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SHAREHOLDERS

BOARD OF DIRECTORS

CHAIRMAN AND GENERAL MANAGER

GENERAL MANAGER

GENERAL MANAGEMENT

Chief Financial Officer Assistant General Managerfor Operations

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PEDESTRIAN STREET / LINK

DEVELOPMENT BELOW CORNICHE LEVEL

NEW DEVELOPMENT - HIGH DENSITY

NEW DEVELOPMENT - MEDIUM DENSITY

NEW DEVELOPMENT - LOW DENSITY

PRIVATE OPEN SPACE

RESTORED BUILDING

PUBLIC OPEN SPACE

PUBLIC OR RELIGIOUS BUILDING

ARCHEOLOGICAL SITE

UTILITIES

PREWAR SHORELINE

Includes proposed modifications to the NewWaterfront District sector plan.

THEMASTER

PLAN

01

TABLE OF CONTENTS 02 introduction

05 consolidated financial highlights

06 chairman’s messagein the last year and a half, we continued to...

12 beirut city centerthe fruit of an ambitious urban regeneration venture...

16 existing city centerin reconstructing Beirut city center, Solidere has built on the intrinsic qualities...

25 waterfront districtthe Waterfront District is taking shape...

34 restorationthe restoration of Beirut city center has confirmed the sustainability...

42 real estate strategya consecration of the city center as a global retail district...

58 sale and rental strategysales revenues rose, sustained by a substantial sales backlog...

64 developers’ projectsa floor area of 2.5 million sq m has been so far the subject of development...

74 corporate funding, treasury and treasury stockthe balance sheet at year end shows positions...

76 solidere shares and GDRsSolidere shares started the year...

80 management systems and studiesSolidere has added new modules on its Enterprise Resource Planning...

82 solidere internationalSolidere International Limited (SI) was established...

91 independent auditors’ report

92 consolidated balance sheet

93 consolidated statement of income

94 consolidated statement of changes in shareholders’ equity

95 consolidated statement of cash flows

96 notes to the consolidated financial statements

128 board of directors – general management

02

The Lebanese Company for the Developmentand Reconstruction of the Beirut CentralDistrict s.a.l. (Solidere) is a joint-stockcompany established on May 5, 1994. It isbased on Law 117 of 1991, which regulatesLebanese real estate companies aiming at thereconstruction of war-damaged areas, inaccordance with an officially approved masterplan. Its share capital is US$1.65 billion.

The Company issues annual and semi-annual reports to its shareholders. Solidere’sactivities through the end of 2007 are alsosummarized in its fourteenth Annual Report.

This Annual Report includes consolidatedfinancial statements, which consolidatethe accounts of Solidere’s subsidiariesdepending on its shareholdings. Solidere’sshareholdings in subsidiaries as at end2007 were as follows: Beirut WaterfrontDevelopment s.a.l. 50%; Beirut Real EstateManagement and Services s.a.l. (BREMS)45%; Solidere Management Services s.a.l.99.95%; Solidere Management Services s.a.l.(Offshore) 99.84%; Solidere InternationalHoldings s.a.l. (Holding) 99.47%; SolidereInternational Limited, DIFC, 0.4286%.

03

Solidere Annual Report 2007

AS IT SPEARHEADSAND OVERSEESTHIS PROJECTSOLIDERE ISBRINGING LIFE TOBEIRUT’S CENTRALDISTRICT ANDHOPES TO TURN ITINTO THE FINESTCITY CENTER INTHE MIDDLE EAST

AT THE HEART OFLEBANON’S CAPITAL,BEIRUT CITY CENTERIS AN URBAN AREATHOUSANDS OFYEARS OLD,TRADITIONALLYA FOCUS OFBUSINESS, FINANCE,GOVERNMENT,CULTURE ANDLEISURE. ITSRECONSTRUCTIONCONSTITUTES ONEOF THE MOSTAMBITIOUS URBANREVITALIZATIONPROJECTS OFOUR TIMES.

Furthermore, Solidere International Holdingss.a.l. (Holding) owns 37.2% of SolidereInternational Limited. Solidere InternationalLimited in turn owns 45% of BREMSInternational s.a.l. (Offshore); 77.27% of SI AlZorah Equity Investments, Inc. (CaymanIslands); and 5% of Al Zorah Development(Private) Company Limited (PrivateShareholding Company), Ajman Free Zone,UAE, of which SI Al Zorah Equity Investments,Inc. also owns 44%. In addition, BREMSInternational s.a.l. (Offshore) owns 38% ofAmman Real Estate Management andServices Limited (AREMS), Amman.

The consolidated financial statements areprepared and audited in accordance withinternational standards.

0504


2007 2006

Summary of Operations in US$ million

Gross land sales 288.5 255.2Gross rental income 20.8 20.7General and administrative expenses 18.1 14.3Net income 224.2 132.2Sales backlog 914.1 1,196.0

Stock Data per Share in US$

Earnings 1.445 0.8375Shareholders' equity 11.81 11.37Stock price rangeA shares 25.09-14.99 26.01-15.07B shares 25.12-15.00 25.89-15.10GDRs 24.75-15.00 26.30-14.45

Financial Data in US$ million

Cash and securities 337.9 114.8Accounts and notes receivable 318.7 348.9Properties held for development and sale 1,404.7 1,457.8Investment properties 150.3 153.8

Retained earnings 263.2 209.7Legal reserves 75.5 59.9Treasury stock (168.5) (162.7)Total shareholders' equity 1832 1768.6

Financial Ratios in %

Gross profit margin 60.82 55.05Return (interest income) on liquid assets 5.5 5.86Debt to equity 0.38 1.57

CONSOLIDATEDFINANCIALHIGHLIGHTS

The year 2007 was a turning point in the life of the Company, as our

international business came faster than we thought. Our activity had previously been

entirely in Beirut where the market was facing a period of stagnation. All of a sudden, we

had to tackle abroad a number of projects, some larger than Solidere. So we had to

stretch our capabilities to the maximum in order to cater both for the local and new

foreign business.

Until recently, we were still operating in a domestic environment

that was not good for business. While we continued to focus on Beirut city center and

aimed at completing our projects in the capital to sustain our role in national

reconstruction, the expansion program was deemed to be the best decision at this

juncture. The idea was to create a new dimension for Solidere, to seize the opportunities

of the fast growing urban development and real estate business in the Middle East and

around the Mediterranean Basin.

Another turning point occurred last week, with

the resolution of the political situation, the

renewed activity in Beirut city center and the

impact of these favorable developments on

investment prospects.

In 2007, in spite of the political stalemate, we

achieved results that were relatively good

when compared to 2006, very good in the local

economic context. The year registered a net

profit of US$156million, US$181million before

income tax. This represents an 18% increase

over 2006. The consolidated net profit

amounted to US$224 million, reflecting the

gain from setting up Solidere International (SI)

and the 2007 profits from SI.

CH

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IN THE LAST YEAR AND A HALF, WECONTINUED TO DEMONSTRATE OURDEDICATION AND PERFORMANCEIN THE FACE OF THE ECONOMICUNCERTAINTY THAT HAD BESETLEBANON SINCE THE JULY 2006WAR AND THE ENSUING POLITICALSTALEMATE. THROUGH SOLIDEREINTERNATIONAL, WE INTENSIFIEDOUR EXPANSION INTO CITY-MAKINGPROJECTS OUTSIDE BEIRUT.ENHANCED BY DIVERSIFIEDACTIVITIES, OUR 2007 RESULTSWERE GOOD.

WE ARE NOW REAPING THE BENEFITSOF OUR RESILIENCE, SOUNDTHINKING, FLEXIBILITY, PROFESSIONALEFFICIENCY AND BUSINESS ACUMEN,AND OUR RESULTS ARE BOUND TOCONSTANTLY IMPROVE. LOCALLY, APOLITICAL SOLUTION IS UNFOLDINGAND THE IMPROVED ECONOMICENVIRONMENT SHOULD QUICKENTHE TEMPO OF DEVELOPMENT.ELSEWHERE, THE SUCCESS OFOUR PROJECTS IN AL ZORAHAND CAIRO IS INTENSIFYINGOUR INTERNATIONAL BUSINESS.

06


0908


A major indicator of our 2007 performance was the 14% increase in

land sales revenues over 2006, to which can be added US$391 million in cash inflows

from the sales backlog.

Investors who bought land from Solidere, though having possibly

missed deadlines, are moving ahead with their projects, with building permits being

obtained and construction starting. After some delays, construction has now picked up.

The sale of flats has picked up within the city center as well as outside, a factor that is

favorable to our development land sale program.

A few deals materialized in the first part of 2008, indicating

continued investors’ appetite for real estate development in the city center. To

accommodate the requirements of certain investors to lighten their burden, we have

extended their payment dates, charging interest on late payments. On the other hand,

we received in November 2007 the amount of US$220 million that was outstanding at

end of year 2006 on Phoenician Village. So cash keeps coming in and our cash level is

quite comfortable.

Rental revenues amounted to US$21 million.

Due to the increase in sales receivables and cash, and the

significant debt reduction, net interest income continued to

increase to a positive US$24.3 million. A new source of income was

Solidere International (SI), with US$17.5 million (representing

37.2% of SI’s net income), and US$ 50.5 million (resulting from

consolidating the equity of SI), included in the consolidated profit.

Our Company expects to receive a growing

and more balanced revenue mix in future years. The yearly income

stream from Solidere International will continue onward, with the

billing for services rendered to SI expected to partially offset

Solidere overheads. With the clearing of the political situation, land

sale volumes are expected to intensify. Land sales margins are to

expand in view of increasing selling prices against a constant cost of

land, about 90% incurred. Rental income is to increase significantly

with the inauguration of the Beirut Souks, supplemented by

revenues from parking and other property related activities.

The South Souks offer 89,000 sq m of floor

space to be delivered at the latest by end 2008. Pre-leasing has

reached 80% of commercial space in the Souks Core (200 shops,

plus a food hall and office space). The North Souks will offer

57,000 sq m of floor space. Work on the entertainment complex,

and on the department store redesigned by Zaha Hadid for an

anchor tenant, are scheduled to start in the course of 2008.

In the Waterfront District, reclamation is

proceeding on a fast-track course for the delivery of the sold sites.

Infrastructure and public domain design is awaiting ratification by

government decree of the master plan proposed by Solidere. An

international competition will then be launched to design the

70,000 sq m waterside park and corniche promenades.

In addition to its yearly performance, the

strength of Solidere is attributed to its strong asset base, minimal

liabilities, its sound financial attributes and its important, varied

and growing sources of revenue: land and real estate sales, real

estate rentals, and recently Solidere International.

The Company has a total estimated Net Asset

Value of US$8.07 billion. The market valuation for the 1.9 million sq m

BUA remaining land inventory, using expected cash inflows at current

land prices, is around US$5.2 billion. We have stopped selling finished

products in order to build a portfolio of income-generating properties.

The growing portfolio of revenue generating properties, including the

Souks, has an estimated market value of US$1.39 billion. Receivables

and cash equivalents at year end amounted to US$0.6 billion.

The Company enjoys minimal liabilities,

consisting of US$181 million in bank facilities, and consequently

earns increasing positive net interest income. The liabilities include

a put option sale of treasury stock shares for US$170.3 million.

Following the annual general meeting to

approve the 2006 results, dividends of US$1 per share were

distributed by Solidere in 2007. We intend to honor our commitment

to distribute dividends regularly. This, we believe, will have a positive

impact on the share value and will be to the advantage of

shareholders.

Having fluctuated throughout 2007 between a

high of US$25 and a low of US$15 in active trading, the shares

closed the year more than 40% above 2006, at around US$23. At

year end, market capitalization was US$3.9 billion. At end of May

2008, improved business expectations resulting from the political

solution led to a sharp increase in share prices to US$35 per share.


Solidere International Limited (SI) has a very

positive impact on Solidere’s financial position. The company,

registered in DIFC in June 2007, was capitalized at US$700 million,

raised through a private placement offering. Solidere’s in-kind

contribution to SI is valued at US$70 million, representing the

premium paid by new shareholders for the value of signed projects.

Solidere’s significant shareholding gives the Company a bigger

share of the intrinsic value of SI’s underlying projects, which will

have a positive impact on the results of Solidere.

Solidere had built a portfolio of projects for

Solidere International prior to its incorporation. Some projects that

were in the pipeline in 2007 have materialized in 2008, and

companies were established to pursue the projects in their respective

countries. The projects include Al Zorah Project in Ajman, UAE, and

two projects, Westown and Eastown, in Cairo, Egypt.

Solidere International teamed up with the

Government of Ajman to develop Al Zorah Project, with the

Government contributing the land and SI preparing the master plan

and raising cash capital for the project development. Al Zorah Project

covers 12 million sq m of land, partly reclaimed from the sea, and

offers real estate facilities with a total BUA of 22.1 million sq m. We

raised AED 1.88 billion in cash subscriptions towards the AED

4 billion capital of Al Zorah Development Company, established in

December 2007 and benefiting from a Concession agreement with

the Government. The Project was successfully launched in May 2008

and the pre-sales campaign brought in US$2.7 billion in sales to

Al Zorah Development Company.

Solidere International partnered with SODIC

(Egypt) for the development of Westown and Eastown Projects,

respectively covering 1.8 million sq m and 0.85 million sq m in the

Sheikh Zayed and Katemeya suburbs of Cairo. SI has land options on

250,000 sq m in Westown and 50,000 sq m in Eastown.

Among the projects in the making is the

Bodrum Project, Turkey, on 8 million sq m of land area, for which an

MOU has been signed. Having been short-listed in partnership with

Vinci (France) for the Monaco Urban Expansion and Development at

Sea, we submitted our offer in March 2008. To fund the project,

20 hectares in land area, we secured equity and shareholders’ loans

from a number of investors, plus debt finance from a European bank

consortium, amounting to around Euros 3.5 billion.

Several opportunities have been identified in

Saudi Arabia and in several parts of the Middle East and the

Mediterranean Basin.

NASSER CHAMMAAChairman and General ManagerMay 30, 2008

Our vision for international expansion has

been vindicated by the success of our Al Zorah and Cairo projects

and our ability to acquire property in Saudi Arabia, a very promising

real estate market. We have leveraged the Solidere brand and

exported our city-making philosophy, know-how and processes. The

reception to our projects is getting better everyday and we have

become well-known in the world for our capacity to raise capital, to

plan and execute large projects, and to market and sell development

land and real estate products.

Starting 2009, we will be concerned about how

to implement a number of these projects. Therefore, 2009 is expected

to be a consolidation year for our international activities. In Beirut, it

is also the target date for intense activity in the Beirut Souks and for

the launching of land development in the waterfront district, a major

phase in Solidere’s master plan.

Judging from our past and new performance,

and in light of the favorable local and regional climate now

prevailing, we expect the near future to be quite favorable to our

activities, both here and globally.

1312


13

BEIR

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12

THE FRUIT OF ANAMBITIOUS URBANREGENERATIONVENTURE ANDWATERFRONTDEVELOPMENT,A FINE CITY CENTERHAS EMERGED INBEIRUT, DUETO ACCOMMODATEA BROAD, SUSTAINABLEMIX OF FACILITIES WITH4.69 MILLION SQ MOF FLOOR SPACE.

Beirut city center enjoys a prime location at the heart of Lebanon’scapital. Sloping down towards the waterfront, the site commands fine views of the sea witha surrounding landscape of mountains and hills. It is easily accessible from all parts of Beirut,including port and airport. Major roads converge on it from its east, south and west, and lineits 1.5 km seafront to the north.

Continuously inhabited for more than 5,000 years, the site bears themarks of eleven civilizations, ranging from the Canaanite to the Ottoman. Beirut’s maritimeand trading legacy dates back to the Phoenicians. Its Roman law school was the mostprominent in the Empire. Its urban character and architectural style were formed during theOttoman period and the French mandate, when it became the seat of public institutions.

Independent Lebanon grew into a booming service economy, thanksto its inherent assets, educated population and liberal political and economic system. Beirutwas a lively, modern, cosmopolitan city, its city center a focus for regional trade, business,finance and tourism. Growth was thwarted at the onset of hostilities in 1975. With the returnto peace and stability, Lebanon’s economy re-emerged in the 1990’s, sustained by a nationalrecovery and development program. Massive public investment was coupled with macro-economic policies designed to stimulate private local and foreign investment. While Beirutcity center benefited from this favorable environment, its entire regeneration is beingachieved without recourse to public funds. In 2005, the country suffered a great loss with theassassination of former prime minister Rafic Hariri. Mr. Hariri was the godfather of nationalrecovery. To himwere owed the vision and inspiration for the rebirth of Beirut. In spite of thetragic circumstances, Solidere successfully pursued its efforts to make Beirut city center asought-after environment of the highest quality.

THEMASTERPLAN

Drawing on the site’s natural assets and rich heritage, the MasterPlan is a carefully formulated, detailed, coordinated and phasedaction plan for the traditional city center and its modern extensionon the waterfront.

The plan subdivides Beirut city center into tensectors, each with its own character. Some are previously existing cityneighborhoods brought back to life, others are defined by topographyor by newboundaries created in the urban fabric. The plan involves therecovery of the public domain, with the installation of a completeinfrastructure. It also provides an urban design framework forrestoration and new construction.

The plan reflects the site topography and naturalfeatures, protects views of the sea and mountains and creates publicspaces, including gardens, squares, belvederes, promenades andtrails. Recognizing the city’s heritage, it also unearths layers of itshistory. It preserves surviving buildings and townscape features andre-establishes the urban fabric and neighborhood structures. It ensuresthe harmonious integration of old and new, combining tradition withinnovation, control with creativity in architectural expression. With theprime objective of creating a vibrant city center, it accommodates abroad mix of land uses, including business, public, residential, hotel,leisure and cultural facilities.

The project covers some 191 ha (472 acres) ofland: 118 ha (292 acres) as the traditional city center and a 73-ha (180-acre) extension reclaimed from the sea. Close to 98 ha (242 acres) willconsist of public space, of which 59 ha (146 acres) in roads and 39 ha(96 acres) in landscaped open spaces.

Allocated for development are 93 ha (230 acres),including 22 ha (54 acres) of retained, public or religious property, withbuilt-up area (BUA) guidelines indicated in the table to the left.

This phase saw the completion of: infrastructure in the traditional citycenter and the treated part of the original landfill; detailed sector planning of existing and newdevelopment areas; landscaping and underground parking design and execution; historic corerestoration; renovation of the banking district, Starco and Lazariya commercial centers; northernWadi Abou Jamil, Zokak El Blatt and Saifi neighborhoods redevelopment; Beirut Souks designand underground construction.

New construction included Solidere’s UN House, Saifi Village, embassycompound, Rue de France multiuse complex; Bank Audi, Medgulf and Bankers’ Associationheadquarters, Monroe hotel, Al-Bourj and Atrium office buildings, the Consulting Clinics, Block24 and Parkview Realty residential buildings.

Still ongoing real estate projects involved predominantly residentialclusters in Saifi andWadi Abou Jamil; Beirut Marina facilities; residential and hotel towers facingBeirut Marina and waterside city park; and inception of other landmarks. Completed on thewaterfront are: marine works, defense structure, sea promenades and Beirut Marina; majoradvances in land treatment and reclamation.

Phase One1994 – 2004

This phase, which started with the launching of the Beirut Souks aboveground structures, will finalize the traditional city center by redeveloping the Saifi andWadi AbouJamil urban villages and establishing prime new areas in the Serail corridor, hotel district andGhalghoul sector. Its focus on the Martyrs’ Square axis and the New Waterfront District willintensify the thrust towards making Beirut city center a favored location to global businesses,financial and other specialized services and institutions, as well as a prime residential area,tourist destination and cultural hub.

Real estate development includes facilities around Beirut Marina and onthe Martyrs’ Square axis; high-density zones comprising the Beirut Trade Center, The Landmarkand other gateway towers on the southern edge of the city center; and northeast gateway towersmarking the point where the coastal highway terminates in the city center.

In the New Waterfront District, this phase involves finalizing masterplanning; completing land reclamation; infrastructure and landscaping design andimplementation; developing the eastern marina; coordinating with the port authority over thedevelopment of the first basin; and launching real estate developments with a distinctarchitectural style.

Phase Two2005 – 2024

SOLIDERE Solidere was initially capitalized with US$1.82 billion: US$1.17 billionas contributions in kind of property right holders, and US$650 million as cash subscriptionsfollowing an oversubscribed initial offering. After the retirement in 1997 of 17,000,129shares, representing recuperated properties, its capital now stands at US$1.65 billion.

Solidere’s duration was extended by decree 13909 of 2005 from 25 yearsto 35 years, starting from May 10, 1994, the date of its registration at the Commercial Register.

The Company has established a solid base for central Beirut prosperitythrough high value-added land development action, competitive real estate projects andproperty management services. Real estate projects are implemented directly, in jointventure with partners, and through or in liaison with other developers. Solidere offersdevelopers services ranging from real estate and architectural concepts to completedevelopment packages.

As lead developer and supervisory body, the Company controls the pace,components and quality of development. Solidere outsources construction to focus on its corecompetencies: managing real estate project development, marketing development land,marketing and servicing rental properties. The Company provides management and operationservices to public utilities, infrastructure, marinas, car parks and landscaped open areas.

Solidere recently expanded the scope of its activities beyond Beirut citycenter, to cover several urban and waterfront projects in the Middle East and around theMediterranean Basin region. Services provided to such projects include: master planning,urban design, infrastructure, landscaping and real estate design; project development; legaland corporate structuring; financial engineering; implementation; marketing and sales.

Floor Space sq m percentage

Offices 1,582,000 33.7

Residential 1,959,000 41.8

Commercial 563,000 12.0

Government / Cultural 386,000 8.2

Hotels 200,000 4.3

Maximum Total 4,690,000 100.0

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Solidere implemented civil works, including culverts, relating to powersupply, and installed the 66 and 220 KV power cables, a 220 KV link between the Beirut pineforest station and the city center, and a 240 MW substation transforming high-tension powertransmitted by Electricité du Liban into medium voltage; local transformers in turn convert itto low voltage electricity for domestic use. Most areas of the existing city center wereequipped with duct banks for its medium voltage cables, with Bachoura and north Saifi stillto follow.

Public lighting was installed throughout, with necessary meters, low-voltage cabling, lighting fixtures and feeder pillars. Tunnels were equipped with lighting,stand-by generators, control and safety systems. Civil works were also implemented fortelecommunications networks, with duct banks for low current networks, cable TV andtelephone services.

Solidere obtained in 1998 a build-and-operate license for broadband Broadband Networkdistribution of a converged IP network including high speed internet, internet protocol TV(IPTV), video on demand, video conferencing, data center facilities and virtual privatenetworking (VPN) for corporate clients. The Company signed in 2006 an agreement withOrange, a member of the France Télécom group, for the building and operation of a fully IPnetwork, using advanced telecom technology based on a fiber-optic backbone with dualconnection to each building in Beirut city center.

Deployment of the Solidere Broadband Network (BBN) was completedby end March 2007, after a slowdown due the 2006 summer war and embargo, with furtherdelay caused by ensuing political events. The pilot project started upon receipt of thebandwidth for testing from theMinistry of Telecommunications. The operationwas launchedonce the required bandwidth was obtained, allowing the provision of services to starteverywhere in September 2007, with the exception of the Riad El Solh, UN House and southMartyrs' Square areas, due to the sit-in at the time.

Solidere, under its unified communication network, is now able toprovide data (internet) and video (TV), operated and monitored from the network operationcenter (NOC) that is hosting its data center, call center (IPCC) and other equipment andservers for the different services. Beirut city center is thus being transformed into a 24-hourIT zone capable of attracting multinational companies and other residents who will benefitfrom the provision of multimedia and broadband communication services.

Hardscaping and street furniture wereupgraded at Solidere’s expense beyond the agreement with the State.Street and sidewalk paving, as well as streetlights, were designed tocomplement the character of each sector. Sidewalks were upgradedfrom concrete to granite tiles and kerbs.

Solidere undertook the integrated design ofstreet furniture, signage and public area lighting, and commissionedpublic art for the city center. Plaques with new postal codes wereinstalled on completed buildings. Development controls weregenerated in a public domain master plan established with the helpof Jean-Michel Wilmotte (France) and Ziad Akl. Street furniture beinginstalled based on the new designs includes street name signage instainless steel, benches, telephone booths, street kiosks, busshelters, café seating enclosures and advertising billboards. Thesignage manual prepared by Solidere received Municipality of Beirutapproval. Street name plates were erected in the conservation areaand Saifi. Pedestrian way-finding signage, 65 panels in total, wasinstalled in all areas. Beyhum street was equipped with new benches,bollards and waste bins. Renovation of the existing street furniturewill gradually be implemented according to the new designs, to beadopted everywhere else. Small advertising billboards for the publicdomain were delivered to theMunicipality, which leases them out foroperation. Large advertising billboards operated by Solidere wereinstalled on private property.

Solidere prepares development sites for investors wishing to developreal estate properties in central Beirut. Its activities in this respect involve town planning,parceling and urban management, site preparation, archeological investigation, and theimplementation of infrastructure, landscaping, hardscaping and street furniture. Thereconstitution of the public domain and the laying of infrastructure and utility networks,completed in the existing city center, will extend to the newwaterfront district. As per its 1994agreement with the Council for Development and Reconstruction (CDR), Solidereimplements these works on behalf of the State in return for an allocation of 29 ha ofdevelopment land in the waterfront district.

The initial master plan was amendedseveral times in the light of necessary changes to the waterfrontreclamation, more detailed urban studies and sector plans,reflecting Solidere’s own city-making experience in Beirut andchanging trends in market demand. The latest Master Plan updatesregarding the existing city center were issued in Council ofMinisters’ decrees in 2006.

Beirut city center has a 3.6-km ring road,8.4 km of primary roads, 16.6 km of secondary, tertiary and pedestrianstreets. Expansions to the prewar grid accommodate traffic andfacilitate land parceling for real estate development. Three major axesform the ring road system: George Haddad street to the east; thewidened Fakhreddine street to the west; Fouad Chehab avenue to thesouth, with a bridge doubled in capacity and new interchange andunderpasses providing fast access to airport, port, east, west andcentral Beirut. Avenues cut across the city center from north to south.Park avenue links the traditional city center to the hotel and waterfrontdistricts. New local streets were created in Wadi Abou Jamil. TheMartyrs’ Square axis links Damascus road to three major east-westboulevards: Weygand, Zeitouneh and Port streets, the latter widenedand extended towards Trieste street. With its western segmentoperational, and connecting directly to the citywide corniche system,the city center corniche is to skirt the waterfront district alongside abroad, terraced, pedestrian esplanade.

Among the Master Plan amendments of2006 are two major road improvements. One is the road linking thenorth of Martyrs’ Square to Trieste street. Michel Macary (France), incoordination with Dar Al-Handasah and Solidere, completed theconcept design for the crossing from Byblos street, which includesbridging part of the ancient Tell area in order to preserve archeology.The other is an improvement of the George Haddad - Fouad Chehabjunction, creating grade separation at the intersection. The project,including the tunnel design, awaits CDR committing funds for theproject and entrusting Solidere with its implementation.

In Bechara Al Mouhandess pedestrian streeteast of Maarad, overlooking Hadiqat As-Samah, Solidere had earliercompleted the part along the restaurants and cafés, where half of thesix-meter space is used as terraces, and the continuation of thepassageway until Amir Assaf mosque. The retaining wall until theSt George Greek-Orthodox and St Elie Greek-Catholic cathedrals wascompleted by end October 2007.

