan a St George Ak Sh. R Kabbani ouri nce St Charles Hel

Fra Souk Cadmus St El Maaniyin New development - low density ou Avenue i Abou Jamil St Wad ein El Ahdab St Capuchin St St Al Omari Mosque H=52m

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Street Street Riad Al Construction allowed Army St Capuchin St St

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A R Hout St R Mgsr Toubia A R

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R Church R R Amir R Al M R R Riad Al Solh R (?) R Street Square Public or religious building Bachir Street Evangelical Gouraud

Amir Amine St Naccache St

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Akl Akl General St Syria

Lazariye St Khalil Ghalghoul S

Pedestrian streets / links Gibran St St Garden t Mere Gel iye Fouad las St Mkhalliss

Cheikh Toufic Khaled St Chehab St Kanafani & Mar Maroun Street Archeological sites St Syria Debbas

Al Khoury St Mar Square Said Damascus St

Av Mansour St Ariss a enue Charles Debbas St

Utilities Haddad George

Bechar © Solidere

General Fouad Chehab Avenue

At the heart of Lebanon’s capital, Beirut city center is an 2 FINANCIAL HIGHLIGHTS urban area thousands of years old, traditionally a focus of 6 CHAIRMAN’S MESSAGE business, finance, government, culture and leisure. Its 10 THE PROJECT reconstruction constitutes one of the most ambitious urban revitalization projects of our times. REVIEW OF OPERATIONS 14 EXISTING CITY CENTER SITE DEVELOPMENT The Lebanese Company for the Development and Reconstruction 24 EXISTING CITY CENTER MASTER PLANNING of the Beirut Central District s.a.l. (Solidere) is a joint-stock 32 NEW WATERFRONT DISTRICT SITE DEVELOPMENT company established on May 5, 1994. 38 NEW WATERFRONT DISTRICT MASTER PLANNING 42 REAL ESTATE STRATEGY It is based on Law 117 of 1991, which regulates Lebanese real 50 RESTORATION estate companies aiming at the reconstruction of war-damaged 56 SALE AND RENTAL STRATEGY areas, in accordance with an officially approved master plan. Its 68 CORPORATE FUNDING AND TREASURY share capital is US$1.65 billion. 70 SOLIDERE SHARES AND GDRs 72 MANAGEMENT SYSTEMS AND STUDIES As it spearheads and oversees this project, Solidere is bringing life to Beirut’s central district and turning it into the finest city CONSOLIDATED FINANCIAL STATEMENTS center in the Middle East. 73 INDEPENDENT AUDITORS’ REPORT 74 BALANCE SHEET The Company issues annual and semi-annual reports to its 75 STATEMENT OF INCOME shareholders. Solidere’s activities through the end of 2005 are 76 STATEMENT OF CASH FLOWS also summarized in its twelfth Annual Report. 77 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 78 NOTES TO THE FINANCIAL STATEMENTS This Annual Report includes for the first time consolidated financial statements, which consolidate the accounts of Beirut EXTRACTS OF STANDALONE FINANCIAL STATEMENTS Waterfront Development s.a.l., a subsidiary with 50% Solidere 104 BALANCE SHEET shareholding. The consolidated financial statements, as well as 105 STATEMENT OF INCOME the standalone financial statement, are prepared and audited in 106 STATEMENT OF CASH FLOWS accordance with international standards. 107 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

108 BOARD OF DIRECTORS GENERAL MANAGEMENT

solidere annual report 2005 1 CONSOLIDATED FINANCIAL HIGHLIGHTS

2005 2004 Summary of Operations (in US$ million) Gross land sales 252.8 169.4 Gross rental income 20.8 18.6 General and administrative expenses 11.5 10.1 Net income 108.5 54.1 Sales backlog* 1,119.2* 78.5

Stock Data per Share (in US$) Earnings 0.6858 0.3400 Shareholders’ equity 11.62 10.84 Stock price range A shares 6.87–19.00 4.290–8.770 B shares 6.87–19.25 4.350–8.720 GDRs 7.63–18.00 4.975–8.125

Financial Data (in US$ million) Cash/cash equivalents and securities 121.1 119.6 Accounts and notes receivable 272.8 210.9

Properties held for development and sale 1527.4 1607.3 Investment properties 160.5 158.7

Total liabilities 282.0 435.6

Retained earnings 185.6 82.9 Legal reserves 46.7 35.8 Treasury stock (38.5) (69.8) Total shareholders’ equity 1845.1 1695.3

Financial Ratios (%) Return (interest income) on liquid assets 4.68 4.43 Debt to equity ratio 7.09 13.98

* As at March 31, 2006.

2 solidere annual report 2005 solidere annual report 2005 3

Investors’ interest in our project is such that demand sometimes precedes the delivery of developed land. The latest illustration is the early purchasing of sites in the new waterfront district, for delivery to investors on completion of land reclamation. We have taken measures to expedite the reclamation works after termination of the Radian contract in February 2006, and will inform investors about the planned timing of site delivery. We will soon launch the design of infrastructure for the new waterfront district, integrating Formula One capability and comprising an upgraded range of utility networks.

The Martyrs’ Square axis international urban design competition, under the auspices of the International Union of Architects, was an unqualified success. Utilizing the best features of the winning scheme together with contributions from our consultants and in-house team, we prepared CHAIRMAN’S MESSAGE a new sector plan for the area. A number of government decrees ratified BCD Master Plan amendments reflecting the new sector plans for the Martyrs’ Square axis, Ghalghoul, Souks, hotel and waterfront districts.

We have now moved into Phase Two of the project and have adapted our strategies accordingly. In addition to the Beirut Souks, we intend to focus on several large-scale real estate projects Beirut city center continues to be a most sought-after place by visitors and residents as well as to enhance our rental revenues. We will also complete the remaining restoration work in our investors. We are particularly gratified to see the intense and growing interest expressed by a large Wadi Abou Jamil and Zokak El Blatt residential properties. and diversified network of investors, including some key business figures and institutions in the Arab world. Within our strategy to attract businesses and residents, direct broadband connection will, by the last quarter of this year, ensure high speed connectivity, state-of-the-art technology for broadband This of course is justified. Over the past 12 years, one of the finest city centers in the Middle East communication and multimedia services in all BCD buildings. Other special services provided by has evolved in Beirut. Together with a remarkable location and other attributes, it enjoys new Solidere, some with participating property owners and users, supplement regular municipal infrastructure and beautifully landscaped open spaces, with many new ones planned for the next services. We continue to stimulate real estate projects by providing advice to investors, building on few years. A range of mutually supportive land uses, residential, hotel, institutional, office and our recent urban and design studies for new development sectors. Our idea of selling development retail activities, form the basis of a coordinated and sustainable development both in terms of blocks with concept designs proved to be efficient in ensuring coherence of architecture, enhancing urbanism and economics. the esthetics of each sector and giving a time advantage to buyers-developers.

The city center is reinvigorated as the Lebanese capital’s focus of government, business and Financially, 2005 was a boom year, with a record net profit of US$108.5 million, US$125.6 million banking. We have also succeeded in emphasizing downtown living, culture, heritage and civic before income tax. This represents a 100% increase on 2004 profits, mainly due to surging land value, while creating a magnet of tourism, shopping and leisure. The conservation area is full of sales to Lebanese and Arab investors. The growth in demand has been accompanied by an appetite shops and cafés, Beirut Marina with yachts and boats, and the whole city center is vibrant with for larger-size projects, commanding higher land prices, and a trend towards front-ended deals in people and events. Downtown Beirut has become an artistic destination, and exhibitions are held terms of cash. Recognized sales reached US$253 million, the highest level since inception. We throughout the year in the Planet Discovery exhibition hall, partly within our artists-in-residence have also established a record in new sales. The US$1.1 billion signed in the first quarter of 2006 program, in the Saifi Village Quartier des Arts and in other galleries. are equivalent to the cumulative recognized sales since inception. These new sales include two substantial deals representing major multiuse projects on the Martyrs’ Square axis, totaling Launched in 2005, Beirut Souks are advancing rapidly for delivery in the second half of 2007 for the 384,240 sq m in floor area. South Souks, and by end 2008 for the North Souks. Ongoing real estate activity also includes facilities in Saifi Village, Wadi Abou Jamil and Zokak El Blatt, around the Souks, around Beirut We have stopped selling finished products in order to build a portfolio of income-generating Marina, and in high-density zones in the hotel district, Martyrs’ Square axis, south and north edges properties. The liquidity derived from increased sales and rentals, coupled with cash deals, was of the city center. Wadi Abou Jamil is being revived as a quiet residential neighborhood, thanks to used in part to reduce the Company’s debt to US$129.74 million at end 2005 and US$51 million at design concepts initiated with the help of excellent local, regional and international architects. end March 2006. In the new development areas, modern high-rise apartment buildings and hotels command exceptional sea and mountain views. During 2005, the share performance was good on very active trading. Shares A and B closed the year at US$17.98, respectively 118% and 122% above 2004. The GDRs closed at US$17 on the Out of a 4.7 million sq m target floor area for the city center, including the new waterfront district, London Stock Exchange, 127% above 2004. The upward trend continued this year. During the first 2.6 million sq m have been so far the subject of development: 819,500 sq m have been completed, quarter, shares A and B respectively peaked at US$26.01 and US$25.89 and closed at US$21.79 and 675,500 sq m are under construction and the balance in various stages of development. US$21.66, with the GDRs closing at US$21.87.

6 solidere annual report 2005 solidere annual report 2005 7 Endeavoring to promote investor relations, we have participated in international and regional conferences. A road show in KSA, other gulf countries, the US and UK early this year had as its object to enhance liquidity and create more trading in the Solidere shares on the Beirut Stock Exchange by providing shares from existing shareholders through a secondary offering. The deal, involving 4.125 million shares, was four times over-subscribed.

Operationally, we intend to concentrate on activities that are revenue generating. These include rental revenues, expected to increase to US$65 million after delivery of the Beirut Souks. We also intend to export our expertise outside the BCD perimeter. Solidere has brought together a broad range of disciplines into a highly competent, multi-tasking team, who has further gained a unique professional and business expertise through the cumulative experience of Beirut city center reconstruction and renewal. The Solidere team has to its credit an unmatched track record in the successful planning, financing, management and implementation of large urban projects and can offer services and consultancy in similar projects in the Middle East and the world.

The liquidity enjoyed by the Company, and expected to continue in 2006 and thereafter, will be partly used to complete the Beirut Souks and renovation projects, implement land development of the new waterfront district, and develop some selected real estate projects. One is a retail and entertainment project that will form a fifth magnet to the Souks. Others include new office buildings. Relying on growing demand for office use, to be further enhanced by our broadband network, we are commissioning world class architects to design three office buildings, two in the hotel district and one on Martyrs’ Square. Two of these projects already have prospective end- users. Financially, we intend to implement a dividend distribution program as well as a share buyback program with a view to cancel these shares and reduce capital. This, we believe, will have a positive impact on the share value and will be to the advantage of shareholders.

To conclude, Solidere is at a lifetime peak in its activity and results. As a land bank, it is both selling more development land and commanding higher prices. Its portfolio of revenue generating assets is increasing at a healthy pace. New lines, added to its core activities, are expected to increase the Company’s bottom line. Coupled with low overheads, a low cost of land, now mostly spent, and debt retirement, the results are expected to boost cash holdings dramatically. The increased liquidity will be mainly used for dividend distribution and share buybacks, as well as for identifying strategic opportunities for new development. Your Company is truly at a turning point on its solid course towards meeting all its targets.

NASSER CHAMMAA Chairman and General Manager May 10, 2006

8 solidere annual report 2005 solidere annual report 2005 9

THE PROJECT The Master Plan Solidere The Master Plan is a carefully Solidere was initially capitalized formulated, detailed, coordinated and Floor Space sq m percentage with US$1.82 billion: US$1.17 billion phased action plan for the traditional as contributions in kind of property city center and its modern extension on Offices 1,582,000 33.7 right holders, and US$650 million the new waterfront. Residential 1,959,000 41.8 as cash subscriptions following an Commercial 563,000 12.0 oversubscribed initial offering. After The plan subdivides Beirut city center Government / Cultural 386,000 8.2 the retirement in 1997 of 17,000,129 into 10 sectors, each with its own Hotels 200,000 4.3 shares, representing recuperated character. Some are existing city properties, its capital now stands at neighborhoods brought back to life, Maximum Total 4,690,000 100.0 US$1.65 billion. others are defined by topography or by new boundaries created in the urban Solidere’s duration was extended fabric. The plan involves the recovery of by decree 13909 of 2005 from 25 years the public domain, with the installation to 35 years, starting from May 10, 1994, of a complete infrastructure. It also the date of its registration at the provides an urban design framework Commercial Register. for restoration and new construction. Phase One 1994 - 2004 Phase Two 2005 - 2024 The Company has established a solid The plan reflects the site topography Infrastructure in the traditional BCD This phase, which started with the base for BCD prosperity through high and natural features, protects views of and the treated part of the original launching of the Beirut Souks above- value-added land development action, the sea and mountains and creates landfill. Detailed sector planning ground structures, will also finalize the competitive real estate projects and The Beirut Central District reconstruction is Independent Lebanon grew into a public spaces, including gardens, relating to the existing as well as new traditional city center, by redeveloping property management services. deemed as one of the most ambitious urban booming service economy, thanks to squares, belvederes, promenades and development areas. Landscaping and the Saifi and Wadi Abou Jamil urban regeneration ventures of our time. its inherent assets, educated population trails. Recognizing the city’s heritage, underground parking design and villages and establishing prime new Real estate projects are implemented and liberal political and economic it also unearths layers of its history. execution. Historic core restoration; areas in the Serail corridor, hotel directly, in joint venture with partners, Drawing on the site’s natural assets and system. Beirut was a lively, modern, It preserves surviving buildings and renovation of the banking district, district and Ghalghoul sector. Its focus and through or in liaison with other rich heritage, the BCD Master Plan aims to cosmopolitan city, its city center a townscape features and re-establishes Starco and Lazarieh centers; northern on the Martyrs’ Square axis and the developers. By encouraging the return create the finest city center in the region, focus for regional trade, business, the urban fabric and neighborhood Wadi Abou Jamil, Zokak El Blatt and new waterfront district will intensify of previous owners and tenants, and endowed with a new waterfront district, finance and tourism. structures. It ensures the harmonious Saifi redevelopment; Beirut Souks the thrust towards making Beirut city by supporting third-party developers, and accommodating a sustainable, broad integration of old and new, combining design and underground construction. center a favored location to global Solidere accelerates the pace of mix of facilities totaling 4.69 million sq m Growth was thwarted at the onset of tradition with innovation, control with businesses, financial and other construction while reducing its risk. of floor space. hostilities in 1975. With the return to creativity in architectural expression. New construction includes Solidere’s specialized services and institutions, peace and stability, Lebanon’s economy With the prime objective of creating UN House, Saifi Village, embassy a prime residential area, tourist As lead developer and supervisory Beirut city center enjoys a prime location re-emerged in the 1990’s, sustained a vibrant city center, it accommodates compound, Rue de France multiuse destination and cultural hub. body, the Company controls the pace, at the heart of Lebanon’s capital. Sloping by a national recovery and development a broad mix of land uses, including complex; Bank Audi, Medgulf and components and quality of BCD down towards the waterfront, the site program. Massive public investment business, public, residential, hotel, Bankers’ Association headquarters, Real estate development includes development. Solidere outsources commands fine views of the sea with a was coupled with macro-economic recreational and cultural facilities. Monroe hotel, Al-Bourj and Atrium facilities around the Beirut Marina construction to focus on its core surrounding landscape of mountains and policies designed to stimulate private office buildings, the Consulting Clinics, and on the Martyrs’ Square axis; competencies: managing real estate hills. It is easily accessible from all parts local and foreign investment. While The project covers some 191 ha (472 Block 24 and Parkview Realty high-density zones comprising the project development, marketing of Beirut, including port and airport. Major Beirut city center benefited from this acres) of land: 118 ha (292 acres) as residential buildings. Beirut Trade Center, The Landmark development land, marketing and roads converge on it from its east, south favorable environment, its entire the traditional BCD and a 73-ha (180- and other gateway towers on the servicing rental properties. and west, and line its 1.5 km seafront to regeneration is being achieved without acre) extension reclaimed from the sea. Ongoing real estate projects involve southern edge of the city center; the north. recourse to public funds. Close to 98 ha (242 acres) will consist predominantly residential clusters and northeast gateway towers The Company provides management of public space, of which 59 ha (146 in Saifi and Wadi Abou Jamil; Beirut marking the point where the coastal and operation services to public Continuously inhabited for more than In 2005, the country suffered a great acres) in roads and 39 ha (96 acres) in Marina facilities; residential and hotel highway terminates in the city center. utilities, infrastructure, marinas, 5,000 years, the site bears the marks loss with the assassination of former landscaped open spaces. towers facing the Beirut Marina and car parks and landscaped open areas. of 11 civilizations, from the Canaanite prime minister Rafic Hariri. Mr. Hariri waterside city park; and inception of The phase involves completing the to the Ottoman. Beirut’s maritime was the godfather of national recovery. Allocated for development are 93 ha other landmarks. infrastructure in the new waterfront and trading legacy dates back to the To him were owed the vision and (230 acres), including 22 ha (54 acres) district, landscaping the waterside Phoenicians. Its Roman law school inspiration for the rebirth of Beirut. of retained, public or religious property, Completed on the new waterfront: park and corniche promenades; was the most prominent in the Empire. In spite of the tragic circumstances, with the following built-up area (BUA) marine works, defense structure, developing the eastern marina; Its urban character and architectural Solidere successfully pursued its guidelines. sea promenades and Beirut Marina; coordinating with the port authority style were formed during the Ottoman efforts to make Beirut city center major advances in land treatment over the development of the first period and the French mandate, when a sought-after environment of the and reclamation. basin and launching developments it became the seat of public institutions. highest quality. with a distinct architectural style.

10 solidere annual report 2005 solidere annual report 2005 11

EXISTING Infrastructure CITY CENTER Beirut city center has a 3.6-km ring Solidere implemented civil works, road, 8.4 km of primary roads and including culverts, relating to power SITE DEVELOPMENT 16.6 km of secondary, tertiary and supply and installed the 66 and 220 KV pedestrian streets. Expansions to power cables, a 220 KV link between the prewar grid accommodate traffic the Beirut pine forest station and the and facilitate land parceling for real BCD, and a 240 MW substation estate development. transforming high-tension power transmitted by Electricité du Liban into 1 Three major axes form the ring road medium voltage; local transformers in system: George Haddad street to the turn convert it to low voltage electricity east; the widened Fakhreddine street to for domestic use. After other areas of the west; Fouad Chehab avenue to the the existing city center, Mina El Hosn south, with a bridge doubled in capacity was equipped in 2005 with duct banks and new interchange and underpasses for its medium voltage cables, with providing fast access to airport, port, Bachoura and north Saifi to follow. east, west and central Beirut. Avenues Public lighting has been installed The ring road cut across the city center north-south. everywhere, with necessary meters, 1-2 Fouad Chehab bridge with Park Avenue links the traditional city low-voltage cabling, lighting fixtures interchange at city center southwestern entrance center to the hotel and waterfront and feeder pillars. Tunnels have been 3 George Haddad street districts. The Martyrs’ Square axis equipped with lighting, stand-by links Damascus road to the harborside generators, control and safety systems. Beirut city center, revitalized thanks to avenue. Weygand, Zeitouneh, and Port 3 2 sound urban planning and design, new streets, widened and extended towards Civil works were also implemented for infrastructure and fine landscaped public Trieste street, form major east-west telecommunications networks, with space, has become a regional attraction, boulevards. Functional in its western duct banks for low current networks, a choice location for living and working, section, the BCD corniche is to skirt the cable TV and telephone services. as well as a cultural, tourist, leisure and waterfront district. New local streets shopping destination. were created in Wadi Abou Jamil. Broadband Network Solidere prepares development sites for Two major road improvements were The Company obtained in 1998 a build- investors wishing to develop real estate among Master Plan amendments and-operate license for broadband properties in central Beirut. Its activities ratified in Council of Ministers’ decree distribution of a wide range of services in this respect involve town planning, 16163 of 2006. One is the road linking including high speed internet, IPTV, parceling and urban management, site the north of Martyrs’ Square to Trieste video on demand, video conferencing, preparation, archeological investigation, street while accommodating important data center facilities and virtual private infrastructure, landscaping, hardscaping archeological sites in the ancient Tell networking for corporate clients. and street furniture. area. The other is an improvement of Solidere intends to build and operate a the George Haddad - Fouad Chehab fully IP network, using advanced The reconstitution of the public domain junction, creating grade separation at telecom technology based on a fiber- and laying of infrastructure, completed the intersection. Among pedestrian optic backbone connecting each in the existing city center, will extend streets, the year 2005 saw the building in the BCD to the network. The to the new waterfront district. As per its completion of Bechara Al Mouhandess services are expected to be available 1994 agreement with the Council for street, east of Maarad, overlooking from the last quarter of 2006. Development and Reconstruction, Solidere Hadiqat As-Samah. Half of the six- implements these works on behalf of the meter space is used as terraces by Beirut city center will be transformed State in return for an allocation of 29 ha restaurants and cafés along the street, into a 24 hour IT zone which will attract of development land on the new waterfront. the rest serving as a pedestrian way. multinational companies and other residents who will benefit from the The water supply network consists of provision of multimedia and broadband 30 km for drinking water and 38 km for communication services. irrigation. The water disposal system comprises a sewage pumping station, 28-km sewage piping and 26-km storm water drainage.

