Table of Contents. What is Saraya? Saraya Real Estate MENA Fund. The MENA Region. The Real Estate Sector. The Tourism Sector.

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2 Table of Contents Section Page What is Saraya? Saraya Real Estate MENA Fund The MENA Region The Real Estate Sector 29 The Tourism Sector 34 Country Snapshots 39 Fund Manager Profile 44 Property Adviser Profile 50 2

3 What is Saraya? We take LOCATIONS & turn them into DESTINATIONS Saraya is a regional real estate developer and asset manager Saraya s Vision To create a series of unique, world-class communities in the Middle East and North Africa (MENA) region, that satisfy the demands of regional and international visitors, and offer distinctive living and/or working environments to residents. To establish a series of unique real estate, hospitality and leisure communities around the MENA region, which focus on locations with high growth potential Saraya s Mission To create distinguished environments, where people enjoy living, working, visiting, and entertaining To be the leading Developer and Asset Manager of these communities To maximize value for investors, enhance domestic economies and benefit local communities To capitalize on the development and construction expertise of Saudi Oger 3

4 Saraya Projects Saraya has a number of projects in the pipeline ( Saraya Projects ) that span the MENA region. The current countries of focus for Saraya are: Jordan, the UAE, Oman, and Lebanon. The Saraya Aqaba Project was launched in It received a positive response from investors as well as tenants, and is on target to officially open in Investment opportunities exist in future Saraya Projects. 4

5 Saraya Aqaba A Bird s Eye View 5

6 Saraya Aqaba Highlights Founders Saraya Jordan Social Security Corporation Arab Bank plc Aqaba Development Corporation Board Members A 9-member Board of Directors, chaired by Sheikh Saad Rafic Al-Hariri Board seats distributed as follows: 3 Seats for Saraya Jordan 2 Seats for Social Security Corporation 1 Seat for each of Arab Bank, Aqaba Development Corporation, Export & Finance Bank, and Dubai International Capital Project Description Land: 610,000 square meters (sqm) Built Up Area: Approx. 650,000 sqm Additional Beachfront: 1.5 km Residential Units: 14 Villas, 90 Townhouses, and 500 Apartments, 100% of which are already reserved, with deposits paid Estimated project cost: US$700 million Mobilisation: January 2005 Includes five hotels all of which are 5-star and above; 3 hotels to be operated by Jumeirah International and 2 hotels by Starwood Asteco is the sales agent for the residential and retail components Saraya Aqaba will employ over 3,000 individuals during construction ( ), and 6,000 after opening (2009 onwards) 6

7 Pipeline Saraya Islands (RAK) Mixed-use resort announced on September 14, million sqm island, off the coast of Ras Al-Khaimah, UAE Will include a range of 5-star hotels, lavish residences, cultural sites and commercial venues Construction expected to start by the end of 2006 Grand opening expected in

8 Pipeline Saraya Dead Sea Mixed-use resort expected to be announced in million sqm plot of land on the northern shore of the Dead Sea (65 km west of Amman, Jordan) Will include 5-star hotels, lavish residences, an 18 hole golf course and a 9-hole practice course Construction expected to start in 2007 Grand opening expected in

9 Table of Contents Section Page What is Saraya? Saraya Real Estate MENA Fund The MENA Region The Real Estate Sector 29 The Tourism Sector 34 Country Snapshots 39 Fund Manager Profile 44 Property Adviser Profile 50 9

10 Fund Overview The Fund Objective A closed-end, Bahrain incorporated fund that invests in real estate and tourism projects, primarily in the Middle East and North Africa (MENA) region through direct equity investment The Fund aims at generating income and capital gains from investing primarily in Saraya real estate and tourism projects ( Saraya Projects ), in addition to other projects in a number of jurisdictions in the MENA region Target IRR The Fund targets an Internal Rate of Return of 17% Target Size Locations of Focus Fund Manager The Fund is seeking to raise US$250 million by issuing 2,500 units worth US$100,000 each. Saraya Holdings, Limited and the Arab Bank plc are providing seed capital of US$25 million each, for a total of US$50 million Initially, the Fund will seek investments in Saraya Projects in Jordan, the UAE, Oman, and Lebanon. In addition, investment opportunities will be pursued in other MENA countries, as well as outside the region Atlas Investment Group (Atlas), a wholly owned subsidiary of the Arab Bank plc and its Investment Banking arm Property Adviser Saraya Real Estate Development Group (SDG) 10

