A real estate company with a capital of $1 billion is expected to be launched in the first half of 2017 by Massaad Fares and Namir Cortas. The company will buy and sell built real estate properties under the directives of Intermediate Circular 427 issued by the Central Bank (BDL) earlier this year.
The new firm’s capital will be raised through a collective investment scheme (fund). Med Securities has been appointed as the leading placement agent and subscriptions will be carried out through local banks, Fares said.
Mohamed Alem, Senior Partner at law firm Alem & Associates, said that this kind of funding is the ideal investment instrument for large conglomerates and institutional investors that sit on big amounts of cash. These include institutions like the National Social Security Fund (NSSF), and the Order of Engineers which has equity of nearly $400 million, according to Alem, the new company’s legal advisor.
“Soon we will start to buy all kinds of properties in all regions across the country,” Fares said.
The fund plans to only buy parts of projects that are completed or are near completion.
“We have to buy properties at competitive prices, close to cost, in order for this business model to be viable, especially since the properties will be held for five to six years or more,” he said.
Circular 427 permits banks to lend to those real estate companies whose activities are restricted to buying built properties to sell on within a ten-year time frame. It also aims to help debt-ridden developers unable to sell their properties. The conditions allow real estate companies therefore to obtain a credit facility to buy only indebted properties. The debt should still be outstanding and should represent more than 50 percent of the property’s value. 40 percent of the price of the properties should be paid from the specialized real estate companies own equity. The remaining 60 percent can be financed through credit facilities provided by banks or financial institutions.
Fares is the Chairman of the Real Estate Brokers and Consultants Syndicate (REAL) and CEO of Prime Consult. Cortas is the Chairman of the Real Estate Developers Association (REDAL) and a shareholder in Estates Property Development & Investment.