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Fri 17 Oct 2008 04:00 AM

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Palestine rebuilding

The Land Holding's most ambitious venture so far is a $250m project planned for Palestine. 

Saudi-based developer The Land Holding is expanding across the Middle East and Europe. However, its most ambitious venture by far is the $250m project currently planned for war-stricken Palestine. CEO Karim Jabbour explains why he is prepared to go where many others fear to tread.

At first glance, the land holding (The Land) might appear to be like any other Gulf real estate developer. It is expanding across the Middle East and even Europe; it is busy promoting a portfolio of ‘unique' and ‘iconic' developments; it has a string of plush offices across the GCC.

Yet while the boldest of its peers have dared to enter untested markets such as Libya and Yemen, The Land has gone a significant step further, becoming the Gulf's first private developer to venture into war-torn, politically-unstable and economically-crippled Palestine.

This is the first time a private investor has come in to a country like Palestine, and taken the risk to invest and develop in it. This is who we are — we calculate risk but we also take risk.

"It's a project of its kind because this is the first time a foreign investor has come in to a country like Palestine, and taken the risk to invest and develop in it," says Karim Jabbour, CEO of the Saudi-based developer. "This is who we are - we calculate risk but we also take risk."

The project, worth $250m, is being developed in partnership with the Palestinian Investment Fund (PIF). It is located in Ramallah, in Al Irsal, and will be spread across a land area of 50,000 sq m. Al Irsal Centre will have a total built up area of 250,000 sq m, including residential, hotel, commercial, retail, and office spaces.

Jabbour says the intention is to sell and develop a number of the plots. Several plots will be sold to strategic investors, possibly government companies, while apartments, offices and retails spaces will be put on sale for interested investors and buyers.

Al Irsal Centre aims to enhance the economic and social life in Ramallah, Al-Bireh and most of the central region of the West Bank. The project is expected to serve more than 800,000 Palestinians.

The instability of politics in the Middle Eastern country has not deterred the company from entering the market, and Jabbour himself is bullish.

"You have ups and downs but at the end of the day you need homes, you need a decent life in Palestine and we believe that the country deserves a project of this kind so we invested in it," says Jabbour, who adds that the company's investment in Palestine was not focused on returns, but was rather a "strategic investment".

It may seem a strange time to be talking about ‘strategic investments' in the real estate sector. Companies across the GCC are beginning to feel the effects of the global credit crunch as liquidity is drained out of the markets.

Funding real estate projects is not getting any easier, and as banks are holding on to their cash so the region's real estate giants are finding it increasingly difficult to find the money with which to build their latest multibillion-dollar developments.

And yet amid this chaos The Land is not only taking the risk to invest in Palestine, but is also working on a new Dubai project.

The company only entered the UAE market in July, but immediately bought up plots in Dubai Waterfront, the world's largest coastal development located in the emirate's Jebel Ali area.

The company has also announced the signing of an initial agreement with Dubai government-owned master developer Nakheel.

The joint venture, which was inked during property show Cityscape Dubai 2008, will see both companies jointly undertaking the development of The Land's project at Dubai Waterfront.

On completion, the Waterfront will be twice the size of Hong Kong Island and will add an extra 70 km to Dubai's coastline.

The Land's project, a 50-storey building called Terra, is currently in the design phase and is estimated at a value of $925m.

"Our portfolio will not be far from 8 million sq ft of built-up area to be developed and not far from$5.44bn, if we develop it and sell it," says Jabbour.

Founded in 2004 by Saudi and Jordanian investors headed by The Al Rajhi Investment Group, The Land also has real estate projects in Qatar, Jordan and Bahrain.

It is also gearing up for the launch of a $1.6bn luxury residential complex in Saudi Arabia next month. The project, Ajmakan, will up the company's Saudi portfolio to approximately $4bn-$4.8bn.

Ajmakan will rise in one of Saudi Arabia's most central areas, in close proximity to the Diplomatic Quarter and King Saud University and other governmental sites, overlooking the historically-known Wadi Hanifa.

Construction is scheduled to begin immediately following the completion of all licence procedures. In addition, other plots of land are awaiting development.Said Said, president of The Land, says that Saudi Arabia will have to develop 2.62 million units with a yearly average of 163,750 units to meet its explosive population growth. Investment in the kingdom's new property projects is estimated to reach $319bn by 2020.