11 Fund Structure Auditor: Ernst & Young Fund Company Fund Manager: Atlas Custodian, Admin, & Registrar: Gulf Clearing Co. Saraya Real Estate MENA Fund Property Adviser: SDG Placement Agents Unit Holders Arab Bank Saraya Holdings Sponsors/ Seed Capital Providers 11

12 Management of the Fund A 6-member Board of Directors retains final decision making power A highly qualified team is spearheading the Fund, combining real estate and tourism experience, as well as financial management expertise Atlas will run the daily affairs of the Fund As Property Adviser, SDG will provide technical opinion to the Fund Manager An Advisory Board may be created to provide additional guidance to the Fund on a range of matters Board of Directors Ali Kolaghassi Board Member Atlas Investment Group Omar Masri Global Head of Investment Banking Arab Bank Eyad Mashal Head of Asset Management Atlas Investment Group Talal Samhouri Fund Manager Atlas Investment Group Oussama Kabbani Managing Partner Millennium Developments Jawdat Halabi Global Head of Private Banking Arab Bank 12

13 Decision Making Process Board of Directors 5. Investment Decision 4. Investment Recommendation Atlas: Fund Manager 3. In-Depth Analysis Potential Investment 2. Technical Advice SDG : Property Adviser 1. Business Plan 13

14 Ali Kolaghassi Vice Chairman and CEO of Saraya Holdings, Limitied Board Member of Atlas Investment Group Senior Adviser to the President and Chairman of Saudi Oger Ltd., Sheikh Saad Al-Hariri Board Member, Abdali Investment & Development Managing Director and Board Member, Omnia Holdings Holds a Bachelor s degree in International Business from George Washington University and undertook postgraduate studies in political science Omar Masri Founder and Managing Director of Atlas Investment Group and Global Head of Investment Banking at Arab Bank Previously a Fund Manager at Foreign & Colonial Emerging Markets Ltd. in London Board Member, Arab National Bank (Saudi Arabia) Director, Arab Bank Europroperty Fund Member of DIFX Practitioner Committee (Dubai) Holds a B.B.A. in Finance from George Washington University, and attended Finance and Accounting courses at The Wharton School at the University of Pennsylvania Jawdat Halabi Global Head of Private Banking at Arab Bank Previously was with National Commercial Bank in Jeddah, where he held a number of senior positions, that last of which was Head of Private Banking Held various positions in corporate banking at Saudi American Bank and Saudi Hollandi Bank Holds a B.Sc. in Industrial Engineering from Texas A&M University Attended the Wharton Executive Development Program and the Stanford Executive Program Eyad Mashal Head of Asset Management at Atlas Investment Group Former board member in a number of private and public companies, and worked on various private equity transactions Previously a Financial Analyst at the Central Bank of Jordan Holds an MBA and a B.Sc. in Accounting and Business Administration with honors from the University of Jordan He is a CFA Charterholder and a level 3 candidate for the CMT program Oussama Kabbani Managing Partner of Millennium Development International, Beirut, Lebanon Previously Head of the Town Planning and Urban Management Department at SOLIDERE, and Senior Urban Designer at the Boston Redevelopment Authority Taught at the Boston Architecture Center Author of Prospects for Lebanon: the Reconstruction of Beirut, published in 1992 Talal Samhouri Management Team Directors Directors and Fund Managers Fund Manager in the Asset Management Division at Atlas Investment Group Previously a Financial Advisor at American Express Financial Advisors in the US Holds an MBA in Finance from the University of Memphis, and a Bachelor s degree in Accounting and Business Administration from the University of Jordan He is a CFA Charterholder 14

