Auchi seizes opportunities to invest in Lebanon

By Natasha Tohme

Source: The Daily Star Lebanon

Nadhmi Auchi is not your typical billionaire. To begin with, he is charmingly unassuming. Instead of being ushered in to an imposing office, I was greeted by Auchi at the entrance of a restaurant at Le Royal Beirut, the $150 million hotel in Dbayyeh, in which he holds a majority share. During the course of the interview – which was conducted over breakfast and in the presence of hotel guests – Auchi used the term “we” instead of “I” when talking about his many achievements.

But his modesty could not cover his justified pride in what he has accomplished. He readily divulged information about General Mediterranean Holding (GMH), the company he established in 1979, two years before immigrating from his native Iraq. In fact, Auchi said, laughing, the holding company he majority owns “started with a capital of $2.5 million and is now worth more than $2 billion.” It seems that the man simply enjoys making money.

Auchi began by saying that GMH was involved in several sectors. Indeed, its subsidiaries are involved in pharmaceuticals, construction, real estate development, the airline industry and telecommunications, to name but a few.

GMH’s first major investment, however, was in the hotel industry, with the establishment of Le Royal Luxembourg in 1981. It marked the beginning of GMH’s Le Royal chain, which currently boasts five hotels. The other four are located in the Middle East and North Africa region – namely, Tunisia, Morocco, Jordan and Lebanon.

Auchi added that the hotel in Tunisia was part of a 186,000-square meter tourism complex that GMH developed. Likewise, the one in Jordan is part of a $200-million complex that GMH began developing in 1998. This project, which encompasses 127,000-square meters, “includes a shopping mall with an entertainment center that has three cinemas and 14 restaurants,” said Auchi.

In keeping with GMH’s approach of linking hotels with tourist attractions, the hotel in Lebanon was developed together with the adjoining Watergate theme park. Auchi said that the park boasts “equipment that is only available in two other countries.” Besides the Le Royal chain, GMH owns several hotels throughout the Europe and the world. They include Madrid’s Miguel Angel and Egypt’s Hurghada Inter-Continental Resort & Casino.

GMH has also invested heavily in the banking sector, through its subsidiary Compagnie internationale de participations bancaires en financieres (Cipaf). The company, which was established in 1982, “is mainly involved in banking and finance,” said Auchi. He said that Cipaf has a majority stake “in one of Europe’s biggest banks,” BNP Paribas.

Together with Paribas Group, Cipaf made one of its biggest acquisitions to date – that of Banque Continentale du Luxembourg. “It was a 50-50 arrangement,” said Auchi. He added that one of Cipaf’s more profitable portfolio investments was in Banque Paribas Luxembourg. “In 1982 we acquired 20 percent of the bank, and later on, in 1994, we sold our shares and made tens of millions in the deal,” he said, laughing at the memory. In this region, Cipaf’s major investments are in Jordanian banks. “We own 17 percent of Union Bank, 10 percent of Jordan Bank, and 5 percent of The Kuwaiti Jordanian Bank,” he said, adding: “the Jordanian banks are doing excellent – this year the value of our shares increased by more than 100 percent from last year.”

Up until the mid-1990s, Auchi’s investments in Lebanon were limited to portfolio investments, namely minority shares in Solidere and a number of unnamed local banks. By the time Auchi decided to invest in a development project here, it was only natural that it would be in the hospitality industry. “Because this is one of the sectors that we are in,” he said. The $150 million Le Royal Beirut and adjoining Watergate theme park in Dbayeh, which opened last August, was the chain’s fifth hotel.

Ever the astute businessman, Auchi said that the main reason he entered Lebanon’s hotel industry was because he recognized its potential. “There is a big demand for hotels here,” said Auchi, adding: “I believe that Lebanon’s tourism industry is probably the best in the Arab world.” He said that he was already pleased with the performance of the 380-room Le Royal Beirut – even though it has only been operating for six months. “Usually, when you open a hotel, you don’t expect to operate at a profit in the first year. However, we believe that we will make a profit,” he said.

Predictably, Auchi cited overly bureaucratic administrative procedures as the major obstacle he has faced in Lebanon. “We definitely faced problems getting all the necessary approvals. The problems were not from the top people – they were very cooperative. The problems were at the administrative level in day-to-day business.”

Long before work began on the hotel, which took five years to complete, Auchi had been working on developing a luxury apartment complex in Adma. The project has yet to be completed due to administrative procedures. When asked how much was being invested in that project, Auchi said: “I don’t remember because it’s been going on for a while.”

Auchi acknowledged that these types of problems exist everywhere, but said that in Lebanon it is worse than elsewhere in the Arab world. “In Jordan, we got almost all the approvals in just three days,” he said referring to GMH’s tourism complex there. “The possibilities in Lebanon are excellent, but investors are reluctant to come because of these problems.”

Asked whether he plans to make further investments in Lebanon, Auchi said: “It all depends on what is offered to us. When we receive proposals we study them, and if we believe in them we go for it.” This is how he became involved in the $60 million Hilton Beirut project being developed downtown, his second biggest investment in the country.

Nizar and Issam Younes, the people behind the project, approached Auchi to join the venture and “after studying the project we acquired a 51 percent stake,” said Auchi, adding “if it is a major investment, we like to have a controlling interest.” GMH holds more than 90 percent of Le Royal Beirut. To date, Auchi’s largest investment in the Middle East has been in Jordan. “Our total investment there is about $300 million,” he said. He acknowledged that his investments in Lebanon were increasing. “With the Hilton it would be about $200 million,” he said.

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16/02/2004