14 solidere annual report 2005 solidere annual report 2005 15 Parking Facilities Archeology Pending completion of sufficient space Extensive archeological excavations underground, 20 vacant lots assigned and research yielded evidence on for surface parking provide 3,418 car civilizations spanning 5,000 years. spaces servicing 10,000 customers Solidere supported the rescuing Hardscaping and Street Furniture per day. They include a car park in and preservation of this heritage Hardscaping and street furniture were the eastern section of the waterfront and financed the teams working upgraded at Solidere’s expense district with a free shuttle service to under the supervision of the beyond the agreement with the State. the existing city center. Some surface Directorate General of Antiquities. Street and sidewalk paving, as well as parking is moving to new locations to street lights, were designed to make room for development. Research proceeded in 2005 in five complement the character of each archeological sites on public space, sector. Sidewalks have been upgraded Underground public parking facilities development lots, or built lots under from concrete to granite tiles and provided by Solidere include the Beirut restoration. The documentation, kerbs. Souks car park with a final capacity of digitizing and evaluation of the results 2,500 spaces and currently providing provide data for a new synthesis of Solidere undertook the integrated 1,200 spaces; and the 108-space, four- Beirut’s urban history. Operation and Maintenance design of street furniture, signage and level Weygand street car park topped public area lighting, and commissioned by a garden. Serving the northern part Solidere operates and maintains Operation and maintenance of street New discoveries have confirmed the public art for the city center. Plaques of Foch-Allenby, the private car park infrastructure and the reconstituted lighting, sewage and storm water location of more monumental buildings with new postal codes were installed jointly developed by Solidere and public domain until their delivery to the networks, are undertaken by the along the Decumanus Maximus, the on completed buildings. Development owners of neighboring properties has State. These services cover: tunnels Municipality under the supervision of main east-west street of the Roman controls were generated in a public become operational in the 280-space and underpasses, roads and sidewalks; Solidere. However, Solidere remains in city defined by the alignment of the domain master plan established with section owned by Solidere, which will street furniture, traffic lights and street charge of the control room in tunnels Hellenistic city, which became the the help of Jean-Michel Wilmotte be topped by a landscaped square. lighting; utility ducts and manholes, and the sewage pumping station. The alignment of the Medieval city wall. (France) and Ziad Akl. sewage pumping station and network, repair of damage to street furniture Excavations of a Phoenico-Persian Two car parks under public property storm water networks; irrigation station due to car accidents or to vandalism cemetery below a Roman open space The street furniture being installed in Martyrs’ Square and near the Grand and network, trees and landscaped acts is monitored by the Company, with (Eastern Forum?), partly destroyed based on the new designs includes Serail, tendered out as BOT projects open spaces. The Company does not related documentation and claims sent during the construction of Souk advertising billboards, telephone by the Council for Development and receive any payment in consideration to the Municipality. Sursock in the Ottoman period, have booths, benches, street kiosks, bus Reconstruction (CDR), have not been for these services, and has raised with provided new benchmarks for the shelters, street name signage in implemented. The international urban State authorities the issue of the costs Solidere continually upgrades its site ancient growth of the city. Articles by stainless steel, and street balustrades design competition winning team, incurred for which it intends to seek logistics services: cleaning, pest archeologists of the fourteen teams destined to contain sidewalk cafés. currently undertaking the design of compensation. These costs were control, safety, security and traffic that worked in the BCD continue to be The signage manual prepared by Martyrs’ Square, is integrating with it compounded by handover delays. management. In a city center image published in scientific journals. Solidere has been approved by the a new design for the parking structure improvement program, undertaken in Municipality of Beirut. below the square. The project is crucial As per Law 117 of 1991 and the collaboration with participating Solidere initiated the integration of for the development of that major agreement with the State, ratified in property owners and users, Solidere archeological sites within the city Decree 14881 of 2005 regulates the sector and should be delivered by 2008 decree 5665 of 1994, infrastructure is implementing the following services, fabric. The main features in this use of the municipal public domain. according to a parking strategy study and the public domain are to be to supplement those provided by the approach are Hadiqat As-Samah and Areas adjoining Parliament and the conducted for Solidere. The Company delivered upon completion to CDR, Municipality: surveillance security, the Heritage Trail. The landscaped area deputies’ office building are kept free is offering its assistance to CDR for its representing the State. Primary door-to-door waste collection; street on block 94 will feature in its design for security reasons. Elsewhere in implementation on a BOT basis. infrastructure and utilities, including and sidewalk washing and street the memories of geological and urban the conservation area, restaurants the ring road with its bridges and furniture cleaning; pest control and history. A city history museum near and cafés are allowed the use of areas In its resolution 21 of 2005, the Council overpasses, main and secondary underground utilities; maintenance of the ancient Tell, to be the starting and immediately facing them provided they of Ministers instructed CDR to proceed roads, and the sewage pumping open spaces, trees and planters; and ending point of the trail, will celebrate do not extend over building entrances. with the design and construction of the station, were delivered to the State in street decorations during holidays. major Beirut finds. A four-meter pedestrian passage clear Riad El Solh car park, also under public earlier years. Utility networks in Solidere is installing a CCTV security of outdoor furniture is to be maintained property, in coordination with Solidere. Maarad, Foch-Allenby, Zokak El Blatt, surveillance system to cover all sectors at the center of the street. The outdoor Riad El Solh and Saifi were delivered in the BCD. The first phase of this furniture used on the public domain to the State in 2003; Wadi Abou Jamil system covering the Foch-Allenby must conform to Solidere specifications networks in 2004. In January 2005, sector became operational by end as per Wilmotte and Akl’s designs. CDR took delivery of sidewalks. February 2006.

16 solidere annual report 2005 solidere annual report 2005 17 Landscaping The public domain is designed to comprise 60 parks, gardens, squares, historical trails and sea promenades, the most important of which is the waterside city park. This will amount to some 39 ha, equivalent to the entire green space area in the remainder of municipal Beirut. Thus the city center, which constitutes 10% of the capital’s area, will contain half its green area, providing relief for a dense city.

Solidere has been vindicated in its Samir Kassir Square, for which Louis The next few years are expected to see Gustafson-Porter presented their quest for quality and for a unique Derbre (France) was commissioned to the implementation of other open concept designs for Harbor Square, integration of public domain design: create the sculpture, Amir Amin Square spaces that ‘remember the past while located on block 93 over part of the pedestrianized areas and streets lined in Bachoura, Saifi Square, Omar Daouk creating a livable urban environment’. ancient harbor, and for hardscaping with trees or incorporating planters or Square in Wadi Abou Jamil, provide and landscaping the hotel district and wide medians landscaped with trees, other landscaped areas, as well as Designed by Gustafson-Porter (US-UK), the Old Shoreline Walk. shrubs and colorful plants; as well as private spaces in Saifi, Zokak El Blatt Hadiqat As-Samah (the Garden of in its commissioning of public art. and Mina El Hosn near Planet Discovery. Forgiveness) is to be constructed in a The elevated Mina El Hosn Square in 2.3-hectare site on which Solidere has the hotel district is the culmination of Fine public spaces are perceived to In 2005, landscaping works involved relinquished its development rights. a series of south-to-north open spaces exert a significant impact on land sales. completing Wadi Abou Jamil Square The garden, overlooked by several also serving as view corridors. Detailed They have also made central Beirut the and the space near St Elias church, places of worship and with a design design of the part falling between the city’s main meeting point. The social both designed by Thibaud Urbanisme reflecting Lebanon’s varied landscape eastern and western plots of block 17 promenading use of public spaces, et Paysage (TUP) (France) and Rafic and numerous historical layers, will be is being developed by Vladimir Djurovic. encouraged by the Mediterranean El Khoury; as well as adding trees in a place of calm reflection. The western climate and lifestyle, has made the city Weygand, Foch and Allenby streets, terrace wall was completed and work The Old Shoreline Walk is a sequence center a most active destination for upgrading trees in Zeitouneh and in was started on the continuation of the of connected spaces representing the Beirutis as well as visitors from the Wadi Abou Jamil and upgrading the pedestrian street and retaining wall on submerged old shoreline. All Saints’ rest of the country and from Arab and Mina El Hosn open space next to the west side of the garden. Square, Shoreline Gardens (blocks 11 overseas countries. Starco’s northwestern corner. and 25), Zeitouneh Square and Santiyeh Gustafson-Porter are also designing Garden, in Sectors B, C and E (hotel Among completed spaces are Gibran The design for the Rafic Hariri garden, the garden adjoining St Elias Greek- district, Serail corridor and Souks Khalil Gibran garden facing UN House; by Vladimir Djurovic Landscape Catholic church. district), are the main components of Roman Baths garden and public space; Architecture, was approved, with the first phase of this project. A later Fouad Chehab gardens overlooking the Antoine Berberi commissioned for the Machado and Silvetti Associates (US) phase, starting with Jean-Paul II city; Riad El Solh Square; and Debbas sculpture. So were their concepts for completed in 2005 the design of Castle Square, will prolong the walk into the Square. Adjoining public and religious upgrading Amir Amin Square and for Square on block 94. They were also Ottoman Wall Walk in Sector D (new buildings are landscaped spaces in a new landscape of Nejmeh Square. commissioned to design the adjacent waterfront district). Nejmeh Square, facing the Beirut The concept design for the CDR open castle belvedere, a garden containing Municipality, cascading under the space on the Serail hill was undertaken historic remains and affording fine Work started on the Heritage Trail Grand Serail with Omar Onsi garden by Frederic Francis. The pedestrian views of the port first basin. The open pedestrian circuit, with information at street level, along the CDR stairs, bridge leading to the Beirut Marina is space, overlooking the ancient Tell on panels under preparation, together near the Serail entrance, between the under design by Nadim Karam. the Martyrs’ Square axis at the site of with a tourist map of archeological Evangelical church and National the Iron Age city, includes a promontory sites and historic buildings. Music Conservatoire. above the Crusader castle remains.

18 solidere annual report 2005 solidere annual report 2005 19 3

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1 Rafic Hariri garden Vladimir Djurovic 2 Hadiqat As-Samah, Garden of Forgiveness Gustafson-Porter landscaping projects 3 Inset: Rafic Hariri memorial garden Gustafson-Porter 2

20 solidere annual report 2005 solidere annual report 2005 21 1 3

6 landscaping projects

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2

5

8

7 Wadi Abou Jamil block 63 square Thibaud Urbanisme et Paysage 8 Castle Square and Castle Belvedere Machado and Silvetti Associates

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3 All Saints’ Square 4 Zeitouneh Square Old Shoreline Walk 5 Shoreline Gardens Gustafson-Porter 6 Santiyeh Garden

1 Mina El Hosn Square Vladimir Djurovic Net bridge by Nadim Karam 2 Hotel district corridor Gustafson-Porter

22 solidere annual report 2005 solidere annual report 2005 23 EXISTING CITY CENTER MASTER PLANNING Sector H - Martyrs’ Square Axis Sector H follows the south-to-north With a view to make the Martyrs’ axis formed by Bechara El Khoury and Square axis a destination, not a transit Damascus streets, to reach Trieste area, Solidere removed the north-south street bordering the first basin of the highways through the corridor that Beirut port. It includes important were part of the initial Master Plan. Land Use symbolic sites: Garden of Forgiveness, This will shift traffic at the ancient Tell Solidere’s concepts, planning and Mohamad Al Amin mosque, St George level to the eastern side only. Through 2 development control framework Maronite cathedral, PM Rafic Hariri traffic is discouraged by addressing have so far been based on working gravesite, Martyrs’ Square itself; as accesses to and from Fouad Chehab with individual developers or end- well as the archeological area around and George Haddad streets. users, not selling for speculation. the ancient Tell. Its development blocks The land use strategy study for this The Company did not prescribe a land In order to guide them, a number of are defined by Fouad Chehab avenue to Other ideas contributed by Solidere sector, aiming at preserving Beirut’s use plan, preferring to give mixed-use land use strategies were prepared. the south, George Haddad street and include extending the scope of Saifi character, was commissioned to Ian indications for each sector in line with The objective is to create sustainable sector I (Saifi) to the east and south, Village to some sections of the Martyrs’ Hogan, urban planner, Ken Conway, its belief that such a concept is more activities that generate enough value Syria street and sector G (conservation Square axis, improving pedestrian links urban development economist, and conducive to a natural development of to allow Solidere to sell BUA at a good area) to the west, Trieste and Port between Monot and Maarad streets, Gaia-Heritage, cultural advisor. the city. The process was thus market- price. The highest price is on the streets to the north and northwest. and strengthening the east façade of driven, the developers selecting land waterfront. Sites on important public Martyrs’ Square. A workshop was held, grouping the uses with the approval of Solidere. spaces come next: all along the Old Solidere prepared amendments of above consultants, the competition- Shoreline Walk, Martyrs’ Square, and the Master Plan as far as the Martyrs’ winning designers and Solidere’s urban The range of investors has recently around the squares. But it is not just Square axis (sector H). Following the development team. This workshop extended to new categories and the proximity to public spaces that adds international urban design competition, produced the sketch plan from which Company is now approached by value. It is also the views, especially the Company, borrowing the winning the Master Plan amendments evolved. investment banks. These like the Beirut sea and mountain views. scheme’s treatment of the axis as a The sector plan and resulting changes city center project; want to be part of it, sequence of four clearly differentiated to the Master Plan were approved in deeming that it provides blue-chip Solidere is first considering the sections, each attuned to its context, Council of Ministers’ decree 16163 of investment opportunities; and trust Martyrs’ Square axis, then will added important ideas of its own, 2006. Following is a review of the Solidere as lead developer. address the new waterfront district. based on other studies. 3 sector plan, from south to north.

Martyrs’ Square axis 1 Greek team winning scheme 2 Aerial picture 3 Master Plan amendments model

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24 solidere annual report 2005 solidere annual report 2005 25 Southern section: the Threshold The southern section, constituting the threshold to the Martyrs’ Square axis, can also be thought of as forming an east-west continuity with Saifi Village.

An important feature of the Martyrs’ Square axis plan involves creating, in the development block at its southwestern end, a new gateway tower with 120 m maximum height along Bechara El Khoury street, the The concept is to have a continuous rest of the block along Syria street colonnade facing Martyrs' Square, retaining its 40 m height. to create a strong urban statement representing the 21st century To its north, lot 987 Marfaa, site of expression of the 1920's Maarad street the City Center Dome, is planned as colonnade, the signature feature of a mixed-use development and major Beirut's historic core. It will be a two- cultural destination, containing a to three-story stone arcade, 15-m high. 2 public square, retail, entertainment, The height of the development blocks residential and hotel use. forming the edge east of the square was increased to a 52 m maximum, Open space is created to enhance with a mandated setback at maximum each building, and to create links cornice height of 36 m. between Debbas Square garden, the buildings in the eastern part of 1 The spine of tall buildings, with 52 m Mid section: the Memorial Site the mid section, and the City Center maximum height, on this edge is to Dome site. A pedestrian connection The Martyrs' Square axis mid section continue into the southern section to Monot street is established, and covers in its western part the sites of (the Threshold), as well as extending a diagonal movement is created the Garden of Forgiveness, Mohamad to the northern section of the Martyrs' through these development blocks Al Amin mosque and PM Rafic Hariri Square corridor. to reach the Maarad area, also going gravesite, along with the development into the Martyrs’ Square corridor. blocks west of Bechara El Khoury street. park design will be used to re-launch Among the sector H amendments to the project on a BOT basis. The Greek the Master Plan is the removal of the In Solidere’s strategy, the City Center Master Plan amendments introduced team is therefore integrating the police station reconstruction on lot Dome site should be connected to the in order to accommodate the Garden design of the substructure with that 1085 Saifi, site of the former Ottoman rest of Beirut city center, especially of Forgiveness, involve property swaps of the square itself. police station. The lot is planned to

Saifi Village, and to the peri-central and allow the creation of a footbridge, 3 house the Rafic Hariri library. districts, including Basta and Monot. pergolas and enclosing garden walls. In the eastern part of the mid section, The Dome building could be preserved The gravesite of Mr. Hariri and his a main amendment to the Master Plan Behind the Martyrs' Square frontage and used as the first major focus of the companions will take the form of a introduced by the sector plan is the buildings, building height is reduced Company’s cultural strategy, through memorial garden, under design by creation of new streetwall controls to 32 m instead of the 40 m maximum creating 7,000 sq m BUA for a center Gustafson-Porter. No building will be that will incorporate a two- to three- formerly allowed in the Master Plan of contemporary art. It would have erected at this site. Lots 1524 and 1489 story arcade. (24 m, with a setback at 16 m), with

connections with Saifi Village Quartier Marfaa comprise the mid-rise Beirut Martyrs’ Square axis 1 Martyrs’ Square: Greek team the creation of two blocks planned to des Arts and with smaller cultural Gardens residential building, and Bab Because of gardens, low-rise buildings landscaping concept feature typical Saifi Village courtyards 2 Southern section: the Threshold activities in private developments El Saray hotel, designed as a low-rise and archeological penetrations in the 3 Mid section: the Memorial Site and pedestrian streets. distributed along the Martyrs’ Square building symbolizing the gateway into northern section, the strong edge west axis. For instance, lot 1524 Marfaa, the historic core. of Martyrs' Square was lost, leaving The northeastern part of lot 1076 Saifi designed by Arata Isosaki, would a single streetwall edge to the square will house the Ministry of Foreign contain a music venue. Other aspects At the center of the section is Martyrs' on its east side. Solidere aims to Affairs, to be designed in the form of Solidere’s strategy are stimulating Square. The Greek team that won the emphasize this edge with increased of a reconstruction of the former Petit the office market, promoting central international urban design competition height; to establish façade guidelines Serail palace. Its site forms part of a Beirut as a regional business center is preparing the concept design for for the elevation facing Martyrs' property swap with the government and offering smaller residential units its landscape scheme together with Square; and to commission the design involving the above lot 1085 Saifi, site of for the Lebanese market. the underground car park. The car of one building in the elevation. the former Ottoman police station.

26 solidere annual report 2005 solidere annual report 2005 27 1 Northern section: the Trench An important amendment, based on studies by Dar Al-Handasah, relates to grade separation and creates a new road system involving a two-way road link (Byblos street) east of Martyrs’ Square axis, and no link on the west. some losses in BUA which Solidere The access in and out of Martyrs’ has taken in the rest of sector H, due Square was, in the Master Plan, to the conservation of archeology, and 2 through a continuation of Bechara the reduction of building heights near El Khoury street across the square Saifi Village and for the Ministry of and down to Trieste street. Foreign Affairs building to 32 and 24 m respectively, instead of the maximum The plan cancels the section between 40 m formerly allowed. Urban Design Strategy 3 Weygand and Trieste streets, leaving Cultural Corridor Ian Hogan / Kevin Conway a shorter, tertiary road which goes Solidere further wants to encourage 1 The Ottoman jetty 2 The port first basin behind Al-Bourj building to reach linking the sub-sector to the Beirut 3 Museum of the Mediterranean Hassan Al Kadi and Foch streets. port first basin quayside, through two 4 Archeological park 5 Beirut city history museum The canceled road would have cut the pedestrian bridges across Trieste 6 Garden of Forgiveness ancient Tell in two. street: one linking sub-sector Hc to Northern section 7 Rafic Hariri library urban planning design 8 Center of contemporary arts sub-sector Dc on the Beirut port first Koetter Kim 9 Saifi Village Quartier des Arts This solution provides a larger area basin, another linking the archeological 4 around the ancient Tell and the area of the ancient Tell to the same Crusaders’ castle, which are among the sub-sector. important archeological remains which Solidere is striving to integrate into the In addition to designing Martyrs’ The center of contemporary art, urban fabric. Square with its underground parking, where artists can be promoted locally the Greek team may work on the and internationally, will stimulate 5 The traffic of the canceled road is archeological park to the north, while the Lebanese public’s exposure to directed to Byblos street, turning the Machado and Silvetti (US) undertake contemporary art. Together with the latter into a two-way traffic street. the castle belvedere garden. Quartier des Arts and a proposed art The change also affects accesses and auction house in Saifi, the center will 6 footprints of adjacent lots, especially create a strong artistic magnet, lots 1474 and 1475 Marfaa, which The Sea Gate positioning Beirut as the place for are separated by a well showing The Sea Gate envisioned in the Martyrs’ arts in the Middle East and on the important archeological finds. Square axis urban design study is not international art market. part of sector H, but of sub-sector Dc Solidere has incorporated in its cultural north of sector H. Solidere may consider The Beirut city history museum, 6 strategy the Beirut city museum, to the introduction of a water feature located on the Tell archeological site, 7 be created on the public domain facing extending onto the first basin, but rejects will use classical conservation methods Al-Bourj building, with a link between the idea of an elevated road on Trieste and the latest audiovisual technologies the museum and the Tell. An early street. Any change to sub-sector Dc will to present the history of the city from concept design for the museum was require an amendment of the recently the first human settlements. prepared by Michel Macary (France), issued decree 15803 of 2005 relating to who also contributed to the design sectors A and D of the Master Plan. The museum of the Mediterranean and finishes of the new road scheme will provide a large exhibition space across, included in the sector plan. on Lebanon and the Mediterranean The Cultural Corridor basin. It will host a research center 9 In the eastern part of the Martyrs’ Solidere’s concept for a Martyrs' with a specialized library, and major 8 Square axis northern section (sub- Square cultural corridor was developed international thematic exhibitions. sector Hc), the urban design is based in detail by Gaia-Heritage. The strategy on a planning study by Koetter Kim envisages twinning projects with The congress hall and center of (US). A main change is an increase in similar cultural projects in other performing arts will have a dual tower height to a 160 m maximum, Mediterranean cities, with funding function, as a venue for international from the former Master Plan maximum potentially sourced from the European conventions, and as a national center of 120 m. This was done to compensate Union. The cultural corridor includes: for opera, music, dance and theater.

28 solidere annual report 2005 solidere annual report 2005 29 Sector J and The Landmark Council of Ministers’ decree 16184 of 2006 ratified amendments of the Master Plan as far as sector J.