15 Property Adviser Team Property Adviser: SDG Nasser Massoud: Managing Director Previously management consultant & financial advisor (PricewaterhouseCoopers and Concept Realization). With PWC he was a leading practitioner in their Real Estate and Capital Programme Management Group, and in Project Finance (PFI) Worked on deals worth in excess of US$2 billion Construction industry experience with Kier and Ove Arup and Partners Masters in Finance LBS; Masters in Construction Economics & Management UCL; BSc in Civil Engineering UCL; Chartered Engineer; Member of Institute of Civil Engineers; Fellow of the Chartered Institute of Arbitrators; Visiting Fellow at UCL Elias Moubayed: VP- Development & Construction Extensive experience in architecture and urban design, including large scale urban and mixed-use projects, private and institutional development, land use planning, infrastructure implementation, planning regulations and design guidelines Prior to joining Saraya, he was an Associate at the international architecture firm Skidmore, Owings and Merrill, LLP (SOM) for six years. Previously held the post of Head of Town Planning Section at SOLIDERE in Beirut, Lebanon Bachelor of Architecture degree from University of Toronto; Master of Architecture in Urban Design degree from Harvard University Hilal Abuzeid: VP- Finance 20-year, wide-ranging experience in debt & equity financing, corporate restructuring & valuation, privatization, money & capital market investment, treasury and banking operations, and economic research. Previously Executive VP of Jordinvest, supervising the operations of the Corporate Finance, Capital Markets and Asset Management Departments Established and managed Cairo Amman Bank s Research and Investment Management Department for 11 years Held posts in the Investment and Foreign Debt Sections of the Central Bank of Jordan s Foreign Banking Operations Department BSc in Civil Engineering and MSc in Finance from Texas Tech University; International Securities Markets Association (ISMA) Certificate holder Bassam Talhouni: VP- Asset Management More than 25 years experience in project management and real estate investment Before joining Saraya, he held the post of VP for Development at Damac Properties in Dubai. Prior to that, he was GM of Abdul Latif Real Estate Investment Co. in Saudi Arabia, and Technical Director at Zara Investment (Holding) Co. in Jordan Possesses in-depth knowledge of real estate investment, due diligence, valuation, appraisal, acquisition and profit maximization Lectured extensively and published a book and many articles on project appraisal and management BSc, MSc and PhD degrees in Project Management and Building Economics, all from the UK 15

16 Investment Strategy and Approach Investment Objective Site Features The Fund aims at capitalising on the positive economic developments across the MENA region in general, and on the growth of the real estate and tourism sectors in particular, through direct investment in real estate and tourism projects. Investment Approach 1 Developing real estate and tourism investment projects; i.e. green-field projects Under- Developed Investment Approach 1 High Growth Potential Low Competition Determining Investment Approach Investment Approach 2 Investment Approach 2 Acquiring existing, income producing, and/or distressed real estate property Making the Investment Investment Approach 3 Investing in listed real estate securities Exiting the Investment 16

17 Investment Strategy and Approach Real Estate Project Development Process Strategize Originate & Secure Develop Business Opportunity Raise Funds Execute Realize Value Develop concepts and strategies The conceptproject, site, and services Market study, business plan, and design Determination of size and fund sources Actual construction of project Sales, asset management, and maintenance Fund s Entry Fund s Exit 17

18 Origination and Pipeline The Fund already has three projects in the pipeline: RAK: Saraya Islands Jordan: Saraya Dead Sea Oman: work in progress Project origination is conducted by Property Adviser Fund Manager: Real Estate team Arab Bank team & Project Partners 18

19 Investment Assessment and Valuation The Fund Manager will conduct in-depth analysis on every potential investment in order to assess its feasibility and ability to meet the Fund s objectives, by primarily using the Discounted Cash Flow (DCF) approach, along with other valuation techniques. Discounted Cash Flow Forecasting cash flows to arrive at the fair value and optimal capital structure Income generated Operating expenses Investments required Construction period Taxes Financing needs Exit price Discount rate Cost Approach For existing property, land value plus the replacement cost of the property Potential Investment Sales Comparison Approach Considers prices paid by other investors for similar properties within the same area to ensure that the Fund does not overpay when acquiring property Income Approach For income-generating property, total value based on future income stream 19

20 Exit and Value Realisation The Fund will consider in advance the exit strategies available for each investment. The most common exit strategies include: Trade Sale Initial Public Offering Put Option Selling the Fund s stake to a strategic or financial investor An IPO for a Project on a MENA stock exchange Arranging a put option at the time of investment to ensure the sale of the Fund s shares 20

