Exclusive Interview with EL-HAJJAR Enterprises

Interview with Karim El Hajjar, Chairman of EL-HAJJAR Enterprises Co. (H.E.C Holding)

You have a number of units in real estate, construction, and contracting development which are core in Lebanon and also starting to reach out in MENA and into Canada. You have also recently expanded into fitness products. Briefly tell us about your operations, your separate units, sales and staff.

The company is H.E.C Holding; it has been in business since 1959. When the younger generation took over ten years ago, it was changed into a corporate company, an S.A.L, and we created the holding arm. With the holding arm we are managing the financial structure of all the companies and subdivisions that we have. We created a good management team that could handle fast expansion. The largest expansion has occurred over the last 3 years.

Today we have H.E.C Real Estate development which is the main core of the business. We have H.E.C Wood which is our manufacturing arm covering anything that has to do with interior design, furniture, kitchens, doors etc. We work for individual end users and for larger projects. We have a lot of friends; architects and developers who buy from us. This year we opened H.E.C Aluminum, which is our aluminum windows, doors and cladding arm. So far it is performing well; we have been in business for 6 months and already working on more than 30 buildings. We are discussing more projects to come outside of the H.E.C family for the next coming years. 

The way we have set up the real estate development goes to speaking of H.E.C, which is the family business. Correspondingly, we use a three pillar concept: we buy the land; we develop it and finance it. We also have H.E.C Development, which is a partnership. We have taken on a couple of partnerships and that section is doing really well. Parallel to that, we welcome any foreign investors; we have interest from the US and Canada also lately a lot of interest from the Iraqi market. However we do not give ownership to foreigners, but a return on their investment. We are maintaining the Lebanese ownership to maintain land in Lebanon which is becoming scarce. At the same time we have to be realistic and remember that Lebanon relies a lot on foreign help whether it be from Lebanese expats who are injecting a lot of money into the country or simply foreigners who believe in the market regardless of what is going on politically. The situation has been like this for the past 45 years, I don’t remember it differently. Even though we have some political unrest and militia, globally this is still a safe country. If you look at it statistically based on a population of 4 million, the death rate due to war or bombing is a lot less than the crime rate anywhere in America or Europe. You probably have cyclones in some more civilized countries that do a lot more damage to the population. I say that to get a little bit of balance on why you would or wouldn’t invest in Lebanon. I think that is something that investors are aware of.

We have interest from the US and Canada also lately a lot of interest from the Iraqi market.

From a financial perspective real estate has never failed, not for the last 55 years at least. Mainly because we don’t have enough land but we do have good weather, restaurants, wine and excellent food. We have great beach resorts such as Edde Sands and Cflow. We are service orientated and multilingual. These are all attractive factors for real estate here.

We are selective when it comes to contracting: we only take on contracting projects that we choose and where we know the owners and the partners.

People seek you out for your attributes.

Yes. Usually they seek us out because we are real estate developers and at the same time we are not a shareholders’ company. People probably prefer to work with us as we have a bigger name and more reputability, therefore if we make a mistake there are consequences. I think that is why people approach us from a contracting point of view.

H.E.C Fitness is a new start for us. We first set up H.E.C Lifestyle which is our magazine. We created it to start a community for our clients and our partners. Not only so that they can buy a service from us but to create a place where we can sell and buy from each other through that marketing or advertising arm. Then H.E.C followed with the idea of encouraging better health and lifestyle. H.E.C Fitness is a franchise concept and it has been under development for almost 5 years now. We are working with the top companies in Finland. We have created the software and we have a small demo that is being developed further. Hopefully we are going to open our first location soon and then start franchising it. This is a world concept; we are trying to sell it now in the US and in Canada. It is a concept where you can start with a 3×3 room in your house with fully automated machines. It is as though you had your personal trainer with you. It can automatically connect to the internet. You can see all the statistics, all the muscles you have worked, your muscle mass, your heart rate etc. If you have injuries on your back or your neck it will calculate that into your plan and will tell you what to work and what to avoid. If you need a physiotherapist to be supporting you then the system will tell you and it won’t let you work out. That is the safety aspect of it that we are trying to promote.

Will we be seeing this new product on the market in about 6 months?

Yes, hopefully. It depends on how it is going to be developed. We are still undecided whether to open our first unit then franchise it, or to create the system and then sell it out as a franchise.

Please tell us a bit about the company´s background, its growth story and your tenure as the CEO.

The business started with my father and uncle back in 1959. They had a small leather production factory but they closed the business down and moved to Beirut where they opened a small grocery shop. My father was studying part time; when he finished his studies they contracted their first real estate building and saw there was a potential in this business. The name Hajjar means stone, so that has also probably helped us a bit.

Today, we have developed in Dubai, Abu Dhabi, Saudi, Kuwait and hoping to enter the Iraqi market as well. We have also done some real estate and gas business in Canada.
In California we opened a spa, which is where some of our knowledge for H.E.C Fitness comes from today. This spa was called Aphrodite Inc. it was in Newport Beach, California and we sold it after 2 and a half years. The people who bought it are continuing the business.