The main changes were eliminating the tower on the site south of Amir Amin garden, featured in the original Master Plan, and transposing it to the There is no reduction in building Landmark site, north of the garden. height to the west of the Mina El Hosn The decree approves The Landmark Square central green corridor. On the scheme as designed by Jean Nouvel contrary, a clear edge is created on on lot 1520 Bachoura, and grants it Sector B - Hotel District these blocks to match the high specific exemptions from BCD and Sector B was originally envisioned buildings on the opposite side of Lebanon construction law regulation. Sector I - Saifi as a mixed-use district, with podiums Fakhreddine street. The increases in and towers on setbacks planned on maximum building heights compared The Landmark exemptions involve Council of Minister’s decree 16163 the basis of that assumption. As a to the Master Plan are, from north to canceling streetwall controls, of 2006 approved the Master Plan

result of a shift in market demand, Solidere 3D model south (cadastral zone Mina El Hosn): modifying pedestrian passages by amendments relating to sector I, the district is acquiring a residential lot 1421, Platinum Tower, from 120 to removing part of the north-south which involve smoothing in and out character, with only three hotels and 140 m; lot 1399, Dib and Town Towers, passage and adding an east-west accesses between Fouad Chehab three office buildings to date. from 90 to 110 m; lot 1396, Damac passage; exemption from providing and George Haddad streets. Properties Lebanon project, from 75 landscaping on 50% of un-built areas. The redesign of the whole corridor to 90 m. The former Master Plan maximum Vehicles coming from the west will was made, with modifications destined height of the tower is increased from use a tunnel, yet to be designed, to enhance it for residential and tourist On the eastern side of Mina El Hosn 40 to 164 m with a 55 m-high podium. without having to go through traffic use. The revised sector B plan, with Square, building heights are slightly lights. Those coming from the east consequent amendments to the BCD lower than on the western side, except Other exemptions relate to technical can go north on George Haddad. Master Plan, was ratified by Council of the parts overlooking the square, issues: location of the technical floor, This improvement will reduce traffic Ministers’ decree 15780 of 2005. where heights may reach 110 or 120 m. direct sunlight, ventilation, claustra within the city center. Changes in maximum building heights, (musharrabiya); and to the BUA The changes, which stress open space compared to the Master Plan, are as calculation for cinemas’ halls and and capture views, include increases follows, from north to south: lot 1401, double volumes (more than 5.50 m Sector E - Souks District in the heights of some development Beirut Tower, lot 1422, New Beirut of height). blocks; parceling the blocks into east Tower, from 90 to 106 m; lot 1398, from Proposed changes to the Master Plan and west plots, instead of north and 75 to 90 m, with 75 m to the east; and Sector J amendments also include basically include a pedestrian bridge south ones as in the initial sector plan; lot 1397, from 75 to 120 m in the an increase in the heights of the two across Park boulevard to link to and changes in streetwall controls. southwestern part facing lot 1015 gateway buildings framing Gibran Jean-Paul II Square. overlooking the square; 90 m with 75 m Khalil Gibran garden at the southern The adjustments to setbacks and to the east in the rest of the block. edge of the city center. To the west height increases result in slender, of the garden, the tower height on lot Other Master Plan Issues elegant towers, focusing on sea views, Streetwall control amendments ratified 1132 Zokak El Blatt is increased from with increased (up to 4 m) floor heights, in the decree involve among others lot 90 to 130 m. To the east of the garden, A small number of religious and thus enhancing property values. But 1353, The Dana of CCC. The design as the tower on the western part of lot private lots were found to be slightly the total built-up area for the sector approved by Solidere gives the property 739 Bachoura is increased in height trespassing on the public domain. remains the same. an address facing the sea with rounded from 120 to 150 m along the two roads Solidere coordinated efforts with architectural features at the east and framing the development block, Fouad concerned public agencies to legalize The height increases maintain the west ends, thus removing streetwall Chehab avenue and Ghalghoul street; their situation. Council of Ministers’ hierarchy of maximum heights to the control there, in line with what is done while the part of the block behind the decree 15384 of 2005 ratified a north, gradually reducing them to meet in the Marina Towers and the Four tower, facing Amir Amin garden, is property swap between the private the scale of residential buildings in Seasons Hotel. decreased in height to 40 m. and public domain covering a total Wadi Abou Jamil. land area of 318 sq m.

30 solidere annual report 2005 solidere annual report 2005 31

NEW WATERFRONT DISTRICT SITE DEVELOPMENT

The new waterfront district will connect Altogether some 73 ha of reclaimed Beirut Marina hosted 128 boats in the A comprehensive sector plan has directly to the west with the city’s land is now enclosed within a terraced last year. It is edged by a public town laid the ground for the waterfront waterside drive and corniche esplanade, sea defense system designed to quay designed to house waterside district development, and the early and to the east with the historic first basin withstand centennial storms. Its unique restaurants and shops alongside a purchasing of sites is brisk, for of the port. A prime, active, multiuse district caisson structure is limited in height to yacht club and apartments. An iconic delivery to investors on completion with extensive green areas and bold 5.5 m above sea level so as to protect bridge will link it to the hotel district. of reclamation. architecture, it commands fine views of the sea views from deep within the city’s Providing an uninterrupted 3.5-km sea, with a picturesque landscape of hills historic core. The sea defenses provide extension of the Beirut shoreline, and mountains across the bay to the harbor enclosures for two marinas. corniche promenades, marina and northeast. When completed, it will contain a harbor quaysides will represent more city waterside park, two marinas, corniche than four times the area of seafront and quayside promenades, with 29 ha of public space currently available on new waterside development land. and around the Beirut peninsula. Beirut Marina Marina Development Beirut Marina, located at the heart of Civil works for the marina were part pontoons, harbor master, customs and Steven Holl Architects (US) were The design submitted by Steven Holl in Following the Directorate General for the capital, entered its fourth season of important marine works delivered immigration facilities, and utilities for commissioned in November 2002 to August 2004 was gradually amended Urbanism (DGU) recommendations in April 2005. Its capacity stands at in 2002, as per the 1994 agreement the boats; and issued marina by-laws undertake the design of the buildings following BWD and Solidere comments. on November 2, 2005, the exemptions 186 boats ranging from 5 to 65 m, 75% with the State, and also comprising addressing such matters as general and public space around the marina. The project is integrated into the city were ratified by Council of Ministers’ of the mooring area accommodating a breakwater and a two-line defense services administration, operation, This includes a town quay of waterside center through direct access to the decree 16546 of 2006. This will pave the boats of more than 25 m length. structure protecting the marina and boat traffic, pedestrian and vehicular restaurants and shops; a yacht club corniche promenade to the north, and way for the building permit issuance, the new waterfront. circulation, environmental protection with apartments above; and harbor a footbridge over the corniche to the after which Holl, teaming up with By the end of 2005, Solidere had and public safety. master, customs and immigration south, designed by architect-sculptor Nabil Gholam, will complete the signed medium- or long-term leases The US$298 million project cost was buildings on the quayside. High-Point Nadim Karam, providing access to detailed design. (three, five or ten years) for 28 boats, partly financed with a US$107.3 million, The pontoons, mooring and service Rendell (UK) were appointed the town quay restaurants and shops. and one-year leases for 100 boats. 10-year loan, concluded in 1996 with bollards, utilities, network ducting, construction managers. Landscape designs were developed for BWD commissioned the restaurant Temporary portacabins have been used BNP Paribas and Banque Indo-Suez, designed by Groupe Camille Rayon the entry plaza, quayside and extension consultant Ulysses (France) to conduct for harbormaster and public authorities with US$7.3 million COFACE guarantee. (France) together with an additional Developing these facilities is Beirut of the corniche sidewalk above, a market study with a view to select an activities, pending completion of the Solidere continued repayment of the quay providing improved shelter in Waterfront Development s.a.l. (BWD), creating open-air terraces in the form optimal type and size mix, as well as marina development, as per Steven loan in 2005, with US$30.7 million times of northerly winds, were all established in April 2004 with 50% of a ‘stone beach’ over the restaurants establish a typical rental agreement Holl’s design. outstanding at year end. completed in 2004. shareholding for each of Solidere and and shops. for the quayside restaurants. Stow Waterfront Development s.a.l. Beirut Marina was put at the disposal The connecting of utilities: water, (Stow). Solidere contributed in kind The project file presented to Beirut Meanwhile, BWD launched a design- of Solidere in 2002, as per a 1997 electricity, fire line, telecom / internet, 20,000 sq m of BUA on 22,341 sq m of Municipality in January 2005 involved and-build tender for underground agreement with the State granting the cable TV, was delayed by the closure land; Stow contributed US$31.6 million. some exemptions from the BCD structural work and construction of Company the right to operate the of the north quay access after the Council of Ministers’ decree 14704 of regulations, mainly a 2-m height three basement floors. The contract for marina and below-corniche car park explosion of February 2005, which June 30, 2005 allowed BWD, with less increase for the yacht club building to these works is scheduled for signature for a 50-year period. also caused damage to the electricity than 100% Lebanese shareholding, to 13 m above the reference point. in April 2006. room and water tank. Only in December own the regrouped lots 1455 and 1456 Solidere undertook at its own expense, 2005 was Solidere allowed to withdraw Mina El Hosn. A fast track approach will use up down and with the relevant public authorities’ the damaged standby generator and construction, based on a technology supervision, the construction of electric switches for repair. specific to underground construction necessary installations, including below sea level, that may be applied access and circulation roads, surface throughout the new waterfront district. parking on the breakwater, The project target completion date is underground car park below the summer 2008. corniche and on-site development, Steven Holl

34 solidere annual report 2005 solidere annual report 2005 35

Land Reclamation The design-and-build contract for on February 14, 2005 and ignored all benefits from US$14.7 million in export Phase Two of land reclamation was instructions to return to work. Finally, credit financing and US$10 million in awarded to Radian International (US). the contractor refused to reimburse additional local financing, concluded in The contract, covering 18 ha of land, Solidere's legal costs. Accordingly, 2001. These amounts were fully drawn, plus extensions below sea level, Solidere terminated the Radian contract and the amount of US$18.7 million was involves the excavation, sorting and on February 10, 2006. Both Radian and outstanding by end 2005. treatment of 5 million cubic meters Solidere submitted further requests for of debris and waste materials. arbitration to ICC. The backfilling and consolidation Other Works of clean material at the end of the Solidere submitted to the Municipality The works, supervised by Fairhurst Solidere is taking measures to expedite reclamation process will allow the the building permit application for the International (UK) until October 2005, completion of the project and intends delivery of sites for infrastructure, 400-space, below-corniche car park and controlled by Bureau Veritas to inform investors about the planned development and public space. designed by Dar Al-Handasah. This (France), started in April 1999 and were timing of delivery of development land. followed the issuing by the Council of scheduled for completion in April 2004. In December 2005, Hornagold & Hills Development studies for infrastructure, Ministers of decree 15803 of 2005, The contract was the subject of a International - H2i (UK) were appointed parks and high-density structures on ratifiying Master Plan amendments dispute which went in 2003 before an construction manager, and work is the new waterfront district started with relating to sectors A and D, and of international arbitration tribunal under under way to split the project into a 2004 feasibility study, financed resolution 59 of 2005, appointing the the rules of the International Chamber operations packages to be executed by a US$450,000 grant from the US Municipality as State representative of Commerce (ICC). The tribunal issued by separate contractors. Department of Trade. The study, by for the project. The permit will allow its award in July 2004. Paul Rizzo Associates (US), provides completing the design and launching The US$56 million project is financed the basis for developing 20 ha of land the tendering process, with works The award required Radian to remedy by means of three bank loans, with in the eastern part of the district, in expected to start by summer 2006. the defects in the works at no cost to a consolidated repayment schedule. partnership with private investors. Solidere, to cover all arbitration legal A six-year, locally syndicated loan of Designed by Nadim Karam, working costs, and to provide Solidere with a US$22 million, concluded in March A section of this area was leveled, with Arups structural engineers (UK), plan showing how Radian proposed to 2000, finances its local content. The equipped with temporary roads and the net bridge overlooking Beirut continue the works to comply with the loan was fully drawn and repayments parking areas, and leased to Beirut Marina is part of the overall plan to contract. Lengthy negotiations, aimed started, with a US$2.3 million amount International Exhibition and Leisure connect the marina to surrounding at obtaining such a proposal, proved to outstanding at end 2005. On its US Center. Activities hosted in temporary areas and give public access to the be fruitless. Moreover, the contractor content in equipment, engineering structures currently include exhibition town quay. suspended the progress of the works and construction services, the project halls, conference areas, a banquet pavilion and a seaside restaurant.

36 solidere annual report 2005 NEW WATERFRONT The plan aims at turning the new The Beirut Marina yacht club building Two streetwall controls are applied and The road widening and addition of new waterfront into the destination and is subject to a maximum height of 11 m view corridors are created to preserve roads in the sector plan result in larger DISTRICT climax of Beirut’s citywide corniche. above corniche level. No permanent sea and mountain views. SW5 requires areas dedicated to public domain. The MASTER PLANNING Upon completion of the Beirut Marina construction is allowed on the marina a 3 m setback at the 36 m height. SW6 total built-up area remains unchanged, town quays, corniche promenade, quays and breakwater, apart from is similar to SW5 with the additional with no increase in development areas eastern marina quayside and Beirut infrastructure or buildings relating to requirement of a 5.5-m high arcade on allocated to Solidere. port first basin promenade, the city port management, such as customs, the street frontage. center will provide an uninterrupted immigration, petrol station or car The ratification of the sector plan will extension of the Beirut shoreline. parks. Restaurants and shops built as Building heights and envelope controls pave the way for starting the detailed The terraced corniche promenade, temporary structures along the town ensure a careful distribution of floor design for infrastructure, hardscaping over 1.3-km (0.8-mile) long, with a quay are not to exceed the height of the space. The majority of development is and landscaping, preceding real estate width varying between 45 and 110 m, finished corniche promenade above. at medium density (40 or 52 m height). development in the district. will be a socially active pedestrian with a limited number of high-rise sites arena, with views to the sea, Jounieh Sector D comprises the development (90, 120 and 160 m height) planned in bay and Mount Sannine. blocks and public domain extending distinctive locations and landmark north of Sector E (Souks district) to buildings framing spectacular views to The street network, designed to fit a reach the corniche promenade, and the sea and mountains. Monaco-style Formula One Grand Prix east of the waterside park to reach circuit, received FIA’s preliminary the Beirut port first basin and the technical approval in 2002. The track eastern marina. New waterfront district is to run clockwise along 4.8 km with urban planning design model The new waterfront district elicited the starting grid on the coastal Planned as an exemplar of modern Skidmore Owings & Merrill early indications of interest on the part corniche. Where streets are less than development, it is a multiuse district of developers. In response to their the standard 12 m width, construction with a wide range of commerce and demands, Solidere proposed a plan for works are to dismantle the existing retail services, office, tourist and hotel sectors A and D, which, together with sidewalk, widen the carriageway and space, convention centers, exhibition related general and special regulations install safety barriers and debris and cultural facilities, together with of the Master Plan, received official fences prior to the race event. On the extensive residential development. It approval in Council of Ministers’ decree 40-m wide upper corniche promenade, also includes a part of the Formula 15803 of 2005. temporary stands are to be installed to One track. The provisions relating to accommodate spectators during races. developments on the Beirut Marina are The plan is a development of the 2001 also applicable on the eastern marina. planning study by a consortium of US Sector A comprises the waterside park, firms: Skidmore Owings & Merrill corniche, land, quays and breakwater Development lots should have specified (SOM) for urban design, Sasaki for around Beirut Marina. Leisure, sporting minimum areas: 750 sq m subject to landscaping, and Parsons Brinckerhoff and tourist activities are the dominant encompassing an 18 x 18 m square, in for transport planning. The study ones. The decree lists an outdoor sub-sectors Da, Dc and Dd; 1500 sq m provided a conceptual urban design amphitheatre in the waterside park; subject to encompassing a 25 x 25 m framework for the district; integrated infrastructure and developments for square, in sub-sectors Db and De. landscaping guidelines for the new the Formula One racing; developments coastal corniche; and resolved the for the yacht club and related services, connection to the city and to the two hotels, tourist and exhibition centers, marinas at the northwestern and sports courts, restaurants and cafés. northeastern ends of the city center.

The detailed plan was completed in 2001 and submitted to the relevant authorities for review and approval. The higher council for Urban Planning and the Beirut city municipal council approved it in 2002 with some qualifications, which were left to the government’s decision. In 2002, the SOM design was the only non-American project to win a Charter Award of the Congress for the New Urbanism (US).

38 solidere annual report 2005 solidere annual report 2005 39

REAL ESTATE South Souks STRATEGY Having previously completed the 2500- In the Souks core, around 200 shops or space underground car park, built with other retail units of various sizes and Dimitri Alatzas Asociados (Spain) as volumes are aligned along streets and management system consultant and around squares, with shops, cafés or now operational, as well as the design, restaurants on one ground floor, one The launching of the Beirut Souks is a building permit and tendering process, ground floor with a mezzanine, or two consecration of the city center's character Solidere launched in 2005 the South full floors. Block M accommodates a as a global retail district and constitutes Souks, first phase of the Beirut Souks number of fine retail outlets on street a major step towards completing a critical superstructures development. level in Weygand, the main entrance of mass there. Jamil and Arwam streets, and a food The project involves construction of the hall in Tawila street, with four upper Quality space earlier put on the market by Souks core, designed by Rafael Moneo floors of intelligent offices. Solidere includes such new construction 1 (Spain) and Samir Khairallah Partners; as UN House, Saifi Village, the embassy and the jewelers' block, designed by The site topography has been exploited The jewelers' block is almost entirely compound and the Rue de France complex. Kevin Dash (UK) and Rafik Khoury; advantageously, with streets situated sold. It comprises four parts, with Alongside its own projects, the Company together with the underlying streets at different levels. The north-south around 80 shops on ground floors and continues to develop and share with and other public spaces, for which Ayyas, Tawila, Arwam and Jamil and offices for jewelers on upper floors. interested investors real estate and Olivier Vidal (France) is space and the east-west Bustros, Sayour and Two blocks with façades on Weygand architectural concepts relating to Saifi or landscaping consultant. lower Arwad streets are at lower and Allenby streets, D and E, have Wadi Abou Jamil residential clusters and ground floor level, while upper Arwad three and four floors respectively. Block to other commercial or multiuse projects. The South Souks incorporate the street is at upper ground floor level. F, with façades on Tawila and Sayour Beirut Souks Mamluk Zawiyat Ibn Iraq shrine, Arwam street has an major entrance at streets, has a ground floor for jewelry 1 Jewelers’ block and Souk Ayyas Byzantine period shops, remnants of street level which extends to become 2 Key plan shops and one upper floor dedicated 3 Jewelers’ block Weygand elevation the medieval city wall, late Phoenico- an upper ground level at Ajami Square. for a large restaurant. Block W has a Beirut Souks Persian harborside settlement and partially restored façade on Allenby Beirut Souks are re-emerging as a Retail units will form shopping streets other unearthed artifacts and mosaics. A covered meeting place with seating street, with upper floors as offices. lively shopping and entertainment that offer a concentration of the finest and restaurants is planned in the center, a regional retail destination local and international retail brands. Works on the US$50.6 million contract square. Other features include three The delivery of the South Souks in and a magnet both for local residents awarded to Société d'Entreprises fountains, planters, benches, room for the second half of 2007 will allow department and visitors. Visitors can stroll along the streets, store A.R. Hourié, started in July 2005, are café external seating, information the leasing of shops, as well as the khan antoun bey some covered with skylights and a square multiuse scheduled for completion by summer desks and screens, ATM machines, and realization of pre-sales previously At the heart of Beirut, the new Souks natural aeration system, such as Souks bldg 2007. Internal partitioning and fit-out a CCTV system for security. concluded for jewelers’ retail and majidiya are integrated within the city's historic Tawila, Jamil and Arwam, and others mosque works tailored to specific units will office space. The revenue elements

multiuse core, close to the hotel district and open to the sky, such as Souks Ayyas, bldg gradually be delivered to users. of the project will reinforce the new waterfront. With direct links to Bustros and Sayour, and enjoy Company’s policy to generate funds the airport and metropolitan transport shopping or entertainment in a wide entertainment to shareholders. complex network, they enjoy easy car and variety of shops, restaurants and cafés. trablous street pedestrian access from up-market ajami square hotel, residential and office areas.

t

The Souks have been designed in five mil

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and Lebanese architects. 110,000 sq m s y 3

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of floor space are interspersed among souks core souk a hry

60,000 sq m of landscaped pedestrian patria fak al arwam areas that follow the ancient street grid square et implanted since pre-Roman times. tre M W F allenby s A unique environment has thus been jewelers’ created, integrating archeological zawiyat block ibn irak features and gardens and consecrating 2 wey gan d s tre E D the historic value of the place while et using the state-of-the-art technology of modern commercial centers.

42 solidere annual report 2005 solidere annual report 2005 43 Other Real Estate Projects Lot 1144 Zokak El Blatt The lot 1144 Zokak El Blatt residential building designed by Fouad Menem has been completed. It offers 2,158 sq m of floor space on five floors with access to an inner garden, and six basements providing 128 parking spaces for the neighborhood, of which 14 dedicated to the building users.

Grand Theatre Solidere is developing around the Grand Theatre an integrated project Lot 1144 Zokak El Blatt enjoys on 2,370 sq m of land, consolidating landscaped space and sports facilities the lot 891 Bachoura historic building, lot 870 building and vacant lot 1521. The concept design by Architecture 1 2 Studio (France) obtained approval from the Directorate General of Urbanism in April 2005.

The project offers a total floor area of North Souks Souk Tawila 11,850 sq m over four floors and five 1 Model The next phase of the Beirut Souks 2 Construction site basements. The main use is a boutique development covers the North Souks, hotel enjoying a roof swimming pool, consisting of a department store and restaurants and bars offering artistic Block 93 multiuse building designed by Nabil performances. Shops are located at Implemented by Solidere, the car park Tabbarah; an entertainment complex street level below the arcades, as was jointly developed with owners of six and a multiuse building designed by the case before the war demolitions. properties in blocks 93 and 87, provides Valode et Pistre (France) and Annabel The building permit file is soon to be 700 spaces on four underground levels Karim Kassar. This phase will allow submitted to the Beirut Municipality. totaling 31,200 sq m of floor area, with leasing and management agreements two main access ramps on Foch and with anchor tenants and operators. Allenby streets. Civil works were Management and Services completed in 2005 for all but two The department store is inspired by The entertainment complex comprises Beirut Real Estate Management and properties, one of which still awaits a the architecture of Khan Antoun Bey, 14 modern cinemas above ground with Services (BREMS) was established by building permit. Now operational, the the Ottoman caravanserai formerly generous lounges and concession Solidere and Aswaq Management and 280-space section owned by Solidere on its site. The multiuse building areas, a retail / entertainment magnet, Services s.a.l., subsidiary of Société will be topped by a landscaped square. comprises offices, restaurants and restaurants, a multimedia store, games des Centres Commerciaux (France), a commercial gallery. A landscaped arcades and retail extending to Khan a leader in shopping mall management square with a fountain faces the Antoun Bey Square. in Europe. Grand Theatre section and southwest view department store and the restored Architecture Studio Majidiya mosque. The multiuse building comprises retail Its object is to carry out real estate at ground floor level, retail or offices on activities, sales and leasing activities, The development of this part of the the first and offices on the second floor. shop fitting, property and facility North Souks is expected to start upon management, rental management, obtaining the building permit, which is marketing management. An assistance in progress, and completing / updating agreement was signed with BREMS for the related tendering process. Facilities the Beirut Souks. should be completed within 14 to 18 months. Internal partitioning and fit- out works tailored to specific units will gradually be delivered to the users.