21 Investment Restrictions The Fund Manager will not make any investment which could expose the Fund to unlimited liability. The maximum equity allocation to listed real estate and/or tourism company securities will be 25% of the total commitment. The maximum equity allocation to any single direct investment will be 20% of the total commitment. The maximum equity allocation to any single MENA country will be 40% of the total commitment. The Fund may invest up to 25% of the total commitment outside the MENA region. The Fund may borrow to finance a direct investment, on a case-by-case basis, up to 75% of the value of such a direct investment. 21

22 IRR and Sensitivity Analysis The Fund Manager is targeting a 17% IRR. The following matrix highlights the Fund s expected IRR under different scenarios: Cost of leverage 8.0% 9.0% 10.0% Project s IRR 18.0% 16.0% 15.0% 21.50% 19.06% 17.85% 20.98% 18.54% 17.33% 20.47% 18.03% 16.81% Other assumptions: Leverage ratio is 50% Leverage duration is 5 years Exit price is at a Project s IRR return per annum 22

23 Advantages of Investing in the Fund A geographically diversified real estate portfolio Ability to invest in future Saraya Projects on the same terms as the founders, but without a lock-up period Taking advantage of opportunities beyond the Saraya Projects Fair evaluation and assessment of investment opportunities by the Fund Manager Represented on the board of each Saraya Project 23

24 Fund Terms Fund Structure Closed-end, Bahrain incorporated company Fund Sponsors Arab Bank plc and Saraya Holdings, Limited Fund Manager Atlas Investment Group Property Adviser Saraya Real Estate Development Group Placing Agent Atlas Investment Group Administrator Gulf Clearing Company B.S.C. Registrar Gulf Clearing Company B.S.C. Custodian Gulf Clearing Company B.S.C. Auditor Ernst & Young Target Size US$250 million Minimum Commitment US$500,000 per subscriber Closing Date Upon the discretion of the Fund Directors Fund Term 8 years from closing date, extendable by three 1-year periods Investment Period 4 years from the Closing Date Management Fee 2% per annum of committed capital Carried Interest 20% of the Fund s return upon reaching a hurdle rate of 10% per annum Front End Charge Up to 2% of committed capital 24

25 Table of Contents Section Page What is Saraya? Saraya Real Estate MENA Fund The MENA Region The Real Estate Sector 29 The Tourism Sector 34 Country Snapshots 39 Fund Manager Profile 44 Property Adviser Profile 50 25

26 Significant Regional Developments Political Developments Legal Reforms Economic Developments New Generation of Leaders Introduction of Democracy Freedom of the Press Advancing Towards Peace in Palestine and Iraq Improved Political Environment in North Africa Investment Promotion Infrastructure Allowing Foreign Ownership of Real Estate Capital Market Laws Introduction of Mortgage Laws Specialized Regulatory Bodies (Banking, Insurance and Telecom) Reforming Tax Laws High Oil Prices Repatriation of Capital from Abroad Low Interest Rate Environment Privatization Drive Trade Reforms Enhanced Competition Incorporating Family Businesses 26

27 Impact of Regional Developments Political Developments High GDP Growth Rates Higher per capita income and higher disposable income leading to better quality of life. Legal Reforms Economic Developments Economic Diversification Real Estate Boom Enhanced Tourism Activity Capital Market Performance Starting to shift away from oil-related sectors. Real estate, construction, and telecom sectors are expanding. Stimulated by favourable demographics, growth in real estate is leading to growth in other sectors including cement, steel, banking, and insurance. Higher standards of living and higher incomes are leading to increased regional leisure and business tourism. Good corporate performance and high liquidity levels resulting in impressive returns at regional stock markets. 27

28 Future Economic Growth Drivers Continued high oil prices Abundance of liquidity Relatively low interest rate and inflation rate environment Regional economic liberalization and diversification Healthy IPO and privatization pipelines 6% 5% 4% 3% 2% 1% 0% Real GDP Growth Rates F 2006F MENA Industrial Countries World Mega projects in real estate, petrochemicals, LNG, and energy sectors Regional and international expansion of leading companies Strengthened corporate governance Solid corporate earnings Favourable demographics Greater Arab Free Trade Area initiative Source: The World Bank MENA Region Inflation Rate 5% Low inflation rate environment is expected to be sustained 4% 3% 2% 1% 0% F 2006F Source: The World Bank 28

29 Table of Contents Section Page What is Saraya? Saraya Real Estate MENA Fund The MENA Region The Real Estate Sector 29 The Tourism Sector 34 Country Snapshots 39 Fund Manager Profile 44 Property Adviser Profile 50 29

