Profits of real estate developer Solidere are expected to rise to $52 million in 2013 and $61 million in 2014 compared to $18 million in 2012, FFA Private Bank projected.
FFA said the firm expects some sale contracts before the end of this year which would improve its revenues.
“Solidere management mentioned that there are currently some deals under serious negotiations. The company expects to sell these before year end. The company is targeting selling prices of $4,500+ per sqm BUA [built up area] in waterfront and $3,000 per sqm BUA in traditional. It should be noted that revenues from land sales in 2012 totaled $50 million [down from $242 million in 2011] from one sale contract signed in the waterfront during the last quarter of 2012 [about 12,000 sqm BUA at an average price of $4,600],” the report said.
Solidere’s net profits in 2012 plunged to $18 million from $159 million in 2011 as the company cited poor land sales and rents.
The steep economic crisis which hit most sectors, including real estate, did not even spare Solidere which is considered on the largest real estate developers in the Middle East.
FFA argued that poor market conditions in Lebanon would surely affect the performance of Solidere this year.
“While Solidere’s management seems to be comforted by current deals under negotiations, the conditions of the market into 2013 highlight a continued sluggishness in real estate activity in light of a decline in investor and consumer sentiment from softer economic conditions and rising political uncertainties in Lebanon and the region,” the report said.
It added that based on real estate sector data, number of transactions has seen a 5 percent year-on-year decline in the first seven months of 2013 to 38,127, while the aggregate value of real estate transactions totaled $4.65 billion, 6 percent higher year-on-year as the average value per transaction increased by 11 percent year-on-year to $122,022.
On the supply side, figures released by the Association of Engineers of Beirut and Tripoli show that construction permits issued in the first seven months of 2013 reached 7.58 million sqm representing a decrease of 14 percent year-on-year.
However, cement deliveries totaled 2.66 million tons which represents a 2.7 percent year-on-year increase.
FFA estimated the true value of Solidere shares at $17.
“We maintain our target price on Solidere shares at $17.00 with an Overweight recommendation, however we remain cautious in the short term in light of weak operating conditions against an uncertain economic and political backdrop,” FFA said.
The Daily Star