44 solidere annual report 2005 solidere annual report 2005 45

Solidere Development Concepts Solidere's strategy has always been to stimulate high quality real estate development in the city center. Its support to investors has expanded in the last year to cover project design. Lot 800 Mina El Hosn In addition to the development briefs, 178 Saifi Village, a cluster designed by In Wadi Abou Jamil, Solidere initiated based on sector plans and adapted to Nabil Gholam on 2,937 sq m of land, the design and implementation of five project sites, the Company engaged offers 10,100 sq m of residential and predominantly residential clusters Le Passage de Hoyek in consultancy with Lebanese and 670 sq m of commercial floor space. of various sizes, involving restoration Solidere has commissioned the Jerde international architects to prepare The cluster is formed of five buildings and infills. The use of such clusters Partnership (US) to design a multiuse concept designs for a number of lots, with façades along the streets. They are as a typology on the city scale, in complex in lot 1338 Mina El Hosn, to with obvious benefits for prospective organized in a traditional way around a combination with detailed and create a fifth magnet to Beirut Souks buyers, to whom Solidere sometimes garden courtyard, which constitutes individual residential buildings, is on Patriarche Hoyek street. The floor sells land with a real estate program, 30% of the total site area, providing meant to reinforce urban integration. area of 16,382 sq m over 3,739 sq m architectural design, and possibly a private terrace gardens. In the center is of land comprises shops, restaurants, development package. a three-floor, five-flat building from the A variety of design concepts were cafés, night-clubs and a boutique hotel 1940s, restored by Solidere. contributed by international and with associated apartments. 178 Saifi Village Lebanese architects, with experience In Saifi Village, new development Inspired by the Beirut architecture in Mediterranean and Middle Eastern The architecture, inspired by Beirut's designed in the Lebanese vernacular of the 1950s, the five- or six-floor countries reflecting responsiveness Pigeon Rock, has the character of style blends with buildings restored to buildings use materials and pastel to local context, culture and climate. weathered rock: sliced, chiseled and their original glory. Public realm design colors faithful to the neighborhood's Market interest has led to the sale cut away. Surfaces facing the streets and landscaping convey an appealing character. The 45 apartments enjoy of practically all the properties with are striated and layered, while interior and communal ambience of gardens, interiors with beautiful volume and cluster concepts. façades looking onto the courtyard are courts and walkways. The character high ceilings. Taking into account the smooth and honed. of the Village was recently enhanced Mediterranean climate, they draw on Lot 800 Mina El Hosn, still held by by the Quartier des Arts designers' the best features of the central hall Solidere, is a triplet designed by Ayman The multi-level design makes use of and art galleries. plan to create a well-balanced, well- Sanioura and combining restoration the sloping site to provide access to oriented, well-lit space ensuring and new construction. The 1,400 sq m 2 several retail levels, with a continuous This success led Solidere to initiate optimum efficiency and minimum floor area comprises two twin restored circulation route created around an concepts for extensions to Saifi Village. energy costs. Ranging from one to four Levantine houses plus an infill building, active central square. The visitor's A number of development lots were bedrooms, the latter as penthouse with four floors each, located between curiosity will be aroused by sneak accordingly sold with their concepts. duplexes, the apartments benefit from two streets, a lower, entrance level, previews of the interior from the modern amenities. The building has street, and Rue de France at the upper exterior and of upper levels from below. obtained a building permit. level. The infill building was designed in a similar style, with two basement The project distributes retail and floors linking the three buildings. leisure uses complementing Beirut Souks on the lower floors, in the form of a 'vertical village' that can attract 1 3 pedestrians up through the project, and will have continuing, but changing, patterns of use troughout the day and night. The upper floors will host a

1 Lot 800 Mina El Hosn boutique hotel and nightclubs. residential triplet Ayman Sanioura 2 Le Passage de Hoyek Lot 1487 Mina El Hosn multiuse complex Solidere commissioned Joe Geitani for Jerde Partnership 3 Lot 1487 Mina El Hosn the design of a commercial development commercial development on lot 1487 Mina El Hosn. The project Joe Geitani consists of two blocks with 8,865 sq m of floor area on nine floors, consisting of office space with retail at ground and possibly first level; and four parking

Solidere rendering basements providing 109 car spaces.

46 solidere annual report 2005 solidere annual report 2005 47 wadi abou jamil sector rendering Solidere rendering

48 solidere annual report 2005 solidere annual report 2005 49 RESTORATION

In Beirut city center, the re-emergence of the historic core and peripheral urban villages is recognized as a conservation showpiece. Restored buildings with beautiful façades and modern interiors enjoy landscaped squares and pedestrian streets, with numerous cafés and shops as popular meeting places at all times.

With its rich heritage of religious, public, institutional and commercial buildings, the ‘vieille ville’ witnessed a high demand for a broad range of office, retail, cultural and recreational uses. Saifi, Wadi Abou Jamil and Zokak El Blatt are urban villages. 1

3

1 Bab Idriss area 2 Lazarieh center and Markazia Monroe Suites 2 3 Foch street at dusk

Restoration Process In the Master Plan, 265 buildings and Projects go through preliminary design City center restoration combines Recuperated and Sold Buildings 27 public or religious buildings were approval, restoration permit issuance, authenticity with a progressive outlook. Solidere successfully completed the Lot 16 Marfaa is an office building with Of retained built lots whose ownership retained for preservation. These were mobilization of site works, façade and Buildings are rejuvenated through the recuperation process, giving former retail on the ground floor. Designed by devolved to Solidere, 37 original lots, carefully restored in accordance with material sample approval, site use of skylight atria, roof gardens or owners and tenants the opportunity Pierre Neema with 415 sq m of floor regrouped into 31 lots, had been sold a set of rules established by Solidere inspection, and finally occupancy glazed roofs. Interiors are modern and to regain their rights in the buildings area, the building is under restoration. 'as is' by the end of 2005, while one had in cooperation with urban planning permit procedure. fitted with equipment for functionality, retained for preservation. In the Foch-Allenby area, cadastral been leased 'as is' to be restored by its authorities, and which involve sector comfort and efficiency. In residential zone Marfaa, El Patio development on user. Restoration is proceeding on the plans and restoration guidelines. Solidere has a dedicated team to neighborhoods, this is allied with a Beside fulfilling the requirements that lot 1144 is under restoration as a hotel. part of buyers / users, with 28 built lots monitor implementation. Restored sensitivity to the Mediterranean apply to all other restoration projects, The project, designed by Joe Chehwan, ready, two under renovation and one Restoration briefs established for buildings are maintained on a regular typology. In office buildings, open recuperation contracts outlined the has a floor area of 2,158 sq m. under study. the retained buildings were based basis. To that effect, owners provide plans allow optimal and flexible use financial rights and responsibilities of on architectural and photogrammetric the Beirut Municipality with a signed of floor area. involved parties, be they returnee Under restoration in Mina El Hosn is surveys, damage assessment and commitment to undertake general owners or tenants. lot 702, designed by Jean Harfouche as historical research on original designs cleaning and façade maintenance The final product of restoration is an office building with retail at ground and materials. The briefs provide every five years. quality space with special character. At the conclusion of the recuperation floor, and covering 3,032 sq m of floor guidelines for articulating the design Its success has confirmed that heritage process, a total of 146 built lots were space. A private residence, designed by and restoration strategy to be adopted Stone repair was important in the buildings can survive and even create recuperated: 127 buildings are now Pierre El Khoury Architecte on lot 771, in each individual case, and are stricter Foch-Allenby and Nejmeh-Maarad great value, provided they are adapted fully restored, six are under restoration, and covering 1,883 sq m of floor area, for those buildings deemed of heritage areas, both notable for their faithful to the needs of contemporary life of which one after sale to a third party, is under study at Beirut Municipality. or architectural value. reconstitution of elaborate façades and business. and 13 are under study, of which three and high quality stone masonry. after sale to a third party.

50 solidere annual report 2005 solidere annual report 2005 51

Solidere Buildings Solidere took the lead in the restoration By year end, 23 buildings had been process, undertaking showcase work restored: 12 residential buildings in Saifi, on its properties and closely monitoring Wadi Abou Jamil and Zokak El Blatt, and other parties' projects. 11 for office use with retail at street level Religious buildings in the Maarad and Foch-Allenby areas: Nineteen places of worship attest to The 44 built lots remaining with Solidere they include five built lots (six buildings) the spiritual value of central Beirut. were regrouped into 41 lots, including serving as Company premises. Solidere has assisted in the gradual five co-owned buildings. Of these, 37 restoration of 18 of them, with 13 now lots were the object of restoration by The implementation of restoration in use and drawing increasing numbers the Company. The other four are being concepts is proceeding in 14 Solidere of people. The new Mohamad Al Amin restored by third parties, respectively the built lots, with five at the construction mosque took on a profound meaning co-owners and the leaseholder, with one stage and nine under study. Saifi Village Zokak El Blatt Wadi Abou Jamil when the late PM Rafic Hariri was completed, two under restoration and In addition to the restoration, as per Lot 670 Zokak El Blatt, a two-story In Wadi Abou Jamil, Mina El Hosn laid to rest near it. one under study. In addition, Solidere Solidere leases space in its restored Fouad Menem's design, of the existing building restored by Solidere as per cadastral zone, lot 1015 is a five-story undertook the restoration of two lots on buildings. By end 2005, 80 agreements building in 178 Saifi Village, Solidere Fouad Menem's design, obtained from residential building which was restored behalf of the Islamic Wakfs, with one relating to commercial buildings or completed two projects designed by the Directorate General of Urbanism an by Solidere following Ziad Akl's design. completed and another under way. sections thereof, and 109 agreements Erga Group. Lot 332 is a building of approval for two additional floors and is An underground car park servicing the relating to residential properties, had four floors, with one apartment each, now awaiting building permit approval building is covered by a private garden. been signed. This had resulted in the all leased; the ground floor retail units from Beirut Municipality. The parking The apartments and the shops on the occupation of around 16,300 sq m of were leased as part of Quartier des spaces required for the building permit north side street level are all occupied. commercial space and 20,100 sq m of Arts. Lot 741 contains four buildings are to be provided in adjacent lot 1144, residential space. around an internal garden. The three a six-story infill building with 128 car Two buildings are under restoration as restored buildings are occupied and spaces on six basement floors. per Fouad Menem's design. Lot 799 is the four-story infill building is now a seven-story building including one- completed. A 50-space car park to three-room flats and two duplex falls under the garden and in three apartments with roof gardens. Lot 955 basement floors of the new building. is a seven-story building with two apartments per floor.

52 solidere annual report 2005 solidere annual report 2005 53

SALE AND Sales Record Sales Results Real Estate Leasing RENTAL STRATEGY In any given year, the sales recognized A combination of strong demand and Solidere has increased its portfolio of in the income statement consist of incentives was successful in stimulating income-generating properties. UN closed deals negotiated in that year land sales. The discounts on land sale House and Lot 1 Zokak El Blatt are and in preceding ones. On the other prices offered in 2004 within the land- each leased to a single institutional hand, the deals negotiated up to that for-share sales scheme were reflected tenant. One compound is dedicated for year and not closed during the year, in the sales value for the year 2005, as embassy use. The Company also leases make up the sales backlog at year end. were some additional built-up areas space in its buildings, in car parks and sold to buyers-developers whose deals mooring spaces in the Beirut Marina. Aggregate sales of US$1.1 billion have had been closed several years earlier. been recognized from inception to end At end 2005, leased property value was 2005 (1,003,000 sq m of floor space, Gross land sales of US$252.8 million US$160.5 million (US$158.7 million of which 218,600 sq m in 2005). The were recognized during the year 2005, after depreciation): US$120.6 million in sales backlog as at March 31, 2006 (US$169.4 million in 2004). Solidere has buildings, US$43.2 million in land and amounted US$1.12 billion. Recognized stopped selling finished products US$8.3 million in other assets. Solidere has encouraged the return sales rose from US$22.5 million in in order to build a portfolio of income- of previous property owners or tenants. 1995 to US$92.4 million in 1996 and generating properties. However, Saifi Gross rental income was US$20.8 It has attracted magnets to the city US$144 million in 1997. The 1998 fall to Village deals closed in previous years million, against US$7.5 million in 2000, center, and was instrumental in the US$117.9 million was later aggravated and recognized in 2005 amount to US$10.2 million, US$14.1 million and relocation of expatriates and foreign by Master Plan issues which delayed US$1.1 million, 568 sq m of floor area US$15.4 million in 2001 to 2003, and companies there. Its clientele includes construction permits. Sales fell in 1999 (US$11.1 million, 6,270 sq m in 2004). US$18.6 million in 2004. Downpayments Périmètre Immobilier The past year and the beginning of the individual clients; public and private to US$37.5 million and plummeted to received on lease agreements are commercial building current one have seen a dramatic increase local institutions; Lebanese and foreign US$6.3 million in 2000. This trend was The backlog of negotiated sales not treated as deferred revenues and not in land sales. Thanks to the strong interest banks, corporations and businesses; reversed in 2001 and 2002, with sales closed during the year amounted to recognized as income. in Beirut city center, many projects, some international organizations and foreign respectively jumping to US$77.5 million US$112.6 million at end 2005. Due to of important proportions, are under way, embassies, for which specifically and US$128.9 million. Sales in 2003 the surge in demand, the sales backlog Residential leases relate to new and stimulated by Solidere's incentive policies designed buildings were constructed were only US$80.6 million, due to jumped to US$1.12 billion at March 31, restored flats in Saifi, Zokak El Blatt in offering investors development concepts. for long-term leases. accounting standards for recognition, 2006. To those figures must be added and Wadi Abou Jamil. Leased office Sale Procedure / Payment Schemes Real estate sale and rental activity is also but jumped again in 2004 and 2005 to commitments of US$33 million relating space relates to UN House, lot 1 Zokak increasing at a healthy pace, sustained by After offering in 2004 a land-for-share record levels of US$174.5 million and to the pre-sales of units in the Beirut El Blatt and the embassy compound. A sale agreement which includes demand for quality space and services. sales scheme, Solidere pursued in 2005 US$252.8 million respectively. Souks jewelers' block, concluded a Other commercial space relates to pre-development and construction its support to investors by providing number of years ago. offices and shops in restored buildings, standards and timetables, as well as As a land bank with a considerable land for sale with associated concepts. as well as shops in Saifi Village. payment conditions, is signed upfront. property portfolio, Solidere markets The Company monitors the demand Downpayments received on signed Sales are expressed in terms of floor or a wide range of built or un-built lots and supply of real estate in the city deals as at end 2005 amount to built-up area (net development rights). for residential, office, hotel, retail and center, to the benefit of all. US$41.6 million: US$33.4 million from other specialized uses. land sales, US$6.5 million from sale of Property transfer is registered before residential space, and US$1.7 million the Real Estate Registrar upon signing In the early years, sales mainly involved from sale of space in the Beirut Souks the final sale deed, following fulfillment un-built lots and existing buildings sold jewelers' retail and office block. of technical and legal conditions, 'as is' for renovation or development. Downpayments are treated as deferred together with the mortgage contract in The delivery of Solidere real estate revenues, to be recognized as part of case of finance. Solidere pursued in projects led to a growing volume of revenues only upon sales realization. 2005 its policy of offering buyers the sale and leasing operations involving possibility to either pay cash or defer finished products, new or preserved part of the sale price payment, thus buildings or parts thereof. A flexible enabling them to better plan the marketing policy, allowing for revision financing of their investments. and adjustment according to demand and other circumstances, resulted in Concomitant with the property transfer a healthy mix of sales and leases. registration, the buyer / developer provides Solidere with a first-degree This ensured a speedy recovery and mortgage on the sold property, as a occupation of the historic core and guarantee against any outstanding residential neighborhoods, and an payments. A bank guarantee also early launching of developments in Elie Saab provides security for proper and timely new sectors of the city center. fashion boutique execution of all construction works.

56 solidere annual report 2005 solidere annual report 2005 57 Wadi Abou Jamil cityscape, Bank Audi and Starco, Grand Serail and embassy complex CDR in the background in the background

Nine other residential buildings are in Complementing it, serviced apartments On the Martyrs' Square axis, Canadian Named after the medieval city gate that At the city center southern gateway, progress. Under construction are two designed by Ziad Akl on lot 1410, offer Bank headquarters designed by Axel formerly stood nearby, Bab El Saray is The Landmark luxury development, private residences: lot 911, designed 2,950 sq m of floor space. The project Schultes on lot 1524 Bachoura, offers under construction on lot 1489 Marfaa. designed by Jean Nouvel (France) on by Abdel Wahed Al Wakeel (UK-Egypt) is under study at Beirut Municipality. 6,300 sq m of floor space with retail The project, designed by Kevin Dash lot 1520 Bachoura, offers 70,000 sq m and ARC Group with 1,500 sq m of floor on ground floor. (UK-Australia) and Hani Murad as a of floor space distributed into a thirty- area, and lot 855, designed by Nabil Al Mawared Bank headquarters are hotel, with retail on ground floor, offers seven floor hotel and apartment tower Gholam with 1,063 sq m of floor area; designed by Zaha Hadid (UK-Iraq) on Beirut Gate, an important development 17,500 sq m of floor space. overlooking Riad El Solh Square, and Developers' Projects as well as the Mina El Hosn 1466 lot 1383 with 7,580 sq m of floor space. totaling 178,506 sq m of floor area on two ten- and eleven-story buildings Progress was registered in 2005 for a residential building, designed by Fouad The project includes ground floor bank lots 987 (site of the City Center Dome), Behind the spine of the tall buildings containing offices, retail and a cinema number of large projects. (Also see Menem with 1,773 sq m of floor area. services, eight upper floors including 1523, 1525, 1526, 1542 and 1544 (52 m maximum height) on the Martyrs’ entertainment complex. The building Existing City Center Master Planning.) banking executive offices, auditorium Bachoura and lot 901 Saifi, is under Square eastern side, part of lot 1076 permit application is proceeding, after Under study at Beirut Municipality are and amenities (café, gym and library) study. This development consists of Saifi will house the Ministry of Foreign ratification of requested derogations in In Wadi Abou Jamil, cadastral zone a private residence on lot 771 and three on the first basement level, and six several projects, each on a separate Affairs. The building, to be inspired by decree 16184 of 2006. Mina El Hosn, Solidere has sold nine residential buildings: Mira Real Estate, underground parking levels. site and by a different architect, with a the former Ottoman Petit Sérail, will residential clusters together with their designed by Erga Group on lot 1478 land use mix ranging from residential have a 12,990 sq m floor area. In Saifi, two developments are under concepts. The Courtyard, designed by with 3,528 sq m of floor space, Cedar Two other office buildings are in to office, retail and cultural activities. construction: Saifi Village 2, designed Maha Nasrallah, is under construction and Pine Houses, designed by Maha progress. Greenline Real Estate, Northwest of Martyrs' Square, two by Nabil Gholam on lot 146 and sold on lot 1371 with 5,096 sq m of floor Nasrallah on lot 1133 with 1,500 sq m designed by Batimat on lot 1393 with On the western side of Martyrs' Square residential developments overlooking with its concept, offering 22,350 sq m space. Wadi Gardens, designed by of floor space, and The School Real 2,229 sq m of floor space, is under are Beirut Gardens and Bab El Saray. the Tell archeological site are under of floor space; and Al Dalal residential Dar Al Omran (Jordan) on lot 1392 with Estate, designed by Bechara Bacha on construction. Luna Company, offering study. Marfaa 94 on lot 1475 offers building, designed by Atelier des 24,000 sq m of floor space, is under lot 1380 with 2,272 sq m of floor space. 4,084 sq m of floor space on lot 1394, Designed by Arata Isozaki (Japan) and 10,700 sq m of floor space. Designed Architectes Associés (AAA) on lot 1077, study at the Beirut Municipality. Still under design: a private residence is under design by Diyar Consultants. Erga Group on lot 1524 Marfaa, Beirut by Axel Schultes, 1474 Marfaa, offers with 4,688 sq m of floor space. Saifi on lot 1375, by Charles Hadifé, with Gardens offers 17,110 sq m of floor 8,270 sq m of floor space on eight upper Khan, designed by Elias Issa on lot 752, Under study at Solidere are: Beirut 1,407 sq m of floor space, and New In Zokak El Blatt, a private residence space. This residential development, floors, and underground parking floors. is under restoration with 3,770 sq m of Village One and Beirut Village Two, Zone Real Estate, a residential building designed by Farouk El Sheikh on lot 77 integrating cultural activities (media floor space. Al Mashrek Insurance designed by Giancarlo De Carlo (Italy) by Tripod Architecture on lot 1477, with with 5,711 sq m of floor space, and The center, exhibition and music venues), Northeast of Martyrs’ Square, the high- office building, designed by Nabil Azar on lots 1370 and 1379, with respectively 3,477 sq m of floor space. Pavilions residential complex, designed is under study at Beirut Municipality. density mixed-use Phoenician Village on lot 1080 with 2,301 sq m of floor 11,778 sq m and 15,313 sq m of floor by R & K Consultants on lot 1128 with The façades overlooking the Garden of is under study. Comprising block 118 space, is under study at Beirut area; as well as five buildings with The Royal Hotels and Resorts boutique 9,500 sq m of floor space, are under Forgiveness and Martyrs' Square are on Martyrs’ Square axis and block 144 Municipality. On lots 1059 and 1069, a total floor space of 19,179 sq m, hotel on lots 824, 1430, 1457, designed construction. covered by a marble skin treated as a on the port first basin quayside, it is Saifi Square and Al Mada residential designed by Dimitri Porphyrios (UK- by Ziad Akl with interiors by Philippe screen with a computer-generated the largest development to date, with buildings respectively offer 5,095 sq m Greece): Med Invest on lot 1440, DBA Starck (France), has a floor space of geometric pattern. This creates an 205,735 sq m floor area. It contains four and 6,350 sq m of floor space; they are on lot 1365, DBA2 on lot 1439, DBA3 on 11,700 sq m, integrating infill buildings ambiguous space between inside and towers, stepping in height to a 160 m both under design by Nabil Gholam. lot 1395 and Stow Wadi on lot 1407. and Levantine houses to be restored. outside and gives the building a three- maximum, incorporating office, hotel dimensional impression from outside. and residential use around a central plaza, active with multi-level retail.