30 Real Estate Sector Overview The real estate sector moves in cycles that lag the macro-economy; i.e. expected to outperform during economic downturns. Real estate investment returns have historically exerted low or negative correlation with stock and bond returns; i.e. an effective asset class for portfolio diversification. The Real Estate Cycle 2. Expansion 3. Hyper Supply Value or Occupancy/ GDP Growth Performance Lag Time 1. Recovery Source: Legg Mason Wood Walker, Inc. and Atlas 4. Recession Real estate cycle Economic cycle MENA region s position in each cycle 30

31 Real Estate Sector Overview Country Infrastructure Commercial Real Estate Residential Real Estate Tourism Saudi Arabia Further development in power, water desalination, and road network Shortage of high quality facilities Not a concern yet, but expected to experience a shortage in the near future Developing various new sites as part of the National Tourism Development Plan UAE Most emirates are underdeveloped, with Dubai being the most advanced Numerous developers in Dubai and Abu Dhabi; lack of adequate facilities in other emirates Dubai close to saturation, leading to spill over to other emirates A hub for business tourism; focusing on themed large scale projects Oman Inadequate transportation, and power shortages Limited capacity and high growth potential Fragmented and old; a number of major projects are under way; foreign ownership restrictions Expanding cultural and eco-tourism in the southern region Jordan Improving, but many areas outside Amman are underdeveloped Mostly small and old; major projects are under construction Small scale projects, with large scale projects gaining ground Aqaba, Dead Sea, and Petra are being developed, but require larger investment Lebanon Basic utilities require upgrading Modern commercial facilities and shopping malls are being introduced Underserved as there is high demand for high-end housing from regional investors More facilities are needed to accommodate increasing tourists Egypt Old and requires repair; new urban areas are being developed outside of Cairo Fragmented market; limited initiatives in constructing new and modern facilities The majority being of poor quality; high growth potential as the population is young Room for improvement in historical sites; focus on developing the Red Sea coastline 31

32 Market Forces Demand Side The MENA real estate sector is one of the most active and lucrative sectors as the region is embarking on a new era of development that is redefining its economic landscape. Favourable Demographics Improved Standards of Living Increased Business Activity Increasing Regional Tourism Introduction of Mortgage Loans 20% Construction and Real Estate Sectors' Contribution to GDP (2004) Supply Side 15% High Liquidity Levels 10% Low Interest Rate Environment 5% Land Available for Development 0% Qatar Kuwait Jordan UAE Oman Egypt Increasing Property Prices and Rent Source: Corresponding countries central banks 32

33 Real Estate Sector Growth Drivers High GDP growth rates 4% MENA Population Growth Rate High growth rates indicate potential increase in demand Continued high oil prices feeding liquidity into regional economies 3% 2.3% 2.3% 2.3% 2.7% 2% Increased lending mortgage loans Low interest rate environment 1% Source: Arab Monetary Fund High population growth rates High birth rates Increase in expatriates Growth in the tourism sector 10% 8% 6% 4% 2% 1-Year Deposit Interest Rate Trend for Selected Countries Rates are increasing, but are still low compared to historical levels Average Rate 0% Jordan Saudi Arabia Kuwait Oman Source: Corresponding countries central banks 33

34 Table of Contents Section Page What is Saraya? Saraya Real Estate MENA Fund The MENA Region The Real Estate Sector 29 The Tourism Sector 34 Country Snapshots 39 Fund Manager Profile 44 Property Adviser Profile 50 34

35 Tourism Sector Overview Tourism is proving to be one of the major growth sectors. The MENA region remains the world s fastest growing region in terms of tourist arrivals, due to: In Mn International Tourist Arrivals in MENA Growth = 59% Improving standards of living 20 Government spending on tourism Emergence of tourist resorts Rising preference for regional destinations Increase in number of hotels and other facilities Growth of business tourism Infrastructure developments (transportation networks, etc.) Improved marketing of the region as a tourist destination Relatively good weather all-year-round F Source: World Tourism Organization and Atlas estimates 100% 80% 60% 40% 20% 0% Global Market Share in International Tourist Arrivals 2% 1% 3% 1% 3% 1% 19% 16% 19% 4% 6% 5% 14% 19% 19% 59% 54% 52% Europe East Asia and Pacific MENA Americas South Asia Africa Source: World Tourism Organization and Atlas estimates 35