The city center water supply networkconsists of 30 km for drinking water and 38 km for irrigation. The waterdisposal system comprises a sewage pumping station, 28-km sewagepiping and 26-km storm water drainage.

IN RECONSTRUCTING BEIRUTCITY CENTER, SOLIDERE HASBUILT ON THE INTRINSICQUALITIES OF THISEXCEPTIONAL GEOGRAPHICAND HISTORIC SITE ANDGREATLY ENHANCEDTHROUGH SOUND URBANPLANNING AND DESIGN, NEWINFRASTRUCTURE AND FINELANDSCAPED PUBLIC SPACE,MAKING IT A CHOICELOCATION FOR LIVING ANDWORKING, AS WELL AS ACULTURAL, TOURIST, LEISUREAND SHOPPING DESTINATION.

MASTERPLANNING

INFRASTRUCTURE

HARDSCAPINGAND STREETFURNITURE

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Among the underground public parkingfacilities provided by Solidere, the Beirut Souks car park, with a finalcapacity of 2,500 spaces, is currently providing 2,000 spaces to Foch-Allenby users, with the four-level Weygand street car park topped by agarden providing another 108 spaces.

The block 93 private car park jointlydeveloped by Solidere and owners of neighboring properties, hasbecome operational in the 320-space section owned by Solidere. Dueto serve the north Foch-Allenby area, the car park occupies the spacebelow Harbor Square.

Two car parks under public property inMartyrs’ Square and near the Grand Serail, initially tendered out asBOT projects by the Council for Development and Reconstruction(CDR), have not yet been implemented. The winning team of theMartyrs’ Square axis international urban design competitionintegrated an underground parking structure concept design withinthe landscape scheme for the square, to re-launch the project on aBOT basis. The Council of Ministers had instructed CDR in 2005 toproceed with the design and construction of the Riad El Solhunderground car park, also under public property, in coordinationwith Solidere. However, the Municipality took the resolution not toexecute the project.

Pending completion of sufficient spaceunderground, 20 vacant lots assigned for surface parking provide3,500 car spaces servicing up to 10,000 customers per day. Theyinclude a car park in the eastern section of the waterfront district witha free shuttle service to the existing city center. Surface parkingmovesto new locations to make room for development.

Solidere operates and maintains thecompleted infrastructure and reconstituted public domain untiltheir delivery to the State. These services cover: tunnels andunderpasses, roads and sidewalks; street furniture, traffic lights andstreet lighting; utility ducts and manholes, sewage pumping stationand network, storm water networks; irrigation station and network,trees and landscaped open spaces.

As per Law 117 of 1991 and the agreementwith the State, ratified in decree 5665 of 1994, infrastructure and thepublic domain are to be delivered upon completion to CDR,representing the State. All the works above ground have beendelivered to the public authorities. They include roads, tunnels,sidewalks, street furniture, signage and lighting. Electricity networkswere delivered everywhere except for north Saifi, Bachoura andTrablous street. However, Solidere continues to operate the controlroom in tunnels, and remains in charge of the irrigation network,streets and open spaces. Solidere documents damages occurring inBeirut city center, including those due to car accidents or vandalismacts. The Company sends reports to theMunicipality to that effect, withlists of repairs that need to be done and a mention whether thedamages result from accidents or from wear and tear.

Since 2006, the Municipality has beensubcontracting the operation and maintenance of handed over works, under Solidere’ssupervision. The stormwater network is maintained by the Municipality, with Solidere doingquality control on the work done by the contractors and subcontractors. Solidere is stillmaintaining the sewage pumping station, andwill continue to do so until such time the BeirutAdministration (Mohafazat) assigns an operation and maintenance team of its own.

Solidere continually upgrades itssite logistics services: cleaning, pest control, safety,security and traffic management. In a city center imageimprovement program, undertaken in collaboration withparticipating property owners and users, Solidere isimplementing the following services, to supplementthose provided by the Municipality: surveillance security;door-to-door waste collection; street and sidewalkwashing and street furniture cleaning; pest control;maintenance of open spaces, trees and planters; and streetdecorations during holidays.

Solidere is also installing a trafficcontrol system that, in addition to phasing traffic lights,monitors drivers violating speed limits. Control panels andcameras have been installed at two intersections so far, withothers to follow.

The Company is also installing a CCTVsurveillance system to cover all sectors in the BCD. The firstphase of the system covering the Foch-Allenby and Saifisectors became operational in 2006. The Zokak El Blatt,Bachoura, Wadi Abou Jamil, Beirut Souks and Beirut Marinaareas were completed in April 2007. The installation of CCTVin the Nejmeh, Maarad, Riad El Solh and Lazariya areas,initially scheduled for end May 2007, was delayed in view ofthe political situation. Once completed, the CCTV surveillanceand traffic light control systems will be handed over to theconcerned public authorities.

OPERATION ANDMAINTENANCE

PARKINGFACILITIES

21


Extensive archeological excavation andresearch of sites throughout the city center has yielded evidence oncivilizations spanning 5,000 years. Solidere has supported therescuing and preservation of this heritage, financed the teamsworkingunder the supervision of the Directorate General of Antiquities, andprepared plans and a signage system locating all key historic sites ona 3.5 km Heritage Trail.

Research proceeded in 2007 on eightarcheological sites in public spaces, development lots, or built lotsunder restoration. The documentation, digitizing and evaluation of theresults provide data for a new synthesis of Beirut’s urban history.

New discoveries have confirmed the location ofRoman Beirut’s major porticoed streets. Excavations in theWadi AbouJamil area yielded vestiges of the ancient Hippodrome where chariotraces took place, and to the large club buildings used by participantsin the races. The club buildings were situated north of the track, whilethe seats were situated to the south, built on stepped platforms cut outof the Serail hill rock. The archeologists have uncovered two parts ofthe Hippodrome’s central median, or spina. The earlier one is part ofthe program to make ancient Beirut a Roman colony. The later one, ofmore monumental nature, may have been sponsored by EmperorHadrian and built in 130 A.D. Subject to agreement with the DirectorateGeneral of Antiquities, these artifacts are to be incorporated withinWadi Abou Jamil Square.

Solidere continues the integration ofarcheological sites within the city fabric. Elements of the ancientharbor walls are to be incorporated in Khan Antoun Bey Square and inHarbor Square on block 93. The landscaping of Castle Square inblock 94 has started with the conservation of ruins containing majorelements of the local geological and urbanmemories. A second phaseof this project, the Belvedere Garden, is now in design. Themain focusremains Hadiqat As-Samah and the Heritage Trail. A city historymuseum near the ancient Tell, to be the starting and ending point ofthe Trail, will bring to life Beirut’s 5,000-year heritage and celebratemajor Beirut finds.

Articles by archeologists of the fourteen teamsthat worked in Beirut city center continue to be published in scientificjournals, and a number of young Lebanese and foreign archeologistshave completed their dissertations attempting to synthesize part ofBeirut’s history.

With green public space covering 39 ha ofland, the city center, representing 10% of municipal Beirut, willcontain half of the capital’s green areas. Solidere has beenvindicated in its quest for quality and unique integration of publicdomain design accompanied by public art.

Fine public spaces have exerted a significantimpact on development land sales. Encouraged by the Mediterraneanclimate and lifestyle, café society and social promenading withinpublic spaces has also made the city center a most active destinationfor Beirutis as well as for visitors from the rest of the country, from theentire Arab region and the wider world.

The public domain is designed to comprise 60parks, gardens, squares, pedestrian areas, quaysides and seafrontpromenades, themost important of which is thewaterside city park; aswell as pedestrianized areas and streets lined with trees orincorporating planters or wide medians landscaped with trees, shrubsand colorful plants.

Among completed spaces: Gibran Khalil Gibrangarden facing UN House, Roman Baths garden and public space,Fouad Chehab gardens overlooking the city, Riad El Solh Square,Debbas Square and Wadi Abou Jamil Square. Adjoining public andreligious buildings are landscaped spaces in Nejmeh Square, facingthe Municipality, cascading under the Grand Serail with Omar Onsigarden at street level, along the CDR stairs, between the Evangelicalchurch and National Music Conservatoire, near St Elie church in WadiAbou Jamil. Saifi Square and Omar Daouk Square provide otherlandscaped areas, to which are added private spaces in Saifi, Zokak ElBlatt and Mina El Hosn near Planet Discovery. Other works involvedupgrading Amir Amin Square in Bachoura by adding a water feature,as per a Vladimir Djurovic Landscape Architecture design; andproviding Samir Kassir Square on Weygand street with a sculpture byLouis Derbré (France); the latter garden received a 2007 Aga KhanAward for Architecture.

In Wadi Abou Jamil, the design for block 65 wascompleted, with a redesign option under way by the Royal Hotel andResorts. Olivier Vidal (France) was commissioned by Solidere todesign the Bab Idriss Square. The square will incorporate sculpture byXavier Corbero (Spain) to mark the location of Bab Idriss and access tothe Roman Hippodrome.

Works in other areas include commissioningtwo artists for a concept for the sculpture in the Rafic Hariri gardendesigned by Djurovic. Its construction by the contractor, Target, wasinterrupted by inaccessibility to the site due to the political situation atthe time. The upgrading of Nejmeh Square and of the CDR open spaceon the Serail hill, for which concept designs were respectivelysubmitted by Djurovic and by Frédéric Francis, were delayed forsimilar considerations.

The design of Gebran Tuéni memorial gardenalong Weygand street, voluntarily offered by Djurovic, needs to betotally revised to make room for a public transport drop-off at thatpoint, as well as access to Le Gray Hotel.

Designed by Gustafson-Porter (US-UK), HadiqatAs-Samah (Garden of Forgiveness) is to be constructed in a 2.3-ha siteon which Solidere has relinquished its development rights. Thegarden, overlooked by several places of worship and with a designreflecting Lebanon’s varied landscape and numerous historical layers,will be a place of calm reflection.

The building permit for the garden is about to beissued. Solidere is carrying out all the works that are part of the publicdomain. The western terrace wall was completed. Continuation of thepedestrian street, including the belvedere to the south of St Georgecathedral and the passages leading to Amir Assaf mosque, as well asthe street between Al Amin mosque and St George cathedral, werecompleted in June 2007.

Gustafson-Porter also completed the conceptdesign of the garden on municipal land adjoining St Elie Greek-Catholic cathedral. The project is to be presented for Municipalityapproval before proceeding further with the design.

The winning Greek team included in theirpresentation to the Martyrs’ Square axis competition a concept designfor its landscaping. The design will evolve in coordination withSolidere and Beirut Gate, developer of eight lots on the southernsection of the axis. The consultant completed the preliminary design ofthe square together with the concept design of the underlying car park,and is about to proceed with the square’s detailed design. To improvethe initial design, Solidere approached Xavier Corbero to propose, incoordination with the Greek team, an artistic treatment of the car parkventilation shafts, comprising a tall sculpture south of the square anda number of small sculptures along the Martyrs’ Square axis.

ARCHEOLOGY

LANDSCAPING

fig.1 Dar Al-Handasah, Square 25fig.2 Public space onGeneral Fouad Chehab avenue

fig.2

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Gustafson-Porter designed the Old ShorelineWalk, a sequence of connected spaces representing the submergedold shoreline. All Saints’ Square, Shoreline gardens (blocks 11 and25), Zeitouneh Square and Santiyeh gardens, in Sectors B, C and E(hotel district, Serail corridor and Souks district), are the maincomponents of the first phase of this project. A later phase, startingwith Jean-Paul II Square, will prolong this walk into the OttomanWall walk in Sector D (Waterfront District). Progress was achievedon the project detailed design.

The bid for Zeitouneh Square was launched,with the participation of four contractors: Maroun Abi Ghanem,PEG, Target and Sabeco. Tender packages for All Saints’ Square,Shoreline gardens and Santiyeh promenade and garden werereceived by mid February 2008. The preliminary design for theSantiyeh promenade, based on a new concept, was approved bySolidere and by the concerned religious authority, the Mufti. Thedetailed design is currently under process.

Gustafson-Porter also worked on the conceptdesign for the hotel district corridor landscaping, the culmination ofa series of south-to-north open spaces serving as view corridors,including the elevated Mina El Hosn Square. The part of the squarefalling between the block 17 eastern and western plots isundergoing detailed design by Djurovic.

Machado and Silvetti Associates (US) finalizedin 2005 the design of Castle Square on block 94. The designintegrates a promontory wall at the citadel level, with pedestrianpassages offering fine views of the square and of the port first basin.Solidere completed in 2006 the consolidation and restoration of thecitadel. The tender, launched with the participation of TargetEngineering, AG Contracting, Nassar Trading and ContractingCompany, Khoury Contracting Company and PEG, had resulted inPEG winning the construction contract.

Preliminary design is proceeding for the adjacentBelvedere Park, on block 95, which overlooks the ancient Tell andincludes a garden with historic remains, following approval of itsconcept design by the Directorate General of Archeology.

The preliminary design for Harbor Square,located on block 93 over part of the ancient harbor, was completed byGustafson-Porter in July 2007. The detailed design scheduled forcompletion by mid 2008, includes part of the reconstructed ancientharbor wall, water features, extensive pergola shading and café seating.

Work started on the Heritage Trail pedestriancircuit, with information panels under preparation, together with atourist map of archeological sites and historic buildings.

Landscaping work planned for the future in theexisting city center includes: the next stage of design ofMartyrs’ Square,design completion implementation of the Machado Silvetti Belvedere,landscaping by the Greek team of the northern part of Martyrs’ Square.

fig.1 Castle Square and Castle Belvedere,Machado and Silvetti Associatesfig.2 Wadi Abou Jamil Square, ThibaudUrbanisme et Paysage / Rafic El Khouryfig.3 Fouad Chehab gardens

fig.3

fig.2

fig.1

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WATERFRONT

DISTRICT

THE WATERFRONT DISTRICT IS TAKING SHAPE ASSOLIDERE PROCEEDS WITH ITS TREATMENT ANDRECLAMATION, MASTER PLANNING AND LANDDEVELOPMENT, WITH A VIEW TO THE PROMPTDELIVERY OF THE SITES TO INVESTORS. THE DISTRICTHAS ALREADY ELICITED STRONG INVESTOR INTERESTAND LAND SALES, TOTALING 326,000 SQ M BUA,HERALD ITS REAL ESTATE DEVELOPMENT PLANNEDTO REACH AN AGGREGATE 1.7 MILLION SQ M BUA.

Destined to be a prime, active, multiuse district with extensivegreen areas and bold architecture, the Waterfront District commands fine views of thesea, with hills and mountains across the bay to the northeast. As an urban destination,the district comprises the termination and climax of Beirut’s citywide seaside drive, thecorniche. When completed, it will contain a city waterside park, two marinas, quaysidepromenades and 29 ha of development land.

Altogether some 73 ha of reclaimed land are enclosed within aterraced sea defense system designed to withstand centennial storms. Its unique caissonstructure is limited in height to 5.5 m above sea level to protect sea views from deep withinthe city’s historic core. The sea defenses provide harbor enclosures for the two marinas.

Beirut Marina is edged by a public town quay, designed to housewaterside restaurants and shops, alongside a yacht club and apartments. A pedestrianbridge will link it to the hotel district. Providing an uninterrupted 3.5-km extension of theBeirut shoreline, the marina, harbor quaysides and corniche promenades will provide morethan four times the area of seafront public space currently available in the Beirut peninsula.

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In 2006, Solidere commissioned urban designconsultant Ian Hogan to undertake a planning exercise for theWaterfront District. An intense interest was perceived on the part ofinvestors, who were pressing Solidere to buy lots in the district.The Solidere proposal resulting from this planning exerciseaddresses its concern about Beirut being turned exclusively into aresort and residential center, with the disadvantages of extensiveabsentee homeownership. Solidere is keen to counteract this trendby encouraging the development of a comprehensive mixed-usewaterfront district. This also falls within the Company’s strategy tomarket and promote Beirut as a corporate international businesscenter, based on the city’s lifestyle assets and skilled humanresources. Beirut’s competitive edge lies in the qualities of itspeople and services. Discussion is proceeding with the governmenton providing business incentives within a defined area of thewaterfront district. Consistent with Solidere’s mixed-usephilosophy, the incentives are planned to apply not only to offices,but also to all supporting uses, including hotels, servicedapartments, retail and other services. Employment generation andother effects are expected to have a big impact on the Beiruteconomy. At full build-out, the special business district is plannedto create some 40,000 new jobs.

The Master Plan amendment for the Waterfront Districtproposed by Solidere was approved by the Directorate General for Urbanismin January 2007 and sent to the Municipality and the Council forReconstruction and Development. However, it is still awaiting Governmentratification, to be issued in a Council of Ministers’ decree.

The amended Master Plan creates two poles, focused ontwo groups of towers that constitute very dramatic landmarks, within aperimeter of buildings conforming to the previous Master Plan’s streetwallvocabulary as well as new skywall controls that condition the profiles of towerswithin the clusters.

The pedestrian connectivity within the Master Planamendment forms a branching spine, which starts from the Souks through afootbridge and continues north towards the sea. A special business district,planned to comprise a group of towers with heights ranging from 140 to 220 m,is created on either side of this central boulevard and around the new square toits east. Within the spine, the street is to be widened to accommodate a light railtrain. The detailed alignments of the LRT are under study by the Greek team,winner of the Martyrs’ Square competition. A new avenue, parallel to the centralboulevard and to its east, features arcades providing an architectural link with theexisting Maarad-Allenby axis.

A second, easterly cluster of higher towers, centered onan axis aligned on the view of Mount Sannine, is expected to be mainlyresidential, with hotel, serviced apartments, supporting retail, and alsopossibly some office use. This cluster is carefully controlled to enhance theoffshore view terminating the Martyrs’ Square axis, with towers leaving spacebetween them to give glimpses of the sea.

The proposed amendment involves a transfer to the NewWaterfront District of some 110,000 sq m of BUA, equivalent to the areas loston the Martyrs’ Square axis, in sector H, as well as in Wadi Abou Jamildevelopments and in 178 Saifi Village, where one floor had to be removed tocompensate for higher ceilings destined to improve the residentialenvironment. The principle of BUA transfer between the various sectors isrecognized in the BCD Master Plan and detailed regulations.

SOLIDEREMASTER PLANPROPOSAL

The Waterfront District consists of Sectors A and D. Sector Acomprises the waterside park, corniche, land, quays and breakwater around BeirutMarina. Sector D comprises the development blocks and public domain extending northof the Souks district to reach the corniche promenade, and east of the waterside park toreach the Beirut port first basin and the planned eastern marina. In response to investors’early declarations of interest, Solidere has engaged since 2001 in a serious planningexercise for Sectors A and D, continually improving this planning and seeking approvalfrom the public authorities for its proposals regarding the district, together with relatedgeneral and special regulations of the BCD Master Plan.

The current Waterfront District master plan, ratified in Council ofMinisters’ decree 15803 of 2005, was a development by urban design consultant IanHogan of the 2001 planning study by a consortium of US firms: Skidmore Owings &Merrill (SOM) for urban design, Sasaki for landscaping and Parsons Brinckerhoff fortransport planning.

The plan aims at turning the new waterfront into the destinationand climax of Beirut’s citywide corniche. Upon completion of the Beirut Marina townquays, corniche promenade, eastern marina quayside and Beirut port first basinpromenade, the city center will provide an uninterrupted extension of the Beirutshoreline. The terraced corniche promenade, over 1.3-km (0.8-mile) long, with a widthvarying between 45 and 110 m, will be a socially active pedestrian arena, with views tothe sea, Jounieh bay and Mount Sannine.

The street network was designed to accommodate an urbanFormula One Grand Prix circuit. This received FIA’s preliminary technical approval in2002. The track is to run clockwise along 4.8 km with the starting grid on the coastalcorniche. Where necessary, particularly at bends and chicanes and over-runs,construction works are to dismantle sidewalks, widen carriageways and install safetybarriers and debris fences prior to the race event. On the 40-m wide upper cornichepromenade, temporary stands are to be installed to accommodate spectators.

In Sector A, leisure, sporting and tourist activities are the dominantones. Decree 15803 of 2005 lists: an outdoor amphitheater in the waterside park;infrastructure and installations for Formula One racing; buildings for the yacht club andrelated services, hotels, tourism, exhibition centers, sports courts, restaurants and cafés. TheBeirut Marina yacht club building was subject to a maximum height of 11 m above cornichelevel. This stipulation was amended in Council of Minister’s decree 16546 of March 9, 2006,which increased the yacht club maximum height to 13 m. No permanent construction isallowed on the marina quays and breakwater, apart from infrastructure or buildings relatingto port management, such as customs, immigration, petrol station or car parks. Restaurantsand shops built as temporary structures along the town quay are not to exceed the height ofthe finished corniche promenade above.

Planned as an exemplar of modern development, Sector D is amultiuse district with a wide range of commerce and retail services, office, tourist and hotelspace, convention centers, exhibition and cultural facilities, together with extensiveresidential development. It also includes a part of the Formula One track. The provisionsrelating to developments on the Beirut Marina are also applicable on the eastern marina.

Development lots should have the following specified minimum areas:750 sq m subject to encompassing an 18 x 18 m square, in sub-sectors Da, Dc and Dd;1,500 sq m subject to encompassing a 25 x 25 m square, in sub-sectors Db and De. Twostreetwall controls are applied and view corridors are created to preserve sea and mountainviews. SW5 requires a 3 m setback at the 36 m height. SW6 is similar to SW5 with theadditional requirement of a 5.5-m high arcade on the street frontage. Building heights andenvelope controls ensure a careful distribution of floor space. The majority of developmentis at medium density (40 or 52 m height), with a limited number of high-rise sites (90, 120 and160 m height) planned in distinctive locations and landmark buildings framing spectacularviews to the sea and mountains. The road widening and addition of new roads in the sectorplan result in larger areas dedicated to public domain. The total built-up area remainsunchanged, with no increase in development areas allocated to Solidere.

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MASTERPLANNING

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Beirut Marina hosted 136 boats in the lastyear, having entered its sixth season in April 2007. Its capacitystands at 186 boats, ranging from 5 m to 65 m, with 75% of themooring area accommodating boats of more than 25 m length.

By end 2007, Solidere had signed medium- orlong-term leases (three, five or ten years) for 32 boats, and one-yearleases for 104 boats. Temporary quayside offices have beenprovided for harbormaster and public authority activities, pendingcompletion of the marina development based on Steven Holl’sdesign. Civil works for the marina were part of important marineworks delivered in 2002, as per the 1994 agreement with the State,and also comprising a breakwater and a two-line defense structureprotecting the marina and the waterfront. The US$298 millionproject cost was partly financed with a 10-year US$107.3 millionloan concluded in 1996 with BNP Paribas and Banque Indo-Suez,with US$7.3 million COFACE guarantee. Repayment of the loancontinued in 2007, with no amount outstanding at year end.

BEIRUT MARINA Beirut Marina was put at the disposal ofSolidere in 2002, as per a 1997 agreement with the State grantingthe Company the right to operate the marina and below-cornichecar park for a 50-year period. Solidere undertook at its ownexpense, and with the relevant public authorities’ supervision, theconstruction of necessary installations, including access andcirculation roads, surface parking on the breakwater, belowcorniche car park, and on-site development: pontoons, utilities forthe boats, harbormaster, customs and immigration facilities. It alsoissued marina by-laws addressing such matters as general servicesadministration, operation, boat traffic, pedestrian and vehicularcirculation, environmental protection and public safety.

Completed works include pontoons, mooringand service bollards, utilities and network ducting, designed byGroupe Camille Rayon (France) together with an additional quayproviding improved shelter in times of northerly winds. Theconnecting of utilities: water, electricity, fire line, telecom/internet,cable TV, was delayed by the closure of the north quay access afterthe explosion of February 2005, which also caused damage to theelectricity room and water tank. Only in December 2005 wasSolidere allowed to withdraw the damaged standby generator andelectric switches for repair. The road access was opened on June 6,2007. Repairs were later completed for the standby generators,switchgears and Electricité du Liban (EDL) transformer room. A gasstation for diesel and fuel was installed, as well as CCTV and safetysigns for marina users. In time for the new season, the marina wasconnected to EDL power by mid-February 2008 and to the BeirutBroadband Network together with IPTV by end April. A new officefor the coast guard was installed at Beirut Marina’s southernentrance, which will also feature a green area.

Solidere is awaiting the building permit forthe 400-space below-corniche car park designed by DarAl-Handasah. The issuing of the building permit will allowcompleting the detailed design, launching the tendering processand starting construction works.

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Phase Two of land reclamation covers 18 ha of land, plus extensionsbelow sea level, and involves the excavation, sorting and treatment of 5 million cubic metersof debris and waste materials. The design-and-build contract was awarded to RadianInternational (US). The works, started in April 1999, were supervised by Fairhurst International(UK) until October 2005, and controlled by Bureau Veritas (France).

The US$56 million project was financed by means of three bank loans,with a consolidated repayment schedule. A six-year, locally syndicated loan of US$22 million,concluded in March 2000, financed its local content. The loan was fully drawn and entirely repaid.On its US content in equipment, engineering and construction services, the project benefitedfrom US$14.7 million in export credit financing and US$10 million in additional local financing,concluded in 2001. These amounts were fully drawn, and US$7.04 million was outstanding byend 2007.

The project was scheduled for completion in April 2004. However, theRadian contract was the subject of a dispute which went in 2003 before an internationalarbitration tribunal under the rules of the International Chamber of Commerce (ICC). Thetribunal award, issued in July 2004, required Radian to remedy the defects in the works atno cost to Solidere, cover all arbitration legal costs, and provide Solidere with a planshowing how Radian proposed to continue the works to comply with the contract. Thefailure of negotiations was coupled with the contractor’s suspending works in February2005, ignoring all instructions to return to work, and refusing to reimburse Solidere's legalcosts. The Company terminated the Radian contract in February 2006. Both Solidere and thecontractor filed counter arbitrations against each other that were still pending as ofDecember 31, 2007. The arbitrations are currently in a jurisdictional phase with a partialaward relating to jurisdictional issues expected in the very near future.

Solidere was recently approached by Radian and its mother company,URS, for negotiations on a possible settlement. As a result of these negotiations, asettlement was reached, whereby Radian - URS accepted to pay Solidere an agreed amountas final settlement of all Solidere claims. A term sheet was signed to this effect and finalarrangements are being prepared for the execution of a settlement agreement and thesubsequent cessation of all arbitration proceedings.

LANDRECLAMATION

Solidere had taken measures on the ground to expedite completion ofthe project, informing investors about the planned timing of delivery of development land.A fast track approach was adopted, with Hornagold & Hills International - H2i (UK) asconstruction manager. The project was split into four operations packages, to be executedby separate contractors. These include Société Contemporaine de Développement, Assaf &Coex, Alfarah Co, and Lechbenberg (Germany), which studied the possible options fordealing with the leftover stockpile of plastics.

The 2006 summer war, added to the legal issues, delayed operations.But the year 2007 saw the completion of all excavations, the processing of the materials andrapid advances in backfilling, leveling and consolidation of clean material at the end of thereclamation and sorting process. The waterside park site was backfilled with clean andprocessed soil, clearing the view for end-users of the hotel district developments facing thesite and for Beirut Marina boat owners. Clean imported material was used for the mainroads, one extending Park avenue along the eastern edge of the park and the otherextending Patriarch Hoyek street; as well as in the backfilling of the water basin excavatedto seabed level, and of the third main road which forms a branching spine due to startopposite Khan Antoun Bey Square, in the Beirut Souks, and continue north towards the sea.

