Solidere’s profit drops
despite surge in land sales

Decline in rents and rise in provisions and other costs

Solidere’s standalone net profit dropped by 67 percent to $20.7 million in 2020 compared with the previous year despite a surge in revenues from land sales and a plunge in interest expenses.

The profit decline was mainly driven by cancellation of some previous sales in addition to increases in cost of land sales, provisions, and foreign exchange losses. A drop in revenues from rented properties has also contributed to the decrease in profit.

Revenues from rented properties plunged by 57 percent to $22.8 million due to a slump in commercial activity. Many businesses have closed down in addition to the severe damages caused by the Port Explosion. Solidere said these revenues are expected to decline further in 2021 as additional businesses have shut down this year.

Loss on cancellation of recognized sales was $24.3 million in 2020 versus none in 2019.

The cost of land sales increased by $88 million (70 percent) to $214.4 million. The increase was mainly driven by the upsurge in land sales and partly by additional infrastructure development works. The company has also revised up the cost of land sales per square meter.

Revenues from land sales soared by 63 percent to $382 million. The plots of land, which are located in Beirut Central District, were sold to local investors, Solidere said. Sales are expected to continue in 2021 but a slower pace, according a source.

Solidere said it has an inventory of land plots ready for sale or development with an estimated market value of $6.74 billion in addition to a portfolio of rent-generating built properties with an estimated market value of $2.42 billion as at the end of 2020.

The company increased provision for contingencies from just $1.2 million to nearly $38 million due to the deterioration of the political and economic conditions in the country.

Net provision for impairment jumped by 61 percent to $29 million as the book value of some assets (real estate properties) did not reflect anymore their real market value.

Net loss on foreign exchange surged to $22 million from just $19,700. The loss has resulted from the fact that the company has sourced offshore liquidity of $59 million in 2020 from the parallel market at a much higher price than the official rate.

Solidere said it continued to cut general and administrative costs in 2020 but the collapse of the lira and multiple exchange rates have resulted in the increase of the book value of these expenses.

The company’s debt to banks was completely settled by the end of 2020. As a result, its interest expense plummeted from $27.3 million in 2019 to just $3.5 million. Its term bank loans stood at $155.5 million at the end of 2019.

Solidere has reported a consolidated loss of $16 million for 2020 compared with a consolidated net profit of $49 million in the previous year. Its share in the losses of associates and joint ventures more than doubled to $34.5 million.