58 solidere annual report 2005 solidere annual report 2005 59 In Foch-Allenby, in Marfaa cadastral Near the Beirut Souks, Mina El Hosn At the city center northwest gateway, zone, four office developments are in cadastral zone, four residential in the hotel district, Mina El Hosn progress. Under construction are the buildings are under construction: cadastral zone, are seven high-rise Bank of Kuwait and the Arab World, 1330 Park Avenue, designed by Imad luxury residential developments and designed by Abdel Wahed Al Wakeel Hajj Ali on lot 1330 with 4,654 sq m hotels overlooking the Beirut Marina. (UK-Egypt) and Arc Group on lot 1470, of floor space; Luna One, designed Four are under construction. On lot with 8,300 sq m of floor space; and by Diyar Consultants on lot 1331 with 1354, the Marina Towers complex, Foch 126, designed by Nabil Gholam on 2,757 sq m of floor space; Capital designed by Kohn Pedersen Fox lot 126, with 2,190 sq m of floor space. Gardens, designed by Erga Group on Associates (US) and Dar Al-Handasah, Fochville, designed by Nabil Gholam on lot 1327 with 5,659 sq m of floor space; offers 35,938 sq m of floor area: Marina lot 1497 with 5,554 sq m of floor space; and 45 Park Avenue, designed by Tower, with 400- to 500-sq m flats; and Radium on lot 114, designed by Laceco on lot 1337, with 6,403 sq m of Marina Gardens, with 300- to 350 sq m R & K Consultants with 2,400 sq m of floor space. flats; and Marina Courts, with 100- to floor space, are under study at the 250-sq m flats (still under study at Beirut Municipality. Three residential developments are Under construction are: Hilton Hotel, Beirut Municipality). The Four Seasons under study: Mina Two, designed by designed by Butec and AAA on lot 129, Hotel designed by Dar Al-Handasah on Four residential buildings are also in Axel Schultes (Germany) and Batimat with 11,150 sq m of floor area; three lot 1418 offers 35,938 sq m of floor area. progress. Under construction: Foch 94, on lot 2, with 14,000 sq m of floor office developments, Two Park Avenue, designed by Nabil Gholam on lot 1498, space; Media Fan, designed by Joe designed by Samir Khairallah on lot Designed by Ricardo Bofill (Spain) and with 7,320 sq m of floor space; Foch Geitani on lot 134, with 5,581 sq m of 1334, with 13,950 sq m of floor area, Nabil Gholam on lot 1421, Platinum Residence, designed by Batimat on lot floor space; and Park Palace, designed Berytus Parks on lot 1344, designed Tower offers 53,887 sq m of floor 1466, with 5,012 sq m of floor space; by Fouad Menem on lot 1339, with by Pierre El Khoury Architecte, with space, its requested height increase and Starway, designed by Nachaat 12,060 sq m of floor space. 11,628 sq m of floor space, and the having been approved in decree 14687 Owaida on lot 1464, with 3,000 sq m second Medgulf building, designed of 2005. Beirut Tower, designed by of floor space. Under study at Beirut by Nachaat Owaida on lot 1348, with Wimberley Allison Tong & Goo (US) and Municipality: lot 108 residential 2,514 sq m of floor space. Samir Khairallah on lot 1401, offers building developed by Banque du Crédit 36,559 sq m of floor space. On the Libanais and designed by Erga Group, Closer to the Souks, the Semiramis adjacent lot 1422, New Beirut Tower, offering 2,798 sq m of floor area. residential building, designed by with same developer and designer and Robert Adam (UK) and Fouad Hanna / offering 26,000 sq m of floor area, is Fadlo Dagher on lot 1458 Marfaa with under study. 6,500 sq m of floor space, is under study at Beirut Municipality. The Dana of CCC, designed by Kevin Machado and Silvetti Associates (US) on Dash and Al Salam on lot 1353, offers lot 1464, has 14,102 sq m of floor 12,800 sq m of floor space. Among space. Garden View, designed by Nabil amendments ratified by decree 15780 Gholam, has 13,095 sq m of floor of 2005 was the removing of streetwall space. Both are under study at Beirut controls on its two main façades. Municipality. On lot 111, the Grand The project is under study at Beirut Hyatt Hotel, designed by Michael Municipality. Under design by Michael Graves (US) and Dar Al-Handasah with Signs of vigorous construction 1 Around the Beirut Souks Graves (US) and Ayman Sanioura on 26,637 sq m of floor space, is under 2 Berytus Parks and Hilton hotel lot 1399 are the two 110-m high study at Beirut Municipality. On lot 3 Marina Towers and Four Seasons residential Dib and Town Towers, with 1369, Architecture Studio (France), retail on street level, offering a total selected among four competition floor space of 48,600 sq m. runners, is designing the Rotana Hotel with 21,155 sq m of floor space. Within walking distance from the New Designed by Lo Mauro & Reggiani Beirut Tower are two other luxury Associati (Italy) and Raed Abillamah, residential developments, two Bemo House, with 10,831 sq m of international hotels and a mixed-use mixed office and residential floor space building. Capital Plaza, designed by on lot 1363, is under study at Solidere.

60 solidere annual report 2005 solidere annual report 2005 61

Property Marketing Saifi Village restored buildings The Company has been successful in marketing its residential, commercial and institutional space, new and restored. Alternative schemes were offered until 2004 for residential space: simple lease, lease with option to buy or outright sale. Buyers could also benefit from payment facilities. From 2005, property sales or options to buy Also at year end, the Company had five were discontinued, with only leases lease agreements totaling 33,630 sq m continuing to generate income flows. of floor space in new office buildings: UN House, lot 1 Zokak El Blatt and The 136 new Saifi Village apartments, most of the embassy compound. totaling 30,700 sq m of floor area, had all been marketed by end 2003: 38 In the Maarad and Foch-Allenby (7,408 sq m) leased; seven (1,351 sq m) restored office buildings, 25 lease leased with an option to buy; and 91 agreements for 8,640 sq m, one sale (21,900 sq m) sold, 55 (12,452 sq m) agreement for 2,604 sq m of office after exercising options to buy. space, as well as 22 lease agreements relating to 4,084 sq m of retail space, Concurrently, 39 agreements totaling had been signed. 9,783 sq m of floor space had been signed for restored houses or flats. They represent 4,374 sq m of leases, Property Management Services 2,590 sq m of leases with options to buy and 2,819 sq m of sales, of which Solidere provides complete full-time 1,433 sq m as a result of exercising operation and maintenance for all its options to buy. Lease agreements had properties. These include the new and been signed for a nursery (240 sq m) restored buildings, the Souks and and for 32 shops (3,304 sq m), as part Weygand street car parks. In UN of the Quartier des Arts. House, electro-mechanical and civil works are provided as per an operation In Zokak El Blatt, 75 apartments, agreement with ESCWA. with 13,903 sq m of floor space, had been the subject of agreements. They Extending its services to other property represent 11,051 sq m of leases and owners, Solidere signed agreements 2,853 sq m of sales, of which 979 sq m for the marketing of several third-party as a result of exercising options to buy. properties, prior to undertaking their management and maintenance. In Mina El Hosn, nine agreements for 3,432 sq m of residential floor space The Company is currently offering had been signed: 372 sq m of leases, such buildings the following services: Future Prospects 1,562 sq m of leases with options to technical maintenance, cleaning, buy and 1,497 sq m of sales, of which safety, security and the maintenance Solidere is firmly relying on growth 408 sq m as a result of exercising of landscaped areas; marketing, lease in its rental income as it steps up the options to buy. management, including drawing up delivery of new and restored buildings. budgets, arranging insurance, collecting rents, preparing assets Both sale and rental revenues are inventories, subscribing to utilities, expected to be strongly boosted upon tackling co-ownership issues, and delivery of the Beirut Souks, by far paying real estate and municipal taxes. the most important Solidere real estate project. Rentals are then expected to Solidere expects to derive increasing reach close to US$65 million. revenues from property management services in the coming years.

62 solidere annual report 2005 solidere annual report 2005 63

developers’ 1 23 4 projects

1 Dib and Town Towers residential development lot 1399 Mina El Hosn Michael Graves / Ayman Sanioura 2 The Landmark multiuse development lot 1520 Bachoura Jean Nouvel 3 Beirut Gardens residential building lot 1524 Marfaa Arata Isosaki / Erga Group 4 Merit Corporation headquarters lot 1536 Marfaa Nabil Gholam

5 Rotana Hotel lot 1369 Mina El Hosn Architecture Studio 6 Marina Court residential development lot 1354 Mina El Hosn Kohn Pedersen Fox Associates / Dar Al-Handasah 7 Bemo House office and residential building lot 1363 Mina El Hosn Lo Mauro & Reggiani Associati / Raed Abillamah 8 Al-Mawared Bank headquarters lot 1383 Mina El Hosn Zaha Hadid

5 6 7 8

64 solidere annual report 2005 solidere annual report 2005 65

1 Saifi Khan residential building lot 749 Saifi Elias Issa 2 Royal Hotel serviced apartments lot 1410 Mina Hosn 1 2 34 5 6 Ziad Akl & Partners 3 Mina El Hosn 1466 residential building Fouad Menem 4 The Capital Gardens residential building lot 1327 Mina El Hosn Erga Group 5 Media Fan residential building lot 1347 Mina El Hosn Joe Geitani 6 Mokhtara residential building lot 1468 Marfaa Erga Group 7 Cedar House and Pine House restored development lot 1133 Mina El Hosn Maha Nasrallah

8 Capital Plaza 7 residential building lot 1464 Mina El Hosn Machado and Silvetti 9 Park Palace residential building lot 1339 Mina El Hosn Fouad Menem 10 Bab El Saray hotel development lot 1489 Marfaa Kevin Dash / Hani Mourad 11 Foch 94 residential development lot 1498 Marfaa Nabil Gholam

8 9 10 11

66 solidere annual report 2005 solidere annual report 2005 67

CORPORATE FUNDING AND TREASURY

Treasury Corporate Funding The balance sheet at year end shows In line with the decisions made by the In 2005, the Company resorted to received. In 2004, the fixed rate positions of US$102.3 million for cash, Company’s management in 2004 to more flexible arrangements, mainly contract was unwound and replaced by US$9.6 million for investments in reduce borrowing levels by accelerating temporary overdrafts, at a lower cost a floating rate arrangement at LIBOR securities and US$10 million for bank bank loan repayments, this strategy than term loans. This practice was plus 1.4%, with a cap of 5%. This five- overdrafts. was pursued in 2005, utilizing growing pursued to replace the discounting of year arrangement will mature in 2006. levels of liquidity generated from land sales receivables, as a less costly The Company maintained its previous sales. Previous flexible and low cost financing of temporary cash shortfalls. At end 2005, Solidere had 4.3 million policy of investing its liquid funds in short-term funding arrangements with At end 2005, Solidere had outstanding treasury shares outstanding, of which assets presenting minimum risk, and local banks were maintained in parallel overdrafts of US$10 million with two 2 million shares were sold in 2005 with with top-ranking banking and financial for optimum cashflow management. local lenders. a two-year put back option. The price institutions in the domestic and was US$10.3 per share, with the strike international markets, including some The two locally syndicated corporate At year end, Solidere’s indebtedness to price at maturity, December 14, 2007, structural products that carry high loans, US$100 million each, which were banks amounted to US$129.4 million, of US$11.44 per share. By end March returns with guaranteed capital. For refinanced in 2004 for the second time substantially lower than the 2004 level 2006, the option is deemed expired as efficient cash management, Solidere with shorter term and lower interest of US$234 million. By end March 2006, part of these shares were traded. also arranged with local banks certain rates, were again considered by the the debt fell to US$51 million, all of Another 600,000 shares with a put back revolving current overdraft facilities, Company for prepayment. At end 2005, which in long-term loans. option maturing on February 24, 2006 utilized and refunded according to cash prepayment notices were issued for Consolidated repayment continues on were deemed finally sold as the option needs and availability. the remaining outstanding principals the three loans used to finance land The Company maintains a debt-to- was not exercised by the investor at the of US$40 million and US$30 million reclamation works: equity ratio of less than 20%, both as maturity date. During 2005, Solidere made 73 cash with Fransabank and Arab Bank a self-imposed limitation decided by investments totaling US$236 million. respectively. Both of these loans were A US$22 million locally syndicated loan the Board of Directors and to fulfill a The sales deals signed under the land- These figures include investments fully repaid by end March 2006. concluded in 2000, with Citibank N.A. - covenant of the COFACE guaranteed for-share sales program launched in made in 2005 which matured in the Beirut Branch as lender, arranger and loan. By end 2005 the debt-equity ratio June 2004 generated 3 million shares, same year or will mature in 2006 or Solidere continued repayment on the agent; Banque Libano-Française s.a.l. dropped to 7%, substantially lower than which were delivered to Solidere during later. The Company pursued again this US$107.3 million, ten-year marine and Byblos Bank s.a.l. as co-lenders. the 13.98% ratio by end 2004. the year and were still held at end 2005 year a strategy of short-term cash works loan concluded in 1996 with The loan has a tenor of 6 years with with a view to be retired. investments, with a weighted average BNP Paribas and Banque Indo-Suez, repayments ending in June 2006. It is With a view to buy the floor and hedge holding period of about 44 days. Around with US$7.3 million as COFACE subject to an interest rate of one-year against possible future LIBOR rate 304 points were secured on average guarantee premium. Half-yearly LIBOR plus 4%. The remaining balance increases, Solidere entered towards over the median 2005 three-month payments of US$7.7 million in principal at year end is US$2.3 million. end 2001 into a five-year interest swap LIBOR rate. repayment and interest at 7.39% per agreement with Citibank on a notional annum had started in 2001. The Two parallel facilities concluded with amount of US$100 million. Interest income earned during the year outstanding balance was US$31 million Citibank N.A. - Beirut Branch in 2001 on the aggregate cash investments was at end 2005 and US$22.4 million by end to the amount of US$24.7 million: a The interest rate to be paid in the first equivalent to an annualized interest February 2006. Having reached a debt- US$14.7 million export credit financing year was fixed at 4.39%, compared to a rate of about 5.6%. This includes an equity ratio of 20%, Solidere reduced with guarantee from the US Export - 5% rate to be received from Citibank. In annualized rate of return of 8.2% on the loan collateral from US$37 million Import Bank, repaid in 10 semi-annual the second year, the interest rate was investment in securities. to US$30 million in 2003 and US$18.5 installments, at an interest rate of fixed at 3.58% compared to 4.94% to be million in 2004. The collateral is to be LIBOR plus 0.25%; and a US$10 million reduced progressively to represent at local facility with a matching tenor. all times two principal maturities plus The remaining balance at year end accrued interest. is US$16.4 million.

68 solidere annual report 2005 solidere annual report 2005 69 SOLIDERE Research and Investors’ Relations SHARES AND GDRs The Company pursued its investors’ relations efforts in 2005, participating in several financial, investment and real estate conferences and exhibitions.

Solidere addressed the Arab Economic Forum organized by Al Iktissad wal Aamal, in response to Arab support for Lebanon’s economic recovery, and Exchange Listings & Ticker Symbols as a tribute to PM Hariri’s crucial role Beirut Stock Exchange in promoting investment opportunities SOLIDERE A shares in the country. Solidere emphasized its SOLIDERE B shares sustained success that elicited positive responses from the various investor SOLIDERE SHARES: VOLUME AND PRICE MOVEMENT 2005 Kuwait Stock Exchange sectors due to the improved financial SOLIDERE A situation and fundamentals. SHARE PRICE SOLIDERE B The Company also participated in the A SHARES - DAILY TRADE VOLUME OF SHARES TRADED London Stock Exchange 2005 meeting of the Conference Board GDRs SOLAq.L Middle East Business Leaders Council held at AUB, and addressed the subject of competitive challenges in the Arab Analysis of share prices world, stressing Solidere’s successes Starting with PM Hariri's assassination Trading was very active in 2005. Share in the face of the various challenges on February 14, major tragic events A closed the year at US$17.98, a 118% encountered in the reconstruction and marked the year 2005 in Lebanon. increase over the previous year closing development process. Since it is Mr. Hariri's vision that made price. Share B closed at the same level, possible the creation and the success a 122% rise over the 2004 closing level. In December 2005 Solidere participated of Solidere, the Company was watched The GDRs, which are traded in the in the conference organized by Merrill VOLUME SHARE PRICE US$ with special interest throughout 2005. London Stock Exchange, similarly Lynch in London and New York, and moved up by more than twofold, held several one-on-one meetings with Beside tragedy, however, a series closing the year at US$17, a 127% international fund managers and of positive political developments surge compared to the previous year. analysts, giving an update on latest occurred in the country. These, financial and operational achievements. combined with strong fundamentals Both shares fluctuated between a high and substantial accomplishments that of US$19 and a low of US$6.87. Trading To reach regional and Arab investors, made Solidere a brand name all over was active, with a total of around Solidere participated for the second B SHARES - DAILY TRADE the region, alleviated most investors' 53 million shares changing hands, for consecutive year in Dubai’s Cityscape, concerns and helped the shares recoup a cumulative value of US$614 million. together with a number of Beirut city most of their lost ground shortly after This represents around 32.12% of the center developers, and addressed February 14. Company capital changing hands. conference participants on its latest The average daily volume was about achievements and fundamentals. The success of the share listing in 204,000 shares worth US$2.4 million. Kuwait starting March 8 added a The average price for the year was Financial research resumed in 2005 comforting signal to the market. The consequently about US$11.66, a 58.63% after a period of bearish interest in the shares continued their upward thrust increase compared to the previous year. Company, with research papers and for the rest of the year, reaching their valuations issued by Lebanon’s Bank all time high in December. Audi and Egypt’s leading investment VOLUME bankers, EFG Hermes. SHARE PRICE US$ This positive move continued in 2006 as the shares reached a new high of The Company continued to receive at US$26 before some profit taking pulled its premises numerous visitors with them back to the lower twenties level diverse profiles. early in March.

70 solidere annual report 2005 solidere annual report 2005 71 MANAGEMENT Shareholders SYSTEMS

AND STUDIES Board of Directors

General Management

Chairman - General Manager General Counsel Investor Relations

Corporate Reporting Business Development and Publications General Manager

Sales & Project Planning & Operations Services Finance & Administration Development

Property Contract Urban Development Land Sales Administration Finance

Property Services Tendering, Contracting and Land Development Property Sales and Leasing Management Procurement

Real Estate Development Project Development Property Maintenance Human Resources

Broadband Network Promotional Activities General Services IT-MIS

Management Systems An FTP server was introduced to ease through transfers of built-up area from citywide traffic model was completed file exchange over the internet and to the traditional BCD. Greater emphasis in February 2006. The study is useful maintain bandwidth management and on office use is envisaged, as well as for assessing traffic around projects in network security at peak, using the the creation of a major focus of mixed the BCD and for the design of Martyrs' latest hardware and software solutions. use activity around the East Marina, Square and its car park. incorporating international convention A new system is used to automate and cultural uses. The urban design A public transport planning project is to violation issuing and follow-up. Other study will be completed by mid 2006. be launched in May 2006. Its purpose is systems were rewritten to meet new to develop a long-term strategy for requirements as far as treasury, stock Solidere’s new objectives in sector J public transportation, including parking management and urban development. are to further reduce built-up areas by provision, bus routing to and through limiting building heights and increasing the city center, and tram or potential A new journal printing report was green areas; providing for a concert hall light rail networks for the city. developed to meet Ministry of Finance fronting the Theatre District Square; requirements and fill revenue forms for eliminating construction over tunnels Work is proceeding on the BCD’s 3D both the ministry and the Municipality. near Beirut Trade Center; transferring computer model. In addition to its this and other saved built-up area to core use for town planning, building The GIS data base and information the New Waterfront District. massing and development briefs, the system is now completed. model will be a major communications The urban design study for the Wadi and marketing tool. The model will be Abou Jamil market square area is due continually updated as new projects Urban and Strategic Studies for completion by mid 2006. and Master Plan amendments are As a result of the substantial increase confirmed. in investment into the BCD, a new The traffic impact studies for Saifi, urban planning strategy has been Wadi Abou Jamil and the Souks area initiated for the new waterfront district, were completed in 2005. The transport involving some increase in density modeling study updating the Beirut

72 solidersolideree annual report 2005

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 balance sheet of The Lebanese Company for the Development and Reconstruction of Beirut Central District S.A.L. (a Lebanese joint stock company) known as SOLIDERE and its interest in joint venture, (the Company), as of December 31, 2005 and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of The Lebanese Company for the Development and Reconstruction of Beirut Central District S.A.L. and its interest in joint venture as of December 31, 2005 and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Beirut, Lebanon March 15, 2006 Deloitte & Touche Ernst & Young

solidere annual report 2005 73 CONSOLIDATED BALANCE SHEET CONSOLIDATED STATEMENT OF INCOME

December 31, 2005 2004 December 31, 2005 2004 Notes US$ US$ Notes US$ US$

Assets Revenues from land and real estate sales 235,256,243 174,523,834 Cash and bank balances 4 111,535,548 115,933,035 Revenues from rented properties 20,793,378 18,612,382 Prepayments and other debit balances 5 25,771,367 15,740,225 Cost of land and real estate sales (107,378,218) (92,001,530) Accounts and notes receivable, net 6 272,820,638 210,894,461 Charges on rented properties 19 (6,479,558) (7,092,861) Investments in securities 7 9,579,440 3,650,907 Gain on sale of investment properties 9 297,436 1,695,723 Properties held for development and sale, net 8 1,527,484,124 1,607,296,508 Net revenues from operations 142,489,281 95,737,548 Investment properties, net 9 160,487,428 158,720,275 Fixed assets, net 10 19,477,370 18,748,885 General and administrative expenses 20 (11,493,031) (10,130,652) Total Assets 2,127,155,915 2,130,984,296 Depreciation (1,432,625) (1,130,781) Provision for doubtful receivables and write-offs 5 & 6 (298,693) (739,083) Impairment loss on properties held Liabilities for development and sale 8 (1,685,783) - Bank overdrafts 4 10,020,182 10,596,118 Provision for contingencies and other charges - (1,820,362) Accounts payable and other liabilities 11 73,312,685 82,060,356 Interest income 21 15,614,324 8,344,243 Dividends payable 12 10,266,707 11,430,866 Interest expense (17,490,405) (26,045,835) Deferred revenues and other credit balances 13 55,099,426 61,583,981 Net income for the year before income tax 125,703,068 64,215,078 Deferred credits 14 3,900,000 35,911,930 Loans from banks and financial institutions 15 129,399,059 234,050,237 Accrued income tax 11 (17,174,870) (10,122,897) Total Liabilities 281,998,059 435,633,488 Net income for the year 108,528,198 54,092,181

Shareholders’ Equity Basic earnings per share 22 0.6863 0.3400 Issued capital at par value US$10 per share: 16 100,000,000 class (A) shares 1,000,000,000 1,000,000,000 65,000,000 class (B) shares 650,000,000 650,000,000 1,650,000,000 1,650,000,000 Legal reserve 17 46,717,354 35,864,534 Retained earnings 87,892,299 34,183,162 Cumulative changes in fair value of interest rate swap agreement 11 (861,982) (3,557,815) Cumulative changes in fair value of available-for-sale securities 7 (233,180) - Surplus on sale of treasury shares 14 2,508,180 - Net income for the year less legal reserve 97,675,378 48,681,791 Less: Treasury shares 12 & 18 (38,540,193) (69,820,864) Total Shareholders’ Equity 1,845,157,856 1,695,350,808

Total Liabilities and Shareholders’ Equity 2,127,155,915 2,130,984,296

The accompanying notes form an integral part of these statements The accompanying notes form an integral part of these statements

74 solidere annual report 2005 solidere annual report 2005 75 CONSOLIDATED STATEMENT OF CASH FLOWS

December 31, 2005 2004 Notes US$ US$ ------(233,180) US$ 2,695,833 2,508,180 2,894,259 36,308,017 Cash flows from operating activities (24,205,933) Net income for the year before income tax 125,703,068 64,215,078 Adjustments to reconcile net income to net cash ------provided by operating activities - US$