All earthworks originally part of Radian’s contract (excavation, sorting,processing, backfilling) were thus completed by end January 2008. Backfilling works to closethe open water channel along the caissons will be completed by end June 2008. Thebackfilling of surface areas is in progress. Works are also under way to backfill the sub-baselayers of streets and roads, as per the detailed master plan.

Ongoing remedial works include monitoring boreholes, ventingtrenches, and gas remediation measures to ensure compliance with international norms andspecifications of backfilled materials. MORES (Lebanon) was assigned as environmentalconsultant for remediation and treatment, in charge of monitoring the generation of landfillgas from 70 bore holes and proposing remedial measures.

Longitudinal venting trenches were executed to help relieve gasesgenerated in backfilled materials placed by Radian prior to their contract termination.Radian’s inadequate dealing with the gas issue had been at the heart of the dispute withthem. Radian alleged that there was no problem with gas, but Solidere later found problemswith gas generation below sea level. They did not have a program for dealing with the gasissue; later, upon Solidere’s insistence, they presented a program ending in 2013, which wasunacceptable in view of the commitment made to some investors who bought developmentland to deliver those sites early in 2011.

The sorted plastic stockpile was successfullyrelocated to a disused quarry site outside Beirut, in accordance withpermits issued by concerned public authorities and as perspecifications by the Ministry of Environment and the engineeringoffice of Rafic Khoury and Partners. The backfilling of sortedplastics in that disused quarry was fully supervised and monitoredby the Ministry of Environment and its appointed consultants.

Pending the delivery of all Waterfront Districtsites for infrastructure, development and public space, an area in theeastern part of the district was leveled, equipped with temporaryroads and parking areas, and leased to Beirut International Exhibitionand Leisure Center (Biel) until 2013. Activities hosted in temporarystructures currently include exhibition halls, conference areas, abanquet pavilion and a seaside restaurant.

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In 2007, Solidere started the process for theconcept design for infrastructure, hardscaping and landscaping. Inspite of the delivery of the Waterfront District sites, this process hadbeen delayed, pending the issuing of a Council of Ministers’ decreeapproving Solidere’s Master Plan proposal for sectors A and D.

Once the decree is issued, Solidere willcommission the infrastructure design, based on the prepared scopeof work. A consultant will be assigned as lead designer, withWilmotte for street furniture and other consultants for specifictasks. Solidere may benefit from its cooperation with Arup (UK),one of Solidere International’s consultants, to improve itsguidelines for infrastructure design in the New Waterfront District.The design is expected to involve potential application of valueadded services that include provisions for bus-based publictransport as well as a tramway or light rail reservation linking withthat of the Martyrs’ Square axis.

Concerning landscaping, a limited internationalcompetition, engaging some of the world’s leading landscapearchitects, will be launched to design the 70,000 sq m waterside park,and the corniche promenades, that are to constitute the city center’smajor contribution to Beirut’s public domain. The brief for thiscompetition is underway. Other green areas will be designed byseparate consultants, with the Ottoman wall by Gustafson Porter.

INFRASTRUCTUREAND PUBLICSPACE

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THE RESTORATION OFBEIRUT CITY CENTERHAS CONFIRMED THESUSTAINABILITY OFTRADITIONALDISTRICTS ANDHERITAGE BUILDINGSAND THEIR GREATPOTENTIAL FORCREATING VALUE,ONCE THEY AREADAPTED TOTHE NEEDS OFCONTEMPORARYLIFE AND BUSINESS.

Beirut historic core has a rich heritage of religious, public,institutional and commercial buildings. Widely recognized as a conservation showpiece,this ‘vieille ville’, with its modern amenities behind beautifully renovated façades, haswitnessed a high demand for a broad range of office, retail, cultural and recreationaluses. The peripheral neighborhoods of Saifi, Wadi Abou Jamil and Zokak El Blatt, havere-emerged as urban villages.

In the Master Plan, 265 buildings and 27public or religious buildings were retained for preservation. Thesewere carefully restored in accordance with a set of rules establishedby Solidere, in cooperation with urban planning authorities, andinvolving sector plans and restoration guidelines.

Restoration briefs established for the retainedbuildings were based on architectural and photogrammetricsurveys, damage assessment and historical research on originaldesigns and materials. The briefs provide guidelines for articulatingthe design and restoration strategy to be adopted in each individualcase, and are stricter for those buildings deemed of heritage orarchitectural value. Projects go through preliminary designapproval, restoration permit issuance, mobilization of site works,façade and material sample approval, site inspection and finallyoccupancy permit procedure. Solidere has a dedicated team tomonitor implementation.

Stone repair was important in the Foch-Allenby and Nejmeh-Maarad areas, notable for their faithfulreconstitution of elaborate façades and their high quality stonemasonry. City center restoration combines authenticity with aprogressive outlook. Buildings are rejuvenated through the use ofskylight atria, roof gardens or glazed roofs. Interiors are fitted withmodern equipment for functionality, comfort and efficiency. Inresidential neighborhoods, this is allied with a sensitivity to theMediterranean typology. In office buildings, open plan designallows optimal and flexible use of floor area. Restored buildings aremaintained on a regular basis. To that effect, owners provide theBeirut Municipality with a signed commitment to undertake generalcleaning and façade maintenance every five years.

RESTORATIONPROCESS

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Solidere has successfully completed therecuperation process, giving former owners and tenants theopportunity to regain their rights in the buildings retained forpreservation. Besides fulfilling the requirements that apply to allrestoration projects, recuperation contracts outlined the financialrights and responsibilities of involved parties, be they returneeowners or tenants.

At the end of the recuperation process, 146built lots had been recuperated. Of this total, 126 buildings are nowfully restored and two are under finishing. In Mina El Hosn, lot 702,designed by Jean Harfouche as a residential building, offers3,032 sq m of floor space; Star Tower on lot 121, designed byNatcon as a hotel with 4,762 sq m of floor space, is underrefurbishment by the new owner. Seven buildings are underrenovation. In Marfaa, El Patio hotel, designed by Joe Chehwan onlot 1144, has a floor area of 2,958 sq m; the Municipality Annex onlot 243, designed by Nabil Azar as an office building, offers5,179 sq m of floor area; and lot 1353 Islamic Wakfs building,designed by Michel Barmaki as an office building, has 2,098 sq mof floor space. In Mina El Hosn, the Besançon School extension onlot 1024 is designed by Tony Haddad with 7,015 sq m of floor space;a private residence on lot 771, designed by Pierre El KhouryArchitect, covers 2,054 sq m of floor space. Two recuperatedbuildings were brought by Solidere and sold to investors as newdevelopments. Finally, four lots are under permitting at theMunicipality of Beirut, while one is under design and six arestopped for various legal problems.

Of the retained built lots whose ownershipdevolved to Solidere, 37 original lots, regrouped into 31 lots, weresold 'as is', while one was leased 'as is' to be restored by its user.Restoration is proceeding on the part of buyers / users, with 29 builtlots ready, one under renovation and one under permitting atBeirut Municipality.

RECUPERATEDAND SOLDBUILDINGS

Solidere took the lead in the restorationprocess, undertaking showcase work in its properties and closelymonitoring other parties' projects.

The 44 built lots retained by Solidere wereregrouped into 41 lots, including five co-owned buildings. Of these,37 lots were the object of restoration by the Company. The otherfour are being restored by third parties, respectively co-owners andleaseholder, with lot 164 Saifi completed, lot 1042 Mina El Hosnunder restoration, lot 1261 Mina el Hosn under permitting at BeirutMunicipality, and lot 996 Mina El Hosn on hold for legal problems.In addition, Solidere undertook the restoration of two lots on behalfof the Islamic Wakfs, with lot 141 Marfaa completed and lot 1353Marfaa under renovation.

By year end, 26 buildings had been restoredby Solidere: 13 residential buildings in Saifi, Wadi Abou Jamil and Zokak El Blatt; and 13for office use with retail at street level in the Maarad and Foch-Allenby areas, whichinclude five built lots (six buildings) serving as Company premises.

Restoration is proceeding in 11 Solidere built lots, with five at theconstruction stage, one under permitting at Beirut Municipality, and five demolished forstructural reasons.

Solidere leases space in its restored buildings: 72 agreementsrelating to commercial buildings or sections thereof, and 129 agreements relating toresidential properties, had been signed by end 2006. This had resulted in the occupationof around 19,266 sq m of commercial space and 23,751 sq m of residential space.

SOLIDEREBUILDINGS

fig.1 Allenby streetfig.2 Lot 702 Mina El Hosn, Army streetfig.3 Lots 671, 1021 and 1144 Zokak El Blatt,restored residential buildings on Army street

fig.3

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In Saifi Village, two projects designed by ErgaGroup have been completed: a building of four floors with oneapartment each, all leased, on lot 332, with ground floor retail unitsleased as part of Quartier des Arts; and four buildings on lot 741around an internal garden over a 50-space car park, with three restoredbuildings plus a four-story infill building completed and occupied.

In Zokak El Blatt, lot 670, designed by FouadMenem, is under construction, having obtained building permit for its fourfloors. Parking spaces for the building are provided in adjacent lot 1144, asix-story infill building with 128 car spaces on six basement levels.

In Wadi Abou Jamil, Mina El Hosn cadastral zone,two residential buildings were completed. Designed by Fouad Menem,lot 799 is a seven-story building including one- to three-bedroom flatsand two duplex apartments with roof gardens; while lot 995 is a seven-story building with two apartments per floor.

RELIGIOUSBUILDINGS

Nineteen places of worship attest to thespiritual value of central Beirut. Solidere has assisted in the gradualrestoration of 18 of them, with 13 now in use and drawingincreasing numbers of people. The newMohamad Al Amin mosquetook on a profound meaning when the late PM Rafic Hariri was laidto rest near it.

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A CONSECRATION OFTHE CITY CENTER ASA GLOBAL RETAILDISTRICT AND AMAJOR STEPTOWARDS COMPLETINGA CRITICAL MASSTHERE, BEIRUT SOUKSHAVE EVOLVED IN ASIGNIFICANT WAY.THE NEW SOUKS,SOLIDERE’S MOSTIMPORTANT REALESTATE PROJECT,WILL OFFER A MODERNSHOPPING AND LEISUREEXPERIENCE THATPRESERVES THEINTRICATE SPATIALRELATIONSHIPS OFAN URBAN MARKET.

The reconstruction of the Beirut Souks hasafforded the opportunity of bringing the traditional souks form ofbuilding into the 21st century. The Souks follow contemporarystandards for retail space, offering the convenience and comfortassociated with malls within a structure of open and shadedstreets, interrupted by pleasant open landscaped spaces. On theother hand, Beirut Marina development is an example of jointventure between Solidere and third-party developers.

The range of quality space earlier put on themarket by Solidere spans such new construction as UN House, SaifiVillage, the embassy compound and the Rue de France complex.Alongside its own projects, the Company continues to develop andshare with interested investors real estate and architecturalconcepts for residential clusters in Saifi and Wadi Abou Jamil, andcommercial, tourist, entertainment or multiuse projects elsewhere.

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Beirut Souks are re-emerging as a lively shopping andentertainment center, a regional retail destination and a magnet both for local residents andvisitors. Located at the heart of Beirut, they are integrated within the city's historic core,close to the hotel district and the new waterfront. With direct links to the port, airport andmetropolitan transport network, they enjoy easy car and pedestrian access from up-markethotel, residential and office areas.

Designed in five separate commissions by international andLebanese architects, the 146,000 sq m of floor space will be interspersed among60,000 sq m of landscaped pedestrian areas. As they follow the ancient street grid implantedsince pre-Roman times, integrating archeological features and gardens, the Souksconsecrate the historic value of the place while using the state-of-the-art technology ofmodern commercial centers. Visitors can stroll along the souks, some covered with skylightsand a natural aeration system, such as Tawila, Jamil and Arwam, others open to the sky,such as Ayyas, Bustros and Sayyour, and enjoy shopping and entertainment in a widevariety of shops, restaurants and cafés.

Solidere launched in 2005 the South Souks, first phase of the Beirut Soukssuperstructures, having previously completed the now operational southern part of the2500-space underground car park, as well as the design, building permit and tendering process.

The project involves the Souks Core, with 75,700 sq m of floor space,designed by Rafael Moneo (Spain) and Samir Khairallah and Partners; the Jewelers' Area,designed by Kevin Dash (UK) and Rafik Khoury, with 13,300 sq m of floor space; and theunderlying streets and other public spaces, for which Olivier Vidal (France) is landscape architect.Dimitri Alatzas Asociados (Spain) was management system consultant for the car park.

The South Souks site incorporates the Mamluk shrine Zawiyat Ibn Iraq.Remains of the medieval city wall, Byzantine shops and late Phoenico-Persian harborsidesettlements were also unearthed.

Works on the US$50.6 million contract were awarded to Sociétéd'Entreprises A.R. Hourié, started in July 2005, stopped in July 2006, but were soonresumed. Delays due to the situation then prevailing in the country extended the completiondate of the project to the end of 2008. Internal partitioning and fit-out works tailored tospecific units will gradually be delivered to users. The official opening of the South Souks isscheduled for early 2009.

BEIRUT SOUKS

South Souks

fig.1 Corbels in Souk Tawilafig.2 Skylights in Souk Tawilafig.3,4 Chevron pattern cladding

fig.2fig.1

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Beirut Souks are a design signature forSolidere, reviving the mood and atmosphere of the old Souks fromwhich they derive their name, identity, urban plan and architecturalcharacter. Inspired by such urban spatial relationships andhistorical layers, a unique experience will be offered there, quitedifferent from that of a commercial mall. Beirut Souks are to be anopen bazaar, affording a modern shopping and leisure experience,while preserving the rich historicity of the site in a seminal andcontemporary interpretation. To experience Beirut Souks is to feelthat one is moving within patterns inspired by medieval cityplanning, with its gates and meanders. Street alignment is indentedin Arwam, Bustros and Arwad, and squares and plazas are notcentered. The walk, however, is no longer conducted on one plane,but rather as an intricate three-dimensional promenade, with multi-directional spatial and visual links.

The dramatic vertical linearity of the Souksthemselves, and in particular Tawila and Jamil, provides unusualand exciting connectivity with the rest of the project. While the mallexperience is self-contained in a limited and closed space, BeirutSouks can be experienced in a transversal way, extending or lyingacross at right angles to the long axes of the main souks andconnecting with the fabric of the city center. The layout creates anetwork that provides a labyrinthine yet rich experience fullyintegrated with the city.

Spanish Pritzker-Award winner architectRafael Moneo does not conceive the project as one, or several, buildings, but rather as anon-building composition of a series of structures creating a network of internal streets,dramatic vistas, covered bazaars and various plazas. As the South Souks take shape, one canbegin to grasp the powerful idea behind this iconic project.

The design responds to the historical site and city layering through thecreation of exposed structural and architectural layers, showing visitors and retailers whatthey are made of. Moneo’s layering stategy provides an atrium at the intersection of Arwam,Tawila and Sayyour streets. This sunken, landscaped courtyard provides light andventilation to the underground parking levels and reaches up to the open plaza. Inarchitecturally exposing the modern construction method used, it creates a poetic statementfor the successful integration between new buildings and city layers.

The archeological site in the middle of the Souks, with remains goingas far back as the Phoenico-Persian era, is preserved through a carefully proportioned voidwith archeological exposure, equivalent in area and volume to Nejmeh Square, whichMoneo stresses, at both city and Souks levels, in a studied urban gesture. Within the Souks,this void is balanced at the northern end by Ajami Square, an 18-meter high, covered plazaleading to Trablous street.

Another example of Moneo’s combination of historicity and inventionis evident as one approaches the site along Souk Tawila from the south. A new prayer hall,covered by a small dome, is integrated within block M, a four-floor complex with 5,500 sq mof intelligent offices and 16,000 sq m commercial space, close to the Mamluk Ibn Iraq shrine.It creates a gateway effect in its symmetry, shows a modern approach to a religious domeand offers a virtual portal to the bazaar leading to the major north-south Souks axis: Tawila,the longest of the Souks, with Ayyas to its east, Jamil and Arwam to its west. They convergenorth in Ajami Square, off Trablous street. The main east-west axis is Sayyour street, withBustros and Arwad as secondary streets.

Moneo’s approach enhances both the urban and the human scale ofthe project to ensure a harmonious relationship with the surroundings, attentive at theforeground to the details: colors, textures, joints, details; at the background, to the urbanscale: urban portals, framed views. The height considerations and the massing all take theircues from existing neighboring structures and infrastructure. The choice of materials bringsunity across the entire city block. However, the ubiquity and consistency in this surfacetreatment recedes into the background as it anticipates the arrival of the middle ground, tobe taken up and filled by the day-to-day activities of retailers, shoppers and by the people ofthe city.

Souks Core The main entrance to the Souks is on Weygand street, a few meterseast of Riad El Solh street. The space constitutes a plaza: to its left is block M, to its right isthe Jewelers’ Area designed by Kevin Dash, with the Ibn Iraq shrine being renovated byYousef Haidar.

Block M accommodates a food hall at a lower level, 6,500 sq m,accessed from Tawila and Sayyour souks, and fine retail outlets at street level in Weygand,9,500 sq m, with outside restaurants seating on Bab Idriss Square and at the main entrancesto Jamil and Arwam souks.

Around 200 retail units of various sizes and volumes, 41,000 sq m intotal, are aligned along streets and around squares, with shops, cafés or restaurants on oneground floor, one ground floor with mezzanine or two full floors, and provision for a futureChildren’s Center including a nursery. The site topography, with streets situated at differentlevels, has been exploited advantageously. Thus, Souks Jamil, Arwam and Tawila startpractically on the same street level. But Arwam, falling in between the other two souks, risesabove them by midway, becoming an upper-level souk. Consequently, ground floor shopson the west side of Souk Tawila can also have frontage on Souk Jamil; while from Arwamshops, one can have views of either Tawila or Jamil.

Souk Ayyas is a narrower souk, fully open to the sky. At its crossingwith Souk Bustros is Intabli Square, featuring a water fountain. The east side shops on Ayyashave views on the beautiful, restored Art Deco building in Fakhry Bey street.

Ajami Square, at the convergence of the north-south souks, is a grandplaza with restaurants, sidewalk cafés, designed to house large events and concerts. Thecovered plaza has an 18 m high ceiling with massive drop beams, equipped with roof ventsand skylights to protect from direct sunlight, heat and rain. The walls and large opening onTrablous street form a huge northern portal to the South Souks.

fig.1 Zawiyat Ibn Irak shrineand block M prayer hallfig.2 Ajami Square covered plaza

fig.1

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On the corner of Weygand and Allenby Streets,the Jewelers’ Area, initially called the Gold Souk, connects the wholeof the Beirut Souks to the restored pedestrianized heart of the city.The buildings on both street frontages have shops at street levelsheltered by deep arcades which form a natural extension of those ofMaarad street and provide covered access to the three primaryentrances of the Souks.

The corner entrance is emphasized naturallyby the way the run of buildings on Allenby turns and folds into it,marking its importance from all directions. Jewel-like overscaledchandeliers furnish the 10 m high entrance arcade and announcethe Gold Souk beyond. The two other entrances are from Ibn IraqSquare, the primary entrance to the Souks from Weygand street,and from the Fakhry Bey steps which lead directly to Allenby street.

The buildings are designed as a naturalextension of the restored conservation area. The façades are yellowlimestone with simple punched windows, the rhythm andproportion of which change to effect a gradual transition from theornate, restored buildings on Fakhry Bey street to the modernsimplicity of Moneo's design on Weygand street.

High specification modern aluminum windowsare faced externally with timber, typical of the conservation area, and set in honed revealswhich suggest in a subtle way the more elaborate window surrounds of its restored neighbors.

Buildings on the street frontages form a protecting wall enclosingpavilions of only two floors linked by, and forming, human scale pedestrian passages andsquares, lined with tiny shops typical of jewelry markets. The scale and detail of thebuildings is small and precious and provides a level of intimacy and delicacy appropriate toa concentrated group of jewelry shops. The shopfronts are set between paired, honed,yellow limestone columns with display cabinets suspended at eye level. The shops aresheltered by arcades or black fabric awnings and are discreetly signed and lit.

The four blocks accommodate around 80 jewelry boutiques on theground floors totaling 5,600 sq m. Block W has three floors, D and E four, with 7,700 sq m ofoffice space on the upper floors. Block F, with façades on Tawila and Sayyour streets, has aground floor for jewelry shops. The walkways are covered with wood and stainless steel.

The enclosed space is considered as an extension of Zawiyat Ibn IraqSquare and the low scale pavilion contained within it is split by the extension of Souk Tawila.This part of the Souks is made up of small units with a major restaurant space with terracesoverlooking and animating the trading level.

The Jewelers’ Area accommodates an entrance to the undergroundparking and the entrance to the servicing area which lies directly below. Access from the carpark is from the landscaped court in the Souks Core.

Beirut Souks are equipped with ATM machines, public phones,broadband internet provisions, information screens and desks and a CCTV system for security.

Jewelers' Area

Facilities

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North SouksThe next phase of the Beirut Souks development covers the North Souks,which offer 56,000 sq m of floor space. These consist of: a 27,000 sq m department store (blocksS and T), initially designed by Nabil Tabbarah but being redesigned by UK-Iraqi Pritzker-Awardwinner architect Zaha Hadid on behalf of an important anchor tenant; an entertainment complexand another multiuse building (blocks V and U), totaling 30,000 sq m of floor space, designedby Valode et Pistre (France) and Annabel Karim Kassar. This phase will allow the finalization ofleasing and management agreements with anchor tenants and operators.

The building permit for the department store was issued in November2006. The redesigning by Zaha Hadid will not require a new building permit as the built-uparea remains unchanged. A landscaped square with a fountain faces the department storeand the restored Majidiya mosque.

The entertainment complex (block V) comprises 14 modern cinemasabove ground with generous lounges and concession areas, a retail / entertainment magnet,restaurants, a multimedia store, games arcades and retail extending to Khan Antoun BeySquare. The project was redesigned by Valode et Pistre in line with up-to-date norms andstandards, featuring more commercial space and introducing a pedestrian link betweenAllenby and Trablous streets. The architects designed the project as a mega entertainmentdestination and as an architecturally avant-garde structure. The final design was deliveredin March 2007 and Solidere expects the building permit to be issued soon. Constructionwould then start within the course of 2008, allowing for the tendering process.

Work on the concept design for the cinemas internal circulation andinterior design is proceeding under Solidere’s supervision, in coordination between thearchitects, Valode et Pistre, the interior designer, Nabil Dada, and the cinema consultant,Hamad Atassi. The multiuse building (block U) comprises a food court with garden and retailat ground level, retail or offices on the first and media-related offices on the second floor.

At the time of the South Souks opening, by early 2009, it is expectedthat the entertainment center will be in an advanced stage of construction and thedepartment store at the detailed design stage, within a few months of tendering.

Beirut Real Estate Management and Services (BREMS) was establishedby Solidere and Aswaq Management and Services s.a.l., subsidiary of Société des CentresCommerciaux (France), a leader in shopping mall management in Europe.

Its object is to implement the tenant mix strategy designed by anumber of consultants, leasing activities, shop fitting, property and facility management,rental management and marketing management. An assistance agreement was signed withBREMS for the Beirut Souks.

Solidere has laid down for the Souks tenants design specifications forthe shopfronts and guidelines to direct interior construction works, and is conducting sitesupervision for quality control.

Zaha Hadid,North Souks department storepreliminary design

Beirut Real EstateManagementand Services

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In November 2002, Solidere commissioned Steven Holl Architects(US), in joint venture with Nabil Gholam, to design public space together with real estatefacilities totaling 20,000 sq m of mixed-use floor area around Beirut Marina. The facilitiesinclude a town quay of waterside restaurants, cafés and shops, and a yacht club withapartments on upper floors. In addition, a harbormaster, customs and immigration buildingwill be erected on public domain.

The project is undertaken by Beirut Waterfront Development s.a.l.(BWD), established in 2004 as a 50-50 joint venture between Solidere and Stow WaterfrontDevelopment s.a.l. (Stow). BWD was capitalized with Solidere contributing in kind20,000 sq m BUA on 22,341 sq m of land, and Stow contributing in cash US$31.6 million.

The design submitted by Holl in August 2004 was gradually amendedfollowing BWD and Solidere comments. The project is integrated into the city center throughdirect access to the corniche promenade to the north, waterside city park to the east, and apedestrian bridge over the corniche to the south providing access to the town quayrestaurants and shops. Landscape designs were developed for the entry plaza, the quaysideand the extension of the corniche sidewalk above, creating open-air terraces in the form ofa ‘stone beach’ over the restaurants and shops.

BWD commissioned restaurant consultant Ulysses (France) to conducta market study for selecting an optimal type and size mix, as well as establishing a typicalrental agreement for the quayside restaurants.

The project covers two plots. On Plot One, the development consists offour floors plus three basements, accommodating 57 apartments and a yacht club. On PlotTwo, the development consists of 26 quayside restaurants and shops, along a one-floor levelstretching from the western limit of the Marina development site to the yacht club building.

The building permit for the apartment building and yacht club on PlotOne was secured for the basements until ground floor, and execution works are in progress.

The contractor, Hourié - Profond joint venture, winner of the design-and-build tender for underground structural work and construction of three basement floors,started enabling works in 2006, based on the design endorsed by Solétanche Bachy group(France). Profond are in charge of the shoring diaphragm wall, piling and dewatering; Houriéof excavations and construction of slabs and columns. A fast track approach was adopted,using up down construction based on a technology specific to underground constructionbelow sea level, which may be applied throughout the waterfront district.

The building diaphragm wall was completed in March 2007. Theongoing excavation and basement-level construction works are expected to be completedby end March 2009.

The permit for the upper floors is still under study at BeirutMunicipality. Once issued, it will allow Holl, teaming up with Nabil Gholam, to finalize thedetailed design. Beginning 2007, Nabil Dada was commissioned to undertake the interiordesign of the project. The Plot One development is expected to be completed in May 2010.

Regarding the quayside restaurants on Plot Two, a shoring permit iscurrently being sought from the Municipality. Contractors are ready to start enabling works,which require nine months. It is hoped that during that period, the building permit will besecured to continue construction. Completion of the development is targeted for 2010.

The intention is to deliver Plot One and Plot Two together, in time forthe entire Beirut Marina Development inauguration. It is also important to ensure thatdelivery of the below-corniche car park and of the pedestrian bridge linking to the hoteldistrict should precede the inauguration. (See section on Waterfront District.)

BEIRUTMARINADEVELOPMENT

Apartmentbuilding andyacht club

Quaysiderestaurants on

Plot Two

DevelopmentPhasing Issues

Solidere's strategy is to stimulate high quality real estate developmentin the city center. Its support to investors has expanded in the last two years to cover projectdesign and development. In addition to the development briefs, based on sector plans andadapted to project sites, the Company engaged in consultancy with Lebanese andinternational architects to prepare concept designs for a number of lots, with obviousbenefits for prospective buyers, to whom Solidere sometimes sells land with a real estateprogram, architectural design and even a development package.

In Wadi Abou Jamil, Solidere initiated the design and implementationof predominantly residential clusters of various sizes, involving restoration and infillconstruction. The use of this typology on the city scale, in combination with detailed andindividual residential buildings, is meant to reinforce urban integration. International andLebanese architects, with experience in Mediterranean and Middle Eastern countries,contributed design concepts reflecting responsiveness to local context, culture and climate,and the market interest led to the sale of practically all the properties with cluster concepts.

