July - September 2000
Addressing Issues with the State - Part One

  
Three issues that were pending with the State have been resolved this quarter. They concern the sea defense structure and the Souks of Beirut, both SOLIDERE projects, as well as the Hilton hotel. While this is sending a positive signal, investors are still awaiting the resolution of other important issues which remain outstanding with the State, thus hindering the reconstruction and development of Beirut city center.

The government put its seal of approval on the sea defense structure built by SOLIDERE, as part of its 1994 agreement with the State, represented by the Council for Development and Reconstruction (CDR). The defense structure falls within marine works, also comprising the construction of the Beirut Marina with a breakwater. The works , awarded to Bouygues in 1996, are scheduled for delivery this fall.

In the design-and-build tendering in 1995, the bidders had the latitude to submit:

  • either a proposal based on the preliminary design suggested by CDR's consultant, Sogreah;

  • or a proposal based on an alternative design.

    Bouygues were awarded the contract on the basis of their alternative design, aimed at reducing the hydrological pressure of major waves.
    The design, endorsed by Sogreah and approved by CDR, involved:

  • a submerged reef, forming the first defense line, extends for an average of 100 m seawards along the full extent of the corniche.

  • eighty reinforced concrete caissons, each 17.5m wide, 27.75m long and 10.5m high, form a second defense line. They support a concrete superstructure providing continuous promenades at two levels over 1.3 km.
    Backfilling behind the caissons provides both a stabilizing bond and a third promenade, 5.5m above sea level.

    T    he Bouygues design results in a widening of the corniche from 40m to 100m, thus extending the new waterfront land by around 37000 sq m compared to the original BCD master plan. As advised to CDR, this additional area, to remain non aedificandi, constitutes part of the public promenades planned within the design.

    T    he project suffered several interruptions in backfilling and dredging works, and their complete suspension since March 7, 2000, by decision of the Transportation Ministry. As the defense structure's design and execution had proceeded according to tender specifications, contractual agreements, and technical approvals by CDR, SOLIDERE lodged a claim for damages on July 7.

    O    n September 8, 2000, the Council of Ministers issued decree 3808 approving the amendments to the BCD master plan entailed by the sea defense design. The decree, published in the Official Gazette on September 21, 2000, has allowed SOLIDERE to resume landfilling works for the defense structure and sea promenades. The reason invoked for the suspension of work, namely the need for a decree officially approving the Bouygues design, was totally unjustified. Accordingly, the Company intends to pursue its claim for damage.
Two companies have trespassed on the Beirut Marina since spring 1999. In 1995, by allocating to them 11000 sq m of land to be backfilled on the public domain, the Council of Ministers had rescinded former authorizations to occupy areas of the maritime public domain. The companies have ignored CDR and Transportation Ministry resolutions ordering them to vacate the marina.

Despite SOLIDERE's, requests, no effective action was taken by the authorities to evict the trespassers. SOLIDERE has taken the necessary legal measures to preserve its rights in the marina and to obtain compensation for the violations obstructing its works. The delay is also depriving the State from the income to be generated by the marina concession.

The Souks of Beirut were finally given the green light. In a resolution dated September 27, 2000, the Council of Ministers sanctioned the Souks master plan, by approving related amendments to Sector E of the BCD master plan. The approval is soon to be issued by decree.

The Souks of Beirut redevelopment will provide 100000 sq m of leisure and commercial facilities. SOLIDERE has finalized the project's detailed design and completed the 2500 car underground car park.

The superstructure was delayed by more than a year, as SOLIDERE went through various stages of the regulatory permission process.

Following approval by the Higher Council of Urbanism and Beirut Municipal Council, on March 31 and May 15, 1999, the Souks master plan was successively forwarded to the Ministers for Municipalities and Public Works and to the Council of Ministers. On July 26, 2000, the Prime Minister appointed a review committee. The two above-mentioned ministers, though having already formally approved the master plan, were on the committee, together with the Tourism Minister.

The issuance of the decree should pave the way for the Souks of Beirut building permit. SOLIDERE can then proceed with the construction of the superstructure.