Depreciation 23 4,387,126 4,016,561 (5,410,390) 48,681,791 1,695,350,808 16,431,956 1,662,570,301 54,092,181 54,092,181 54,092,181 56,986,440 (48,681,791) (10,852,820) (16,431,956) Gain on sale of investment properties 9 (297,436) (1,695,723) Less Legal Provision for doubtful receivables and write offs 6 298,693 739,083 Provision for contingencies and other charges 11(d) 515,000 1,820,362 - - - - - 108,528,198 108,528,198 ------108,528,198 110,990,851 - - - Sale transactions against acquisition of treasury shares 23 6,360,898 18,273,003 - US$ 2,508,180 - Loss from cancellation of sales - 6,000,000 2,508,180 97,675,378 1,845,157,856 Interest income 21 (15,614,324) (8,344,244) Interest expense 23 18,692,698 27,192,664 ------(233,180) Changes in working capital (233,180) US$

Prepayments and other debit balances (5,547,336) 3,700,073 for-sale- of Treasury Accounts and notes receivable 23 (62,864,840) (26,846,226) Properties held for development and sale 23 74,485,876 26,575,960 Accounts payable and other liabilities 23 (27,044,859) 1,546,916 ------US$ Deferred revenues and other credit balances 23 (6,484,555) 48,953,635 (861,982) (233,180) Swap 2,695,833 - 2,695,833 2,894,259 - 2,894,259 - (3,557,815) (6,452,074) Changes in Changes in Interest received 9,552,249 1,363,042 Cumulative Cumulative Fair Value of Fair Value of Surplus Net Income Interest Rate Available- on sale for the Year Income tax paid (10,122,897) - Net cash provided by operating activities 112,019,361 167,510,184 ------540,661 US$ Cash flows from investing activities 5,027,346 - 34,183,162 48,681,791- 17,210,545 - 16,431,956 - 87,892,299 Pledged term deposits with banks 1,761,170 12,538,342 Investments in securities 23 (6,202,863) (3,650,907) Receivable from recuperated properties 23 981,303 327,206 ------Proceeds from sale of fixed assets 28,202 - - US$

Proceeds from sale of investment properties 9 1,098,486 11,084,658 (5,027,346) 36,308,017 - Treasury Retained (69,820,864) (28,404,386) (24,205,933) (17,210,545) Acquisition of fixed assets 23 (1,757,748) (1,021,691) (38,540,193) Acquisition of investment properties 9 (627,759) (3,323,760) Net cash (used in)/provided by investing activities (4,719,209) 15,953,848 ------US$ Legal 5,410,390 - Reserve Shares Earnings Agreement Securities Shares Reserve Total Cash flows from financing activities 10,852,820 - Bank loans (settlement) (104,651,178) (85,517,758) Dividends paid 12 (963,659) (736,022) Deferred credits (13,000,000) ------

Treasury shares 23 4,786,691 (49,006,387) US$ Share Proceeds from sales of treasury shares 14 20,600,000 - Capital 1,650,000,000 35,864,534 1,650,000,000 30,454,144 Interest paid (16,132,387) (20,028,942) 1,650,000,000 46,717,354 Net cash used in financing activities (109,360,533) (155,289,109)

Net change in cash and cash equivalents (2,060,381) 28,174,923 Cash and cash equivalents — Beginning of the year 74,089,924 45,915,001

Cash and cash equivalents — End of the year 23 72,029,543 74,089,924

The accompanying notes form an integral part of these statements Treasury shares trade Treasury shares trade Allocation to legal reserve from 2005 net income Effect of mark up treasury shares Balance at December 31, 2004 Net income for the year Change in fair value of interest rate swap agreement Total result of the year Change in fair value of Allocation of 2004 net income Net income for the year Balance at December 31, 2003 rate swap agreement and land sale exchange (net) available-for-sale securities and land sale exchange (net) Balance at December 31, 2005 The accompanying notes form an integral part of these statements Change in fair value of interest Total result of the year Effect of mark up treasury shares Surplus on sale of treasury shares Allocation to legal reserve from 2004 net income Allocation of 2003 profit CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

76 solidere annual report 2005 solidere annual report 2005 77 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

1. Formation and Objective of the Company Held-to-Maturity Securities Held-to-maturity securities which have fixed or determinable payments which are intended to be held to maturity, are The Lebanese Company for the Development and Reconstruction of Beirut Central District S.A.L. (SOLIDERE) was established as subsequently measured at amortized cost, less provision for impairment in value. This cost is computed as the amount initially a Lebanese joint stock company on May 5, 1994 based on Law No. 117/91, and was registered on May 10, 1994 under Commercial recognized minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any Registration No. 67000. The articles of incorporation of the Company were approved by Decree No. 2537 dated July 22, 1992. difference between the initially recognized amount and the maturity amount. Amortized cost is calculated by taking into account any discount or premium on acquisition. Any gain or loss on such investments is recognized in the statement of income when the The objective of the Company, is to acquire real estate properties, to finance and ensure the execution of all infrastructure works investment is derecognized or impaired. in the Beirut Central District (BCD) area, to prepare and reconstruct the BCD area, to reconstruct or restore the existing buildings, to erect buildings and sell, lease or exploit such buildings and lots and to develop the landfill on the seaside. This operation is Available-for-Sale Securities treated as one segment and the Company operates currently in Beirut only. Available-for-sale securities are those non-derivative financial assets that are designated as available-for-sale or are not classified in any other category. After initial recognition available-for-sale financial assets are measured at fair value with gains The duration of the Company is 25 years, beginning from the date of establishment. An extraordinary general assembly dated June or losses being recognized as a separate component of equity until the investment is derecognized or until the investment is 29, 1998 resolved to amend the duration of the Company to be 75 years beginning from the date of establishment. During 2005, determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the statement of the Council of Ministers approved the extension of the duration of the Company for 10 years. income.

The Company’s shares are listed on the Beirut stock exchange and Global Depository Shares (GDS) are listed on the London stock The fair value of investments that are actively traded in organized financial markets is determined by reference to quoted market exchange. Furthermore, the Company’s shares were listed on the Kuwait stock exchange during the year 2005. 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 valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of another instrument, which is substantially the same, discounted cash flow analysis and option pricing 2. Summary of Significant Accounting Policies models. The financial statements have been prepared in accordance with International Financial Reporting Standards. E. Offsetting These financial statements relate to Solidere and its interest of 50% of the results and net equity of the joint venture, Beirut Financial assets and financial liabilities are only offset and the net amount is reported in the balance sheet when there is a legally Waterfront Development S.A.L. enforceable right to set-off the recognized amounts and the Company intends to either settle on a net basis, or to realize the asset and the liability simultaneously. The financial statements are prepared under the historical cost convention as modified for the measurement at fair value of financial assets and derivatives, as applicable. F. Properties Held for Development and Sale Properties held for development and sale are stated at the lower of cost and estimated net realizable value. Costs include The significant accounting policies are set here below: appraisal values of real estate plots constituting the contributions in kind to capital (A shares), in addition to capitalized costs. A. Basis of Presentation Capitalized costs comprise the following: In view of the long term nature and particulars of the Company’s operations, the financial statements are presented on the basis that the operations have realization and liquidation periods spread over the duration of the Company and which are subject to . Project direct costs and overheads related to the properties development, construction and project management as a whole, market conditions and other factors commonly associated with development projects; as such, the balance sheet is shown as as well as acquisition, zoning, and eviction costs. “unclassified” without distinction between current and long-term components. . Indirect costs, such as overheads, which were partially allocated to properties held for development and sale.

B. Foreign Currencies G. Investment Properties The functional and presentation currency is U.S. Dollars, in accordance with the applicable law, which reflects the economic Investment properties which represent rented and vacant available for rent properties are stated at cost less accumulated substance of the underlying events and circumstances of the Company. Transactions denominated in other currencies are depreciation and any impairment in value. translated into U.S. Dollars at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities stated in currencies other than the U.S. Dollar are translated at the rates of exchange prevailing at the end of the period. The resulting Depreciation is computed using the straight-line method over the estimated useful lives of the properties, excluding the cost of exchange gain or loss which is not material is reflected in the statement of income. land, based on the following annual rates:

C. Accounts and Notes Receivable Buildings 2% Accounts and notes receivable which are originated by the Company are stated at amortized cost less any amount written off and Furniture, fixtures, equipment and other assets 9%-15% provisions for impairment. An assessment is made at each balance sheet date to determine whether there is objective evidence Marina 2% that accounts or notes receivable may be impaired. If such evidence exists, the estimated recoverable amount of that asset is determined and any impairment loss, based on the net present value of future anticipated cash flows discounted at original The carrying values of investment properties are reviewed for impairment when events or changes in circumstances indicate that effective interest rates, is included in the statement of income. The carrying amount of the asset is adjusted through the use of the carrying value may not be recoverable. If any such indication exists and the carrying value exceeds the estimated recoverable an allowance account. amount, the investment properties are written down to their recoverable amount.

D. Investments in Securities H. Interest in a joint venture All investments in securities are initially recognized at cost, being the fair value of the consideration given including directly The Company has an interest in a joint venture. A joint venture is a contractual arrangement whereby two or more parties attributable transaction costs. undertake an economic activity that is subject to joint control.

78 solidere annual report 2005 solidere annual report 2005 79 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

When the Company contributes or sells assets to the joint venture, any portion of gain or loss from the transaction is recognized estimated cost of the land development project over total available BUA after deduction of the BUA relating to recuperated based on the substance of the transaction. When the Company sells assets to the joint venture, the Company does not recognize properties and those relating to the religious and public administrations. its share of the profits from the transaction until the joint venture resells the assets to an independent party. M. Financial Liabilities and Equity Instruments The joint venture is proportionately consolidated until the date on which the Company ceases to have joint control over the joint venture. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Treasury shares sold where the buyer has the option to put back to the Company are treated as deferred credits. The I. Fixed Assets difference between the original sales proceeds and option strike price is treated as interest which is accrued using the effective Fixed assets are stated at cost net of accumulated depreciation and any impairment in value. Depreciation is computed using the interest rate method. straight-line method over the estimated useful lives of the assets based on the following annual rates: N. Borrowing Costs Buildings 2% Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that Furniture and fixtures 9% necessarily take a substantial period of time to be ready for their intended use, are added to the cost of those assets, until such Freehold improvements 9% time that the assets are substantially ready for their intended use. Plant 10% Machines and equipment 15%-20% All other borrowing costs are reflected in the statement of income in the period in which they are incurred.

The carrying values of fixed assets are reviewed for impairment when events or changes in circumstances indicate that the O. Derivative Financial Instruments carrying value may not be recoverable. If any such indication exists and the carrying value exceeds the estimated recoverable Derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and amount, the fixed assets are written down to their recoverable amount. are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. J. Treasury Shares Own equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or loss is recognized in profit Fair values are generally obtained by reference to quoted market prices, discounted cash flow models and pricing models as or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. appropriate.

Treasury shares are recorded and carried at their reacquisition cost. Cash flow hedges are a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect profit or loss. The effective portion of the Treasury shares previously marked down due to sharp decrease in market price are marked up through retained earnings up to gain or loss on the hedging instrument is recognized directly in equity, while the ineffective portion is recognized in profit or loss. the average cost of acquisition. Gains on sale of treasury shares are recorded under a reserve account in shareholders’ equity, losses are charged to retained earnings if the surplus account does not have a balance enough to absorb the loss. Amounts taken to equity are transferred to the income statement when the hedged transaction affects profits or loss, such as when hedged financial income or financial expense is recognized or when a forecast sale or purchase occurs. Where the hedged K. Revenue Recognition item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of Revenue on land and real estate sales transactions is recognized on the basis of the full accrual method as and when the following the non-financial assets or liability. conditions are met: P. Taxation . A sale is consummated and contracts are signed. Current Tax . The buyer’s initial (in principle over 25% of sales price) and continuing investments are adequate to demonstrate a In accordance with law No. 117/91, the Company was exempt from corporate income tax on profit for a period of 10 years from commitment to pay for the property. the date of establishment, ending on May 10, 2004. . The Company’s receivable is not subject to future subordination. . The Company has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a Effective May 10, 2004, income tax is determined and provided for in accordance with the Lebanese tax laws. Income tax expense sale and the Company does not have a substantial continuing involvement with the property. is calculated based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of income because it excludes items of income or expense that are taxable or deductible in future years and it further excludes items that If any of the above conditions is not met, the initial payments received from buyers are recorded under deferred revenues and are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates enacted at the balance sheet other credit balances. Amounts are released to revenue as and when the above conditions are fulfilled. date. Provision for income tax is reflected in the balance sheet net of taxes previously settled in the form of withholding tax.

Financial assets (including treasury shares) received in return for the sale of land and real estate are valued at fair market value. Rental income is subject to the built property tax in accordance with the Lebanese tax law.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Deferred tax Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the Interest income is recognized as interest accrues using the effective interest method accrued on a time basis, by reference to the tax bases of assets and liabilities and their carrying amounts. principal outstanding and the applicable interest rate. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset L. Cost of Sales is realized or the liability is settled, based on laws that have been enacted at the balance sheet date. Cost of properties sold is determined on the basis of the built up area (BUA) - permitted right to build in square meters - on the sold plots based on the terms of the sales agreements. The cost of one square meter of BUA is arrived at by dividing, total

80 solidere annual report 2005 solidere annual report 2005 81 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

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 that taxable profit will be available against which the deductible temporary December 31, 2005 2004 differences and the carry-forward of unused tax assets and unused tax losses can be utilized. US$ US$ Assets The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no Cash and bank balances 9,282,897 4,214,439 longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Prepayments and other debit balances 17,493 25,397 Properties held for development and sales 6,344,896 975,033 Taxes payable on unrealized revenues are deferred until the revenue is realized. Fixed assets, net 66,700 65,328 15,711,986 5,280,197 Current tax and deferred tax relating to items that are credited or charged directly to equity are recognized directly in equity. Liabilities Value added tax (VAT) Bank overdrafts 2,089 - Revenues, expenses and assets are recognized net of the amount of VAT except: Accounts payable and other liabilities 60,353 5,281,964 62,442 5,281,964 . Where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and . Receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Income and Expenses Period from balance sheet. April 21, 2004 Year Ended (Establishment Date) Q. Provisions December 31, December 31, Provisions are recognized when the Company has a present obligation as a result of a past event whereby it is probable that it will 2005 2004 result in an outflow of economic benefits that can be reasonably estimated. US$ US$

R. Employees’ end-of-service benefits General and administrative expenses (121,658) (73,180) The Company provides end-of-service benefits to its employees. The entitlement to these benefits is based upon the employees’ Depreciation (8,600) (1,422) final salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are Interest income 212,086 62,885 accrued over the period of employment. Net income for the year before income tax 81,828 (11,717)

S. Use of Estimates Accrued income tax (10,517) - In preparing the financial statements in conformity with International Financial Reporting Standards, management is required to Net income/(loss) for the year/period 71,311 (11,717) make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. The most significant estimate relates to the estimated total cost of the BCD project. 4. Cash and Bank Balances Cash and bank balances are composed of the following: 3. Interest in a Joint Venture The Company entered into a joint venture agreement on February 11, 2004, with Stow Waterfont S.A.L. (Holding) to establish Beirut Waterfront Development S.A.L. with a 50% stake in the joint venture’s total capital amounting to US$19,900. The main December 31, 2005 2004 activity of the joint venture is to develop, operate, manage, exploit and sell real estate properties in the Marina area in Beirut US$ US$ Central District. Cash on hand 93,902 95,513 As per the terms of the agreement, on December 31, 2005, the Company sold properties to the joint venture with an aggregate Current accounts 20,446,999 45,917,144 cost of US$10,100,000 from properties held for development and sale, to joint venture for a total consideration of US$31,600,000. Short term deposits 61,508,824 38,673,385 The other venturer will contribute cash of US$31,600,000 to the joint venture. As of December 31, 2005, the amount contributed 82,049,725 84,686,042 by the other venturer amounted to US$21,060,000. Pledged term deposits 29,485,823 31,246,993 111,535,548 115,933,035 The share of the assets, liabilities, income and expenses of the jointly controlled entity at December 31, 2005 and 2004, which are included in the consolidated financial statements, are as follows:

82 solidere annual report 2005 solidere annual report 2005 83 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

Term deposits mature in January 2006 (December 31, 2004: Term deposits mature in January 2005). The average yield on the term 6. Accounts and Notes Receivable, Net deposits as of December 31, 2005 was approximately 4.68% (4.43% for 2004). Accounts and notes receivable are composed of the following: Pledged term deposits include an amount of US$18.5million as of December 31, 2005 (US$18.5million as of December 31, 2004) pledged against the loan provided to the Company and guaranteed by “COFACE” as explained in Note 15. It also includes deposits of US$10.9million (US$12.8million as of December 31, 2004) pledged against a stand-by letter of credit to the extent of about December 31, 2005 2004 US$3.5million (US$3.5million as of December 31, 2004) and a deposit pledged against a local bank loan to the extent of US$ US$ US$7.4million (US$9.2million as of December 31, 2004) as explained under Note 15 and Note 25 (h). Notes receivable 282,568,976 208,680,815 Bank overdrafts in the amount of US$10,018,093 as at December 31, 2005 represent short-term facilities granted by local banks. Accounts receivable 18,745,807 25,555,779 The average interest on these overdrafts as of December 31, 2005 was approximately 6.86%. Receivables from tenants 5,936,288 2,285,503 Interest receivable on discounted notes 883,946 1,395,039 In the cash flow statement, cash and cash equivalents include cash on hand, current accounts, and short term deposits and bank Less: Unearned interest (34,963,059) (26,800,743) overdrafts as explained under Note 23(n). Less: Provision for problematic receivables (351,320) (221,932) 272,820,638 210,894,461

5. Prepayments and Other Debit Balances The Company’s credit risk exposure is spread over 109 counter-parties; 6 customers constitute 50% of the total exposure and Prepayments and other debit balances are composed of the following: 103 customers constitute the remaining 50% as of December 31, 2005 (as of December 31, 2004, 89 counter-parties; 6 customers constitute 48% of the total exposure and 83 customers constitute the remaining 52%).

December 31, 2005 2004 Notes receivable, which resulted mainly from sales (and recuperations in previous years), carry the following maturities: US$ US$

Accrued interest income 6,062,077 6,981,201 December 31, 2005 2004 Due from joint venture shareholder 5,270,000 - US$ US$ Prepaid expenses 517,362 419,148 Advance payments to contractors 7,302,639 1,585,821 Doubtful balances 365,935 349,560 Advances to employees 1,700,331 1,651,234 Overdue 4,247,835 1,512,002 Deferred tax assets 193,264 - 2005 - 64,120,301 Other debit balances 4,564,668 4,941,795 2006 83,025,595 50,937,123 Investment in non-consolidated subsidiaries 161,026 161,026 2007 79,029,806 44,719,734 25,771,367 15,740,225 2008 43,251,153 17,527,924 2009 33,925,664 12,247,719 2010 23,299,352 12,964,670 Due from joint venture shareholder represents 50% of a balance due from the other venturer, since as of December 31, 2005 the 2011 and thereafter 15,423,636 4,301,782 Company has contributed its full share in the Beirut Waterfront Development S.A.L. the joint venture entity, whereas the other 282,568,976 208,680,815 venturer has not yet settled its full contribution.

Advance payments to contractors include an amount of US$6,211,679 relating to a contractor involved in the execution of the The average yield on accounts and notes receivable was 5.87% as of December 31, 2005 (5.17% as of December 31, 2004). “Souk” Project. The provision for problematic receivables has been established to meet probable defaults of certain clients whose notes Other debit balances include an amount of US$2,358,000 representing a claim receivable in connection with an arbitration receivable aggregate to US$365,935 as of December 31, 2005 (US$349,560 as of December 31, 2004 regarding a dispute with one of the Company’s contractors as explained under Note 25 (j).

Investments in non-consolidated subsidiaries are carried at cost as they are not material and consist of 9 inactive subsidiaries (9 inactive subsidiaries in 2004). The principal activity of these subsidiaries, which are incorporated in Lebanon, is to acquire, construct, lease and manage real estate properties in the BCD.

During the year ended December 31, 2005, the Company wrote-off irrecoverable debit balances amounting to US$159,033 (Nil for the year ended December 31, 2004).

84 solidere annual report 2005 solidere annual report 2005 85 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

The movement in the provision for problematic receivables during the year was as follows: ------(5,000) December 31, 2005 2004 Net US$ US$

Balance at the beginning of the year 221,932 4,336,110 - - Additions 200,660 221,932 - - - -

Write-back of provision (61,000) - leverage Write-offs (10,272) (4,336,110) December 31, 2004 Balance at the end of the year 351,320 221,932

During the year ended December 31, 2005, the Company wrote-off accounts and notes receivable amounting to nil (US$517,151 for the year ended December 31, 2004). - 2,000,000 1,000,000 1,000,000 - 1,000,000 1,005,000 US$ US$ US$ US$ 7,722,670 - 4,540,000 5,000,000 2,344,093 2,655,907 1,934,800 - 2,109,400 2,000,000 2,000,000 - 2,725,500 - 2,882,9102,877,900 - - 1,961,860 - 19,032,370 10,000,000 6,349,093 3,650,907 7. Investments in Securities 11,309,700 10,000,000 6,349,093 3,650,907 During 2004 and 2005, the Company purchased several investments in capital guaranteed structured products, issued by foreign financial institutions, whereby a considerable part of the price was financed by a loan from the issuing foreign bank. The financial + 0.5% + 0.5% + 0.5% + 0.5% + 0.5% + 0.75% + 0.75% + 0.75% + 0.75% 2 2 2 2 2

assets and the financial liabilities resulting from these transactions are offset and the net amount is reported in the balance sheet 2 2 2 2 since the Company has a legally enforceable right of set-off and the Company intends to settle them on a net basis at maturity. 1YL Coupon rates depend on certain conditions being satisfied which vary depending on the instrument, but mainly is related to the Libor rate. This portfolio has yielded income of 9% in 2005. 6 % 6.1 3ML 5.66.2 3ML 3ML 7.5 6ML 6.65 3ML 4.80 3ML 6.13 3ML 6-13 3ML

The details of the above investments are as follows: Coupon Interest on Fair Market Book with right Conditional - - Net (274,330) 9,579,440 December 31, 2005 - - Leverage US$ US$ US$ 7,997,000 2,140,955 5,856,045 19,990,500 10,136,730 9,853,770 11,993,500 7,995,775 3,997,725 Date Value of set-off Value Rate Leverage Value Value of set-off Value Maturity Book with right 8/01/2014 - 8/12/2014 1,998,000 878,815 1,119,185 16/03/2015 2,995,500 2,935,500 60,000 23/02/2014 5,000,000 2,181,460 2,818,540 12/11/2014 - 29/03/2012 3,000,00029/03/2012 2,997,000 793,28529/03/2012 2,206,715 807,600 2,000,000 2,189,400 540,070 1,459,930 26/03/2008 2,000,000 2,000,000 - 3 1 1 3 3 at net book value Less Change in fair value of available-for -sale securities Investments in securities Total investments in securities 10-year USD “Momentum” Callable Range Accrual Note Available-for-sale 7-year Non-Call 3 month Knock-out Callable Range Note 7-year USD Callable Range Accrual Puttable Note 7-year Non-Call 3 month Knock-out Callable Range Note Held-to-Maturity USD Spread Callable Range Accrual Note 10-year USD Callable Range Accrual Note 10-year USD Libor Callable Range Accrual Note 10-year USD Callable Range Accrual Note 4 year CPU MULTIPLUS on Asian Indices 1. The investment was called by the issuer during year ended December 31, 2005. 2. L = Libor 3. The Company has a put option to sell back the notes issuer at 100% provided certain conditions are met.