36 Tourism Sector Overview 2004 witnessed a major increase in hotel occupancy rates and in average revenue per 80% 60% MENA Occupancy Rates and Revenue Per Room 72% 68% 64% 66% 66% US$ available room, after several years of lacklustre 40% 40 performance, which could mark the start of a 20% 20 significant up-trend in the sector. 0% Avg Annual Room Occupancy Avg Revenue Per Available Room Source: HVS International Research US$ Billion MENA Tourism Receipts Tourism receipts also witnessed significant growth, as the contribution of the tourism sector Growth = 57% is becoming more significant to regional economies Source: World Tourism Organization 36

37 Tourism Sector Overview Lebanon: strong potential for Beirut to become a prime beach resort destination Jordan: areas in Amman are being revamped. Opportunities present in high growth areas Aqaba and Dead Sea Qatar: plans to boost leisure tourism through beach resorts, shopping centres, and sports events RAK: strong business and tourism drive. Abu Dhabi: Initiative to develop the emirate s tourism sector Egypt: further development on the Red Sea coastline. Expanding hotel room capacity. Target is to double arrivals by 2015 Saudi Arabia: various tourist areas are being developed across the country. Religious tourism is on a constant rise Oman: home to a beautiful long coastline with high potential for eco-tourism 37

38 Tourism Sector Growth Driver Introduction of different types of tourism (cultural, religious, eco-tourism) Country No. of Proposed Hotels No. of Proposed Rooms Bahrain 12 3,555 Rising income levels Egypt 22 6,994 Jordan 7 3,100 Improved quality and number of tourist facilities (hotels, etc.) Kuwait Lebanon ,895 2,546 Emergence of new destinations Oman 7 3,914 Qatar 13 4,754 Low inflation rates Saudi Arabia 18 4,252 Syria 9 1,985 Relative political stability UAE 56 19,905 Elimination of barriers via tourism promotion policies Total 165 Source: HVS International Research 52,900 38

39 Table of Contents Section Page What is Saraya? Saraya Real Estate MENA Fund The MENA Region The Real Estate Sector 29 The Tourism Sector 34 Country Snapshots 39 Fund Manager Profile 44 Property Adviser Profile 50 39

40 UAE Snapshot The UAE has one of the highest population growth rates in the world. Government initiatives boosted real estate and infrastructure sectors beyond the Emirate of Dubai. Increasing demand for quality residential units and leisure facilities. US$1.6 billion worth of real estate projects launched by the government of Ras Al Khaimah, along with several mega tourism projects in the pipeline. (in per cent) Real GDP Growth Inflation Rate Population Growth Source: IMF and EIU 2003A A F F US$ Mn 1,500 Basic Tourism Statistics In Mn 6.0 AED Mn 60,000 Domestic Output of Real Estate and Construction Sectors 1, ,000 1, ,000 1, ,000 1, ,000 1, Tourism Receipts (US$) Tourist Arrivals , Source: World Tourism Organization Source: Central Bank of UAE 40

41 Jordan Snapshot The construction boom started in 2003, but was initially limited to small-scale projects. New real estate projects are of a much larger scale, with mega residential, commercial, and resort projects currently under development. Strong interest from regional investors in the real estate sector, as obstacles to foreign ownership have been eliminated. Amman, Aqaba, and the Dead Sea are attracting the bulk of the investment. The industrial zones segment is witnessing further expansion. (in per cent) Real GDP Growth Inflation Rate Population Growth Source: IMF and EIU 2003A A F F US$ Mn 900 Basic Tourism Statistics In Mn ,000 Number of Building Permits , , , Tourism Receipts (US$) Tourist Arrivals , Source: World Tourism Organization Source: Central Bank of Jordan 41

42 Oman Snapshot Oman is lagging behind the region in real estate development. A decree was issued in late 2004 allowing freehold ownership of real estate by foreigners in designated integrated tourism development areas, which is luring investors. Freehold properties will be offered in certain areas of Oman. A number of large scale projects are underway, including Barr Al Jissah, The Wave, and Al Sawadi tourism projects. Strong potential for tourism in Oman, a sector that is virtually untapped. (in per cent) Real GDP Growth Inflation Rate Population Growth Source: IMF and EIU 2003A A F F US$ Mn 250 Basic Tourism Statistics In Mn 1.0 RO Mn 800 Domestic Output of Real Estate and Construction Sectors Tourism Receipts (US$) Tourist Arrivals Source: World Tourism Organization Source: Central Bank of Oman 42