Assuming a release of the building permit during next quarter, most facilities - gold souk, supermarket, entertainment, center, department store and multipurpose building - should be ready beginning 2002, with the souks proper following by mid-year. This will allow the closing of pre-sales covering the entire gold souk and the finalizing of leasing and management agreements for the Souks of Beirut anchor tenants and international operators. The completion of the project  is bound to have a profound impact on the profitability of all central Beirut developments.

The Souks of Beirut are destined to be a major magnet in the city center, perhaps even the jewel in the crown.
Master Plan Issues
Reconstitution of the public domain
The roads, squares and public gardens executed in accordance with SOLIDERE's agreement with the State, shall become public domain. The areas forming the newly reconstituted public domain, to be delivered by the Company to the public authorities, were agreed upon in 1998 with the Mohafez (Administrator) of Beirut, based on an opinion by the head of the Beirut Municipality legal division.

In April 1999, the current Mohafez, invoking considerations of administrative authority, forwarded the procedure to the Council for Development and Reconstruction (CDR). SOLIDERE followed up on the matter with CDR and the Mohafez. In January 2000, the Prime Minister formed a committee grouping all concerned administrative authorities, to finalize the location and areas of the reconstituted public domain. Another committee was formed to resolve all obstacles to the BCD development. The meetings held by these committees have not resulted in a definitive resolution of outstanding issues.

The delay in reconstituting the public domain has greatly harmed the development of the city center, by retarding the issuance of the BCD maps on a 1/500 scale, and impeding the issuance the issuance of easement and alignment certificates, as well as regulatory construction and occupation permits. Ongoing projects were obstructed and new investment discouraged. Major BCD developers formed a pressure group to deal with government-related issues. SOLIDERE itself has actively addressed matters with relevant authorities. Decree 2370, dated February 7, 2000 gave exceptional powers to the High Council of Urbanism, over a period of six months, for the interpretation of a number of the BCD master plan provisions. SOLIDERE has asked for an extension of the period.
1/500 Maps
Upon the Beirut Municipality's request, SOLIDERE prepared the BCD master plan 1/500 maps and regulations and submitted them in October 1999 to CDR.

The latter transmitted them to the second above-mentioned committee appointed by the Prime Minister. The approval of the plans by the Council of Ministers in the form of a decree should remove the hurdles currently hindering the issuance of construction and occupancy permits.
Easement and Alignment certificates
Easement and alignment certificates are required for the conclusion of real estate transactions, such as parcel subdivision and regrouping, sale and purchase, and the release of construction and occupation permits.

Normally issued by the Municipality upon verification of conformity with the master plan, such certificates were withheld by the current Mohafez, pending the finalization of the 1/500 BCD maps.

In March 2000, the Mohafez made their issuance conditional on an undertaking by concerned property owners, including SOLIDERE, not to hold the Municipality liable for any prejudice resulting from inaccuracies in the maps, and to waive all rights to claim damages in this respect. It is difficult to see how such differences might occur since the maps are to be issued with the joint signature of the Municipality and the Directorate General of Urbanism.

On September 12, 2000, the Company requested the Mohafez to cancel this measure, which has in effect frozen most real estate transactions in the city center.
Construction permits
Due to the above hurdles, more than 24 new projects are still awaiting approval by government agencies on various issues.

Council of Ministers' decree 3862 dated September 20, 2000 has finally allowed the demolition (requested in 1999) of the old Hilton hotel structure, paving the way for its reconstruction. Three other internationally operated hotels have been delayed, pending approvals by the Directorate General of Urbanism (DGU). Minor modifications on the 'build-to-line', which controls building alignments, are delaying a prime luxury residential project, as well as three office buildings in the historic core. Permits have been totally refused in other cases, most notably a petrol car service station due to an opinion by the Ministry of Petroleum regarding petrol storage in the BCD.
Occupancy permits
The Beirut Municipality refused in many cases to issue occupancy permits for BCD properties after the completion of restoration works. Owners were unable to offer, as required, proof of the pre-war legality of their buildings, since the Municipality, itself the custodian of these records, had lost them during the hostilities, due to fire or other reasons.

On February 11, 2000, the government released decree 2404, allowing municipal authorities to remedy any noted violations through the payment of a settlement tax. As this decree did not resolve all cases, discussions being held between the Municipality and representatives of the new owners and investors, are attempting to address these issues.