Still held by Solidere, lot 800 Mina El Hosn is a triplet designed byAyman Senyora, combining restoration and new construction. The 4,234 sq m floor areacomprises two twin restored Levantine houses plus an infill building, with four floors each,located between two streets, a lower entrance street and Rue de France. The infill building,designed in a similar style but with two basement floors linking the three buildings andproviding parking space to serve the entire triplet, has obtained a building permit and is nowcompleting the earthworks, with civil works expected to start by end July 2008.

The success of Saifi Village led Solidere to initiate concepts for its extension. 178 Saifi Villageis a residential cluster, designed by Nabil Gholam on 2,937 sq m of land to offer about 11,225 sq m of residential and1,066 sq m of commercial floor space. The cluster is formed by six elegant buildings with clean modern façadesalong surrounding streets, set around a landscaped courtyard. The design offers a range of spacious apartments toinclude lofts with 5.75 m high ceilings, mini lofts with work live space, ground floor maisonettes with privategardens, central hall apartments and a variety of penthouses with generous terraces, while the building opening onthe ring road offers modular office platforms, with a restaurant on the ground floor and mezzanine. The schemefocuses on a contemporary lifestyle, bringing a blend of services, convenience and a discreet sense of luxury. Space,light, calm and comfort characterize the townhouse-like residential units, combining the advantage of a great urbanlocation with the pleasure of a quiet green haven in the heart of Beirut. The development is to be sold with itsconcept to an investor.

OTHERREAL ESTATEPROJECTS

Lot 800Mina El Hosn

178 Saifi Village

Steven Holl Architects / Nabil Gholam,Beirut Waterfront Developmentfig.1 The master planfig.2 The yacht club with apartments,town quay with restaurants and shops

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Solidere is developing around the Grand Theatrean integrated project on the 2,370-sq m lot 891 Bachoura, whichregrouped the former lot 891 historic building, lot 870 building andvacant lot 1521. The concept design by Architecture Studio (France)obtained approval from the Directorate General of Urbanism in April2005. The project offers a total floor area of 11,850 sq m over fourfloors and five basements. The main use is a boutique hotel enjoying aroof swimming pool, restaurants and bars offering artisticperformances. Shops are located at street level below the arcades. Allthe restoration work was done and the theater is to be preserved. Thebuilding permit file obtained the Ministry of Tourism approval and isstill under study at the Municipality of Beirut.

Implemented by Solidere, the car park jointlydeveloped with owners of blocks 93 and 87 properties, provides 700spaces on four underground levels totaling 31,200 sq m of floor area,with two main access ramps on Foch and Allenby streets.Underground construction was completed for all projects. One of thebuildings was completed, two are under finishing, one is underconstruction and one is still under study at the Municipality of Beirut.Now open to the public, the 320-space section owned by Solidere willbe topped by the landscaped Harbor Square.

Solidere commissioned Vincent Van Duysen(Belgium) to present a concept for an office building on lot1493 Mina El Hosn. The design is an architecturally strong sculpturewith a light colored appearance, addressing the landscaped hoteldistrict corridor overlooking Beirut Marina. The provision of amixed-use program with public, semi-public and private functions,allows for a very vivid and diverse character. It is intended to sellthe development with its concept to an investor.

This multiuse complex on lot 1338 MinaEl Hosn, located on a 3,740-sq m island plot near Beirut Souks,combines commercial space, entertainment activities and a100-room luxury hotel with a total floor area of 21,400 sq m,together with basement parking levels. The project, as conceivedby Bernard Khoury, presents itself as a crystalline organic mass, anurban event that does not comply with surrounding streetwallcontrols. The project was submitted to the DGU for approval.

The commercial base aligns with the plotperimeter, forming a pedestal to the body of the building above.Pedestrian entrances, the culmination of existing pedestrian flows,connect in all directions to the various levels of surrounding streets,while leading to a central internal piazza, a circular void, 32 m indiameter, 30 m in height, open to a skylight. On top of the base is the‘sky lobby’, a suspended, 9-m high internal garden with a peripheralterrace. It is conceived as an exceptional entertainment destination,where leisure activities intersect to create a programmatic synergy.

This is where the hotel reception, restaurants,cafés, terraces and bars are located. The hotel is built above the skylobby, on a succession of five floor plates that recess at the higherlevels, mutating in plan from a circular base to become an ovoid.Vertical glass louvers / sun breakers, placed at varying distances,create a pattern across the hotel floors, in an arrangement thatblurs the reading of the consecutive levels and renders it as one.

On the roof, a panoramic terrace with anopen-air restaurant and bar enjoys 360 degrees views over theMediterranean Sea and Mount Lebanon in the background.

Office building

Le Passagede Hoyek

Grand Theatre

Block 93

fig.1

fig.2

fig.1 Bernard Khoury,Le Passage de Hoyekmultiuse complex,lot 1338 Mina El Hosnfig.2 Vincent Van Duysen,office building,lot 1493 Mina El Hosn


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As land bank with a considerable property portfolio, Solideremarkets a wide range of land and built space for residential, office, hotel, retail and otherspecialized uses. In the early years, sales mainly involved un-built lots and existingbuildings sold 'as is' for renovation or development. The delivery of Solidere real estateprojects led to a growing volume of sale and leasing operations involving finishedproducts, new or preserved buildings or parts thereof.

Since 2005, the Company has been holding on to its portfolio offinished products, leasing space in it to generate income flows, and will continue to doso in the foreseeable future as part of its revenue diversification strategy. Solidereactively supports developers and monitors the demand and supply of real estate in thecity center, to the benefit of all.

In any given year, the sales recognized in theincome statement consist of closed deals negotiated in that yearand in preceding ones. On the other hand, the deals negotiated upto that year and not closed during the year make up the salesbacklog at year end. Aggregate sales of US$1.67 billion have beenrecognized from inception to end 2007 (1,456,609 sq m of floorspace), of which US$288.5 million (224,500 sq m) in 2007.

Gross land sales of US$288.5 million wererecognized during the year 2007 (US$255.2 million in 2006). Soliderehas stopped selling finished products in order to build a portfolio ofincome-generating properties. However, such deals closed in previousyears and recognized in 2007 amount to US$7.7 million representing3,979 sq m of floor area (US$0.96 million, 499 sq m in 2006).

At end 2007, the backlog of closed sales notrecognized during the year amounted toUS$914.1million (443,000 sqmBUA). Also in the backlog are US$8.82 million (4,532 sq m BUA) ofapartments for which title transfer is awaiting occupancy permits asthe lots need final parceling, plus commitments of US$8.5 millionrelating to the pre-sales of units in the Beirut Souks Jewelers' Area,concluded a number of years ago.

Downpayments received on signed deals as atend 2007 amount to US$124.2 million: US$120 million from land salesand US$4.2 million from the sale of residential space. Downpaymentsare treated as deferred revenues, to be recognized as part of revenuesonly upon sales realization.

Solidere’s portfolio of income-generatingproperties includes UN House and lot 1 Zokak El Blatt, each leasedto a single institutional tenant, and a compound dedicated forembassy use. The Company also leases space in its buildings, incar parks and mooring spaces in Beirut Marina. At end 2007, thevalue of leased properties was US$170.5 million (US$150 millionafter depreciation): US$124 million in buildings, US$42 million inland and US$4.5 million in other assets.

Gross rental income from leased space,including parking spaces and marina berths, was US$20.8 million,against US$7.5 million, US$10.2 million, US$14.1 million andUS$15.4 million in 2000 to 2003; US$18.6 million, US$20.8 millionand US$20.7 million in 2004 to 2006. Downpayments received onlease agreements are treated as deferred revenues and notrecognized as income. Residential leases relate to new and restoredflats in Saifi, Zokak El Blatt and Wadi Abou Jamil. Leased officespace relates to UN House, lot 1 Zokak El Blatt and the embassycompound. Other commercial space relates to offices and shops inrestored buildings, as well as shops in Saifi Village.

A sale agreement which includes pre-development and construction standards and timetables, as well aspayment conditions, is signed upfront. Sales are expressed interms of floor or built-up area (net development rights).

Property transfer is registered before the RealEstate Registrar upon signing the final sale deed, followingfulfillment of technical and legal conditions, together with themortgage contract in case of finance. Solidere pursued in 2007 itspolicy of offering buyers the possibility to either pay cash or deferpart of the sale price payment, thus enabling them to better planthe financing of their investments.

Concomitant with the property transferregistration, the buyer / developer provides Solidere with a first-degree mortgage on the sold property as a guarantee against anyoutstanding payments. A bank guarantee also provides security forproper and timely execution of all construction works.

SALESPROCEDUREPAYMENTSCHEMES

SALES RESULTS

REAL ESTATELEASING

SALES REVENUES ROSE, SUSTAINED BY A SUBSTANTIAL SALES BACKLOG. MANYPROJECTS, SOME OF IMPORTANT PROPORTIONS, WERE PURSUED, REGIONALINVESTORS CONTINUING TO GIVE STRONG INDICATIONS OF INTEREST IN BEIRUTCITY CENTER. THIS WAS EVIDENCED BY A STRONG PICK-UP OF NEGOTIATINGACTIVITY AT THE END OF THE YEAR. RENTAL ACTIVITY MAINTAINED ITS HEALTHYPACE DUE TO CONTINUING DEMAND FOR QUALITY SPACE AND SERVICES.

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The Company has been successful in marketing its residential,commercial and institutional space, new and restored. As alternatives to a simple lease,schemes such as lease with option to buy or outright sale were offered for residentialspace until 2002 and 2004 respectively. Buyers could also benefit from payment facilities.From 2005, property sales or options to buy were discontinued, with only leasescontinuing to generate income flows, and no outstanding options to buy at end 2007.

From the 136 Saifi Village apartments, totaling 29,707 sq m of floorarea, 134 apartments had been marketed by end 2007, of which 38 (6,980 sq m) areleased and 96 (22,558 sq m) were sold, 61 (13,279 sq m) after exercising options to buy,while two apartments (169 sq m) are available for rent. Concurrently, from 40 restoredhouses or flats in Saifi, totaling 8,604 sq m in floor space, 37 agreements had beensigned at year end. They represent 3,779 sq m of leases and 4,684 sq m of sales, of which4,024 sq m as a result of exercising options to buy, with three apartments (141 sq m)available for rent. Lease agreements had also been signed for a nursery (240 sq m) andfor 34 shops (3,612 sq m), as part of Quartier des Arts.

In Zokak El Blatt, 87 apartments, with 12,951 sq m of floor space,had been the subject of agreements at year end. They represent 9,664 sq m of leases and2,854 sq m of sales, of which 979 sq m as a result of exercising options to buy, with 12apartments available for rent. In Mina El Hosn, nine agreements for 3,432 sq m ofresidential floor space had been signed: 372 sq m as leases and 3,060 sq m as sales, ofwhich 1,971 sq m as a result of exercising options to buy.

Also at year end, the Company had five lease agreements totaling33,630 sq m of floor space in new office buildings: UN House, lot 1 Zokak El Blatt andmost of the embassy compound. In the Maarad and Foch-Allenby restored officebuildings, 19 lease agreements for 9,710 sq m, as well as 16 lease agreements relatingto 3,575 sq m of retail space, had been signed.

Solidere provides complete full-time property management,operation and maintenance services for all its properties. These include the new andrestored buildings, the Souks, Weygand street and block 93 car parks. In UN House,electro-mechanical and civil works are provided as per an operation agreement withESCWA. Extending its services to other property owners, Solidere signed agreements forthe marketing of several third-party properties, prior to undertaking their managementand maintenance.

The Company is currently offering such buildings the followingservices: technical maintenance, cleaning, safety, security and the maintenance oflandscaped areas; marketing, lease management, including drawing up budgets,arranging insurance, collecting rents, preparing assets inventories, subscribing toutilities, tackling co-ownership issues, and paying real estate and municipal taxes.Solidere expects to derive increasing revenues from property management services inthe coming years.

PROPERTYMANAGEMENT

FUTUREPROSPECTS

fig.1 Dar Al-Handasah, Four Seasons Hotel, lot 1418Mina El Hosn and Kohn Pedersen Fox Associates / DarAl-Handasah, Marina Towers complex, lot 1354 Mina El Hosnfig.2 Wimberley Allison Tong & Goo / Samir Khairallah, BeirutTower, lot 1401 Mina El Hosn, and Ricardo Bofill / Nabil gholam,Platinum Tower, lot 1421 Mina El Hosn, Samir Khairallah,Monroe Hotel, lot 1400 Mina El Hosn

PROPERTYMARKETING

Solidere is firmly relying on growth in its rentalincome as it steps up the delivery of new and restored buildings. Rentalrevenues are expected to be strongly boosted, upon delivery of theBeirut Souks, by far the most important Solidere real estate project andits flagship commercial development. Rentals are then expected toreach close to US$65 million from 2010.

fig.1

fig.2

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DEVELO

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In Saifi, Saifi Khan is being restored as per Elias Issa’s design onlots 749 and 752, respectevely offering 783 sq m and 3,467 sq m. The lot 752 component,five floors with retail on ground floor, has been completed. Two residentialdevelopments are under finishing. Saifi Village Two, designed by Nabil Gholam on lot146 Saifi, offers 22,350 sq m distributed over four buildings of 11 floors each, 74 flats intotal. Al Dalal residential building, designed by Ateliers des Architectes Associés (AAA)on lot 1077, offers 4,750 sq m over six floors, six flats and a duplex.

Under study at Beirut Municipality are a private residence, threeresidential developments and an office building. The lot 749 component of Saifi Khan has783 sq m over three floors with retail on ground floor. Saifi Square and Al Mada,designed by Nabil Gholam on lots 1059 and 1069, offer 5,114 sq m and 6,350 sq mdistributed over seven floors, 16 flats and 17 flats respectively. The Selwan building,designed by Nabil Azar on lot 1056, offers 2,350 sq m distributed over five floors, 14 flats.Al Mashrek Insurance Company building also designed by Nabil Azar on lot 1080 offers2,301 sq m distributed over seven floors. 1079 Real Estate residential building on lot 1079is under design by Youssef Haidar with 3,358 sq m of floor space.

At the city center southern gateway, The Landmark multiusedevelopment, designed by Jean Nouvel (France) on lot 1520 Bachoura, is still underdesign. The project offers 74,500 sq m distributed over a thirty-seven floor hotel andapartment tower overlooking Riad El Solh Square, and two ten- and eleven-floor buildingscontaining offices, retail, and a cinema entertainment complex at basement levels.

In Foch-Allenby, Marfaa cadastral zone, two buildings werecompleted. Foch 126 office building, designed by Nabil Gholam on lot 126, has2,190 sq m over five floors. Foch Residence, designed by Batimat Architects on lot 1466,has 5,012 sq m over nine floors, 10 flats and two duplexes. Four residentialdevelopments are under finishing. Fochville, designed by R & K Consultants on lot 1497,has 5,841 sq m over nine floors, 12 apartments and one duplex. Starway, designed byNachaat Owaida on lot 1440, has 3,000 sq m over six floors, 26 flats in total. Lot 108,developed by Banque du Crédit Libanais and designed by Erga Group, has 3,005 sq mover five floors, five flats in total. Foch 94 residential development, designed by VincentVan Duyssen (Belgium) and Nabil Gholam on lot 1498, has 7,320 sq m over nine floors,29 flats in total.

Two developments are under construction. Bank of Kuwait and theArab World, designed by Abdel Wahed Al Wakeel (Egypt-UK) and Arc Group on lot 1470,has 8,300 sq m over eight floors. Radium office building, designed by R & K Consultantson lot 114, has 2,600 sq m over five floors.

Under study at Beirut Municipality is Mokhtara residential building,designed by Erga Group on lot 1468 with 7,467 sq m over nine floors, 26 flats in total.

A FLOOR AREA OF2.5 MILLION SQ MHAS BEEN SO FARTHE SUBJECT OFDEVELOPMENTBY THIRD-PARTYDEVELOPERS,OF WHICH1.8 MILLION SQ MARE IN NEWCONSTRUCTION.OF THAT TOTAL,998,519 SQ MARE COMPLETED,240,229 SQ MARE UNDERCONSTRUCTION ANDTHE BALANCE IS INVARIOUS STAGESOF DEVELOPMENT.

On the Martyrs’ Square axis northeast section, the MeritCorporation headquarters building, designed by Nabil Gholam on lot 1536 Marfaa, isunder construction with 7,234 sq m of floor space over six floors.

The Phoenician Village is a landmark high-density, mixed-useproject under development by the Kuwaiti Investors Group led by Al Sayer Group andAl Dhow Investment Company. Spread over lots 1501, 1502, 1503 and 1081 Marfaa, itoffers 206,000 sq m of floor area, thus constituting the city center’s largest real estatedevelopment to date. The urban design for the site, as adopted in the Beirut city centermaster plan, is based on the Koetter Kim (US) planning study, updated according to newenvelope controls incorporated in the master plan amendment for Sector H. Thedevelopment contains four towers, stepping in height to a 160 m maximum, andcomprises visitor attractions and cultural facilities, upscale residential, hotel and majorcorporate office opportunities around a central active plaza, with retail on ground level.A pedestrian bridge across Rue de Trieste will connect the towers to the waterfrontcomponent of the project on the Beirut port first basin quayside. The development isplanned to create an important visitor destination.

In the Martyrs’ Square northwestern section, Marfaa cadastralzone, three residential developments overlooking the Tell archeological site are underdesign. Marfaa 94, designed by Machado and Silvetti Associates (US) and CharlesHadifeh on lot 1538, covers 12,700 sq m of floor area. Marfaa 1474, designed by AxelSchultes (Germany) and Kamal Homsi Architects on lot 1474, offers 8,270 sq m of floorarea. Park Side on lot 1475 is to be designed by Axel Schultes, to offer 6,500 sq m offloor space.

In the mid section, Le Gray hotel, under finishing, was designed byKevin Dash (UK-Australia) and Hani Murad on lot 1489 Marfaa, to offer 17,635 sq m overeight floors, 85 suites in total with retail on ground floor. The Beirut Gardens residentialdevelopment, designed by Arata Isozaki (Japan) and Erga Group on lot 1524 Marfaa, isunder study at Beirut Municipality. It offers 18,325 sq m over 12 floors, consisting of59 flats and six duplexes, 65 units in all. The façades overlooking the Garden ofForgiveness and Martyrs’ Square are covered by a white marble skin treated as a screenwith a computer-generated geometric pattern, giving a three-dimensional impression.

In the southern section of the Martyrs’ Square axis is the BeirutGate landmark development covering 21,448 sq m of land area and spreading over lots1523, 1525, 1542, 1544, 987, 1526, 1477 Bachoura and lot 901 Saifi. Several world-classarchitects worked in tandem to design the project components for ADIH, Abu DhabiInvestment House, as development manager. Out of a 178,506 sq m total floor space, theresidential use represents 78%, offices 6%, retail and cultural activities 16%.

Under study at Beirut Municipality, lots 1525, 1542 and 1544Bachoura are designed by Architectonica (US) and Erga Group. Lot 1525, sold by BeirutGate to Star Property and Tourism Development, offers 13,600 sq m over 13 floors withretail on street level. Lot 1542 offers 14,200 sq m over 12 floors. Lot 1544 offers15,000 sq m over 13 floors. Lot 1523 Bachoura, designed by Nabil Gholam, offers37,000 sq m over 13 floors, 153 flats in total.

Still under design are lots 987, 1526 and 1477 Bachoura, designedby Christian de Portzamparc (France). Lot 987, former Dome City Center site, offers39,000 sq m over three towers with up to 21 floors, and is planned to incorporatea contemporary cultural use within the partly preserved Dome. Lot 1526 offers26,000 sq m over 10 floors. Lot 1477 offers 22,400 sq m over 25 floors. Also under designis lot 901 Saifi, designed by Erga Group with 11,200 sq m over 13 floors.

The Greek partnership Agorastidou, Babalou-Noukaki, Ioannidouand Noukakis, winners of the Martyrs’ Square axis urban design competition, are theBeirut Gate landscape architects.

Two other developments are under design. Immediately north ofBeirut Gate, the Canadian Bank headquarters, designed by Axel Schultes on lot 1524Bachoura, has 7,800 sq m of floor space over eight floors, with retail on the ground floor.

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Near the Beirut Souks, Mina El Hosn cadastral zone, two residentialbuildings, a hotel and three office buildings were completed. The Capital Garden on lot 1327,designed by Erga Group, offers 5,659 sq m over eight floors, 24 flats in total. 1330 ParkAvenue, designed by Abdallah Hajj Ali on lot 1330, has 4,700 sq m over eight floors, 11 flatsin total. The Hilton Hotel on lot 129, designed by Butec and AAA, has11,137 sq m distributed over nine floors, 158 rooms in total. Berytus Parks on lot 1344,designed by Pierre El Khoury Architect, offers 12,227 sq m over nine floors. The secondMedgulf building, designed by Nachaat Owaida on lot 1348, has 2,903 sq m over sevenfloors. Périmètre Immobilier, designed by Elie-Pierre Sabbagh on lot 1459, offers3,360 sq m over seven floors. Also completed, Sémiramis mixed-use development on lot1458 Marfaa, designed by Robert Adam (UK) and Fouad Hanna / Fadlallah Dagher, offers7,750 sq m distributed over eight floors, 11 flats in total.

One mixed-use and two residential developments are underconstruction. Mina Two mixed-use building, designed by Kevin Dash and R & K Consultanton lot 2, offers 14,000 sq m over seven floors, 15 flats in total. 45 Park Avenue, designed byLaceco on lot 1337, offers 7,150 sq m, distributed over 12 floors, 12 flats in total. Luna One,designed by Diyar Consultants on lot 1331, has 2,723 sq m over seven floors, 10 flats in total.

Under study at Beirut Municipality is the ParkPalace residential building, designed by Fouad Menem on lot 1339,with 12,790 sq m over 10 floors, 24 flats in total. Under design arethree residential developments. Media Fan, designed by JoeGeitani on lot 1347, has 6,403 sq m of floor space. Avenue Venture,designed by LAB Architecture Studio (Australia) and Elie-PierreSabbagh on lot 1450, has 7,300 sq m. Block 42 development,designed by Victor Legorreta (Mexico) and Fadlallah Dagher on lot1495 Marfaa, has 13,493 sq m.

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In Wadi Abou Jamil, cadastral zone Mina El Hosn, two projects are underfinishing: Mina El Hosn 1466 residential development designed by Fouad Menem on lot 1466,offering 1,788 sqm of floor space over five floors, two duplexes and a penthouse; and a privateresidence on lot 855, designed by Nabil Gholam with 1,250 sq m of floor space. Underconstruction are two residential developments, one private residence and two office buildings.The Courtyard, designed by Maha Nasrallah on lot 1371, offers 5,280 sq m distributed aroundan internal courtyard over three buildings of seven floors each, 19 flats in total; the works weredelayed because of the Roman Hippodrome archeological remains found on the site. Phoenixbuilding, designed by Porphyrios Associates (UK-Greece) and Samir Khairallah and Partnerson lot 1440, has 4,117 sq m over seven floors: six apartments and one duplex. The privateresidence on lot 911, designed by Abdel Wahed Al Wakeel (UK-Egypt) and ARC Group has,1,595 sq m of floor space. Cedar House and Pine House on lot 1133 were redesigned byYoussef Haidar as an office building with 1,939 sq m over three floors. Greenline Real Estatebuilding, designed by Batimat Architects on lot 1393, has 2,750 sq m over seven floors: two forretail, three for offices and a duplex on the top two floors.

Under study at Beirut Municipality are four residential developments,two private residences and a hotel with serviced apartments. Wadi Gardens, designed by Daral Omran (Jordan) and Hani Murad on lot 1392, has 25,768 sq m distributed around aninternal garden over six buildings of eight floors each, 68 flats in total; the undergroundpermit was granted and basement floors are under construction. Stow Wadi, designedby Porphyrios Associates on lot 1407, has seven apartments and two duplexes totaling3,750 sq m over seven floors. Wadi Hills on lot 1388, designed by Agence d’ArchitectureAntoine Bechu (France) and Nabih Sinno, offers 22,000 sq m of floor space distributed aroundan internal garden over seven buildings of six floors each, 68 flats in total. Mira Immobilièreon lot 1478, designed by Erga Group offers 3,581 sq m distributed over six floors, threeapartments and one duplex. The private residences are lot 771, designed and restored byPierre El Khoury Architect, with 2,093 sq m of floor space; and lot 1375, designed by CharlesHadifeh with 1,278 sq m of floor space. Designed by Ziad Akl in collaboration with PhilippeStarck (France) on lots 834, 1430 and 1410, the Royal Hotel and Resorts boutique hotel with77 rooms and 50 suites has a floor space of 14,856 sq m, distributed over 12 buildings of two,three or four floors.

Still under design are a bank and a residentialbuilding. Al Mawared Bank headquarters, designed by Zaha Hadid(UK-Iraq) and Raed Abillama on lot 1383, has 7,580 sq m of floorspace. 1442 Mina Company on lot 1442, designed by PorphyriosAssociates, offers 4,200 sq m of floor space.

fig.1 Giancarlo De Carlo & Associates / RaficEl Khoury, Beirut Village residential cluster,lot 1370 Mina El Hosnfig.2 Porphyrios Associates / MalekMahmassani, DBA 1, DBA 2, DBA 3 residentialcluster, lots 1365, 1439 and 1395 Mina El Hosnfig.3 Fouad Menem / Ayman Senyora,Mina El Hosn 1466, lot 800 Mina El Hosnresidential developments

In Zokak El Blatt, The Pavilions residentialcomplex, designed by R & K Consultants on lot 1128 and offering10,312 sq m of floor space, is under finishing. The conceptcombines a three-floor private villa on Rue de France with a nine-floor modern infill on Rue de l’Armée, consisting of 23 units: 16apartments, five duplexes and two triplexes. Under restoration aretwo private residences: The Doghmosh, designed by Zahi Cardahion lot 122 with 1,336 sq m of floor space, and Les Gradins, designedby Ziad Akl on lot 73 with 734 sq m of floor space. Under design byElie-Pierre Sabbagh is Périmètre Rue de France, a residentialcomplex on lot 59, with a 4,200 sq m BUA. No architect has yetbeen assigned for City Hill residential development on lot 1137 with3,090 sq m BUA.

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In the hotel district, at the city center northwest gateway, Mina El Hosn cadastral zone, aninternational hotel and eight high-rise luxury residential developments overlook Beirut Marina. Three are underfinishing. The Four Seasons Hotel, designed by Dar Al-Handasah on lot 1418, has 27,761 sq m over 25 floors, 243rooms and suites in total. Designed by Ricardo Bofill (Spain) and Nabil Gholam on lot 1421, Platinum Tower offers53,887 sq m over 34 floors, 70 flats in total. Beirut Tower, designed by Wimberley Allison Tong & Goo (US) andSamir Khairallah and Partners on lot 1401, offers 42,638 sq m over 27 floors, 63 apartments, four duplexes andtwo penthouses.

On lot 1354, the Marina Towers complex, designed by Kohn Pedersen Fox Associates (US)and Dar Al-Handasah, includes: the completed Marina Tower and Marina Gardens, with respectively 27,343 sq mand 8,427 sq m; and Marina Courts, under construction to offer 9,079 sq m over 10 floors, with a total of 41 flatsranging from 100 to 250 sq m. Also under construction, The Dana of CCC, designed by Kevin Dash and Al SalamArchitects on lot 1353, offers 13,856 sq m over 10 floors, 15 flats in total. Bay Tower on lot 1422, with the samedeveloper and designers as Beirut Tower, offers 34,760 sq m over 30 floors, 92 flats in total.