It is still a brand?

Yes and I think they are doing well. In 2004 I came back to Lebanon. Since then we have opened all of those companies I mentioned. Today we have something like 600 or 700 apartments that we own either as an investment or an opportunity for investors. We are creating four new projects. One project is in Nabay, called La Pedra, which is a nice two bedroom development. Another is Greenville, a fully serviced gated community in Nabay with 160 units. It is our latest project. This is going to have a green area. We cancelled two of the buildings and we turned them into extra parking for visitors. We have also created a playground for children and a community centre that can be rented out for events. We are planning to open a pharmacy and a mini convenience shop.

We try to design our projects to be environmentally friendly. We work with the Ministry of Agriculture. We are planting cedar trees and we want to create a green community. We are not LEED certified yet because we are focusing mainly on selling at good prices. We are using the LEED concepts as a guideline. All the buildings are pre-equipped with solar photovoltaic installations for heating and all other services you can get from solar. All of the roads in the project are also photovoltaic. We also have sewer treatment facilities which distribute the cleaned water for the gardens. We are also collecting rainwater from the rooftops and putting it to use in the community.

Our main focus is price-quality. We mainly source our materials from Italy. We have a contact there with a good history and reputation. We are using first rate Italian ceramics, sanitary wares and fixtures etc. The doors and kitchens are made by H.E.C Wood from knowledge that we have gained from the Italians. We work to their standards. One service that is great for our clients is that you can buy the house fully furnished from us. We have an interior designer who works in-house.

We have another project called Rosewood in Mansourieh. This project was architecturally designed in-house whereas Greenville was subcontracted. We always have someone from H.E.C overlooking all the projects to create a certain H.E.C “feel” where projects are quality orientated and with really good views, for example we work a lot to get the best amount of sunlight into the rooms. All of our projects are surrounded by greenery to create a nice environment and hopefully it will stay that way.

Tell me about not only your green philosophy but also your management philosophy for running a large, growing, diversified business. How do you keep projects on track, how do you keep staff happy and how do you meet your bottom line to get good return on investments?

Our strategy is to co-venture with people who are excellent at their job. For example, our electrical contractor has been with us for 25 years and so he understands H.E.C concepts whilst at the same time he has worked on projects outside of H.E.C whether in Lebanon or abroad. We work with really talented subcontractors. We have identified people who are good in their field and we put them under our umbrella to create a unit.
The younger generation of staff has been with us for the last ten years and some staff have been with us for more than 30 years. This is what has created such high quality. We set our staff goals and we give them opportunities to grow independently from us. They have the right to work with other contractors, although usually we have so much work to do that they are mainly working with us. If you compare the projects we worked on in 2004 to those we are working on today, you can see the progress we have made not only from a materials point of view but also in terms of installation and implementation.

Now of course Lebanon is a four season country therefore materials take some time to adapt as temperatures change throughout the year. This causes a potential leakage problem. I am not going to lie and say that I have solved that issue permanently because I haven’t but we have given an 8 year warranty regarding leakages on all of our projects as well as a 5 year warranty for any problems on our projects.

Technology has changed a lot with things like double glazing, aluminium products etc.

Yes it has. We have good insulation technology and a lot of things are changing. Many leakages are due to quick work because you want to deliver and work faster as people want to move in faster. However this can cause problems with leakages due to misplaced materials. We are maintaining and respecting the 5 year warranty and we maintain all of our projects for free unless it is personal damage. I think we are the only developers that do this in Lebanon. It is a written certificate that the buyers get.

Tell me a bit about what you consider to be your base demographic in Lebanon.

Our main customer focus is mid to low income. This does not mean we are building at low quality. We are building really high end quality properties in good locations. Our main focus has changed, we are focusing on actual buyers and users. We have opportunities for investors as I said before to invest on a returns on investment basis on some of our projects. Right now we have the best interest rates for mortgages. This year we have worked with the Bank of Beirut for mortgages and housing loans. We have a 10% down payment on our units with 30 years financing at a rate of 2.5% interest. That is the cheapest rate you can get in Lebanon.

So you bring affordability to your products.

Yes because 1 thousand dollars gives you 245 thousand dollars in the Bank of Beirut. That is about 80 thousand dollars more for the same mortgage payment per month from another bank. That is why a lot of our clients can get a bigger, furnished house with us.

You do detached housing and apartments. I noticed that you are bringing in something that is a new concept to Lebanon which is pre-fabricated housing.

Yes. H.E.C Homes has been in business for almost 2 years now. The concept was brought up by an Italian friend, who came up with the idea of implementing this in Lebanon. He worked with us for the first year helping us to set it up. We have researched in Europe, Canada and the US.