86 solidere annual report 2005 solidere annual report 2005 87 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

The change in fair market value of the available-for-sale securities is recorded under “Cumulative changes in fair value of a.4 Eviction costs represent the costs of relocating previous settlers out of the BCD area which were mainly paid through the available-for-sale securities” in shareholders’ equity net of deferred tax in the amount of US$41,150 as of December 31, 2005. Central Fund for the Displaced (a public authority). This caption is stated net of US$21.8million as of December 31, 2005 (US$21.8million as of December 31, 2004) representing a 10% charge on recuperated properties appraised values collected from original owners other than religious and governmental recuperated properties. 8. Properties Held for Development and Sale, Net a.5 Capitalized costs represent allocation of direct overheads. Costs capitalized during the year ended December 31, 2005 Properties held for development and sale consist of the following captions: amounted to US$3.8million (US$3.9million for the year ended December 31, 2004).

b. Real estate development projects include the following: December 31, 2005 2004 US$ US$

December 31, 2005 2004 Land and land development works, net (a) 1,361,823,140 1,458,555,993 US$ US$ Real estate development projects, net (b) 165,660,984 148,740,515 1,527,484,124 1,607,296,508 Construction and rehabilitation of buildings 325,733,826 309,841,780 Cost of land 76,938,653 71,888,653 Cumulative costs 402,672,479 381,730,433 a. Land and land development works include the following cost items: Less: Cost transferred to investment properties, net (174,705,279) (170,722,946) Cost transferred to fixed assets (18,141,961) (18,102,717) Cost of real estate sold (44,164,255) (44,164,255) December 31, 2005 2004 165,660,984 148,740,515 US$ US$

Acquired properties (a.1) 959,007,209 957,290,502 The net cost of real estate development projects includes cost incurred in connection with the construction of a shopping mall in the Pre-acquisition costs (a.2) 9,412,802 9,412,802 amount of US$70.07million and offices and residential complexes as of December 31, 2005 (US$64.6million as of December 31, 2004). Infrastructure costs (a.3) 620,490,858 609,496,262 Eviction costs (a.4) 259,962,995 259,962,995 An impairment loss of US$1,685,783 was recognized in the statement of income in the year 2005 that represents non-recoverable Capitalized costs (a.5) 58,287,311 55,371,924 charges included in the cost of some of these properties. Cumulative costs 1,907,161,175 1,891,534,485 Less: Cost of land sold, net (462,046,261) (356,800,726) Less: Cost of land transferred to 9. Investment Properties, Net real estate development projects (76,938,653) (71,888,653) Investment properties are composed of the following: Less: Cost of infrastructure transferred to real estate development projects (6,353,121) (4,289,113) Transfer from 1,361,823,140 1,458,555,993 Properties Balance as at Held for Balance as at December 31 Development Transfers to Transfer from Disposals December 31 a.1 Acquired properties consist mainly of the aggregate initial appraised value attributed to the plots included in the BCD area of 2004 Additions and Sale Fixed Assets Fixed Assets and Sales 2005 US$1,170,001,290 net of the recuperated properties. The aggregate appraised value is determined in accordance with Decree No. US$ US$ US$ US$ US$ US$ US$ 2236 dated 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 purchased and exchanged properties as well. Cost Land 43,211,293 - - (705,237) - (240,082) 42,265,974 Law No. 117/91 stated the requirements for property recuperation and exemption, in this respect properties appraised at Buildings 120,582,069 359,674 3,982,333 (1,349,571) - (618,552) 122,955,953 US$255million were recuperated by original owners and properties appraised at US$133million were not claimed for recuperation. Marina 4,838,122 - 2,064,008 - 31,970 - 6,934,100 Other assets 3,446,730 268,085 - (457,934) 1,052,061 - 4,308,942 a.2 Pre-acquisition costs include technical and master plan studies incurred during the set up period of the Company. 172,078,214 627,759 6,046,341 (2,512,742) 1,084,031 (858,634) 176,464,969 a.3 Infrastructure costs as at December 31, 2005 include an amount of US$279million (US$279million as of December 31, 2004) relating to the sea front defense and marina works, an amount of US$143million (US$141million as of December 31, 2004) relating Accumulated Depreciation to infrastructure works executed in the traditional BCD area, and an amount of US$74million (US$72million as of December 31, Buildings 11,225,640 2,566,224 - (207,406) - (57,584) 13,526,874 2004) relating to the cost of land reclamation and treatment. It also includes the cost of an electricity power station in the amount Marina 169,892 65,536 - - - - 235,428 of US$42million (US$42million as of December 31, 2004), and other costs which relate mainly to demolition and archeology. This Other assets 1,962,407 322,686 - (81,188) 11,334 - 2,215,239 caption includes capitalized borrowing costs totaling US$39.2million up to December 31, 2005 (US$37.95million up to December 13,357,939 2,954,446 - (288,594) 11,334 (57,584) 15,977,541 31, 2004). During the year ended December 31, 2005, borrowing costs of US$1.25million were capitalized (US$1.1million for the Net Book Value 158,720,275 160,487,428 year ended December 31, 2004).

88 solidere annual report 2005 solidere annual report 2005 89 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

Investment properties include rented and available for rent properties. These represent mainly a property leased out to the 11. Accounts Payable and Other Liabilities Ministry of Foreign Affairs and Emigrants, for use by an international agency. It also includes residential complexes, an embassy complex, and other restored buildings. Accounts payable and other liabilities consist of the following:

During the year ended December 31, 2005, the Company sold property having an aggregate net book value of US$801,050 for total December 31, 2005 2004 proceeds of US$1,098,486 which resulted in a gain of US$297,436 recorded in the statement of income (net book value of US$ US$ US$9.4million, total proceeds of US$11.1million and gain of US$1.7million for the year ended December 31, 2004). Accounts payable (a) 34,266,982 38,909,622 The fair value of the investment properties is estimated by management at around US$248million based on current market prices Accrued charges and other credit balances (b) 11,066,954 10,621,585 (US$245million as of December 31, 2004). There has been no valuation of these properties by an independent valuer. Taxes payable (c) 20,941,184 13,259,117 Due to joint venture shareholder (d) - 5,265,000 Provision for end-of-service indemnity and other charges (e) 3,658,217 3,300,801 10. Fixed Assets, Net Liability under interest rate swap agreement (f) 996,790 3,540,509 Fixed assets are composed of the following: Accrued interest payable 2,382,558 7,163,722 73,312,685 82,060,356

Transfer from Properties a. Accounts payable as of December 31, 2005 and 2004 include balances in the aggregate amount of US$13.8million due to the Balance as at Held for Balance as at Lebanese Government in consideration of the exchange of assets agreement explained in Note 25(f). December 31 Development Transfers to Transfer from Disposals December 31 2004 Additions and Sale Fixed Assets Fixed Assets and Sales 2005 b. Accrued charges and other credit balances as of December 31, 2005 and 2004 include an amount of US$8.5million representing US$ US$ US$ US$ US$ US$ US$ proceeds received in respect of a performance bond executed against a contractor for improper performance of contracted works under arbitration. The Company recognized a liability against the cash proceeds since the outcome of the subject arbitration is Costs not yet certain Note 25(j). Land 4,374,955 - - 705,237 - - 5,080,192 Buildings 9,358,592 71,139 10,552 1,796,737 - - 11,237,020 c. Taxes payable consist of the following: Furniture and fixtures 2,207,664 88,877 4,920 2,150 (3,680) - 2,299,931 Freehold improvements 2,933,720 128,790 23,772 2,480 (125,936) - 2,962,826 December 31, 2005 2004 Plant 1,853,266 - - - - - 1,853,266 US$ US$ Machines and equipment 10,395,459 1,468,942 - 6,138 (954,415) (93,537) 10,822,587 31,123,656 1,757,748 39,244 2,512,742 (1,084,031) (93,537) 34,255,822 Accrued income tax 17,172,643 10,122,897 VAT Payable 872,818 495,689 Accumulated Depreciation Taxes withheld 414,641 590,531 Buildings 1,149,705 212,799 - 207,406 - - 1,569,910 Tax on gain from sale of treasury shares 442,620 - Furniture and fixtures 1,564,536 186,684 - - (11,334) - 1,739,886 Property tax payable 2,038,462 2,050,000 Freehold improvements 1,537,041 255,508 - 948 - - 1,793,497 20,941,184 13,259,117 Plant 926,404 185,327 - - - - 1,111,731 Machines and equipment 7,197,085 1,351,438 - 80,240 - (65,335) 8,563,428 12,374,771 2,191,756 - 288,594 (11,334) (65,335) 14,778,452 The accrued income tax was estimated as follows: Net Book Value 18,748,885 19,477,370

Period from December 31, May 10, 2004 to The depreciation for the year ended December 31, 2005 was split between an allocation to properties held for development and 2005 December 2004 sale and a charge to the statement of income of US$759,076 and US$1,424,081, respectively (US$759,075 and US$1,129,360 US$ US$ respectively, for the year ended December 31, 2004). Income before tax 125,703,068 64,215,078 Less losses of subsidiary (11,717) 11,717 Non deductible losses pertaining to the tax exemption period - 4,612,200 Non deductible provisions and charges 3,121,600 4,651,085 Rent revenue from built up property (Net) (14,313,819) (6,004,099) Taxable income 114,499,132 67,485,981 Applicable tax rate 15% 15% Accrued income tax 17,174,870 10,122,897

90 solidere annual report 2005 solidere annual report 2005 91 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

The applicable tax rate is 15% according to the Lebanese tax laws. The tax returns for the years 2004 and 2005 are still subject to 12. Dividends Payable examination and final tax assessment by the tax authorities. Any additional tax liability is subject to the results of this review. The breakdown of dividends payable is summarized as follows: Property tax payable in the amount of US$2.04million as at December 31, 2005 is included under the caption “Cost of Rented Properties” in the statement of income (US$2.05million as at December 31, 2004). December 31 2005 2004 d. As of December 31, 2004 due to joint venture shareholder, represents 50% of the balance due to the other venturer, since at General Assembly Dividend that date the Company did not contribute its share in the joint venture entity, as explained under Note 3. Date per Share Declared Paid Payable Payable US$ US$ US$ US$ US$ e. The movement of provision for end-of-service indemnity and other charges is as follows: June 29, 1996 0.20 30,918,413 28,782,737 2,135,676 2,376,429 June 30, 1997 0.25 40,367,172 36,764,445 3,602,727 3,913,846 December 31, 2005 2004 June 29, 1998 0.25 39,351,753 34,860,051 4,491,702 4,894,494 US$ US$ June 23, 2003 stock dividends 36,602 246,097 Balance at the beginning of the year 3,300,801 1,509,263 10,266,707 11,430,866 Additions 515,000 1,820,362 Settlements and others (157,584) (28,824) Balance at the end of the year 3,658,217 3,300,801 The outstanding balance of unpaid dividends relates mostly to unclaimed dividends and dividends pertaining to undelivered class (A) shares.

f. The Company has entered into an interest rate swap transaction to provide a cash flow hedge against upward volatility of the cost of funds related to the medium term borrowing referred to under Note 15. 13. Deferred Revenues and Other Credit Balances Deferred revenues and other credit balances consist of the following: On February 25, 2005, the Company restructured the long term loan of US$100million and thereby restructured the 3 year interest rate swap agreement on a notional amount of US$100million by replacing it by two new contracts in line with the restructuring of the loan. December 31, 2005 2004 US$ US$ The first contract extends for a period of two years effective December 20, 2004 for a notional amount of US$60million for the first year extending from December 20, 2004 till December 20, 2005; decreasing to US$40million for the year extending from Cash down payments and commitments on sale contracts 41,654,460 48,194,170 December 20, 2005 till December 20, 2006. During the two year period of the agreement, the interest to be received is determined Deferred rental revenue and related deposits 13,444,966 13,389,811 at 12-month Libor and the interest to be paid is set at 6.5%. 55,099,426 61,583,981

The second contract extends for a period of 18 months from April 21, 2005 till October 21, 2006 for a notional amount of US$40million for the first 3 quarters extending from April 21, 2005 till July 21, 2005. The notional amount decreases to Cash down payments and commitments on sale contracts include balances aggregate to approximately US$33.4million that relate US$30million for the fourth quarter and then to US$20million and US$10million for the fifth and sixth quarters, respectively. to 10 sale contracts with an aggregate potential gross sales value of US$543.5million as of December 31, 2005 (US$42million During the term of the agreement interest to be received is determined at 3-month Libor set at the beginning of each quarter and relating to 19 sale contracts with an aggregate potential gross sale value of US$84million as of December 31, 2004). This caption the interest to be paid is set at a rate of 6.3%. The Company will settle/receive the net interest amount on December 20, 2005 for also includes down payments totaling US$1.66million (US$1.8million as of December 31, 2004) on sale of units in the shopping the first two quarters and on December 20, 2006 for the remaining four quarters. mall project corresponding to a potential gross sales value of US$33million.

The Company settled US$2,623,267 included under “Interest expenses” in the statement of income for the year ended Deferred rental revenue and related deposits represent down payments on lease and rental agreements and reservation deposits December 31, 2005 (US$2,905,125 for the year ended December 31, 2004). for the rental of real estate properties.

As of December 31, 2005, the valuation of this derivative instrument as provided by the arranger bank on the basis of unwind or cancellation value of the transaction amounted to negative US$1,014,096 (negative US$3,557,815 as of December 31, 2004). The 14. Deferred Credits change in fair value is recorded under shareholders equity under “Cumulative changes in fair value of interest rate swap Deferred credits represent put options on treasury shares which are classified as interest bearing liabilities. agreement” net of deferred tax in the amount of US$152,114 as of December 31, 2005.

a. The Company sold on February 24, 2003, 600,000 shares (360,000 “A” shares and 240,000 “B” shares) from treasury shares with a sale back option for a total consideration of US$3.9million at US$6.50 per share. The sale back option can be exercised at a strike price of US$7.61 per share after 3 years subject to certain conditions specified in the sale contract. The strike price represents the selling price plus accumulated interest. Until such time as the Company’s commitment to buy back these shares lapses, the proceeds will be reflected as deferred credit.

92 solidere annual report 2005 solidere annual report 2005 93 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

Subsequent to the balance sheet date the buyer did not exercise the option to sell back these shares to the Company and as a Maturities of the loans from banks and financial institutions are as follows: result deferred credits were offset against treasury shares.

b. The Company sold on April 3, 2002 to a local financial institution, 1,004,004 shares (607,212 “A” shares and 396,792 “B” December 31, 2005 2004 shares) from treasury shares with a sale back option for a total consideration of US$6,011,930 at US$6 per share, which includes US$ US$ an option premium of $0.987 per share. The sale back option can be exercised at a strike price of US$7.10 per share for a period not exceeding 3 years subject to certain conditions specified in the sale contracts. The strike price represents the selling price 2005 - 44,651,179 plus accumulated interest. Until such time as the Company’s commitment to buy back these shares lapses, the proceeds will be 2006 82,336,358 142,336,357 reflected as deferred credits. 2007 40,021,537 40,021,537 2008 4,694,109 4,694,109 The buyer did not exercise the option to sell back the shares during the specified period ending March 2005 and therefore the 2009 2,347,055 2,347,055 buyer retained the above mentioned shares. As a result, the Company derecognized these treasury shares from its books against 129,399,059 234,050,237 deferred credits in the amount of US$6,011,930, previously received, and accrued interest payable in the amount of US$1,116,498.

c. The Company sold on June 27, 2003 to a local financial institution, 4,000,000 shares (2,600,000 “A” shares and 1,400,000 “B” Syndicated Local Bank Loans shares) from treasury shares with a sale back option for a total consideration of US$26million at US$6.50 per share. The sale back The Company entered on January 16, 2003 into a three year loan agreement with a syndicate of local banks for an amount of option can be exercised at a strike price of US$7.63 per share in the period starting on January 1, 2005 and ending on December US$100million payable in April 2006. This loan is subject to interest at the rate of 3 month Libor + 4.25% (with a floor of 7.5%) 14, 2005, to be paid after one year from this date, subject to certain conditions specified in the sale contract. The strike price payable quarterly. represents the selling price plus accumulated interest. In parallel, the Company also had a buy back option at the same strike price. Until such time as the Company’s commitment to buy back these shares lapses, the proceeds will be reflected as deferred credits. The Company entered on December 10, 2004 into a 3 year loan agreement with a syndicate of banks for an amount of US$60million payable in 3 yearly installments of US$20million on December 20, of each year. This loan is subject to an interest rate of 12 months On June 14, 2005, the Company exercised the option to buy back these shares. Contrary to what was originally agreed upon, the Libor + 2.75% payable yearly. purchase price of 2,000,000 shares out of the aggregate shares was set at US$7.52 instead of US$7.63 per share, settled during the first half of the year 2005. The Company subsequently sold these shares for a total consideration of US$18,000,000 during the According to the covenants of the above loan agreements, the Company was required to maintain a debt to equity ratio below 25%, same period. The ownership of the remaining 2,000,000 shares was transferred to the Company on December 14, 2005 and the and maintain ownership of not less than 1million square meters of built-up-area free from any security to third party and maintain purchase price of US$15,260,000 was paid on the same date with offset to deferred credits in the amount of US$13,000,000 and net tangible assets of a minimum of US$1billion. accounts payable and other liabilities in the amount of US$2,260,000 representing interest accrued up to December 14, 2005. Local Bank Loan d. On June 3, 2005, the Company signed a contract with a third party effective December 15, 2005 to sell with a sale back option, The Company entered on December 20, 2004 into an 18 months loan agreement with a local bank for an amount of US$60million 2,000,000 shares from its portfolio for a total consideration of US$20,600,000 at US$10.3 per share. The sale back option can be payable in 6 quarterly installments in the amount of US$10million each, starting July 21, 2005. This loan is subject to an annual exercised at a strike price of US$11.44 per share during the period ending December 14, 2007. The buyer did not abide by the sale interest rate of 3 month Libor + 2.5%, payable quarterly upon the maturity of the installments. The total amount of this loan was back option related terms and conditions of the contract and as a result the Company derecognized both the liability and the withdrawn on April 21, 2005. This loan was fully settled in the subsequent period on February 28, 2006. treasury shares from its balance sheet. The gain on the sale of the treasury shares in the amount of US$2,950,800 net of tax in the amount of US$442,620 was reflected under reserves from gain on treasury shares in the shareholders’ equity. “COFACE” Guaranteed Loan For the purpose of partially financing the sea front defense works, the Company signed in 1996 a 10 year “COFACE” guaranteed Interest in the amount of US$630,820 has been accrued on the deferred credits up to December 31, 2005 (US$4,195,507 up to loan agreement for an amount of US$107.3million of which US$7.3million represents a guarantee premium. This loan, which was December 31, 2004). fully drawn, is scheduled for settlement starting February 2001 through 14 semi annual payments in the amount of US$7.66million each. The Loan is subject to an interest rate of 7.39% per annum payable semi annually starting August 1998. The Company withdrew the total amount of the loan, and total settlements up to December 31, 2005 amounted to US$76.66million 15. Loans from Banks and Financial Institutions (US$61.34million up to December 31, 2004). Under the terms of the loan contract, the Company is required to maintain a pledged deposit of US$23.6million with the lending bank starting from the date of the first withdrawal. The pledged deposit was This caption consists of the following: subsequently reduced in 2004 to US$18.5million. Moreover, the Company is required to maintain a debt to equity ratio of no more than 20% and to maintain a minimum balance of US$53.6million of cash and cash equivalents (as defined by the lending bank). December 31, 2005 2004 US$ US$ For the purpose of partially financing the waste treatment project with a total cost in the amount of approximately US$53million, the following loan agreements were signed by the Company: Syndicated local bank loans 40,000,000 160,000,000 Local bank loan 40,000,000 - Syndicated Loan “COFACE” guaranteed loan 30,654,857 45,982,285 On March 21, 2000 the Company signed a 6 year loan agreement with a syndicate of banks for an amount of US$22million. The Syndicated loan 2,314,821 6,944,462 period in which this loan could be withdrawn ended on December 29, 2002. Total withdrawals up to December 31, 2005 and 2004 Local bank loan 7,000,000 9,000,000 amounted to US$20.26million. This loan will be repaid by one installment in the amount of US$1.74million and eight equal semi- Loan guaranteed by Export - Import Bank of the United States 9,429,381 12,123,490 annual installments. Eight installments in the total amount of US$17.95million were made as of December 31, 2005 (six 129,399,059 234,050,237 installments in the total amount of US$13.31million as of December 31, 2004) and thus the balance of the loan decreased to US$2.31million as at December 31, 2005. This loan is subject to an interest rate of 3 month Libor plus 4%. According to the

94 solidere annual report 2005 solidere annual report 2005 95

Notes to the Consolidated Financial Statements for the year ended December 31, 2005

covenants of this loan agreement, the Company is required to maintain a debt to equity ratio not greater than 25%, maintain The treasury shares outstanding as of December 31, 2005 and December 31, 2004 were stated at the weighted average cost. tangible assets of a minimum of US$1billion and maintain accounts and notes receivable of not less than US$75million free from any liens, assignments or similar charges. In addition to that, the Company should maintain the number of treasury shares below According to its articles of incorporation, the Company may purchase up to 10% of its share capital without the existence of free 11,610,000 shares. reserves, provided that it shall resell these shares within a period not exceeding eighteen months.

Local Bank Loan This caption includes 600,000 shares as of December 31, 2005 that are subject to a sale back option (5,604,000 shares as of In July 2001, a complementary loan agreement in the amount of US$10million was signed with a resident foreign bank. The total December 31, 2004). This caption includes also 3,685,000 shares as of December 31, 2005 that are acquired from sale of amount of the loan was withdrawn up to December 31, 2004. This loan shall be paid in 10 equal semi-annual installments starting properties (3,012,000 shares as of December 31, 2004). October 25, 2004 and ending April 27, 2009. An installment of US$2million was made during 2005 in addition to an installment of US$1million during 2004 and thus the balance of the loan decreased to US$7million as of December 31, 2005. The loan is subject to an interest rate of 3 month Libor plus 1%. The Company shall maintain a pledged fund of not less than 102% of all outstanding 19. Charges on Rented Properties principal and interest amounts, and should maintain a debt to equity ratio not exceeding 25% and total tangible net assets should Charges on rented properties includes the following: not be less than US$1billion free from any liens including permitted liens.