Under study at Beirut Municipality, DIB Tower and Town Tower on lots 1494 and 1399, bothdesigned byMichael Graves (US) and Ayman Senyora, respectively offer 26,700 sqm and 26,500 sqm. La Residenceby Ivana Trump on lot 1396 is still under design by Valode et Pistre (France) with 28,741 sq m of floor space.

Four other luxury residential developments, two international hotels and two officebuildings are in progress within walking distance from Bay Tower.

Under construction are Garden View on lot 1368, designed by Nabil Gholam to offer13,778 sq m over 11 floors, 34 flats in total; and Grand Hyatt Hotel on lot 111, designed by Michael Graves andDar Al-Handasah, with 32,122 sq m over 17 floors, 286 rooms and suites in total. Under study at BeirutMunicipality: Capital Plaza residential building on lot 1464, designed by Machado & Silvetti Associates and NabilAzar, with 14,102 sq m over 12 floors, 36 flats in total; Cibico residential building, designed by Joe Geitani on lot1488, with 4,333 sq m over 11 floors, 14 flats in total; and Stratum residential and furnished apartments building,designed by R & K Consultants on lot 1364 with 11,200 sq m over 10 floors, 71 flats in total.

Still under design, the Rotana Hotel, designed by Architecture Studio (France) and ErgaGroup on lot 1369, has 21,155 sq m of floor space. Trust Construction residential building on lot 1358, designedby Bolles and Wilson (Germany) and Arc Group to offer 17,800 sq m of floor space; and Mika Real Estate officebuilding on lots 1363 and 1487, with 19,697 sq m of floor space designed by Joe Geitani.

A number of developers’ residential projects in Wadi Abou Jamil,cadastral zone Mina El Hosn, are managed by Solidere Management Services (SMS), asubsidiary of Solidere. In addition to construction management, SMS provides a broadscope of services associated with real estate development: program definition, marketing,design control, client representation, financial management, sales and post-constructionoperation and maintenance.

Lot 1380, designed by Tripod Architecture was sold by the initial ownerto third party developers. Now under construction, it offers four flats over five floors with atotal of 2,300 sq m.

Shoring and excavation works have already started on seven projectswhile they are under study at Beirut Municipality. Designed by Giancarlo De Carlo andAssociates (Italy) and Rafic El Khoury are Beirut Village, on lot 1370, offers 12,236 sq m of floorspace over three buildings of six floors each, with 38 flats in total, set around a private gardenfacing the Wadi Abou Jamil public garden; and Beirut Square, on lot 1379, to offer 15,260 sq mof floor space over four buildings of six floors, 49 flats in total, aligned along the streets andarranged around an interior space divided into one common and several private gardens.

The DBA 1, DBA 2, DBA 3 cluster on lots 1365, 1439 and 1395, designedby Porphyrios Associates and Malek Mahmassani Architects, respectively have floor areasof 4,369 sq m, 4,520 sq m and 3,438 sq m over seven floors, 25 flats in total, with groundfloors dedicated for retail use. New Zone Real Estate designed by Tripod Architecture on lots1477 offer 3,616 sq m of floor space over nine floors, 13 flats in total. Property 709 Mina,designed by Antoine Skaf on lot 709, to offer 2,663 sq m of floor space over seven floors,seven apartments and one duplex in total.

In the Serail corridor, on lot 1333 Mina El Hosn, Park Venture is underdesign by Donald Bates (Australia) from LAB Architecture Studio / Batimat, with 6,164 sq m offloor space.

SOLIDEREMANAGEMENTSERVICES

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fig.1 Jean Nouvel, The Landmark, multiusedevelopment, lot 1520 Bachourafig.2 Koetter Kim, Phoenician Village,mixed-use development, lot 1501 Marfaafig.3 Agence d’Architecture Antoine Bechu / Nabih Sinno,Wadi Hills residential complex, lot 1388 Mina El Hosnfig.4 Donald Bates / Batimat, Park Venture residentialbuilding, lot 1333 Mina El Hosnfig.5 Machado and Silvetti Associates / Charles Hadifeh,Marfaa 94 residential building, lot 1538 Marfaafig.6 Axel Schultes / Kamal Homsi Architects,Marfaa 1474 residential building, lot 1474 Marfaa

fig.1 fig.2

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fig.5 fig.6

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The balance sheet at year end showspositions of US$313.4 million for cash, US$181.2 million for bankoverdrafts and US$10.1 million for investments in securities.

The Company maintained its previous policyof investing its liquid funds in assets presenting minimum risk, andwith top-ranking banking and financial institutions in the domesticand international markets, including some structural productsthat carry high returns with guaranteed capital. For efficient cashmanagement, Solidere also arranged with local banks certainrevolving current overdraft facilities, utilized and refundedaccording to cash needs and availability.

During 2007, Solidere made 357 cashinvestments totaling US$1,100 million. These figures includeinvestments made in 2007, which matured in the same year or willmature in a later year. The Company pursued again this year astrategy of short-term cash investments, with a weighted averageholding period of about 38 days. Around 92 basis points were securedon average over the median 2007 three-month LIBOR rate. Interestincome earned during the year on the aggregate cash investmentswas equivalent to an annualized interest rate of about 5.5%.

The strategy to reduce borrowing levels wasagain pursued in 2007, utilizing growing levels of liquiditygenerated from land sales. Consequently, the bank debt levelwas substantially reduced, from US$27.1 million in 2006 toUS$7 million in 2007, representing 0.4 % in debt to equity ratio.

In 2007, the Company pursued the practice ofresorting to flexible short-term credit arrangements, mainlytemporary overdrafts at competitive interest rates.

Several short term bank facilities were signedwith various local banks, and drawdowns of approximatelyUS$250 million were used to help finance the Company’sexpansion program and local commitments. Repayments weremade until year end, resulting in a balance of US$181.1 million.Solidere intends to close this balance in the second half of 2008.

The cash position at year end was mainly dueto collections of maturing receivables from several previouslysigned land sale deals, and particularly the full settlement of amajor developer’s remaining balance.

Solidere completed repayment of theUS$107.3 million, ten-year marine works COFACE guaranteed loan,concluded in 1996 with BNP Paribas and Banque Indo-Suez. Half-yearly payments of US$7.7 million in principal repayment andinterest at 7.39% per annum had started in 2001. The lastrepayment was made in August 2007.

The Company continued repayment in 2007of the three loans used to finance land reclamation works: theUS$22 million locally syndicated loan and the two parallel facilitiesfrom Citibank N.A. totaling US$24.7 million (US$14.7 million inexport credit financing with guarantee from the US Export-ImportBank, and US$10 million as local facility from Citibank Beirut),with respectively US$4.04 million and US$3 million outstanding atyear end.

TREASURY

CORPORATEFUNDING

The share buyback program, launched early inthe year and targeting to acquire A and B shares equivalent to up to10% of the issued capital, with a view to retire these shares and reducecapital accordingly, was temporarily put on hold by the Company infavor of international expansion and local developments.

The 10.7 million treasury shares, with a bookvalue of US$168.5 million, served as a temporary financinginstrument, using a put and a call option with two local financialinstitutions to generate US$170.3 million for meeting financingneeds. These shares are due back to the Company by August 2008at a price of US$182.1 million.

TREASURYSTOCK

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Beirut Stock ExchangeSolidere A sharesSolidere B shares

London Stock ExchangeGDRs SOLAq.L

Solidere shares started the year on a weaknote under the weight of the July 2006 war and its aftermath. Thepolitical sit-in that ensued in the following months in the RiadEl Solh area has added to an already lethargic situation, and is stillaffecting the surrounding parts of Beirut city center to this day.

The shares remained under pressurethroughout most of 2007, trading within a tight band betweenUS$15 and US$17 until September, when news of a politicalsolution to the crisis circulated in the country. Then both classes ofshares started moving decisively higher, as investors’ mood wasturned around by optimism on the nearing of the presidentialelection, coupled with positive news about Solidere Internationalsecuring mega projects in the UAE and Egypt. The year ended withdisappointment regarding the presidential election, but the sharesremained strong, as most market participants believed in the valueof the company and of its international arm.

Share A closed the year at US$23.03,representing a 44% increase over the previous year closing price.Share B closed at US$22.70, representing a 42% increase over the2006 closing level. The GDRs, which are traded in the London StockExchange, also moved up and closed the year at US$23.85, a 48%increase compared to the previous year.

Both classes of shares fluctuated between ahigh of US$25 and a low of US$15. Trading was active, with a totalof around 36.5 million shares changing hands, for a cumulativevalue of about US$647 million. This represents around 22% of theCompany capital changing hands. The average daily volume wasabout 145,000 shares with a value of around US$2.5 million. Theaverage price for the year consequently was about US$17.84, a16.9% decrease compared to the previous year.

EXCHANGELISTINGS ANDTICKER SYMBOLS

ANALYSIS OFSHARE PRICES

0

150,000

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$17.0

$20.0

$23.0

$26.0

Share Price – in US$

1,036,143 733,329 5,937,880

A Shares - Daily Trades

Share Price US$ Volume

2 Jan 07 4 May 07 3 Sept 07 31 Dec 07

Volume of Shares Traded

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$20.0

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B Shares - Daily Trades

Share Price US$ Volume

2 Jan 07 4 May 07 3 Sept 07 31 Dec 07

Volume of Shares Traded

4,039,403

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The annual general meeting of shareholdersheld in June 2007 confirmed the recommendation of the Board ofDirectors to distribute dividends from the 2006 net profits and prioryears’ retained earnings. This was translated into a dividend ofUS$1.00 (US$0.95 after deducting the compulsory 5% tax on profitdistributions) per share held, as per the shareholders’ register atthe general meeting date. The total declared dividends amountedto US$155.1 million, with the balance of the 165 million sharesbeing treasury shares held by the Company.

The Company pursued its investor relationsefforts in 2007, participating in several financial, investment,business and real estate conferences.

Solidere attended the Merrill Lynch MENAOne-on-One Forum held February 10-13 at El Gouna, Egypt, and theEFG Hermes Investors roadshow held March 4-7 at SharmEl Sheikh, Egypt. One-on-one meetings held with a large number offund managers outlined the Company’s strong fundamentals, itsperformance, international expansion and future plans.

At the Urban Planning Conference heldFebruary 19-20 by the Municipality of Ajman, UAE, Beirut citycenter reconstruction was presented as a successful model of apublic-private partnership.

The Solidere roadshow for the privateplacement of the Solidere International capital issue, carried out inJune 2007, included a large number of one-on-one meetings withkey potential individual and institutional investors in the Gulfregion. Presentations were also made for the Lebanese bankingcommunity, individual investors and various interestedinternational funds.

Solidere and its international expansion werepresented at the Beirut Cosmopolitan Rotary Club on June 12, 2007.

At the Merrill Lynch Emerging Europe, MiddleEast and Africa Midcap One-on-One forum, held in July-August2007 and focusing on real estate and construction, Solidere held alarge number of meetings with investment funds. In London andNew York, the General Manager held 24 meetings, of which onewas a collective meeting attended by 21 funds.

Solidere participated in the ConfexBusinessmen Conference on investment opportunities in the Arabworld, held in Beirut on December 5, 2007. The Solidereintervention focused on its know-how, brand name and networkingcapabilities. The reasons behind the regional expansion ofLebanese companies, such as Solidere, were presented, as well asthe rationale for establishing Solidere International with a briefdescription of the company and its portfolio of projects.

Several other presentations on Solidere’sfundamentals and strategies that have led to the success of BeirutCity Center were also made on different occasions.

The Company continued to receive at itspremises numerous visitors with diverse profiles.

DIVIDENDDISTRIBUTION

RESEARCHAND INVESTORRELATIONS

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SSolidere has added new modules on its

Enterprise Resource Planning system (JDEdwards) toaccommodate lease cycle and property management for the SouksProject, as well as the automated billing for the Company's newservices, such as Broadband among other services.

The JDEdwards system was also enhanced toaccommodate the new expansion in external projects. Theexpertise accumulated by Solidere allowed a quick launch ofinternal systems within the subsidiaries of Solidere International.

A complete IT infrastructure was set up for theentire Solidere group, reducing time and effort needed to build thisurgently needed infrastructure.

A web-based document and projectmanagement system, ‘Conject’, was introduced to facilitate thestorage, retrieval and approval of technical drawings over theinternet, allowing consultants, engineers and managers monitorand process drawings wherever they are in the world.

The document management model that wasdeveloped for Solidere was also tuned to be used for SolidereInternational and the external companies.

New video conferencing setup was put inplace to facilitate the communication and enable virtual meetingwith Solidere members abroad.

As institutional investorsbegan to make acquisitions in the city center,Solidere took a more proactive role in guidingthe land use mix within development projects.A successful example is the high density block118 at the northeast corner of the Martyrs’Square axis, where residential, hotel, office andretail will combine to form a mixed-usedestination in the Phoenician Village project.Through a series of in-house workshops,Solidere also developed a strategy forpromoting Beirut city center and particularlythe new waterfront district as an internationalcorporate office location. A ‘special businessdistrict’ was defined within the NewWaterfrontDistrict, work began with the Ministry ofFinance on a package of incentives for thiszone and an office marketing campaign waslaunched. Finally, with cultural consultantsGaia Heritage, Solidere developed a culturalstrategy focused on the Martyrs’ Square axis.

A 5-year parking strategy was completed bylocal transportation consultants SITRAM, to resolve parkingshortfalls arising from the sale of land previously allocated totemporary parking. This is now satisfied by new parking provisionon the reclaimed area, connected to the historic and businesscenter by shuttle bus service. The study indicated the need forimplementation of the Martyrs’ Square car park by 2009. A parkingmeter study was carried out in coordination with the Municipality,identifying demand and allocating specific streets. Meters havenow been installed.

MANAGEMENTINFORMATIONSYSTEMS

URBAN ANDSTRATEGICSTUDIES

The need for implementing a public transport strategy was broughtinto focus in the detailed design of the Martyrs’ Square corridor. As required in theirproject brief, the Greek consultant team included transport planners, and the schemedesign features a dedicated public transport right-of-way on the west side of Martyrs’Square continuing southwards through the Beirut Gate development. Increases indensity and employment uses in the new waterfront district also confirmed the necessityfor mass transit in the near future. In particular, it will not be possible to service the newconcentration of employment in the ‘special business district’ without tram, light rail orbus rapid transit into the city center and connecting onward to a Beirut-wide network. Aproposal was received from the Greek consultants to work in association with SITRAMand Arup, Solidere’s strategic advisors, on such a study, long programmed for Beirut citycenter within its city-wide context.

Having submitted a Master Plan amendmentfor the new waterfront district, Solidere began preparations forlaunching infrastructure contracts for the reclaimed area. Aproposal was received from Arup (UK) to undertake aninfrastructure audit, designed to modernize infrastructureprovisions on the new lands and precede the work of Laceco ontheir detailed design.

An in-house study was carried out toformulate a mixed-use residential, hotel, office and retaildestination on block 21 in the hotel district. Following thedevelopment of a new office strategy and marketing campaign,architects were selected to undertake the design of three new officebuildings: Vincent van Duysen (Belgium), 3XN (Denmark) andMario Botta (Switzerland). The concept design was completed byVincent Van Duysen for a building in lot 1493 Mina El Hosn.

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SOLIDERE INTERNATIONAL LIMITED(SI) WAS ESTABLISHED IN THEDUBAI INTERNATIONAL FINANCIALCENTER (DIFC) ON JUNE 7, 2007.IT WAS CAPITALIZED ATUS$700 MILLION THROUGH APRIVATE PLACEMENT OFFERING.SOLIDERE INTERNATIONALHOLDINGS S.A.L. (99.5% OWNEDBY SOLIDERE) HAS SUBSCRIBEDTO 37.19% OF THE SI SHARE CAPITAL.OTHER SHAREHOLDERS ARE ELITEINDIVIDUAL AND INSTITUTIONALINVESTORS FROM THE MIDDLEEAST AND EUROPE, INCLUDINGSEVERAL INTERNATIONALINVESTMENT FUNDS.

The object of Solidere International is to identify, promote, purchase, invest in, develop,market and manage real estate projects in the Middle East and the Mediterranean Basin (the Target Area). Byleveraging the brand name, know-how and established development processes of Solidere, SI aims to takeadvantage of a booming real estate market in the Target Area by developing on a global/holistic basis urban areaswhere it can create and add value.

Solidere International benefits from the Solidere city-making philosophy which involves:designing and implementing a landscaped public domain; creating a self-sustainable environment through soundurban planning and energy conservation in infrastructure and building design; developing a high-quality, vibrantand attractive mixed-use environment comprising retail, office, residential, leisure and tourist facilities; arts districtsand cultural activities; quality real estate development and the creation of poles of excellence; and propertymanagement and maintenance, as a key to preserve and add value.

Solidere signed in June 2007 with Solidere International a Trade Mark License agreement, aProfessional Services agreement, and a Master Transfer agreement whereby Solidere transferred its rights in theidentified projects.

Solidere International draws on the city-making skills of the Solidere core team, and forspecific, detailed and technical aspects, on the expertise, systems and procedures within the company’s divisionalstructure. The latter includes: finance, tendering, procurement and contracting, management information systems,corporate reporting and publications, human resources, legal, sales and marketing, investor relations,communications and events organization.

Solidere and Solidere International also use an extensive specialistconsultant network, including architectural, urban design, urban planning, civil engineering,infrastructure engineering, traffic planning and management, property marketing and valuation,environmental landscaping and financial services. Together with some of these consultants, anumber of sites were identified and preliminary studies launched for their development.

Solidere International has a multiple role in the projects identified fordevelopment, fulfilling such activities as: master planning, urban design, infrastructure,project development, legal and corporate structuring, financial engineering, marketing andsales. Solidere and SI were able to mobilize important amounts for the funding of theidentified projects.

Solidere has built a portfolio of projects for Solidere International. Someprojects that were in the pipeline in 2007 have materialized in 2008, and companies wereestablished to pursue the projects in their respective countries.

The contracted projects include Al Zorah Project, Ajman, UAE, covering12 million sq m of land area; Eastown Project, Cairo, Egypt, with 1.8 million sq m; and WestownProject, Cairo, Egypt, with 0.85 million sq m.

Among the projects in the making is the Bodrum Project, Turkey, on8 million sq m of land area, and several projects in Saudi Arabia, for which MOUs were signed.

Having been short-listed for the Monaco Urban Expansion anddevelopment at Sea, the Solidere International - Vinci partnership presented their joint offer inMarch 2008.

Several opportunities have been identified in Saudi Arabia, a verypromising real estate market, and Solidere expects to have two or three projects there by end2008. Other opportunities are being assessed in Algeria, Qatar and Montenegro. Starting 2009,the Company will be concerned about how to implement a number of these projects. So theyear 2009 will be a consolidation year. Solidere International has signed with each of theestablished companies a Professional Services agreement.

Al Zorah, in Ajman, United Arab Emirates, isSolidere International’s flagship project and marks SI’s officialdebut into the region’s real estate market. The Project consists inthe planning and development of 12 million square meters ofcoastal and sea-reclaimed land, with an extended waterfront of12 kilometers.

The design process responds directly to thesite itself and includes sustainable development and energyconservation. The urban model objectives are to preserve thenatural context and create a high-value environment for residentsand visitors; promote tourism and eco-tourism; create a newbusiness hub responding to demand for office and business parks;enhance roads and bridges serving Al Zorah and connecting it tothe rest of Ajman and to the national highway grid.

Quality mixed-use real estate productstotaling around 22 million sq m of built-up space are to bedeveloped, with almost all the properties enjoying water andmangroves views. They include world-class beachfront resorts andhotels, several residential zones, office buildings of differentheights and sizes, an important mall, and institutional facilities.

THE PROJECT

AL ZORAHDEVELOPMENTCOMPANY

AL ZORAH PROJECT, AJMANLAND 12 MILLION SQ MBUA 22 MILLION SQ M

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Al Zorah Development (Private) Company Limited P.S.C. wasincorporated in October 2007 as a Free Zone Company under the laws of Ajman, UnitedArab Emirates. Its object is “to carry on all business relevant to the development ofAl Zorah area, acquire lands and properties and market, manage and lease the same forthe Company’s or other parties’ accounts, including real estate brokerage services”.

The Company’s life is 99 years. Its capital is AED 4 billion,consisting of 40 million shares with a par value of AED 100, of which AED 2.12 billionwere contributed in kind by the Ajman Government and Solidere International (theAl Zorah land); and AED 1.88 billion were a cash contribution by SI Al Zorah EquityInvestments, Inc. The latter amount was raised, with Solidere International Limitedowning 77.27% of shares in SI Al Zorah Equity Investments.

In December 2007, the land ownership was transferred to theCompany, which started operation, signed with the Government of Ajman theConcession Agreement and held its first general meeting at which the Board of Directorsapproved the master plan, implementation and phasing program and appointed SheikhRashid bin Humaid Al Noaimi as Chairman and Mr. Imad Mohamed Amin Dana as CEO.

THE COMPANY PROFESSIONALAGREEMENTS

Solidere International and the Company signed a ProfessionalServices Agreement in March 2008.

The Company also hired the services of the following consultantsin their respective capacities: Ian Hogan, Urban Design/Conceptual Master Plan/MasterPlan Development; Ove Arup and Partners Ltd, Strategic Advisory Services on TransportInfrastructure and Sustainability; COWI A/S of Denmark, Environmental ImpactAssessment (EIA) Study, Hydraulic Modeling Studies and Reclamation Works; Dar Al-Handasah (Shair & Partners), Infrastructure Design.

The Project launch on May 1, 2008 was quite successful, supportedby a global communications campaign and a pre-sales campaign that brought inUS$2.7 billion in revenues to Al Zorah Development Company. The exceptional investorreception for the Project is expected to continue. The benefits of this success have notonly reflected positively on Al Zorah, but also on Solidere International’s brand,reputation and growth prospects.

PROJECT LAUNCHAND MARKETING

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TERRA MARISMONACO URBANEXPANSION ANDDEVELOPMENT AT SEALAND 100,000 SQ MBUA 275,000 SQ M OFWHICH 250,000 SQ MPRIVATE

The Monegasque Government launched aprequalification bid for this model projectin an exceptional location, that extends20 ha out into the sea from the heart ofMonte Carlo. Solidere and Vinci (France)were selected as one of the five short-listed consortia from 20 internationalbidders. Solidere transferred all its rightsto Solidere International.

The project, as presented by SI and Vinci,seeks to reinforce Monaco’s strongMediterranean identity, maritime heritageand glamorous past. While creating anew city quarter and public arena for theMonegasque community, it willreposition Monaco as a major destinationfor European and international visitors.

SI secured equity and debt finance tofund the project. Together with Vinci, SIcommissioned studies for the project.The SI – Vinci partnership presented inMarch 2007 their bid through Terra Maris,a newly formed company in Monaco. Thefinal results are expected in the secondhalf of 2008.

CAIRO PROJECTS, EGYPTWESTOWN, SHEIKHZAYED CITYLAND 1.2 MILLION SQ MPROPERTY OF SODICSOLIDERE INTERNATIONALPURCHASE OPTIONON 250,000 SQ MBUA 2.44 MILLION SQ M

EASTOWN, KATEMEYALAND 860,000 SQ MPROPERTY OF SOREALSOLIDERE INTERNATIONALPURCHASE OPTIONON 50,000 SQ MBUA 1.62 MILLION SQ M

Solidere International entered intoagreements with the Egyptian companySix October Development and InvestmentCompany (SODIC) to master plan, design,develop, build, invest, market and propertymanage two projects in Cairo’s westernand eastern suburbs. In both cases, theland is owned by the Egyptian partner,with SI having land purchase options.

The master planning by SI of the twoprojects, named Westown and Eastown,aims at offering mixed-use urbandestinations; different types of residentialoptions; state-of-the-art office buildingsand landmark head offices; hotels andfurnished apartments; outdoor and indoorretail and entertainment; and variousamenities (schools and public facilities).

In February 2008, the master plans forthe two projects were submitted to theEgyptian authorities for final approval.

BODRUM, TURKEYLAND 8,000,000 SQ MBUA 960,000 SQ MABOVE GRADE LEVEL

The project site is in the Turkishvacation region of Yali Ciflik Bay,Bodrum, approximately 20 kilometerseast of Bodrum town center.

Solidere International signed an MOUwith partners for the development ofa resort town aimed at the top incomelevel international clientele.

It is the intention that this projectshould be an example of ecologicalconsciousness and sustainability. Aconceptual master plan was preparedto that effect by Oktay Nayman (Turkey)with the help of Solidere International.The objective of protecting this uniquesite is translated in real estate clustersforming typical hillside Mediterraneanvillages respectful of the site topographyand separated by broad bands of naturallandscape. The overriding intention isto limit intervention to the naturallandscape, to preserve and enhancethe ecological balance of the site withreplantation where necessary. The projectis to use green, intelligent and ecologicalfriendly (low density) concepts andprocesses in terms of energyconsumption and recycling.

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INDEPENDENTAUDITORS’ REPORT

To the shareholdersThe Lebanese Company for the Developmentand Reconstruction of Beirut Central District s.a.l.Beirut - Lebanon

We have audited the accompanying consolidated financial statements of The LebaneseCompany for the Development and Reconstruction of Beirut Central District s.a.l. and itsSubsidiaries (the Group), which comprise the consolidated balance sheet as atDecember 31, 2007, and the consolidated income statement, statement of changes inequity and cash flow statement for the year then ended, and a summary of significantaccounting policies and other explanatory notes.

Management and Directors’ Responsibility for the Financial StatementsManagement and Directors are responsible for the preparation and fair presentation ofthese financial statements in accordance with International Financial ReportingStandards.This responsibility includes: designing, implementing and maintaininginternal control relevant to the preparation and fair presentation of financial statementsthat are free from material misstatement, whether due to fraud or error; selecting andapplying appropriate accounting policies; and making accounting estimates that arereasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on ouraudit.We conducted our audit in accordance with International Standards onAuditing.Those standards require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance whether the financial statementsare free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amountsand disclosures in the financial statements.The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error.In making those riskassessments, the auditor considers internal control relevant to the entity’s preparationand fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the entity’s internal control.An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of thefinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all materialrespects, the financial position of The Lebanese Company for the Development andReconstruction of Beirut Central District s.a.l. and its Subsidiaries (the Group) as ofDecember 31, 2007, and of its consolidated financial performance and its cash flows forthe year then ended in accordance with International Financial Reporting Standards.