So a client in Lebanon can look through a catalogue and buy a custom design…

Yes and you can also choose the brand of house. We actually just closed the deal with the biggest and top of the line production company called HUF HAUS who are a German home production company. They are selling high end homes and we are now their representative in Lebanon. In Canada we also have a couple of builders that we are dealing with and also in the USA, particularly in wooden frames or timber homes. The business is picking up, it´s not quite there yet, the Lebanese society has not really accepted it yet. It works really well in Faraya where there is snow and ski resorts. People accept it more there as it is cosier and warmer. This year we are trying to implement the concept as a first home. The houses are customizable and the main advantages are that they are eco-friendly and human-friendly, which means they are great for people who have allergies. There are also no issues with leakages because they are pre-built and sent to be assembled here in Lebanon. They are also sound proof and eco-friendly in terms of heating and cooling.

What about cost comparison to say stone masonry?

It is very similar. The way that you save a little bit is with the fast installation. We can deliver a 400m2 house in 4 months versus a minimum wait of one year in conventional contracting. This is another advantage.

You are in a period of heavy rebranding and marketing and you have a new relationship with J. Walter Thompson. Tell us a bit about this rebranding and what kind of image you would like to see projected for your company.

We decided to work with J. Walter Thompson this year to create a bit of a difference between the Lebanese marketing and advertising techniques and the international techniques. We wanted to see how people see us from the outside and this is where JWT came in. They are giving us a lot of good advice. We have been encouraged to become better known in our own surroundings and to work on our visual approach from outside. We have worked on all aspects of advertising H.E.C, from our logos to our stationary, from our advertising down to our colours. 

We will be seeing you across all media and social media, are you also going to use standard advertising like billboards, TV, radio…

Television and radio, yes. I don’t think we will use billboards. We are more focused on reaching the end user directly. This year we are also focusing a lot on real estate companies and brokers that help us sell our units. JWT is also helping us to build a relationship where we can better the services of a real estate agent or broker even if they are selling properties that are not related to H.E.C. We believe in strengthening our surroundings, helping others achieve a better image, service and quality in their business that will eventually affect us positively.

We are now in 2014 which is going to be a year of change in Lebanon. We know that 2013 rounded up with a low GDP for Lebanon. What are you looking to do in 2014 and moving down the road? What are we going to see from the company?

For 2014 we have decided to change our perspective a little bit in terms of buildings, sizes and locations. For the last five years there was a lot of focus on Beirut with tower buildings, high end developments, large apartments of 300 to 600m2 etc. However there aren’t a lot of demands for that at the moment. Even if people can afford it, they lately prefer European trends, meaning they would rather buy a nice 150m2 apartment with a nice interior and a good location. Also traditions are changing; people nowadays would rather go out and invite friends to restaurants.

Before we enter an area, if we want to build a community with 300 units or 20 units we consult our private bankers and do the job with the local real estate companies in the area. We study thoroughly what the needs are in that area in coordination with the municipalities.

We try to differentiate ourselves by creating the right house for the client. You can start today with 90m2 and in the same community you can have a 400m2 home and the two can coexist together happily. I can designate a 90m2 unit in one section of a project and put the 400 or 500m2 unit in another section where they can coexist together. We can create a special environment in the same community for the bigger units and for those who want to invest more. Our design and architecture is really modern and can be fully customized by the customers. You can come in and sit down with our architects and customize everything from day one. As long as you are not affecting the exterior architecture and the rules and regulations you can design what you would like.

As an American I would be interested in seeing some of the loft style apartments that are coming up.

Yes they are nice. What hasn’t really been accepted much yet is the open kitchen style. Lebanese people love to cook but they worry about the smells that can go into the living space. However this is changing because we have good ventilation technologies. Some of our clients are actually asking us to open up some of the walls to the dining area to have a bar with an American style open kitchen. We have a really good interior designer who can create any kind of kitchen. We can import from all over the world depending on the demand of our client. We start our kitchens at 1500 going up to 150 thousand, we can cater for all budgets.

At H.E.C Wood satisfaction is 100% and this is something that I am really proud of. We have been in business for 5 years and we have 100% client satisfaction. Not everybody can say that. We created a really good team of 60 employees who have been with us for the 5 years. They are all very loyal and we offer them training. We use the best software: Oracle for management financials and we work with 20-20 which is the best design software. We have changed the company to be technology orientated. We rely a lot on anything that can make us more productive. We can do a full feasibility study and price a project with a 5% accuracy within 3 days. This is something that the management has worked on and we are proud of.

Your father had a saying and the company has had a long time saying about apartments, could you tell us that saying?

“We believe in creating apartments that people call home.” This is actually a saying that we took from California. It’s not my saying. We learnt a lot from a developer over there who focused a lot on services and customer relations. If the customer didn’t like something in the house they would simply go in and change it, they wouldn’t argue. Here in Lebanon this has always been our mentality, but only recently have we put it into our marketing strategy. We want to show people that we care and want to create apartments that they can call home.