Alex Demirdjian (Demco Group): “Bad Cycles Are A Blessing for The Future”

Interview with Alex Demirdjian, CEO of Demco Group

Let’s begin with the overall picture. With the current situation in Lebanon and the surrounding region how would you evaluate the doing business in Lebanon at the moment with regards to the respective sectors that you act in?

It has been very challenging. The conflict in Syria affected Lebanon greatly the past few years. We have been under pressure from all the instability in the region. It is definitely not easy to work in this environment; however we are cautiously optimistic about the future of the region and of Lebanon as soon as the dust settles.

How about the steel industry in particular?

The steel industry has had its own share of suffering as prices of commodities have been downhill in an unprecedented manner. As stockists and traders, we faced very challenging times. The only advantage in this cycle is that we managed to handle it better than our competition and gained significant market share. Demco today enjoys more than 50% of the steel market. We also believe that commodity prices will start to escalate by the end of 2016 and we therefore should enjoy a positive cycle for the coming few years.

You mentioned that you have been leading the steel industry for the last ten years, how do you maintain that position?

By working hard.

How do you differentiate yourselves from the competition?

By trying to think differently in all the sectors we’re involved in; whether it’s in the steel industry, real estate, shipping, etc. We believe that other developers and investors just follow each other’s footsteps, but we try to pioneer by introducing new ideas in the market. The strategy is to be as different as we can from our competition.

With regards to steel, your trading activities span across the Gulf, North Africa and Europe, is there any particular market that you wish to enter?

Not for the moment.

We are optimistic that Redrock will be a pioneer in this typology of villages where all family members can enjoy different activities such as hiking, biking or simply resting by the numerous pools available in the project.

Let’s talk about real estate. What are the main trends?

Real estate in the country witnessed an increased demand from 2007 to 2013, when value of lands and residential/commercial units doubled and even tripled. The third quarter of 2014 witnessed a slight slowdown in the market which is normal for this sector, especially following the conflicts in the region. Ironically, since Lebanon is such a small country and Beirut is such a compact city, it is a challenge to hunt down plots in Beirut to invest in thus leading to an increase in land rates. It is true that the activity of real estate has slowed down but the Lebanese don’t have the tendency to sell their property or decrease its value, because in most cases equity versus loans provided in this industry is well controlled.

With regards to Demco Properties, what are your major developments at the moment?

We currently have four on-going projects. A personal favourite of ours is in the mountainous region of Kfardebien, named Redrock. The latter is a village located at a 2km distance from Faqra club; a well-established summer and winter resort. What’s different about Redrock is the introduction of the eco-friendly neighbourhood that has solar panel heating, green roof structures, embedded underground electricity system, and an organic farm from which the Redrock community can enjoy fresh products from our own land. It is simply a marvellous combination of nature, retreat and comfort which makes it a completely different environment than what is offered in Lebanon today. We are optimistic that Redrock will be a pioneer in this typology of villages where all family members can enjoy different activities such as hiking, biking or simply resting by the numerous pools available in the project.

Could you tell us more about the Redrock project?

The project is currently in phase I. Over the coming 3-4 years, 50 to 55 blocks will be constructed, of which several are already being delivered. Global client interest in the project is relatively very high, so this project is taking a great deal of my time and attention. The aim is to try to bring back every little detail from overseas and modifying them to adapt to the Lebanese culture. Our concern is not the commercial benefit but how this project will improve the quality of development in our beloved country. The investment and detail poured into Redrock whether in the public roads leading to the project or in the surrounding landscaping, are alone indicators of the uniqueness of the project, which will serve as an example for others to follow. The experience on the field has allowed us to believe that being long term oriented is the secret to any success.

Do you want to talk about the other projects you have going on?

Two other projects are currently ongoing. The first will be the second highest building in Lebanon named Fortyfour after its 44 storeys. The latter is a commercial and residential tower in Sin el Fil that we are developing in partnership with M1 Real Estate. The first twelve floors are commercial shops and offices whereas the higher levels are residential. Three distinct accesses separate between the residential block and the two commercial blocks to provide maximum comfort and privacy to all occupants. Commercial unit sizes vary from 50sqm to 120sqm, whereas residential unit sizes vary between 130sqm and 170sqm.

Fortyfour was launched 9 months ago and is until this date 50 to 60% sold. We consider this a record sale bearing in mind the fact that many clients who are greatly interested in investing in the project are hesitant because of the unstable environment in the region. Regardless, this percentage is merely a sign that with the upcoming marketing campaign, sales will be substantial. Eventually, we are offering a 44 storey landmark building with the best possible amenities and finishing at very affordable prices. Considering what is offered, the quality/price ratio is probably incomparable to other projects in the area.

Could you tell us about STARCO?

STARCO is a building built in 1955 we bought with our partners 6 years ago, that is ironically built by my grandfather. It is an office building in downtown Beirut located in a very strategic area. STARCO is considered an infamous landmark in Lebanon. Unfortunately a car bombing in its surrounding led to its significant destruction a couple of years back. With the help of the internationally renowned architect Foster & Partners, we completely reshaped and renovated the building. Foster is also the architect who designed the masterplan of Redrock. We had a fantastic experience working with their staff and I highly recommend them in this country, as they are exceptionally professional.

Going back to the subject at hand, STARCO is a rental property. Occupancy is about 95% on average, as demand for its offices is high because of its location as a landmark, especially after its renovation.

Another on-going project is ‘Demco Towers’ which consists of three buildings in Antelias, El Metn. The towers are the only ones in the area that are 30 storeys high and stand out in a zone full of 6-7 storey high buildings. These small apartments face the Mediterranean Sea with fantastic views, high end finishing at very reasonable prices. Therefore Demco towers serve as a landmark with a particularity which cannot go unnoticeable. With about 38,000m2 of apartments, offices and shops, it is basically a microsystem that we believe will add a lot of value to the Metn area.

Can you talk about your shipping business?

Shipping activity has been remarkably slow worldwide. China’s slowdown affected both this industry as well as the steel sector. We have therefore considerably reduced our shipping activity. However, upon any positive change, we are ready to fully engage in shipping again.

To conclude the interview, what is your overall strategy for Demco Group?

We are always on the watch for opportunities that come during recessions and are very aggressive during these times. In short we believe that bad cycles are a blessing for the future.