Beirut, LebanonMarch 31, 2008 Deloitte & Touche Ernst & Young

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December 31, 2007 2006Notes US$ US$

AssetsCash and bank balances 7 327,847,633 106,202,604Prepayments and other debit balances 8 34,449,004 28,253,397Accounts and notes receivable, net 9 318,734,724 348,942,550Investment securities 10 10,063,020 8,610,673Inventory of land and projects in progress 11 1,404,710,655 1,457,804,977Investment properties, net 12 150,349,040 150,651,813Investment in an associate 13 287,458,659 -Fixed assets, net 14 35,641,877 26,115,483Total Assets 2,569,254,612 2,126,581,497

LiabilitiesBank overdrafts and short term facilities 15 181,186,491 48,362,001Accounts payable and other liabilities 16 99,357,927 83,323,709Dividends payable 17 46,212,797 30,877,712Deferred revenues and other credit balances 18 233,147,452 168,305,793Deferred credits under structured contracts 19 170,280,000 -Loans from banks and financial institutions 20 7,041,163 27,062,700Total Liabilities 737,225,830 357,931,915

EquityIssued capital at par value US$10 per share: 21

100,000,000 class (A) shares 1,000,000,000 1,000,000,00065,000,000 class (B) shares 650,000,000 650,000,000

1,650,000,000 1,650,000,000

Legal reserve 22 75,543,036 59,935,830Retained earnings 263,175,988 209,685,044Cumulative changes in fair value ofavailable-for-sale securities 10 147,492 38,760Surplus on sale of treasury shares 11,653,751 11,653,751Less: Treasury shares 23 (168,491,485) (162,663,803)Total Equity 1,832,028,782 1,768,649,582Total Liabilities and Equity 2,569,254,612 2,126,581,497

the accompanying notes form an integral part of these consolidated financial statements


Revenues from land and real estate sales 288,467,975 253,344,014Revenues from rented properties 20,775,368 20,719,451Revenues from project managementand consulting services 690,845 2,066,977Cost of land and real estate sales (114,089,596) (114,584,398)Charges on rented properties 24 (7,070,296) (6,457,583)Cost related to project managementand consulting services (86,127) (1,831,969)(Loss)/gain on sale of investment properties 12 (824,099) 264,974Net revenues from operations 187,864,070 153,521,466

Share result from an associate 13 68,030,929 -General and administrative expenses 25 (18,086,723) (14,304,800)Depreciation of fixed assets 14 (1,494,267) (1,699,106)Provision against land development cost 11 (7,882,327) (3,036,061)Other taxes 16 (670,059) (1,319,859)Provision for doubtful receivables 9 (314,962) -Other expense, net 26 (1,854,289) -Interest income 27 40,151,525 27,211,687Interest expense (15,885,954) (7,173,307)Profit before tax 249,857,943 153,200,020Income tax expense 16 (25,666,091) (21,033,071)

Profit for the year 224,191,852 132,166,949

Basic/diluted earnings per share 28 1.4450 0.8375


CONSOLIDATEDBALANCE SHEET

CONSOLIDATEDINCOMESTATEMENT

9594



Cash flows from operating activitiesProfit for the year before income tax 249,857,943 153,200,020Adjustments to reconcile income to net cashprovided by operating activities:Depreciation 29 4,340,875 4,577,012Loss/(gain) on sale of investment properties 12 824,099 (264,974)Loss on sale of fixed assets 120,882 -Provision for doubtful receivables 9 314,962 -Provision for contingencies and other charges 16(d) 2,876,491 837,921Share result from an associate 13 (68,030,929) -Interest income 27 (40,151,525) (27,211,687)Interest expense 29 16,524,567 8,153,514Changes in fair value of interestrate swap agreement - 1,012,279

Changes in working capital:Prepayments and other debit balances 8(b) 3,234,418 5,660,430Accounts and notes receivable 29 29,829,496 (76,482,211)Inventory of land and projects in progress 29 35,649,881 70,497,438Accounts payable and other liabilities 29 (3,160,065) 4,166,342Deferred revenues and other credit balances 8(b) 64,841,659 113,206,367Interest received 30,721,497 18,877,780Income tax paid (21,156,116) (17,159,028)

Net cash provided by operating activities 306,638,135 259,071,203

Cash flows from investing activitiesPledged term deposits with banks 18,434,911 3,865,440Investment securities 29 (1,324,427) 1,288,697Receivable from recuperated properties 29 217,008 413,000Acquisition of fixed assets 14&29 (4,633,587) (2,426,067)Acquisition of investment properties 12 (378,731) (467,206)Proceeds from sale of fixed assets 250,001 -Proceeds from sale of investment properties 12 7,697,283 960,446Investment in an associate 13 (219,427,730) -Net cash (used in)/provided by investing activities (199,165,272) 3,634,310

Cash flows from financing activitiesBank loans (settlement) (20,021,537) (102,336,359)Dividends paid 17 (132,003,932) (74,220,101)Deferred credits under structured contracts 19 170,280,000 -Treasury shares (5,981,322) (136,294,710)Proceeds from sales of treasury shares - 17,714,145Interest paid (12,490,622) (7,377,811)Net cash used in financing activities (217,413) (302,514,836)

Net change in cash and cash equivalents 107,255,450 (39,809,323)Cash and cash equivalents — Beginning of the year 32,220,220 72,029,543Cash and cash equivalents — End of the year 29 139,475,670 32,220,220


CONSOLIDATEDCASH FLOWSTATEMENT

Cumulative

Cumulative

Chan

ges

inChan

ges

in

FairValueof

FairValueof

Surplus

onSale

Share

Legal

Treasury

Retained

Interest

Rate

Available-for-sale

ofTreasury

Cap

ital

Reserve

Shares

Earnings

Swap

Agreemen

tSecurities

Shares

Total

US$

US$

US$

US$

US$

US$

US$

US$

Balan

ceat

Decem

ber

31,2

005

1,650,000,000

46,717,354

(38,540,193)

185,567,677

(861,982)

(233,180)

2,508,180

1,845,157,856

Profitfortheyear

-2006

--

-132,166,949

--

-132,166,949

Chan

gein

fairvalueofinterest

rate

swap

agreem

ent

--

--

861,982

--

861,982

Chan

gein

fairvalueof

available-for-sale

securities

--

--

-271,940

-271,940

Totalresultoftheyear

--

-132,166,949

861,982

271,940

-133,300,871

Surplus

onsaleof

treasury

shares

--

--

--

9,145,571

9,145,571

Allo

cationto

legal

reserve

from

2006

profit

-13,218,476

-(13,218,476)

--

--

Treasury

shares

trad

e-

-(124,123,610)

--

--

(124,123,610)

Dividen

ds–Note

17-

--

(94,831,106)

--

-(94,831,106)

Balan

ceat

Decem

ber

31,2

006

1,65

0,000,000

59,935,830

(162,663,803)

209,685,044

-38,760

11,653,751

1,768,649,582

Profitfortheyear

-2007

--

-224,191,852

--

-224,191,852

Chan

gein

fairvalueof

available-for-sale

securities

--

--

-108,732

-108,732

Totalresultoftheyear

--

-224,191,852

-108,732

-224,300,584

Allo

cationto

legal

reservefrom

2007

profit

-15,607,206

-(15,607,206)

--

--

Treasury

shares

trad

e-

-(5,827,682)

--

--

(5,827,682)

Dividen

ds–Note

17-

--

(155,093,702)

--

-(155,093,702)

BalanceatDecember31,2007

1,650,000,000

75,543,036

(168,491,485)

263,175,988

-147,492

11,653,751

1,832,028,782

theaccompan

yingnotesform

anintegralp

artoftheseconsolid

ated

finan

cial

statem

ents

CONSOLIDATE

DSTATEMENT

OFCHANGES

INEQUITY

9796


NO

TE

ST

OT

HE

CO

NS

OLI

DA

TE

DFI

NA

NC

IAL

ST

AT

EM

EN

TS

DE

CE

MB

ER

31

,2

00

7

1. FORMATIONAND OBJECTIVEOF THECOMPANY

The Lebanese Company for the Development and Reconstruction of Beirut Central Districts.a.l. (SOLIDERE) (the Company) was established as a Lebanese joint stock company on May5, 1994 based on Law No. 117/91, and was registered on May 10, 1994 under CommercialRegistration No. 67000.The articles of incorporation of the Company were approved byDecree No. 2537 dated July 22, 1992.

The objective of the Company, is to acquire real estate properties, to finance and ensure theexecution of all infrastructure works in the Beirut Central District (BCD) area, to prepare andreconstruct the BCD area, to reconstruct or restore the existing buildings, to erect buildingsand sell, lease or exploit such buildings and lots and to develop the landfill on the seaside.

The duration of the Company is 25 years, beginning from the date of establishment.Anextraordinary general assembly dated June 29, 1998 resolved to amend the duration of theCompany to be 75 years beginning from the date of establishment.During 2005, the Councilof Ministers approved the extension of the duration of the Company for 10 years.

The Company, based on law No.117/91 mentioned above, was exempt from income tax fora period of ten years beginning on the date of formation.As such beginning May 10, 2004,the Company became subject to income tax.

An extraordinary general assembly dated November 13, 2006 resolved to amend theobjective of the Company to include providing services and consultancy in real estatedevelopment for projects outside the BCD area and all over the world.

During 2007, the Company granted Solidere International Limited (an associate) the right touse the “Solidere” brand in the execution of real estate projects outside the Beirut CentralDistrict area of Lebanon.

The Company’s shares are listed on the Beirut stock exchange and Global DepositoryReceipts (GDR) are listed on the London stock exchange (International TradingList).Furthermore, the Company’s shares were listed on the Kuwait stock exchange duringthe year 2005 and were de-listed during the first quarter of the year 2007.

2. ADOPTIONOF NEW ANDREVISEDINTERNATIONALFINANCIALREPORTINGSTANDARDS

The accounting policies adopted in the preparation of the financial statements are consistentwith those followed in the preparation of the financial statements for the year ended December31, 2006, except for the adoption of new standards and interpretations noted below. Adoptionof these standards and interpretations did not have any effect on the financial position orperformance of the Group. They did, however, give rise to additional disclosures.

IAS 1, “Amendment – Capital disclosure” effective from January 1, 2007 requires the Groupto make new disclosures to enable the users of the financial statements to evaluate theGroup’s objectives, policies and processes for managing capital.

IFRS 7, “Financial instruments: Disclosures”, effective for annual periods beginning on orafter January 1, 2007, requires disclosures that enable the users of the financial statementsto evaluate the significance of the Group’s financial instruments and the nature and extentof risks arising from those financial instruments. The new disclosures are includedthroughout the financial statements. While there has been no effect on the financial positionor results, comparative information has been revised where needed.

Standards, Interpretations and Amendments to Published Standards that are issued but notyet effective

Up to the date of approval of the financial statements, certain new standards, interpretationsand amendments to existing standards have been published but are not yet effective for thecurrent reporting period and which the Group has not early adopted, as follows:

IFRIC 11, “Group and Treasury Share Transactions” is effective for annual periods beginningon or after March 1, 2007 and requires arrangements whereby an employee is grantedoptions to buy equity shares, to be accounted for as equity-settled schemes by an entityeven if the entity chooses or is required to buy those equity shares from another party, orthe shareholders of the entity provide the equity instruments granted.

Amendment to IAS 23 “Borrowing costs” (effective for annual periods beginning on or afterJanuary 1, 2009) eliminates the benchmark treatment of expensing all borrowing costs in thecase of qualifying assets to the income statement. All borrowing costs that are directlyattributable to the acquisition or construction of a qualifying asset must be capitalized. Aqualifying asset is an asset that necessarily takes a substantial period of time to get readyfor its intended use or sale.

Amendments to IAS 1 (effective for annual periods beginning on or after January 1, 2009) whichhas been revised to enhance the usefulness of information presented in the financialstatements.Of the main revisions are the requirement that the statement of changes in equityincludes only transactions with shareholders; the introduction of a new statement ofcomprehensive income that combines all items of income and expense recognized in profit orloss together with “other comprehensive income”; and the statement of financial position as atthe beginning of the earliest comparative period, i.e. a third column on the balance sheet whenthe entity applies an accounting policy retrospectively or makes retrospective restatement.

3. SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIES

The consolidated financial statements have been prepared in accordance with InternationalFinancial Reporting Standards.

The financial statements are presented in U.S. Dollars.

The financial statements are prepared under the historical cost convention as modified for themeasurement at fair value of available-for-sale financial assets and derivatives, as applicable.

The consolidated financial statements incorporate the financial statements of The LebaneseCompany for the Development and Reconstruction of Beirut Central District s.a.l. and itscontrolled subsidiaries drawn up to December 31 of each year.Control is achieved where theGroup has the power to govern the financial and operating policies of an entity so as toobtain benefits from its activities.

9998


Where necessary, adjustments are made to the financial statements of subsidiaries to bringtheir accounting policies in line with those used by other members of the Group.

All intra-Group balances, transactions, income and expenses and profits and losses resultingfrom intra-Group transactions are eliminated in full.

Group entities comprise the following:

Ownership Date ofCompany Share Establishment

Beirut Water Front Development s.a.l.(Joint Venture) (Proportionate consolidation) 50 April 2004

Beirut Real Estate Management andServices s.a.l. (Joint Venture),(Proportionate consolidation) 45 September 2005

Solidere Management Services s.a.l. 100 June 2006

Solidere Management Services (Offshore) s.a.l 100 March 2007

Solidere International Holding s.a.l. 100 May 2007

The significant accounting policies adopted are set here below:

A. Basis of PresentationIn view of the long term nature and particulars of the Group’s operations, the financialstatements are presented on the basis that the operations have realization and liquidationperiods spread over the duration of the Group and which are subject to market conditions andother factors commonly associated with development projects; as such, the balance sheet isshown as “unclassified” without distinction between current and long-term components.

B. Foreign CurrenciesThe functional and presentation currency is the U.S. Dollars, in accordance with theapplicable law, which reflects the economic substance of the underlying events andcircumstances of the Group.Transactions denominated in other currencies are translatedinto U.S. Dollars at the exchange rates prevailing at the dates of the transactions.Monetaryassets and liabilities stated in currencies other than the U.S. Dollar are translated at the ratesof exchange prevailing at the end of the year.The resulting exchange gain or loss which isnot material is reflected in the income statement.

C. Impairment and Uncollectibility of Financial AssetsAn assessment is made at each balance sheet date to determine whether there is objectiveevidence that a financial asset or group of financial assets may be impaired.If such evidenceexists, the estimated recoverable amount of that asset and any impairment loss aredetermined based on the present value of expected future cash flows.Impairment losses arerecognized in the income statement.

D. Accounts and Notes ReceivableAccounts and notes receivable which are originated by the Group are stated at amortizedcost less any amount written off and provisions for impairment. An assessment is made ateach balance sheet date to determine whether there is objective evidence that accounts ornotes receivable may be impaired. If such evidence exists, the estimated recoverableamount of that asset is determined and any impairment loss, based on the net present valueof future anticipated cash flows discounted at original effective interest rates, is included inthe income statement.

The carrying amount of the asset is adjusted through the use of an allowance account.

E. Financial InstrumentsFinancial assets and financial liabilities are recognized on the Group balance sheet when theGroup becomes a party to the contractual provisions of the instrument.

When a financial instrument gives rise to a contractual obligation on the part of the Groupto deliver cash or another financial asset or to exchange another financial instrument underconditions that are potentially unfavorable, it is classified as a financial liability.Theinstrument is an equity instrument if, and only if, both conditions (a) and (b) below are met:

a. The instrument includes no contractual obligation to deliver cash or another financialasset to another entity; or to exchange financial assets or financial liabilities with anotherentity under conditions that are potentially unfavorable to the issuer.

b. If the instrument will or may be settled from the Group’s own equity instruments; it is anon-derivative that includes no contractual obligation for the Group to deliver a variablenumber of its own equity instruments; or a derivative that will be settled only by theGroup exchanging a fixed amount of cash or another financial asset for a fixed number ofits own equity instruments.

Financial assets within the scope of IAS 39 are classified as financial assets at fair valuethrough profit or loss, loans and receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate.When financial assets are recognized initially, they aremeasured at fair value, plus, in the case of investments not at fair value through profit orloss, directly attributable transaction costs.

The Group determines the classification of its financial assets on initial recognition and,where allowed and appropriate, re-evaluates this designation at each financial year end.

All regular way purchases and sales of financial assets are recognised on the trade date,which is the date that the Group commits to purchase the asset.Regular way purchases orsales are purchases or sales of financial assets that require delivery of assets within theperiod generally established by regulation or convention in the marketplace.

Held-to-Maturity SecuritiesHeld-to-maturity securities, which have fixed or determinable payments and which areintended to be held to maturity, are subsequently measured at amortized cost, less provisionfor impairment in value.This cost is computed as the amount initially recognized minusprincipal repayments, plus or minus the cumulative amortization using the effective interestmethod of any difference between the initially recognized amount and the maturity amount.Amortized cost is calculated by taking into account any discount or premium on acquisition.

Impairment loss on such investments is recognized in the income statement.

Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market.After initial measurement, loans and receivables arecarried at amortized cost using the effective interest method less any allowance forimpairment.Gains and losses are recognized in profit and or loss when the loans andreceivables are derecognized or impaired as well as through the amortization process.

Available-for-Sale SecuritiesAvailable-for-sale securities are those non-derivative financial assets that are designated asavailable-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 or losses being recognized netof deferred tax as a separate component of equity until the investment is derecognized oruntil the investment is determined to be impaired at which time the cumulative gain or losspreviously reported in equity is included in the consolidated income statement.

Fair ValueThe fair value of investments that are actively traded in organized financial markets isdetermined by reference to quoted market bid prices at the close of business on the balancesheet date. For investments where there is no active market, fair value is determined using

101100


valuation techniques. Such techniques include using recent arm’s length markettransactions, reference to the current market value of another instrument, which issubstantially the same, discounted cash flow analysis and other pricing models.

DerecognitionFinancial assetsA financial asset (or where applicable, a part of a financial asset or part of a group of similarfinancial assets) is derecognized where:

• The rights to receive cash flows from the asset have expired, or• The Group has transferred its rights to receive cash flows from theasset, or has assumed an obligation to pay the received cash flow infull without material delay to a third party under a ‘pass through’arrangement, and

• Either (a) the Group has transferred substantially all the risks andrewards of the asset, or (b) the Group has neither transferred norretained substantially all the risks and rewards of the asset, but hastransferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset and hasneither transferred nor retained substantially all the risks and rewards of the asset nortransferred control of the asset, the asset is derecognized to the extent of the Group’scontinuing involvement in the asset. Continuing involvement that takes the form of aguarantee over the transferred asset is measured at the lower of the original carryingamount of the asset and the maximum amount of consideration that the Group could berequired to repay.

When continuing involvement takes the form of a written and/or purchased option(including a cash settled option or similar provision) on the transferred asset, the extent ofthe Group’s continuing involvement is the amount of the transferred asset that the Groupmay repurchase, except that in the case of a written put option (including a cash settledoption or similar provision) on an asset measured at fair value, the extent of the Group’scontinuing involvement is limited to the lower of the fair value of the transferred asset andthe option exercise price.

Financial liabilitiesA financial liability is derecognized when the obligation under the liability is discharged orcancelled or expires. Where an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability aresubstantially modified, such an exchange or modification is treated as a derecognition of theoriginal liability and the recognition of a new liability and the difference in the respectivecarrying amount is recognized in profit or loss.

OffsettingFinancial assets and financial liabilities are only offset and the net amount is reported in thebalance sheet when there is a legally enforceable right to set-off the recognized amountsand the Group intends to either settle on a net basis, or to realize the asset and the liabilitysimultaneously.

F. Inventory of Land and Projects in ProgressInventory of land and projects in progress are stated at the lower of cost and estimated netrealizable value.Costs include appraisal values of real estate plots constituting thecontributions in kind to capital (A shares), in addition to capitalized costs. Capitalized costscomprise the following:

• Project direct costs and overheads related to the propertiesdevelopment, construction and project management as a whole, aswell as acquisition, zoning, and eviction costs.

• Indirect costs, such as overheads, which were partially allocated toinventory of land and projects in progress.

G. Investment PropertiesInvestment properties which represent properties held to earn rent and/or for capitalappreciation are measured initially at cost and subsequent to initial recognition are stated attheir cost less accumulated depreciation and any impairment in value.

Depreciation is computed using the straight-line method over the estimated useful lives ofthe properties, excluding the cost of land, based on the following annual rates:

Buildings 2%Furniture, fixtures, equipment and other assets 9%-15%

The carrying amount includes the cost of replacing part of an existing investment propertyat the time that cost is incurred if the recognition criteria are met. Other subsequentexpenditure is capitalized only when it increases future economic benefits of the related itemof investment properties. All other expenditure is recognized in the income statement as theexpense is incurred.

Transfers are made to investment properties when, and only when, there is a change in use,evidenced by the end of owner occupation, commencement of an operating lease to anotherparty or completion of construction or development.

Transfers are made from investment properties when, and only when, there is a change inuse, evidenced by commencement of owner occupation or commencement of developmentwith a view to sell.

H. Interest in Joint VenturesThe Group has interests in joint ventures. A joint venture is a contractual arrangement wherebytwo or more parties undertake an economic activity that is subject to joint control. The Grouprecognizes its share in joint ventures by using the proportionate consolidation method.

Investments in joint ventures are accounted for in the standalone financial statements usinghistorical cost net of any impairment loss. Impairment loss is recognized in the incomestatement.

The Group consolidates its share in assets, liabilities, revenues and expenses with relatedcaptions in the consolidated financial statements.

Financial statements of joint ventures are prepared for the same fiscal year, using the sameaccounting policies.

When the Group contributes or sells assets to the joint venture, any portion of gain or lossfrom the transaction is recognized based on the substance of the transaction. When theGroup sells assets to the joint venture, the Group does not recognize its share of the profitsfrom the transaction until the joint venture resells the assets to an independent party.

The joint venture is proportionately consolidated until the date on which the Group ceasesto have joint control over the joint venture.

I. Investments in AssociatesThe Group’s investments in associates are accounted for under the equity method ofaccounting. These are entities over which the Group exercises significant influence andwhich are neither subsidiaries nor joint ventures.

Under the equity method of accounting, the interest in the associate is carried in the balancesheet at cost as adjusted for post acquisition changes in the Group’s share of the net assetsof the associate, less any impairment in the value of the individual investment.

J. Fixed AssetsFixed assets are stated at cost net of accumulated depreciation and any impairment in value.Depreciation is computed using the straight-line method over the estimated useful lives ofthe assets based on the following annual rates:

103102


Buildings 2%Marina 2%Furniture and fixtures 9%Freehold improvements 9%Plant 10%Machines and equipment 15%-20%

Expenditure incurred to replace a component of an item of fixed assets that is accounted forseparately is capitalized and the carrying amount of the component that is replaced iswritten off. Other subsequent expenditure is capitalized only when it increases futureeconomic benefits of the related item of fixed assets. All other expenditure is recognized inthe income statement as the expense is incurred.

K. ImpairmentAt each balance sheet date, the carrying amounts of tangible assets (investment propertiesand fixed assets) are reviewed to determine whether there is any indication that these assetshave suffered an impairment loss. If any such indication exists, the recoverable amount ofthe asset is estimated in order to determine the extent of the impairment loss, if any.

Recoverable amount is defined as the higher of:

• Fair value that reflects market conditions at the balance sheet dateless cost to sell, if any.

• Value in use assessed as the present value of estimated future cashflows expected to arise from the continuing use of the asset and fromits disposal at the end of its useful life, only for applicable assets withcash generation units, as applicable.

Where an impairment loss subsequently reverses, the carrying amount of the asset isincreased to the revised estimate of its recoverable amount, but so that the increasedcarrying amount does not exceed the carrying amount that would have been determinedhad no impairment loss been recognized for the asset in prior years. A reversal of animpairment loss is recognized immediately in profit or loss, unless the relevant asset iscarried at a revalued amount, in which case the reversal of the impairment loss is treated asa revaluation increase.

The impairment loss is recognized in the income statement.

L. Treasury SharesOwn equity instruments which are reacquired (treasury shares) are deducted from equity.No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation ofthe Group’s own equity instruments.

Gains on sale of treasury shares are recorded under a reserve account in equity. Losses inexcess of previously recognized gains are charged to retained earnings.

M. Revenue RecognitionRevenue on land and real estate sales transactions is recognized on the basis of the fullaccrual method as and when the following conditions are met:

• A sale is consummated and contracts are signed.• The buyer’s initial (in principle over 25% of sales price) andcontinuing investments are adequate to demonstrate a commitmentto pay for the property.

• The Group’s receivable is not subject to future subordination.• The Group has transferred to the buyer the usual risks and rewards ofownership in a transaction that is in substance a sale and the Groupdoes not have a substantial continuing involvement with theproperty.

If any of the above conditions is not met, the initial payments received from buyers arerecorded under deferred revenues and other credit balances. Amounts are released torevenue as and when the above conditions are fulfilled.

Financial assets (including treasury shares) received in return for the sale of land and realestate are valued at fair market value.

Rental income from operating leases is recognized on a straight-line basis over the term ofthe relevant lease.

Interest income is recognized as interest accrues using the effective interest method, byreference to the principal outstanding and the applicable interest rate.

Revenue from rendering of services is recognized when the outcome of the transaction canbe estimated reliably, by reference to the stage of completion of the transaction at thebalance sheet date.

N. Cost of SalesCost of properties sold is determined on the basis of the built up area (BUA) - permitted rightto build in square meters - on the sold plots based on the terms of the sales agreements. Thecost of one square meter of BUA is arrived at by dividing, total estimated cost of the landdevelopment project over total available BUA after deduction of the BUA relating torecuperated properties and those relating to the religious and public administrations.

O. Deferred Credits under Structured ContractsTreasury shares sold where the buyer has the option to put back to the Group the shares ata predetermined price and the Group has the option to buy back these shares at the sameprice, are treated as deferred credits under structured contracts. The difference between theoriginal sales proceeds and option strike price is treated as interest which is accrued usingthe effective interest rate method.

P. Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production ofqualifying assets, which are assets that necessarily take a substantial period of time to beready for their intended use, are added to the cost of those assets, until such time that theassets are substantially ready for their intended use.

All other borrowing costs are reflected in the income statement in the period in which theyare incurred.

Q. Bank BorrowingsInterest-bearing bank loans and overdrafts are initially measured at the fair value of theconsideration received, less directly attributable costs and are subsequently measured atamortized cost, using the effective interest rate method. Any difference between theproceeds (net of transaction costs) and the settlement or redemption of borrowings isrecognized in profit or loss over the term of the borrowings through the amortizationprocess, using the effective interest rate method. The fair value of borrowings for disclosurepurposes is estimated by discounting the future contractual cash flows at the current marketinterest rate that is available to the Group for similar financial instruments.

R. Trade and other payablesTrade and other payables are initially measured at fair value. Due to their short-term nature,the carrying amount of trade and other payables approximates their fair values as ofDecember 31, 2007 and 2006. Average maturity dates of trade payables range between 30-90 days. Short duration payables with no stated interest rate are measured at originalinvoice amount unless the effect of imputing interest is significant.

S. Derivative Financial InstrumentsDerivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently remeasured at fair value.

Derivatives are carried as assets when the fair value is positive and as liabilities when thefair value is negative.

Fair values are generally obtained by reference to quoted market prices, discounted cashflow models and pricing models as appropriate.

105104


Cash flow hedges are a hedge of the exposure to variability in cash flows that is attributableto a particular risk associated with a recognized asset or liability or a highly probableforecast transaction and could affect profit or loss.

The effective portion of the gain or loss on the hedging instrument is recognized directly inequity, while the ineffective portion is recognized in profit or loss.

Amounts taken to equity are transferred to the income statement when the hedgedtransaction affects profit or loss, such as when hedged financial income or financial expenseis recognized or when a forecast sale or purchase occurs. Where the hedged item is the costof a non-financial asset or liability, the amounts taken to equity are transferred to the initialcarrying amount of the non-financial asset or liability.

T. TaxationCurrent TaxIn accordance with law No. 117/91, the Company was exempt from corporate income tax onprofit for a period of 10 years from the date of establishment, ending on May 10, 2004.

Effective May 10, 2004, income tax is determined and provided for in accordance with theLebanese tax laws. Income tax expense is calculated based on the taxable profit for the year.Taxable profit differs from net profit as reported in the income statement because it excludesitems of income or expense that are taxable or deductible in future years and it furtherexcludes items that are never taxable or deductible. The Company’s liability for current taxis calculated using tax rates enacted at the balance sheet date. Provision for income tax isreflected in the balance sheet net of taxes previously settled in the form of withholding tax.