Loan Guaranteed by Export - Import Bank of the United States December 31, 2005 2004 In July 2001, the Company signed an “Export Financing Credit Agreement” in the amount of US$14.71million to support the US$ US$ purchase of engineering and construction services and equipment from the United States for the waste treatment project. This loan is guaranteed by the Export-Import Bank of the United States and financed by a resident foreign bank. An amount of Depreciation expense 2,954,447 2,885,780 US$13.47million had been drawn up to December 31, 2004. Subsequently, up to December 31, 2005 no amounts were drawn. This Real estate taxes 2,038,462 2,451,150 loan shall be paid in 10 approximately equal successive semi-annual installments, the first of which shall be due and payable on Maintenance and other related expenses, net 1,486,649 1,755,931 October 25, 2004. An installment of US$2.7million was made during 2005 in addition to an installment of US$1.35million during 6,479,558 7,092,861 2004 and thus the balance of the loan decreased to US$9.43million as at December 31, 2005. 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 credit in the amount of US$3.57million was submitted to the Export - Import Bank. Moreover, the Company is required to maintain a minimum balance of cash and cash equivalents of US$30million and the number of treasury shares should not exceed 10,131,829 shares or 20. General and Administrative Expenses US$76million in aggregate. General and administrative expenses is composed of the following:

16. Capital December 31, 2005 2004 Capital consists of 165,000,000 shares of US$10 par value, authorized and fully paid and divided in accordance with Law 117/91 US$ US$ into the following:

Salaries, benefits and related charges 7,201,368 6,551,022 Class “A”, amounting to 100,000,000 shares represented contribution in kind of properties in the BCD, based on the . Board of directors’ remuneration 144,000 144,000 resolutions of the High Appraisal Committee. All Class A shares were deemed to have been issued and outstanding since the Administrative expenses 4,147,663 3,435,630 establishment of the Company. 11,493,031 10,130,652 . Class “B”, amounting to 65,000,000 shares represented capital subscription in cash and are all issued and fully paid at the establishment of the Company.

In addition to the above, salaries, benefits and related charges and administrative expenses amounting to US$3.8million were Class “A” and Class “B” shares have the same rights and obligations. reallocated to construction cost during the year ended December 31, 2005 (US$3.9million during the year ended December 31, 2004).

As of December 31, 2005, the Company had 10,191,750 “A” shares listed on the London Stock Exchange in the form of Global Depository Shares (GDS) (9,091,750 “A” shares as of December 31, 2004). 21. Interest Income Interest income is comprised of the following: 17. Legal Reserve In conformity with the Company’s articles of incorporation and the Lebanese Code of Commerce, 10 % of annual net income is December 31, 2005 2004 required to be transferred to legal reserve until this reserve equals one third of capital. This reserve is not available for dividend US$ US$ distribution.

Interest income from notes and accounts receivable 12,570,326 6,347,418 18. Treasury Shares Interest income from banks 3,043,998 1,996,825 15,614,324 8,344,243 This caption includes 4,342,000 shares class (A) and (B) as of December 31, 2005 (8,685,000 shares as of December 31, 2004), of which 600,000 shares are subject to an option (5,604,000 shares subject to an option as of December 31, 2004).

96 solidere annual report 2005 solidere annual report 2005 97 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

22. Earnings per Share include the exercise of an option to buy treasury shares from a local bank against an amount of US$13,000,000 from deferred credits and US$1,116,498 from accounts payable and other liabilities (Note 14). The computation of earnings per share is based on net income for the period and the weighted average number of outstanding class (A) and (B) shares during each period net of treasury shares held by the Company. f. Non-cash transactions in operating and investing activities include sales of built up area against acquisition of treasury shares for an amount of US$6,360,898 for the year ended December 31, 2005 (US$18,273,003 for the year ended December 31, 2004). The weighted average number of shares to compute basic earnings per share is 158,143,126 shares as of December 31, 2005 (158,759,725 shares as of December 31, 2004). g. Non-cash transactions in investing activities include a transfer for the amount of US$2,224,148 from investment properties to fixed assets for the year ended December 31, 2005 (Nil for the year ended December 31, 2004).

23. Notes to the Statements of Cash Flows h. Non-cash transactions in operating and investing activities include a transfer of an amount of US$6,046,341 from properties a. Non-cash transactions in the operating and investing activities related to the proceeds from recuperated properties are detailed held for development and sale to investment properties for the year ended December 31, 2005 (US$53,991 for the year ended as follows: December 31, 2004)

i. Non-cash transactions in operating and investing activities include a transfer of an amount of US$39,244 from properties held December 31, 2005 2004 for development and sale to fixed assets for the year ended December 31, 2005 (Nil for the year ended December 31, 2004). US$ US$ j. Non-cash transactions in the investing activities include transfers from fixed assets to investment properties in the amount of Non-cash proceeds from recuperation (182,300) (91,290) US$1,072,697 for the year ended December 31, 2005 (US$666,225 for the year ended December 31, 2004). Decrease in receivables from recuperated properties (616,703) (19,525) (799,003) (110,815) k. Non-cash transactions in financing activities include the effect of markup of treasury shares for an amount of US$5,027,346 for the year ended December 31, 2005 (US$17,210,545 for the year ended December 31, 2004).

b. Depreciation was applied as follows: l. Non-cash transactions in investing activities include the change in fair value of available-for-sale securities net of deferred tax in the amount of US$274,330 offset against “Cumulative change in fair value of available-for-sale securities” and “prepayments and other debit balances” in the amount of US$233,180 and US$41,150, respectively, for the year ended December 31, 2005. December 31, 2005 2004 US$ US$ m. Non-cash transactions in financing activities include fractions and options dividends in the amount of US$200,500 transferred from dividends paid during the year ended December 31, 2005. Depreciation of fixed assets - Note 10 2,191,756 1,889,856 Depreciation of investment properties - Note 9 2,954,446 2,885,780 n. Cash and cash equivalents comprise of the following: Less: Depreciation allocated to the cost of properties held for development and sale (759,076) (759,075) Depreciation charge for the year 4,387,126 4,016,561 December 31, 2005 2004 US$ US$

c. Interest expense consists of the following: Cash 93,902 95,513 Current accounts 20,446,999 45,917,144 Short term deposits 61,508,824 38,673,385 December 31, 2005 2004 Bank overdrafts (10,020,182) (10,596,118) US$ US$ 72,029,543 74,089,924

Interest charged as period cost 17,490,405 26,045,835 Interest expense allocated to cost of properties held for development and sale 1,202,293 1,146,829 24. Related Party Transactions Total interest expense 18,692,698 27,192,664 These represent transactions with related parties, i.e. significant shareholders, directors and senior management of the Company, and companies of which they are principal owners and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Company’s management. d. Non-cash transactions in the operating activities include sale of properties of total cost of US$10,100,000 to a joint venture entity for a total consideration of US$31,600,000 recorded under “investment in a joint venture” for the year ended and as at Cash and bank balances include US$139,692 as of December 31, 2005 (US$252,273 as of December 31, 2004) representing current December 31, 2005. bank accounts with a local bank who is a significant but minority shareholder of the Company. The Company had obtained a syndicated loan of US$100million which was managed and financed by that bank and which was settled during 2004. Interest e. Non-cash transactions in operating and financing activities include the effect of the non-exercise of the option to sell back expense for 2004 relating to this loan amounted to US$8.1million. treasury shares from a local bank to the Company (Note 14). Non-cash transactions in operating and financing activities also

98 solidere annual report 2005 solidere annual report 2005 99 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

General and administrative expenses include legal fees in the amount of US$120,000 for the year ended December 31, 2005 the concerned authorities nor recorded as receivables in the accompanying financial statements. related to one of the firm’s legal counselors who is also a member in the Company’s board of directors (US$161,799 for the year h. The Company has as a stand-by letter of credit in the amount of US$3,566,993 to be gradually decreased starting June 2007 to ended December 31, 2004). reach US$3,035,622 in June 2011. This instrument is issued in guarantee of the US$14.7million US Export Import Bank of the United States facility amounting to US$9.43million as of December 31, 2005 (US$12.12million as of December 31, 2004). Certain directors are members of the boards of directors of banks with whom the Company has various banking activities. Throughout its life, this stand-by letter of credit shall be fully covered by a cash collateral (Note 4). Transactions with the joint venture are disclosed under Note 9. 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, Income arising and expenses incurred from the Company’s transactions with other related parties, other than those disclosed in the Company signed in 2002 an agreement with the Armenian Orthodox prelacy to demolish the building on the recuperated lot the financial statements, do not form a significant portion of the Company’s operations. and to transfer corresponding building rights to another adjacent lot with minimum building rights of 4,900 m2 against ceding of owners’ shares from both lots. Additionally, a built up area of 5,335 m2 (US$2,700,000) remains as a contingent loss to the Total benefits paid to executives and Board members (including salary, bonus and others), included within General and Company in case the prelacy decides to build this area within the next 10 years following this agreement. Administrative expenses, for the year ended December 31, 2005 amounted to US$1,431,500 (US$1,505,284 for the year ended December 31, 2004). j. During 2003, the Company entered into a dispute with one of its contractors regarding what the Company considered to be a defect in the land remediation works performed by the contractor. The contractor denied this issue and commenced an arbitration in relation to this matter on May 19, 2003. In the request for arbitration, the contractor sought a non-monetary relief that there is 25. Commitments And Contingencies no defect in the works performed, and made monetary claims against the Company in the total amount of US$1,079,533, in addition to claiming for the payment of its legal and other costs incurred in connection with the arbitration for an amount of a. An agreement between the Company and the Council for Development and Reconstruction (“CDR”) was promulgated through US$2,226,569. The Company made counter claims for non-monetary relief that there exists a defect in the works performed by Decree No. 5665 dated September 21, 1994, duly approved by the Council of Ministers. By virtue of this agreement, the Company the contractor and claimed for the payment of its legal and other costs incurred in connection with the arbitration for an amount was granted 291,800 m2 of the reclaimed land surface (totaling 608,000 sqm) against the execution by the Company of the sea of US$3,004,711. In 2004, the Company collected the performance bond amounting to US$8.5million. On July 12, 2004, the landfill and infrastructure works. International Court of Arbitration ruled that the contractor pay the Company the sum of US$2,188,000 in respect of the Company’s cost of arbitration, and additional costs incurred in the amount of US$170,000, in addition to the execution of remedial works at b. The total projected cost for completion of the BCD project has been estimated by management to be approximately US$2billion. the contractor’s own cost. This amount is used as a base for the determination of cost of sales.

On June 21, 2004, the contractor requested arbitration in a second case against the Company to confirm the right to extend the c. Commitments for contracted works not executed as of December 31, 2005 amounted to approximately US$111.4million project’s execution period and increase the cost of works. The total claims by the contractor in this arbitration amounted to (US$67.9million as of December 31, 2004). US$32million representing the increase in the cost of works, other unpaid amounts and amounts the contractor alleged to have been illegally withdrawn by the Company from the performance bond mentioned above. d. A lawsuit was raised in 1999 against the Company by the “CDR” claiming reimbursement of an amount of LL5.4billion (US$3.6million) plus interest. This balance represents payments previously made by the “CDR” in connection with the appraisal of During 2005 and early 2006, both the Company and the contractor filed counter arbitrations against each others that are still the properties in the BCD area and other tender documents. No provision was set up against this claim since, on the basis of the pending as at December 31, 2005. advice received from the Company’s legal advisor; the directors are of the opinion that this claim is not based on sound legal grounds. No assessment was set at this early stage concerning the probable basis of any financial settlement that might result of the claims in these arbitrations. The Company has submitted to the “CDR” claims aggregating US$13.6million representing mainly change orders to infrastructure works in the traditional BCD which were incurred by the Company on behalf of the Government. These claims were No provision was set up against these claims as the legal counsel representing the Company in the arbitration is of the opinion neither approved nor confirmed by the concerned party nor recorded as receivables in the accompanying financial statements. that the Company has strong defenses against all allegations made by the contractor.

e. The Company is a defendant in various legal proceedings and has litigations pending before the courts and faces several claims raised by contractors. On the basis of advice received from the external legal counsel and the Company’s technical department, 26. Financial Instruments the directors are of the opinion that any negative outcome thereof, if any, would not have a material adverse effect on the financial condition of the Company. a. Fair Values of Financial Assets and Liabilities The carrying book value of financial assets and liabilities are not materially different from their fair values applicable at the f. On June 7, 1997, the Company signed an exchange agreement with the Lebanese Government. By virtue of this agreement, the balance sheet date. Company acquired additional built up area of approximately 58,000 m2 and 556,340 Class A shares in exchange for approximately 15,000 m2 and the payment of US$38.7million to restore governmental buildings. US$25million has already been paid and b. Credit Risk accounted for and the balance of US$13.8million continues to be included under accounts payable. According to the terms of the The Company’s credit risk is primarily attributable to its liquid funds and receivables. The amounts presented in the balance agreement, the Company undertook to build a governmental building and to conclude ten finance leases over seven years for sheet are stated at net realizable value, estimated by the Company’s management based on prior experience and the current certain buildings belonging to the Lebanese Government. In 1999, the government canceled the exchange and finance lease economic conditions. agreement. The implementation and the effect of cancellation is not yet determined and has not been reflected in the accompanying financial statements. The Company trades mostly with recognized, credit worthy third parties and in addition receivable balances are monitored on an ongoing basis. It is the Company’s policy to mortgage sold properties as collateral until the full settlement of receivables. 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 excavation works. These claims were not yet approved nor confirmed by The Company credit risk exposure is spread over 109 counter-parties; 6 customers constitute 50% of the total exposure and 103

100 solidere annual report 2005 solidere annual report 2005 101 Notes to the Consolidated Financial Statements for the year ended December 31, 2005

customers constitute the remaining 50%. c. Interest Rate Risk The Company’s interest rate risk arises from the possibility that changes in market interest rates will affect the value of interest earning assets and interest bearing liabilities primarily relating to long term debt obligations with a floating interest rate.

The Company’s policy is to manage its interest cost using a mix of fixed and variable rate debts.

d. Liquidity Risk Liquidity risk is the risk that an institution will be unable to meet its net funding requirements. Liquidity risk can be caused by market disruptions or credit downgrades, which may cause certain sources of funding to dry up immediately.

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans.

27. Comparative Information Bank overdrafts have been reclassified from cash and banks balances to a separate line item “Bank overdrafts” under liabilities in the balance sheet. Comparative amounts, totaling US$10,596,118, have been reclassified accordingly.

28. Approval of Financial Statements The Board of Directors approved the financial statements for the year ended December 31, 2005, on March 14, 2006.

102 solidere annual report 2005 EXTRACTS OF STANDALONE FINANCIAL STATEMENTS BALANCE SHEET STATEMENT OF INCOME

December 31, 2005 2004 December 31, 2005 2004 Notes US$ US$ Notes US$ US$

Assets Revenues from land and real estate sales 235,256,243 174,523,834 Cash and bank balances 3 102,252,651 111,718,596 Revenues from rented properties 20,793,378 18,612,382 Prepayments and other debit balances 4 22,096,374 15,714,828 Cost of land and real estate sales (107,378,218) (92,001,530) Accounts and notes receivable, net 5 272,820,638 210,894,461 Cost of rented properties 19 (6,479,558) (7,092,861) Investments in securities 6 9,579,440 3,650,907 Gain on sale of investment properties 8 297,436 1,695,723 Properties held for development and sale, net 7 1,521,139,228 1,606,321,475 Net revenues from operations 142,489,281 95,737,548 Investment properties, net 8 160,487,428 158,720,275 Investment in a joint venture 9 31,609,950 9,950 General and administrative expenses 20 (11,371,373) (10,057,472) Fixed assets, net 10 19,410,670 18,683,557 Depreciation (1,424,025) (1,129,359) Total Assets 2,139,396,379 2,125,714,049 Provision for doubtful receivables and write-offs 4&5 (298,693) (739,083) Impairment loss on properties held for development and sale 7 (1,685,783) - Liabilities Provision for contingencies and other charges - (1,820,362) Bank overdrafts 3 10,018,093 10,596,118 Interest income 21 15,402,238 8,281,358 Accounts payable and other liabilities 11 74,864,832 76,778,392 Interest expense (17,490,405) (26,045,835) Dividends payable 12 10,266,707 11,430,866 Net income for the year before tax 125,621,240 64,226,795 Deferred revenues and other credit balances 13 65,849,426 61,583,981 Deferred credits 14 3,900,000 35,911,930 Accrued income tax 11 (17,164,353) (10,122,897) Loans from banks and financial institutions 15 129,399,059 234,050,237 Total Liabilities 294,298,117 430,351,524 Net income for the year 108,456,887 54,103,898

Basic earnings per share 22 0.6858 0.3400 Shareholders’ Equity Issued capital at par value US$10 per share: 16 100,000,000 class (A) shares 1,000,000,000 1,000,000,000 65,000,000 class (B) shares 650,000,000 650,000,000 1,650,000,000 1,650,000,000 Legal reserve 17 46,710,223 35,864,534 Retained earnings 87,904,016 34,183,162 Cumulative changes in fair value of interest rate swap agreement 11 (861,982) (3,557,815) Cumulative changes in fair value of available-for-sale securities 6 (233,180) - Reserves from gain on treasury shares 14 2,508,180 - Net income for the year less legal reserve 97,611,198 48,693,508 Less: Treasury shares 12 & 18 (38,540,193) (69,820,864) Total Shareholders’ Equity 1,845,098,262 1,695,362,525

Total Liabilities and Shareholders’ Equity 2,139,396,379 2,125,714,049

The accompanying notes form an integral part of these statements The accompanying notes form an integral part of these statements

104 solidere annual report 2005 solidere annual report 2005 105 STATEMENT OF CASH FLOWS

December 31, 2005 2004 Notes US$ US$ ------(233,180) US$ 2,695,833 2,508,180 2,894,259 36,308,017 Cash flows from operating activities (24,205,933) Net income for the year before income tax 125,621,240 64,226,795 Adjustments to reconcile net income ------to net cash provided by operating activities - US$ (5,410,390) 48,693,508 1,695,362,525 16,431,956 1,662,570,301 54,103,898 54,103,898 Depreciation 23 4,378,527 4,015,140 54,103,898 56,998,157 (48,693,508) (10,845,689) (16,431,956) Less Legal Gain on sale of investment properties 8 (297,436) (1,695,723) for the Year Gain on sale of properties to a joint venture (10,750,000) - Provision for doubtful receivables and write 5 298,693 739,083 - - - - - 108,456,887 108,456,887 ------108,456,887 110,919,540 - - - Provision for contingencies and other charges 11(d) 515,000 1,820,362 - US$ 2,508,180 - Sale transactions against acquisition of treasury shares 23 6,360,898 18,273,003 2,508,180 97,611,198 1,845,098,262 from Gain Loss from cancellation of sales - 6,000,000 Interest income 21 (15,402,238) (8,281,358) Interest expense 23 18,692,698 27,192,664 ------(233,180) (233,180) US$

Changes in assets and liabilities for-sale- on Treasury Prepayments and other debit balances 1,312,075 3,705,571 Accounts and notes receivable 23 (62,864,840) (26,846,226) Properties held for development and sale 23 69,755,739 27,550,993 ------US$ (861,982) (233,180)

Accounts payable and other liabilities 23 (23,425,233) (3,735,050) Swap 2,695,833 - 2,695,833 2,894,259 - 2,894,259 - (3,557,815) (6,452,074) Changes in Changes in Deferred revenues and other credit balances 23 (6,484,555) 48,953,635 Cumulative Cumulative Fair Value of Fair Value of Reserves Net Income Interest Rate Available- Interest received 9,355,350 1,300,157 Income tax paid (10,122,897) - Net cash provided by operating activities 106,943,021 163,219,046 ------540,661 US$ 5,027,346 - 34,183,162 48,693,508 - 17,210,545 - 16,431,956 - 87,904,016 Cash flows from investing activities Pledged term deposits with banks 1,761,170 12,538,342 Investments in securities 23 (6,202,863) (3,650,907) ------Receivable from recuperated properties 23 981,303 327,206 - US$ (5,027,346)

Proceeds from sale of fixed assets 28,202 - 36,308,017 - Treasury Retained (69,820,864) (28,404,386) (24,205,933) (17,210,545) (38,540,193) Proceeds from sale of investment properties 8 1,098,486 11,084,658 Acquisition of fixed assets 23 (1,747,777) (954,942) Acquisition of investment properties 8 (627,759) (3,323,760) ------Investment in a joint venture - 9,950 - US$ Legal 5,410,390 - Reserve Shares Earnings Agreement Securities Shares Reserve Total Net cash (used in)/provided by investing activities (4,709,238) 16,030,547 10,845,689-

Cash flows from financing activities Bank loans (settlement) (104,651,178) (85,517,758) ------

Dividends paid 12 (963,659) (736,022) US$ Share Deferred credits (13,000,000) - Capital 1,650,000,000 35,864,534 1,650,000,000 30,454,144 Treasury shares 23 4,786,691 (49,006,387) 1,650,000,000 46,710,223 Proceeds from sales of treasury shares 14 20,600,000 - Interest paid (16,132,387) (20,028,942) Net cash used in financing activities (109,360,533) (155,289,109)

Net change in cash and cash equivalents (7,126,750) 23,960,484 Cash and cash equivalents — Beginning of the year 69,875,485 45,915,001 Cash and cash equivalents — End of the year 23 62,748,735 69,875,485

The accompanying notes form an integral part of these statements Treasury shares trade Treasury shares trade Allocation to legal reserve from 2005 net income Effect of mark up treasury shares Balance at December 31, 2004 Net income for the year Change in fair value of interest rate swap agreement Total result of the year Change in fair value of Allocation of 2004 net income Balance at December 31, 2003 Net income for the year rate swap agreement and land sale exchange (net) available-for-sale securities and land sale exchange (net) Balance at December 31, 2005 The accompanying notes form an integral part of these statements Change in fair value of interest Total result of the year Effect of mark up treasury shares Gain on sale of treasury shares Allocation to legal reserve from 2004 net income Allocation of 2003 profit STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

106 solidere annual report 2005 solidere annual report 2005 107 BOARD OF DIRECTORS GENERAL MANAGEMENT

Members of the Board

Chairman and General Manager Nasser Chammaa

Vice-Chairmen Nabil Boustani Maher Beydoun

General Manager Raphael Sabbagha Abdulhafiz Mansour Mosbah Kanafani Mounir Douaidy Fouad Al Khazen Maher Daouk Sami Nahas Joseph Asseily Sarkis Demerdjian Basile Yared

108 solidere annual report 2005