The amount of money invested in construction will touch $39.9bn in 2010, according to a study undertaken by the Riyadh Development Authority.

All told, The Land and its partners are investing in excess of $4.2bn across the GCC region. On Qatar, Jabbour says: "We are the most aggressive private developer".

I think our expansion will be limited until 2009 because until then we have to concentrate on development, construction and handover of our existing projects.

The Land is developing 17 towers on The Pearl-Qatar, a man-made island developed in the state's capital Doha, that has over 400 hectares of reclaimed land. The $2.5bn development is the country's first freehold property offered to international investors.

The Land is the largest investor in the island pumping in excess of $2bn. The 17 luxury waterfront towers are scheduled for handover before June next year, while Perlita Gardens, the only private gated community within The Pearl-Qatar, is expected to be launched this month. Perlita will feature five-star luxury residential units and water-featured gardens.

Other projects in Qatar include a commercial project, a five-storey structure called The Atrium, at the heart of Energy City, the country's large energy business cluster. The Atrium is an "eco-friendly business district" in close proximity to residency areas at The Pearl-Qatar. "Our portfolio in Qatar is not far from$2.8bn," reveals Jabbour.

In addition to its projects in the Middle East, The Land has also made its first foray into Eastern Europe by buying land in Romania. Plans for the plot are expected to be announced in December, and Jabbour admits that the company may slow down its growth after that date, in order to concentrate on delivering its existing projects.

"With regards to our expansion, I think it will be limited until 2009 because until then we have to concentrate on development, construction, and handover of our existing projects. This is mainly our strategic direction now," he says.

The firm has no plans to go to the debt markets to raise capital, according to Jabbour, who explains: "We fund our projects based on company equity, on mezzanine loans, and on any fund that is available in the market. And we are very aggressive."

He says The Land is a "healthy company" that calculates its needs in terms of human resources and finances and recognises its boundaries and limits when it comes to expansions - an approach that seems particularly wise given the current global economic crisis. The Land is "prepared for the worst" should it happen, but Jabbour retains confidence in the local markets.

"We are always running our simulations and numbers but you never know how the market will react," he says. "I don't think the crisis will have a huge impact on this region. This is a solid region, mainly Saudi Arabia and Qatar. Let us wait and see."

Palestine’s call for foreign investmentAs Palestine rebuilds itself after 20 years of bloody fighting, the region is crying out for major investment into its creaking infrastructure system and a much-needed boost to its economy.

Ever since Salam Fayyad became Palestinian prime minister in June 2007, things have looked a little rosier for Palestine.

He has focused on rebuilding the economy by attracting foreign investment and promoting the private sector.

At the Palestinian Investment Conference (PIC) last May in Bethlehem, which was set up to improve economic conditions and social living standards in the region, $1.4bn worth of investment projects were announced, many of which were with partners from abroad.

In December that year, America hosted the Middle East peace conference in Annapolis, with president Bush, outlining America's famous two-state solution for the Israel-Palestinian conflict. Days after the Annapolis convention, Bush announced a raft of measures with the Palestinian authorities to create more jobs and improve education in the territories.

Britain too has promoted economic recovery in the state. Before this year's PIC in May, the current and former prime ministers of Britain, Gordon Brown and Tony Blair, urged businesses to invest in the region, the strongest call yet for firms to recognise the potential of Palestine as an emerging market.

Brown was bullish on the subject, at the time saying: "My message is very clear: there is an economic prize before us, there is double dividend for you as companies and the Palestinian people."

Authorities are pursuing an economic strategy based on exports and the state has already begun bolstering relations with neighbouring and international countries through a mix of free trade agreements and trade associations. Laws have been passed to encourage investment in all sectors of the Palestinian economy, which the government hopes will create an export-led manufacturing base, while bringing down the region's massive unemployment levels.

Oil-rich GCC companies are well-placed to see through this wave of investment in Palestine, which the government is so desperately pinning its hopes on.

As the US-brokered Middle East Peace Process flounders, Salam Fayyad appears to winning his drive to attract foreign investment to the West Bank.

On Tuesday October 14, Fayyad announced investments by IT giants Intel and Cisco Systems and communications group TouchStar in the West Bank and the Palestinian neighbourhoods of East Jerusalem. Intel is constructing a minicomputer laboratory in Hebron, Touchstar is throwing $1.5m behind a call centre in East Jerusalem, and Cisco is making $10m worth of investments in the region.

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