Rental income is subject to the built property tax in accordance with the Lebanese tax law.

Deferred taxDeferred income tax is provided, using the liability method, on all temporary differences at thebalance sheet date between the tax bases of assets and liabilities and their carrying amounts.

Deferred income tax assets and liabilities are measured at the tax rates that are expected toapply to the period when the asset is realized or the liability is settled, based on laws thathave been enacted at the balance sheet date.

Deferred income tax assets are recognized for all deductible temporary differences andcarry-forward of unused tax assets and unused tax losses to the extent that it is probablethat taxable profit will be available against which the deductible temporary differences andthe carry-forward of unused tax assets and unused tax losses can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet dateand reduced to the extent that it is no longer probable that sufficient taxable profit will beavailable to allow all or part of the deferred income tax asset to be utilized.

Taxes payable on unrealized revenues are deferred until the revenue is realized.

Current tax and deferred tax relating to items that are credited or charged directly to equityare recognized directly in equity.

Value added tax (VAT)Revenues, expenses and assets are recognized net of the amount of VAT except:

• Where the VAT incurred on a purchase of assets or services is notrecoverable from the taxation authority, in which case the VAT isrecognized as part of the cost of acquisition of the asset or as part ofthe expense item as applicable; and

• Receivables and payables that are stated with the amount of VATincluded.

The net amount of VAT recoverable from, or payable to, the taxation authority is included aspart of receivables or payables in the balance sheet.

U. ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as a result of a pastevent, it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the presentobligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.Where a provision is measured using the cash flows estimated to settle the present obligation, its carryingamount is the present value of these cash flows.

V. Employees’ End-of-Service BenefitsThe Group provides end-of-service benefits to its employees. The entitlement to these benefits is based upon theemployees’ final salary and length of service, subject to the completion of a minimum service period. Theexpected costs of these benefits are accrued over the period of employment.

4. CRITICALACCOUNTINGJUDGMENTSAND USE OFESTIMATES

In the application of the accounting policies described in Note 3 above, management isrequired to make judgments, estimates and assumptions about the carrying amounts ofassets and liabilities that are not readily apparent from other sources. The estimates andassociated assumptions are based on historical experience and other factors that areconsidered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognized in the period in which the estimate is revised if therevision affects only that period, or in the period of the revision and future periods if therevision affects both current and future periods.

The most significant estimate made by the Group is the determination of the aggregate costof the Beirut Central District Project.

Impairment of accounts and notes receivableAn estimate of the collectible amount of accounts and notes receivable is made whencollection of the full amount is no longer probable. For individually significant amounts, thisestimation is performed on an individual basis. Amounts which are not individuallysignificant, but which are past due, are assessed collectively and a provision is set upaccording to the length of time past due, based on historical recovery rates.

At the balance sheet date, accounts and notes receivable amounted to US$68,961,930 andUS$289,075,956 respectively, and the provision for doubtful debts amounted to US$451,320as of the balance sheet date. Any difference between the amounts actually collected in futureperiods and the amounts expected will be recognized in the income statement.

Useful lives of fixed assetsThe Group’s management determines the estimated useful lives of its fixed assets forcalculating depreciation. The estimate is determined after considering the expected usage ofthe assets or physical wear and tear. Management reviews the residual value and usefullives annually and future depreciation charge would be adjusted where the managementbelieves the useful lives differ from previous estimates.

5. INTERESTIN JOINTVENTURES

The Company has interest in joint ventures as follows:a. The Group entered into a joint venture agreement on February 11, 2004, with Stow

Waterfront 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. During the year 2006, thecapital of the joint venture was increased to US$12,819,900 without changing the Group’sshare in the capital. The main activity of the joint venture is to develop, operate, manage,exploit and sell real estate properties in the Marina area in Beirut Central District.

As per the terms of the agreement, on December 31, 2005, the Group sold properties withan aggregate cost of US$10,100,000 from properties held for development and sale, to thejoint venture for a total consideration of US$31,600,000. The other venturer contributed incash an amount of US$31,600,000 to the joint venture.

107106


b. The Group entered into a joint venture agreement on December 23, 2005, with AswaqManagement and Services L.L.C. to establish Beirut Real Estate Management andServices s.a.l., with a 45% stake in the joint venture’s capital amounting to US$19,900. Themain activity of the joint venture is to manage and market Aswaq Beirut Project (underconstruction) which is owned by the Lebanese Company for the Development andReconstruction of Beirut Central District s.a.l.

The Group’s share of the assets, liabilities, income and expenses of the jointly controlledentities at December 31, 2007 and 2006, included in the consolidated financial statements,are as follows:

December 31, 2007 2006US$ US$

AssetsCash and bank balances 11,435,184 13,498,710Prepayments and other debit balances 257,593 559,967Inventory of land and projects in progress 10,850,050 7,933,467Fixed assets, net 70,503 81,085

22,613,330 22,073,229

LiabilitiesAccounts payable and other liabilities 3,980,398 716,140Deferred revenues and other credit balances - 168,565

3,980,398 884,705

Income and expenses

2007 2006US$ US$

Revenues from consulting services 482,544 24,747General and administrative expenses (275,492) (417,482)Depreciation (14,468) (15,220)Interest income 656,582 583,279Interest expense (429,668) -Income for the year before income tax 419,498 175,324

Income tax (60,382) (41,346)Income for the year 359,116 133,978

6. SEGMENTREPORTING

The business segments’ reporting is determined as the Group’s risk and rates of return areaffected predominantly by differences in the products and services. The geographicaloperating segment offers products and services through a specific economic environmentand is subject to risks and returns that differ from other economic environments and isconsidered the primary segment. The Group has no secondary segment.

The Group operates in two geographic markets, the Lebanese market and the Middle Eastmarket consisting primarily of the United Arab Emirates (UAE). The following table showsthe distribution of the Group’s revenues, profit for the year, total assets and total liabilitiesby geographical segment.

Lebanon Middle East TotalUS$ US$ US$

Revenues 288,467,975 - 288,467,975

Profit for the year 156,160,923 68,030,930 224,191,853

Total assets 2,281,795,954 287,458,659 2,569,254,613

Total liabilities 737,225,830 - 737,225,830

7. CASHAND BANKBALANCES

Cash and bank balances are composed of the following:


Cash on hand 85,026 98,749Current accounts 11,064,074 19,515,034Short term deposits 309,513,061 60,968,438

320,662,161 80,582,221Pledged term deposits 7,185,472 25,620,383

327,847,633 106,202,604

Short term deposits mature in January 2008 (December 31, 2006: Short term depositsmature in January 2007). The average yield on the term deposits as of December 31, 2007was approximately 5.5% (5.86% for the year ended December 31, 2006).

Pledged term deposits include an amount of US$16.7million as of December 31, 2006pledged against the loan provided to the Group and guaranteed by “COFACE” as explainedin Note 20. The loan was fully settled during 2007. Pledged term deposits also includedeposits of US$7million as of December 31, 2007 (US$8.9million as of December 31, 2006)pledged against a stand-by letter of credit to the extent of about US$3.5million (US$3.5millionas of December 31, 2006) and against a local bank’s loan to the extent of US$3million(US$5million as of December 31, 2006) as explained under Note 20 and Note 31(h).

8. PREPAYMENTSAND OTHERDEBITBALANCES

Prepayments and other debit balances are composed of the following:


Advance payments to contractors (a) 8,880,279 8,417,396Advances to employees 2,006,704 1,656,325Accrued interest income (b) 9,430,026 8,333,907Prepaid expenses 2,278,275 2,482,895Deferred tax assets (c) 2,277,120 1,945,160Due from related parties (d) 3,808,163 -Other debit balances (e) 5,768,437 5,417,714

34,449,004 28,253,397

a. Advance payments to contractors include an amount of US$7,030,531 as of December 31,2007 (US$5,788,093 as of December 31, 2006) relating to a contractor involved in theexecution of the “Aswaq Beirut” project.

b. Accrued interest income consists of the following:


Interest on bank deposits 1,993,894 157,118Interest on notes and accounts receivables 7,436,132 8,176,789

9,430,026 8,333,907

c. Deferred tax assets caption consists of the following:


Deferred tax assets on unrealized profitsfrom sales to a joint venture – Note 5 (a) 1,612,500 1,612,500Deferred tax assets on cost of land sold –Note 16 (c) 664,620 332,660

2,277,120 1,945,160

109108


10. INVESTMENTSECURITIES

During 2006 and 2007, the Group purchased several investments in capital guaranteedstructured products, issued by foreign financial institutions, whereby a considerable part ofthe price was financed by a loan from the issuing foreign bank. The financial assets and thefinancial liabilities resulting from these transactions are offset and the net amount isreported in the balance sheet since the Group has a legally enforceable right of set-off andthe Group intends to settle them on a net basis at maturity. Coupon rates depend on certainconditions being satisfied which vary depending on the instrument, but mainly are relatedto the Libor rate. The average yield on these investment securities amounted to 6.12% in2007 (6.12% during the year 2006).

The details of the above investments are as follows:

d. Due from related parties caption consists of the following:


Solidere International Limited 3,801,413 -Brems International s.a.l. (Offshore) 6,750 -

3,808,163 -

The above balances are interest free.

e. Other debit balances include an amount of US$2,358,000 as of December 31, 2007 and2006 representing a claim receivable in connection with an arbitration regarding a disputewith one of the Group’s contractors as explained under Note 31 (j).

9. ACCOUNTSAND NOTESRECEIVABLE,NET

Accounts and notes receivable are composed of the following:


Notes receivable 289,075,956 342,970,140Accounts receivable 68,961,930 63,709,387Receivables from tenants 6,539,940 5,945,936Interest receivable on discounted notes 801,730 825,954Less: Unearned interest (46,193,512) (64,157,547)Less: Provision for problematic receivables (451,320) (351,320)

318,734,724 348,942,550

The Group’s credit risk exposure is spread over 118 counter-parties; 6 customers constitute54% of the total exposure and 101 customers constitute the remaining 46% as of December31, 2007 (as of December 31, 2006, 107 counter-parties; 6 customers constitute 48% of thetotal exposure and 101 customers constitute the remaining 52%).

Notes receivable, which resulted mainly from sales, carry the following maturities:


Doubtful balances 470,605 365,935Overdue 66,860,055 878,1412007 - 180,001,9592008 95,993,211 60,421,4552009 61,247,873 51,433,9662010 36,640,650 29,958,5912011 27,863,562 19,910,093

289,075,956 342,970,140

As at December 31, the ageing analyses of notes receivable is as follows:


Doubtful balances 470,605 365,935Past due but not impaired:<30 days 1,209,669 878,14130-60 days 1,584,752 ->120 days 64,065,634 -

66,860,055 878,141

Neither past due nor impaired 221,745,296 341,726,064289,075,956 342,970,140

The average yield on accounts and notes receivable is mainly dependant on the Libor rateand was 9.97% as of December 31, 2007 (7.12% as of December 31, 2006).

In previous years, provision for problematic receivables has been established to meetprobable defaults of certain clients whose notes receivable aggregated to US$470,605 as ofDecember 31, 2007 (US$365,935 as of December 31, 2006).

The movement in the provision for problematic receivables during the year was as follows:

2007 2006US$ US$

Balance at the beginning of the year 351,320 351,320Additions 314,962 -Write-offs (214,962) -Balance at the end of the year 451,320 351,320

Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable.

111110


Decem

ber

31,

2007

2006

Leverage

Conditional

Leve

rage

Maturity

Book

withright

Net

Coupon

Interest

on

FairMarket

Book

withright

Net

Date

Value

ofset-off

Value

Rate

Leverage

Value

Value

ofset-off

Value

US$

US$

US$

%US$

US$

US$

US$

Held-to-Maturity

USDSpread

Callable

Ran

ge

Accrual

Note

23/02/2014

5,000,00

01,450,000

3,550,000

6.10

3ML+0.75%

4,766,500

5,000,000

1,990,000

3,010,000

4year

CPUMULT

IPLU

S

onAsian

Indices

26/03/2008

2,000,00

02,194,000

(194,000)

6.00

1YL+0.75%

3,457,200

2,000,000

2,075,000

(75,000)

10-yearUSD“M

omen

tum”

Callable

Ran

geAccrual

Note

16/03/2015

2,995,500

1,400,000

1,595,500

6.65

3ML+0.5%

2,802,000

2,995,500

1,509,716

1,485,784

9,995,500

5,044,000

4,951,500

11,025,700

9,995,500

5,574,716

4,420,784

Available-for-sale

7-year

Non-Call3

months

Knock-outCallable

Ran

ge

Note

129/03/2012

3,000,00

0750,000

2,250,000

5.60

3ML+0.5%

2,983,920

3,000,000

803,711

2,196,289

7-year

USDCallable

Ran

ge

Accrual

Puttab

leNote

125/04/2016

2,688,00

0-

2,688,000

6.20

3ML+0.5%

2,877,600

2,688,000

740,000

1,948,000

5,688,000

750,000

4,938,000

5,861,520

5,688,000

1,543,711

4,144,289

Totalinvestmen

tsin

securities

atnet

bookvalue

15,683,500

5,794,000

9,889,500

16,887,220

15,683,500

7,118,427

8,565,073

Add/(Less):

Chan

gein

fairvalueof

available-for-salesecurities

173,520

45,600

Investmen

tsecurities

10,063,020

8,610,673

1TheCompan

yhas

aputoptionto

sellbackthenotesto

theissuer

at100%

provided

certainconditionsaremet.

11. INVENTORYOF LAND ANDPROJECTS INPROGRESS

Inventory of land and projects in progress consists of the following:


Land and land development works, net (a) 1,190,541,499 1,270,422,013Real estate development projects, net (b) 214,169,156 187,382,964

1,404,710,655 1,457,804,977

Land and land development works include the following cost items:


Acquired properties (a.1) 959,007,209 959,007,209Pre-acquisition costs (a.2) 9,412,802 9,412,802Infrastructure costs (a.3) 672,458,067 638,602,752Eviction costs (a.4) 259,741,166 260,068,716Capitalized costs (a.5) 64,456,116 62,289,085Cumulative costs 1,965,075,360 1,929,380,564LessCost of land sold, net (689,047,866) (575,666,777)Cost of land transferred to real estatedevelopment projects (79,132,874) (76,938,653)Cost of infrastructure transferred toreal estate development projects (6,353,121) (6,353,121)

1,190,541,499 1,270,422,013

a.1 Acquired properties consist mainly of the aggregate initial appraised value attributed tothe plots included in the BCD area of US$1,170,001,290 net of the recuperated properties.The aggregate appraised value is determined in accordance with Decree No. 2236 (datedFebruary 19, 1992 based on the decision of the Higher Appraisal Committee, which wasestablished in accordance with Law No. 117/91). Acquired properties include the value ofpurchased and exchanged properties as well.

Law No. 117/91 stated the requirements for property recuperation and exemption. In thisrespect properties appraised at US$255million were recuperated by original owners andproperties appraised at US$133million were not claimed for recuperation.

a.2 Pre-acquisition costs include technical and master plan studies incurred during the setup period of the Group.

a.3 Infrastructure costs as at December 31, 2007 include an amount of US$280.55million(US$279.4million as of December 31, 2006) relating to the sea front defense and marinaworks, an amount of US$146million (US$145million as of December 31, 2006) relating toinfrastructure works executed in the traditional BCD area, and an amount ofUS$107million (US$78million as of December 31, 2006) relating to the cost of landreclamation and treatment. It also includes the cost of an electricity power station in theamount of US$42million (US$42million as of December 31, 2006), and other costs whichrelate mainly to demolition and archeology. This caption includes capitalized borrowingcosts totaling US$40.8million up to December 31, 2007 (US$40.2million up to December31, 2006). During the year ended December 31, 2007, borrowing costs of US$0.64millionwere capitalized (US$0.98million for the year ended December 31, 2006).

a.4 Eviction costs represent the costs of relocating previous settlers out of the BCD areawhich were mainly paid through the Central Fund for the Displaced (a public authority).This caption is stated net of US$22.2million as of December 31, 2007 (US$21.8million as

The change in fair market value of the available-for-sale securities is recorded under“Cumulative changes in fair value of available-for-sale securities” in equity net of deferredtax liability in the amount of US$26,028 as of December 31, 2007 (net of deferred tax liabilityin the amount of US$6,840 as of December 31, 2006).

113112


of December 31, 2006) representing a 10% charge on recuperated properties appraisedvalues collected from original owners other than religious and governmentalrecuperated properties.

a.5 Capitalized costs represent allocation of direct overheads. Costs capitalized during theyear ended December 31, 2007 amounted to US$2.8million (US$3.9million for the yearended December 31, 2006).

An impairment loss of US$7,882,327 was recognized in the income statement during theyear 2007 (US$3,036,061 during the year 2006) that represents non-recoverable chargesincluded in the cost of some of these properties relating to the impairment of the value ofan asset due to an arbitration with a contractor.

Real estate development projects include the following:


Construction and rehabilitation of buildings 390,244,030 347,067,525Cost of land 79,521,156 77,326,934Cumulative costs 469,765,186 424,394,459LessCost transferred to investment properties, net (185,286,091) (174,705,279)Cost transferred to fixed assets (26,145,684) (18,141,961)Cost of real estate sold (44,164,255) (44,164,255)

214,169,156 187,382,964

The net cost of real estate development projects includes cost incurred in connection withthe construction of a shopping mall in the amount of US$106.3million as of December 31,2007 (US$81.83million as of December 31, 2006).

12. INVESTMENTPROPERTIES,NET

Investment properties are composed of the following:

Balance as at December 31, 2006 Additions Transfers Disposals & Sales 2007US$ US$ US$ US$ US$

CostLand 42,001,922 - 2,194,225 (2,105,519) 42,090,628Buildings 122,702,684 300,443 8,386,587 (7,108,236) 124,281,478Other assets 4,507,171 78,288 - - 4,585,459

169,211,777 378,731 10,580,812 (9,213,755) 170,957,565

Accumulated DepreciationBuildings 15,911,771 2,424,794 - (692,373) 17,644,192Other assets 2,648,193 316,140 - - 2,964,333

18,559,964 2,740,934 - (692,373) 20,608,525Net Book Value 150,651,813 150,349,040


CostLand 42,265,974 - (53,135) (210,917) 42,001,922Buildings 122,923,983 268,977 53,135 (543,411) 122,702,684Other assets 4,308,942 198,229 - - 4,507,171

169,498,899 467,206 - (754,328) 169,211,777

Accumulated DepreciationBuildings 13,539,952 2,430,675 - (58,856) 15,911,771Other assets 2,200,962 447,231 - - 2,648,193

15,740,914 2,877,906 - (58,856) 18,559,964Net Book Value 153,757,985 150,651,813

13. INVESTMENTIN ANASSOCIATE

Details of the Group’s associate are as follows:

Country of Ownership Group’s ShareIncorporation Interest Cost of Equity

% US$ US$

Solidere International Limited UAE 37.62 219,427,730 287,458,659

Summarized financial information in respect of the Group’s associate is set out below:

December 31,2007 US$

Total assets 878,335,751Total liabilities (5,672,721)Less: Minority interest (108,523,324)Net assets 764,139,706

Group’s share of net assets of an associate 287,458,659

Initial price of investment 219,427,730

Group’s share of results of an associate 68,030,929

Carrying amount of the investment 287,458,659

On June 7, 2007, the Group subscribed into the capital of Solidere International Limited foran amount of US$3,000,060 representing a 0.4286% equity stake.

During the first half of the year 2007, Solidere established Solidere International Holdings s.a.l.(SIH) which in turn established Solidere International Limited (SI) in the Dubai InternationalFinancial Center (DIFC) with an initial capital of US$50,000. The main activity of SI is topromote, invest in, develop, market and manage, as well as provide consulting services withrespect to real estate projects outside the Beirut Central District area of Lebanon.

In the same year, SIH raised additional funds for SI through a private placement.

As a result of the private placement SI’s share capital and share premium amounted toUS$700,050,000 out of which SIH settled US$219,427,060 against an ownership percentageof 37.19%.

The private placement memorandum and other signed agreements between Solidere and SIstipulate that Solidere and SolidereManagement Services s.a.l. will transfer to SI all the projectsthat they currently have outside the Lebanese territories. In addition, Solidere will grant SI theright to use the Solidere brand name through a license agreement and a none compete right.

Investment properties include rented and available for rent properties. These representmainly a property leased out to the Ministry of Foreign Affairs and Emigrants, for use by aninternational agency. It also includes residential complexes, an embassy complex, and otherrestored buildings.

During the year ended December 31, 2007, the Group sold property having an aggregate netbook value of US$8,521,382 for total proceeds of US$7,697,283 which resulted in a loss ofUS$824,099 recorded in the income statement (net book value of US$695,472, total proceedsof US$960,446 and gain of US$264,974 for the year ended December 31, 2006).

During the year ended December 31, 2007, the Group transferred US$10,580,812 from realestate development projects to investment properties.

The fair value of the investment properties is estimated by management at aroundUS$320million based on current market prices (US$248million as of December 31, 2006).There has been no valuation of these properties by an independent valuer.

Depreciation for investment properties in the amount of US$2,740,934 for the year 2007(US$2,877,906 for the year 2006) is recorded under “Charges on rented properties” captionin the income statement (Note 24).

115114


14. FIXEDASSETS, NET

Fixed assets are composed of the following:


CostLand 5,080,192 - - - 5,080,192Buildings 11,507,802 217,727 - - 11,725,529Marina 6,934,100 - - - 6,934,100Furniture and fixtures 2,396,602 151,102 - - 2,547,704Freehold improvements 3,332,025 282,433 - - 3,614,458Plant 1,853,266 - - (1,853,266) -Machines and equipment 12,543,972 3,982,325 8,003,723 - 24,530,020

43,647,959 4,633,587 8,003,723 (1,853,266) 54,432,003

Accumulated DepreciationBuildings 1,785,510 208,533 - - 1,994,043Marina 374,110 138,682 - - 512,792Furniture and fixtures 1,938,764 215,504 - - 2,154,268Freehold improvements 2,090,482 312,980 - - 2,403,462Plant 1,297,058 185,326 - (1,482,384) -Machines and equipment 10,046,552 1,679,009 - - 11,725,561

17,532,476 2,740,034 - (1,482,384) 18,790,126

Net Book Value 26,115,483 35,641,877

Balance as at December 31, 2005 Additions 2006US$ US$ US$

CostLand 5,080,192 - 5,080,192Buildings 11,237,020 270,782 11,507,802Marina 6,934,100 - 6,934,100Furniture and fixtures 2,299,931 96,671 2,396,602Freehold improvements 2,962,826 369,199 3,332,025Plant 1,853,266 - 1,853,266Machines and equipment 10,854,557 1,689,415 12,543,972

41,221,892 2,426,067 43,647,959

Accumulated DepreciationBuildings 1,569,910 215,600 1,785,510Marina 235,428 138,682 374,110Furniture and fixtures 1,739,886 198,878 1,938,764Freehold improvements 1,793,497 296,985 2,090,482Plant 1,111,731 185,327 1,297,058Machines and equipment 8,564,627 1,481,925 10,046,552

15,015,079 2,517,397 17,532,476

Net Book Value 26,206,813 26,115,483

During the year ended December 31, 2007 the Group transferred computer equipment andinstallations (Broad Band Network) amounting to US$8,003,723 from real estatedevelopment projects to fixed assets.

The depreciation for the year ended December 31, 2007 was split between an allocation toinventory of land and projects in progress and a charge to the income statement ofUS$1,245,767 and US$1,494,267, respectively (US$818,291 and US$1,699,106 respectively,for the year ended December 31, 2006).

15. BANKOVERDRAFTSAND SHORTTERMFACILITIES

Bank overdrafts and short term facilities consist of the following:


Bank overdrafts 1,290,555 48,362,001Short term facilities 179,895,936 -

181,186,491 48,362,001

On August 2, 2007, the Group signed two credit facility agreements with a local bank forUS$75million and US$35million. These facilities are subject to an interest rate of one yearLibor plus 1.7% and one year Libor plus 1.5% respectively. These facilities mature on August3, 2008. The covenants of the agreements stipulate that the Group maintain a maximumdebt to equity ratio of 1:4 and a minimum equity balance of US$1billion.

On June 22, 2007, the Group signed a US$50million one year credit facility with a local bank.This facility is subject to an interest rate that varies between one month Libor plus 1.75% andthree-months Libor plus 1.25%.

On June 18, 2007, the Group signed a US$40million one year credit facility with a local bank.This facility is subject to an interest rate of three-months Libor plus 1.25% but not less than6%. The covenants of the agreements stipulate that the Group maintain a maximum debt toequity ratio of 1:4 and a minimum equity balance of US$1billion.

16. ACCOUNTSPAYABLEAND OTHERLIABILITIES

Accounts payable and other liabilities consist of the following:


Accounts payable (a) 39,683,157 39,433,181Accrued charges and other credit balances (b) 18,310,542 14,332,919Taxes payable (c) 29,850,507 24,311,807Provision for end-of-service indemnityand other charges (d) 6,890,576 4,463,259Due to an associate and related party 563,172 -Deferred tax liability – Note 10 26,028 6,840Accrued interest payable 4,033,945 775,703

99,357,927 83,323,709

a. Accounts payable as of December 31, 2007 and 2006 include balances in the aggregateamount of US$13.8million due to the Lebanese Government in consideration of theexchange of assets agreement explained in Note 31(f).

b. Accrued charges and other credit balances as of December 31, 2007 and 2006 include anamount of US$8.5million representing proceeds received in respect of a performancebond executed against a contractor for improper performance of contracted works underarbitration. The Group recognized a liability against the cash proceeds since the outcomeof the subject arbitration is not yet certain Note 31(j).

c. Taxes payable consist of the following:


Accrued income tax 25,652,763 21,188,055VAT Payable 22,232 -Taxes withheld 1,437,522 962,182Property tax payable 2,067,931 2,161,570VAT additional tax assessment 670,059 -

29,850,507 24,311,807

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The accrued income tax for the years 2007 and 2006 was estimated as follows:

2007 2006US$ US$

Profit before tax 249,857,943 153,200,020Less: income/(losses) of subsidiaries (68,028,316) (369,257)Add: Non deductible provisions and charges 4,806,251 3,217,563Less: Non taxable revenues (13,954,898) (13,997,186)Taxable income 172,680,980 142,051,140Applicable tax rate 15% 15%Accrued income tax 25,902,147 21,307,671Add: Income tax provision subsidiaries 95,904 58,060Total accrued income tax 25,998,051 21,365,731Less: Tax on interest previously settled (345,288) (177,676)Accrued income tax payable 25,652,763 21,188,055

Total accrued income tax 25,998,051 21,365,731Less: Deferred tax assets – Note 8(c) (331,960) (332,660)Income tax expense 25,666,091 21,033,071

The applicable tax rate in Lebanon is 15% according to the Lebanese tax laws. The tax returnsfor the years from 2004 till 2007 are still subject to examination and final tax assessment bythe tax authorities. Any additional tax liability is subject to the results of this review.

Property tax payable in the amount of US$2.07million as at December 31, 2007 is includedunder the caption “Charges on rented properties” in the income statement (US$2.16millionas at December 31, 2006). The Group has provided for additional tax related to previousyears in the amount of US$1,319,859 during the year ended December 31, 2006.

During 2007, the Group’s VAT declarations were subject to review and final assessment bythe tax authorities. As a result of this review an additional tax liability in the amount ofUS$670,059 was accrued for and charged to the income statement under “Other taxes”.

d. The movement of provision for end-of-service indemnity and other charges is as follows:

2007 2006US$ US$

Balance at the beginning of the year 4,463,259 3,658,217Additions 2,876,491 837,921Settlements (449,174) (32,879)Balance at the end of the year 6,890,576 4,463,259

17. DIVIDENDSPAYABLE

The breakdown of dividends payable is summarized as follows:

General Assembly Dividend Settled up to Dec 31, 2007 Dec 31, 2006

Date per Share Declared Dec 31, 2007 Payable PayableUS$ US$ US$ US$ US$

June 29, 1996 0.20 30,918,413 29,101,605 1,816,808 1,920,969June 30, 1997 0.25 40,367,172 37,190,157 3,177,015 3,334,353June 29, 1998 0.25 39,351,753 35,558,350 3,793,403 4,113,745June 23, 2003 Stock dividend - - 27,485 27,485June 12, 2006 0.6 94,831,106 84,027,957 10,803,149 21,481,160June 22, 2007 1 155,093,702 128,498,765 26,594,937 -

46,212,797 30,877,712

18. DEFERREDREVENUESAND OTHERCREDITBALANCES

Deferred revenues and other credit balances consist of the following:


Cash down payments and commitmentson sale contracts 222,328,962 154,763,757Deferred rental revenue and related deposits 10,818,490 13,542,036

233,147,452 168,305,793

Cash down payments and commitments on sale contracts include balances aggregating toapproximately US$211million that relate to 13 sale contracts with an aggregate potentialgross sales value of US$826.5million as of December 31, 2007 (US$143.5million relating to15 sale contracts with an aggregate potential gross sale value of US$1,034million as ofDecember 31, 2006).

Deferred rental revenue and related deposits represent down payments on lease and rentalagreements and reservation deposits for the rental of real estate properties.

19. DEFERREDCREDITSUNDERSTRUCTUREDCONTRACTS

Deferred credits under structured contracts represent contracts executed with banks andinvolving put and call options on treasury shares which are classified as interest bearingliabilities.

a. The Group sold on September 7, 2007 to a local bank, 4,360,000 shares (2,585,000 “A”shares and 1,775,000 “B” shares) from treasury shares with a sale back option to the bankand a buy back option to the Group for a total consideration of US$74,992,000 at US$17.2per share. The sale back and buy back option can be exercised at a strike price of US$18.39per share in the period starting on March 10, 2008 and ending on September 10, 2008. Thesettlement is to be paid at the latest on September 10, 2008, subject to certain conditionsspecified in the contract. The strike price represents the selling price plus accumulatedinterest.

b. The Group sold on September 7, 2007 to a local bank, 5,540,000 shares (3,290,000 “A”shares and 2,250,000 “B” shares) from treasury shares with a sale back option to the bankand a buy back option to the Group for a total consideration of US$95,288,000 at US$17.2per share. The sale back and buy back option can be exercised at a strike price ofUS$18.39 per share in the period starting on March 10, 2008 and ending on September 10,2008. The settlement is to be paid at the latest on September 10, 2008, subject to certainconditions specified in the sale contract. The strike price represents the selling price plusaccumulated interest.

Interest in the amount of US$3,605,115 has been accrued on the above deferred creditsunder structured contracts up to December 31, 2007 and recorded under “Accountspayable and other liabilities” in the balance sheet.

The General Assembly of Shareholders in their meeting held on June 12, 2006 decided todistribute dividends at an average of 60 US cents for every share. Accordingly dividendspayable in the amount of US$90.09million were recorded after deducting dividendsdistribution tax in the amount of US$4.74million. An amount of approximately US$84millionwas settled up to December 31, 2007 (US$73million up to December 31, 2006).

In addition, the General Assembly held on June 22, 2007 resolved to distribute dividends onthe basis of US$1 per share. Accordingly, the Group recorded dividends payable in theamount of US$147.3million net of distribution tax in the amount of US$7.75million. Anamount of approximately US$128million was settled up to December 31, 2007.

The outstanding balance of unpaid dividends relates mostly to unclaimed dividends anddividends pertaining to undelivered class (A) shares.

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20. LOANS FROMBANKS ANDFINANCIALINSTITUTIONS

This caption consists of the following:


“COFACE” guaranteed loan - 15,327,428Local bank loan 3,000,000 5,000,000Loan guaranteed by Export - Import Bankof the United States 4,041,163 6,735,272

7,041,163 27,062,700

Maturities of the loans from banks and financial institutions are as follows:


2007 - 20,021,5372008 4,694,109 4,694,1092009 2,347,054 2,347,054

7,041,163 27,062,700

“COFACE” Guaranteed LoanFor the purpose of partially financing the sea front defense works, the Group signed in 1996a 10 year “COFACE” guaranteed loan agreement for an amount of US$107.3million of whichUS$7.3million represents a guarantee premium. This loan, which was fully drawn, wasscheduled for settlement starting February 2001 through 14 semi annual payments in theamount of US$7.66million each. The loan was subject to an interest rate of 7.39% perannum, payable semi annually starting August 1998. The Group settled the loan in full as atDecember 31, 2007 (US$91.98million were settled up to December 31, 2006).

Local Bank LoanIn July 2001, a complementary loan agreement in the amount of US$10million was signedwith a resident foreign bank. The total amount of the loan was withdrawn up to December31, 2004. This loan shall be paid in 10 equal semi-annual installments starting October 25,2004 and ending April 27, 2009. An installment of US$2million was made during 2007 inaddition to settlements aggregating to US$5million from 2004 till 2006 and thus the balanceof the loan decreased to US$3million as of December 31, 2007. The loan is subject to anannual interest rate of 3 months Libor plus 1%. The Company shall maintain a pledged fundof not less than 102% of all outstanding principal and interest amounts, and should maintaina debt to equity ratio not exceeding 25% and total tangible net assets should not be less thanUS$1billion free from any liens including permitted liens.

Loan Guaranteed by Export - Import Bank of the United StatesIn July 2001, the Group signed an “Export Financing Credit Agreement” for the amount ofUS$14.71million to support the purchase of engineering and construction services andequipment from the United States for the waste treatment project. This loan is guaranteedby the Export-Import Bank of the United States and is financed by a resident foreign bank.An amount of US$13.47million had been drawn up to December 31, 2004. Subsequent tothat date, the Group made no withdrawals. This loan shall be paid by 10 equal successivesemi-annual installments, the first of which shall be due and payable on October 25, 2004.An installment of US$2.7million was made during 2007 in addition to installmentsamounting to US$6.75million from 2004 till 2006 and thus the balance of the loan decreasedto US$4.04million as at December 31, 2007. 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 ofcredit in the amount of US$3.57million was submitted to the Export - Import Bank of theUnited States. Moreover, the Group is required to maintain a minimum balance of cash andcash equivalents of US$30million and the treasury shares should not exceed 10,131,829shares or the equivalent of US$76million in aggregate value. In this respect, the number oftreasury shares amounted to 9,906,298 shares with an aggregate value of US$168,491,485as at December 31, 2007 (9,533,318 shares with an aggregate value of US$162,663,803 as atDecember 31, 2006).

21. CAPITAL Capital consists of 165,000,000 shares of US$10 par value, authorized and fully paid anddivided in accordance with Law 117/91 into the following:

• Class “A”, amounting to 100,000,000 shares represented contributionin kind of properties in the BCD, based on the resolutions of the HighAppraisal Committee. All Class A shares were deemed to have beenissued and outstanding since the establishment of the Company.

• Class “B”, amounting to 65,000,000 shares represented capitalsubscription in cash and are all issued and fully paid at theestablishment of the Company.

Class “A” and Class “B” shares have the same rights and obligations.

As of December 31, 2007, the Company had 14,476,898 “A” shares listed on the LondonStock Exchange in the form of Global Depository Receipts (GDR) (12,926,898 “A” shares asof December 31, 2006).

22. LEGALRESERVE

In conformity with the Company’s articles of incorporation and the Lebanese Code ofCommerce, 10 % of the annual net income is required to be transferred to legal reserve untilthis reserve equals one third of capital. This reserve is not available for dividend distribution.

23. TREASURYSHARES

This caption includes 9,906,298 shares class (A) and (B) as of December 31, 2007 (9,533,318shares as of December 31, 2006), of which 9,900,000 shares are subject to specific structuredcontracts (Note 19).

The treasury shares outstanding as of December 31, 2007 and December 31, 2006 are statedat the weighted average cost.

According to its articles of incorporation, the Company may purchase up to 10% of its sharecapital without the existence of free reserves, provided that it shall resell these shares withina period not exceeding eighteen months.

As of December 31, 2007, this caption includes 3,685,000 shares that were acquired fromsale of properties (3,685,000 shares as of December 31, 2006).

24. CHARGESON RENTEDPROPERTIES

Charges on rented properties includes the following:


Depreciation expense (Note 12) 2,740,934 2,877,906Property taxes 2,262,480 2,165,750Maintenance and other related expenses, net 2,066,882 1,413,927

7,070,296 6,457,583

25.GENERAL ANDADMINISTRATIVEEXPENSES

General and administrative expenses is composed of the following:


Salaries, benefits and related charges 12,787,089 9,408,373Board of directors’ remuneration 144,000 144,000Administrative expenses 5,155,634 4,752,427

18,086,723 14,304,800

The Group reallocated salaries, benefits and related charges and administrative expensesamounting to US$2.8million to construction cost during the year ended December 31, 2007(US$3.9million during the year ended December 31, 2006).

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26. OTHEREXPENSE, NET

Other expense consists of the following:


Business development and services expenses 4,319,285 -Business development and servicesexpenses recovered (2,262,480) -Gain on exchange (143,221) -Other income (59,295) -

1,854,289 -

Business development and services expenses represent total costs incurred on projectsoutside Lebanon transferred to Solidere International Limited borne by the Company. Anamount of US$2.26million was charged to Solidere International Limited.

30.RELATEDPARTYTRANSACTIONS

These represent transactions with related parties, i.e. significant shareholders, directors andsenior management of the Group, and companies of which they are principal owners andentities controlled, jointly controlled or significantly influenced by such parties. Pricingpolicies and terms of these transactions are approved by the Group’s management.

Cash and bank balances include US$4,647,108 as of December 31, 2007 (US$2,025,167 as ofDecember 31, 2006) representing current bank accounts with a local bank who is asignificant but minority shareholder of the Group.

Certain directors are members of the boards of directors of banks with whom the Group hasvarious banking activities.

General and administrative expenses include legal fees in the amount of US$120,000 for the yearended December 31, 2007 related to one of the firm’s legal counselors who is also a member inthe Company’s board of directors (US$120,000 for the year ended December 31, 2006).

The Group incurred various expenses on behalf of its related parties whose total balancesdue amounted to US$3,808,163 as of December 31, 2007.

Aswaq Management and Services LLC provided consultancy services to Beirut Real EstateManagement and Services s.a.l. (BREMS) for the amount of US$27,344 for the year endedDecember 31, 2007 (US$79,076 for the year ended December 31, 2006)

27. INTERESTINCOME

Interest income is comprised of the following:


Interest income from notes andaccounts receivable 31,612,508 22,355,270Interest income from banks 8,539,017 4,856,417

40,151,525 27,211,687

28. BASIC/DILUTEDEARNINGS PERSHARE

The computation of earnings per share is based on net income for the period and theweighted average number of outstanding class (A) and (B) shares during each period net oftreasury shares held by the Group.

The weighted average number of shares to compute basic and diluted earnings per share is155,147,918 shares for the year 2007 (157,817,134 shares for the year 2006).

29. NOTES TO THECASH FLOWSTATEMENT

a. Non-cash transactions in the operating and investing activities related to the proceedsfrom recuperated properties are detailed as follows:


Non-cash transfer of shares againstrecuperated properties (153,640) (52,701)Decrease in receivables fromrecuperated properties (63,368) (360,299)

(217,008) (413,000)

b. Depreciation was applied as follows:


Depreciation of fixed assets - Note 14 2,740,034 2,517,397Depreciation of investment properties - Note 12 2,740,934 2,877,906Less: Depreciation allocated to inventoryof land and projects in progress – Note 11 (1,140,093) (818,291)Depreciation charge for the year 4,340,875 4,577,012

c. Interest expense consists of the following:


Interest charged as period cost 15,885,954 7,173,307Interest expense allocated to inventory of landand projects in progress – Note 11 638,613 980,207Total interest expense 16,524,567 8,153,514

d. Non-cash transactions in operating and investing activities include transfers frominventory of land and projects in progress to investment properties in the amount ofUS$10,580,812 for the year ended December 31, 2007.

e. Non-cash transactions in operating and investing activities include transfers frominventory of land and projects in progress to fixed assets in the amount of US$8,003,723for the year ended December 31, 2007.

f. Non-cash transactions in investing activities include the effect of change in fair value ofavailable-for-sale securities in the amount of US$173,520 offset against “Cumulativechange in fair value of available-for-sale securities” and “Accounts payable and otherliabilities” in the amount of US$147,492 and US$26,028, respectively, for the year endedDecember 31, 2007 (US$45,600 offset against “Cumulative change in fair value ofavailable-for-sale securities” and “Accounts payable and other liabilities” in the amount ofUS$38,760 and US$6,840, respectively for the year ended December 31, 2006).

g. Cash and cash equivalents comprise of the following:


Cash 85,026 98,749Current accounts 11,064,074 19,515,034Short term deposits 309,513,061 60,968,438Bank overdrafts (181,186,491) (48,362,001)

139,475,670 32,220,220

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During 2007, the Group charged Solidere International Limited, an associate, administrativeexpenses amounting to US$2,262,480, in addition to an amount of US$322,470 representingpayments on its behalf.

Total benefits paid to executives and members of the Board of Directors (including salary,bonus and others), included within “General and administrative expenses”, for the yearended December 31, 2007 amounted to US$2,865,545 (US$1,969,922 for the year endedDecember 31, 2006).

Income arising and expenses incurred from the Group’s transactions with other relatedparties, other than those disclosed in the financial statements, do not form a significantportion of the Group’s operations.

31. COMMITMENTSANDCONTINGENCIES

a. An agreement between the Company and the Council for Development andReconstruction (“CDR”) was promulgated through Decree No. 5665 dated September 21,1994, duly approved by the Council of Ministers. By virtue of this agreement, theCompany was granted 291,800m² of the reclaimed land surface (totaling 608,000 sqm)against the execution by the Company of the sea landfill and infrastructure works.

b. The total projected cost for completion of the BCD project has been estimated bymanagement to be approximately US$2billion. This amount is used as a base for thedetermination of cost of sales.

c. Commitments for contracted works not executed as of December 31, 2007 amounted toapproximately US$88.5million (US$118.3million as of December 31, 2006).

d. A lawsuit was raised in 1999 against the Company by the “CDR” claiming reimbursementof an amount of LL5.4billion (US$3.6million) plus interest. This balance representspayments previously made by the “CDR” in connection with the appraisal of theproperties in the BCD area and other tender documents. No provision was set up againstthis claim since, on the basis of the advice received from the Company’s legal advisor, thedirectors are of the opinion that this claim is not based on sound legal grounds.

The Company has submitted to the “CDR” claims aggregating US$13.6millionrepresenting mainly change orders to infrastructure works in the traditional BCD whichwere incurred by the Company on behalf of the Government. These claims were neitherapproved nor confirmed by the concerned party nor recorded as receivables in theaccompanying financial statements.

e. The Group is a defendant in various legal proceedings and has litigations pending beforethe courts and faces several claims raised by contractors. On the basis of advice receivedfrom the external legal counsel and the Company’s technical department, the directors areof the opinion that any negative outcome thereof, if any, would not have a materialadverse effect on the financial condition of the Company.

f. On June 7, 1997, the Company signed an exchange agreement with the LebaneseGovernment. By virtue of this agreement, the Company acquired additional built up areaof approximately 58,000m² and 556,340 Class A shares in exchange for approximately15,000m² and the payment of US$38.7million to restore governmental buildings.US$25million has already been paid and accounted for and the balance of US$13.8millioncontinues to be included under accounts payable. According to the terms of theagreement, the Company undertook to build a governmental building and to conclude tenfinance leases over seven years for certain buildings belonging to the LebaneseGovernment. In 1999, the government canceled the exchange and finance leaseagreement. The implementation and the effect of cancellation is not yet determined andhas not been reflected in the accompanying financial statements.

g. In prior periods, the Company submitted to the Ministry of Culture and Higher Educationclaims totaling US$17.7millions representing compensation for delays that resulted fromexcavation works. These claims were not yet approved nor confirmed by the concernedauthorities nor recorded as receivables in the accompanying financial statements.

h. The Company has as a stand-by letter of credit in the amount of US$3,566,993 to begradually decreased starting June 2007 to reach US$3,035,622 in June 2011. Thisinstrument is issued in guarantee of the US$14.7million US Export Import Bank of theUnited States facility amounting to US$4.04million as of December 31, 2007(US$6.74million as of December 31, 2006). Throughout its life, this stand-by letter of creditshall be fully covered by a cash collateral (Note 7).

i. For the purpose of enhancing and improving land value in Zokak Al Blat area and to settlethe recuperation of a lot in that area, the Company signed in 2002 an agreement with theArmenian Orthodox prelacy to demolish the building on the recuperated lot and to transfercorresponding building rights to another adjacent lot with minimum building rights of4,900m² against ceding of owners’ shares from both lots. Additionally, a built up area of5,335m² (US$2,700,000) remains as a contingent loss to the Company in case the prelacydecides to build this area within the next 10 years following this agreement.

j. During 2003, the Company entered into a dispute with one of its contractors regardingwhat the Company considered to be a defect in the land remediation works performed bythe contractor. The contractor denied this issue and commenced an arbitration in relationto this matter on May 19, 2003. In the request for arbitration, the contractor sought a non-monetary relief that there is no defect in the works performed, and made monetary claimsagainst the Company in the total amount of US$1,079,533, in addition to claiming for thepayment of its legal and other costs incurred in connection with the arbitration for anamount of US$2,226,569. The Company made counter claims for non-monetary relief thatthere exists a defect in the works performed by the contractor and claimed for the paymentof its legal and other costs incurred in connection with the arbitration for an amount ofUS$3,004,711. In 2004, the Company collected the performance bond amounting toUS$8.5million. On July 12, 2004, the International Court of Arbitration ruled that thecontractor pay the Company the sum of US$2,188,000 in respect of the Company’s cost ofarbitration, and additional costs incurred in the amount of US$170,000, in addition to theexecution of remedial works at the contractor’s own cost. As a result, the Companyrecorded a receivable in the amount of US$2,358,000 in the accompanying financialstatements which remains uncollected - Note 8(e).

On June 21, 2004, the contractor requested arbitration in a second case against theCompany to confirm the right to extend the project’s execution period and increase thecost of works. The total claims by the contractor in this arbitration amounted toUS$32million representing the increase in the cost of works, other unpaid amounts andamounts the contractor alleged to have been illegally withdrawn by the Company from theperformance bond mentioned above.

During 2005 and early 2006, both the Company and the contractor filed counter arbitrationsagainst each other that are still pending as at December 31, 2007. These arbitrations arecurrently in a jurisdictional phase. On January 30, 2008, the parties exchanged post-hearingwritten pleadings summarizing their respective positions. A jurisdictional award is expectedto be issued by the Arbitral Tribunal during the second quarter of 2008.

No provision was set up against these claims as the legal counsel representing theCompany in the arbitration is of the opinion that the Company has strong defenses againstall allegations made by the contractor.

32. CAPITALMANAGEMENT

The primary objective of the Group’s capital management is to ensure that it maintains astrong credit rating and healthy capital ratios in order to support its business and maximizeshareholder value.

The Group manages its capital structure and makes adjustments to it in light of changes ineconomic conditions. No changes were made in the objectives, policies or processes duringthe years ended December 31, 2007 and December 31, 2006.

The capital structure of the company consists of debt and equity. Debt consists of totalliabilities less cash and bank balances. Equity comprises capital, reserves, retained earnings,cumulative change in fair value and surplus on sale of treasury shares less treasury shares.

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The Group monitors capital on the basis of the debt-to-capital ratio (gearing ratio). Thegearing ratio as at December 31, 2007 and 2006 was as follows:


Total consolidated liabilities 737,225,830 357,931,915Less: Cash and bank balances (327,847,633) (106,202,604)Total debt 409,378,197 251,729,311

Total equity 1,832,028,785 1,768,649,582Gearing ratio 22% 14%

33. RISKMANAGEMENT

The Group’s principal financial liabilities, other than derivatives, comprise bank loans andoverdrafts, deferred credits under structured contracts, deferred revenues and other creditbalances, dividends payable and accounts payable and other liabilities. The main purpose ofthese financial liabilities is to raise finance for the Group’s operations. The Group hasvarious assets such as accounts and notes receivable and cash and bank balances, whicharise directly from its operations. The main risks arising from the Group’s financialinstruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. TheBoard of Directors reviews and agrees policies for managing each of these risks which aresummarized bellow:

a. Interest Rate RiskThe Group’s exposure to the risk of changes in market interest rates relates primarily to theGroup’s long-term debt obligations with floating interest rates. The following tabledemonstrates the sensitivity to a reasonably possible change in interest rates, with all otherconditions held constant, of the Group’s profit before tax.

Increase/decrease Effect on profit

in basis points before taxUSD

2007US Dollars +20 596,105US Dollars -15 447,0792006US Dollars +20 728,465US Dollars -15 546,348

b. Foreign Currency RiskCurrency risk is the risk that the value of a financial instrument will fluctuate due to changesin foreign exchange rates. The Group is not materially exposed to currency risk since themajority of its financial assets and liabilities are denominated in U.S. Dollars or in currenciespegged to the U.S. Dollar.

c. Credit RiskThe Group’s credit risk is primarily attributable to its liquid funds receivables, other debitbalances and investments in securities. The amounts presented in the balance sheet arestated at net realizable value, estimated by the Group’s management based on priorexperience and the current economic conditions.

The Group’s liquid funds are placed with prime banks. Investments in securities are not coveredby collaterals. Other debit balances consist mainly of amounts due from related parties.

The Group trades mostly with recognized, credit worthy third parties and monitorsreceivable balances and collection on an ongoing basis.

The Group’s credit risk exposure is spread over 107 counter-parties; 6 customers constitute48% of the total exposure and 101 customers constitute the remaining 52%. The maximumexposure is the carrying amount as disclosed in Note 8.

The Group’s assets and liabilities are segregated by geographical area as follows:

December 31, 2007 Lebanon Middle East Europe TotalUSD USD USD USD

Total assets 2,267,994,768 290,043,609 11,216,235 2,569,254,612

Total liabilities 737,225,830 - - 737,225,830

Net assets 1,530,768,938 290,043,609 11,216,235 1,832,028,782

December 31, 2006 Lebanon Middle East Europe TotalUSD USD USD USD

Total assets 2,116,501,491 - 10,080,006 2,126,581,497

Total liabilities 342,604,487 - 15,327,428 357,931,915

Net assets 1,773,897,004 - (5,247,422) 1,768,649,582

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

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

The table below summarizes the maturity profile of the Group’s financial liabilities as ofDecember 31, based on contractual undiscounted liabilities:

December 31, 2007 Less than 3-12 1 to 5On Demand 3 Months Months Years Total

USD USD USD USD USD

Bank overdrafts 1,290,555 3,241,841 183,724,799 - 188,257,195Accounts payable andother liabilities 95,323,982 - - - 95,323,982Dividends payable 46,212,797 - - - 46,212,797Deferred revenues andother credit balances 233,147,452 - - - 233,147,452Deferred credits understructured contracts - - 182,061,000 - 182,061,000Loans from banks andfinancial institutions - 51,367 5,016,748 2,421,446 7,489,561

375,974,786 3,293,208 370,802,547 2,421,446 752,491,987

December 31, 2006 Less than 3-12 1 to 5On Demand 3 Months Months Years Total

USD USD USD USD USD

Bank overdrafts 48,362,001 - - - 48,362,001Accounts payable andother liabilities 82,548,006 - - - 82,548,006Dividends payable 30,877,712 - - - 30,877,712Deferred revenues andother credit balances 168,305,793 - - - 168,305,793Loans from banks andfinancial institutions - 8,320,984 13,217,424 7,489,561 29,027,969

330,093,512 8,320,984 13,217,424 7,489,561 359,121,481


34. FAIR VALUEOF FINANCIALINSTRUMENTS

The fair values of financial instruments are not materially different from their carrying values.

Market value has been used to determine the fair value of listed available-for-sale assets.The fair values of loans, notes and other financial assets, and borrowings and other financialliabilities have been calculated by discounting the expected future cash flows at prevailingmarket interest rates.

35. APPROVALOF FINANCIALSTATEMENTS

The Board of Directors approved the financial statements for the year ended December 31,2007, on February 4, 2008.

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BO

AR

DO

FD

IRE

CT

OR

SG

EN

ER

AL

MA

NA

GE

ME

NT

General ManagerMounir Douaidy

Vice-ChairmenNabil BoustaniMaher Beydoun

Chairmanand General ManagerNasser Chammaa

Members of the Board

Joseph Asseily Sarkis DemerdjianRaphael Sabbagha

Abdulhafiz Mansour Maher DaoukBasile Yared

Fouad Al Khazen Sami Nahas Mosbah Kanafani

FinancialAccounting

Treasuryand Financial

Control

CorporateFinance

Infrastructure andSite Logistics

OperationsMaintenance andTechnical Services

Real EstateDevelopment

NewDevelopments

Third-PartyDevelopments

Restoration

Divisions

DepartmentsFunctions

StockManagement

InvestorRelations

LegalCounsel

IT/IS(MIS)

CorporateSystems

RiskManagement


Legal PropertyManagement

TenderingContracting

and Procurement

Administration

HumanResources

GeneralServices

ContractStructuring and

Management

UrbanManagement

Sales Marketingand BusinessDevelopment

LandSales

BeirutSouks


Real EstateLeasing

BusinessDevelopment


TownPlanning

DevelopmentControl

PropertyControl

Landscapingand Public

Space Design

Contractand Property

Administration

Recuperation

PublicServices

PublicRelations and

Communication

BroadbandNetworkSystems

CorporateReporting and

Publications


Reporting andPublications

Research Reportingand Editorial

Creative Artworkand Production

WebsiteDevelopment


Communication

Promotionand Advertising

MediaRelations

Eventsand Activities

SHAREHOLDERS

BOARD OF DIRECTORS

CHAIRMAN AND GENERAL MANAGER

GENERAL MANAGER

GENERAL MANAGEMENT

Chief Financial Officer Assistant General Managerfor Operations

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DebbasDebbas SquareSquare

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Port St

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Saad Zaghloul StSaad Zaghloul St H. Kadi St

H. Kadi St

Azmi Bey StAzmi Bey St

Youssef Rami StYoussef Rami St

Dabbagha Mosque St

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Wadi Abou Jamil St

Wadi Abou Jamil St

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PEDESTRIAN STREET / LINK

DEVELOPMENT BELOW CORNICHE LEVEL

NEW DEVELOPMENT - HIGH DENSITY

NEW DEVELOPMENT - MEDIUM DENSITY

NEW DEVELOPMENT - LOW DENSITY

PRIVATE OPEN SPACE

RESTORED BUILDING

PUBLIC OPEN SPACE

PUBLIC OR RELIGIOUS BUILDING

ARCHEOLOGICAL SITE

UTILITIES

PREWAR SHORELINE

Includes proposed modifications to the NewWaterfront District sector plan.

THEMASTER

PLAN

shareholders - frontpage | solidereadnan el hakim streetadnan el hakim street adnan el hakim...

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