43 Lebanon Snapshot Increasing demand for high-end luxury housing and recreational facilities from Arab nationals and expatriates. (in per cent) 2003A 2004A 2005F 2006F Real estate sector is regaining attractiveness. Real estate in Lebanon is mainly dollar based, which eliminates foreign currency risk. Potential in retail sector, as shopping malls and international retail chains are being introduced. Real GDP Growth Source: EIU and AMF Inflation Rate Population Growth Source: IMF and EIU The success of the Solidere project uncovered the potential of mega projects. US$ Mn 1,300 Basic Tourism Statistics In Mn 1.3 Mn. Sq. Mt. 10 Construction Permits 1,200 1,100 1, Tourism Receipts (US$) Tourist Arrivals Source: World Tourism Organization Source: Central Bank of Lebanon 43

44 Table of Contents Section Page What is Saraya? Saraya Real Estate MENA Fund The MENA Region The Real Estate Sector 29 The Tourism Sector 34 Country Snapshots 39 Fund Manager Profile 44 Property Adviser Profile 50 44

45 Arab Bank Group Propelled by a 75-year history and a network exceeding 400 branches in more than 30 countries, the Arab Bank enjoys an unmatched distribution capability and local market knowledge compared to regional counterparts It is one of the principal financial institutions in the Middle East, with total assets exceeding US$30 billion and assets under management worth US$5 billion The Largest Arab Banking Network 45

46 Atlas Investment Group Atlas, a wholly-owned subsidiary of the Arab Bank plc and its investment banking arm, is one of the oldest, full-fledged investment banking firms in the MENA region, celebrating its 10 th year anniversary. Arab Bank is one of the largest financial institutions in the Arab World. Atlas boasts an integrated set of professional investment services in the fields of: Asset Management Brokerage Corporate Finance Research One of the leading Asset Managers in the region. With invaluable experience from renowned regional and international institutions, Atlas 75-person team is one of the most qualified in the MENA region. It includes one of the largest numbers of CFA (Chartered Financial Analyst) charter holders and MBA graduates. 46

47 Atlas Asset Management Mission To provide professional investment management solutions to institutions and individuals Scope Specialized in investing in the MENA region, in both equity and fixed income instruments Presence Headquartered in Amman with offices in Dubai Client Base A regional client-base that includes prominent institutional clients as well as high net-worth individuals Assets Under Management Team The Arab Bank has more than US$5 billion of assets under management allocated to a number of products, including the Europroperty Fund. Atlas manages the bank s MENA investment activities A highly qualified team will be assigned to the Fund, which includes five CFA charterholders and one Chartered Market Technician (CMT) Level 3 candidate, of whom five are also Masters degree holders 47

48 Atlas Asset Management A Wide Range of Products Discretionary Managed Accounts Constructing and managing tailor-made investment portfolios in accordance with a predetermined set of investment guidelines. Underlying investments are made in the MENA region as well as internationally Arab Bank MENA Fund An open-ended mutual fund that invests in the equity and fixed income markets of the MENA region through a diversified asset allocation strategy Islamic MENA Fund A Wide Range of Products A unique product that offers an opportunity to invest in regional capital markets utilizing a Shari ah compliant approach. Scheduled for launch in February 2006 Saraya Real Estate MENA Fund A US$250 million closed-end, Bahrain incorporated fund that invests in real estate and tourism projects in the region through direct equity investment Private Equity Investing in Jordanian private companies through The Jordan Fund, a US$50 million private equity fund that Atlas co-manages with Foursan Group and Deutsche Bank 48

49 Superior overall performance of the MENA equity portfolio MENA Equities Track Record 150% 138.3% 130% 110% 90% 70% 50% 72.3% 40.9% 55.9% 52.0% 91.6% 30% 25.4% 10% -2.1% 7.3% 0.6% -10% Atlas MENA Equity Portfolio AMF Composite Index Annualized Holding Period Return Atlas MENA Equity Portfolio Arab Monetary Fund (AMF) Composite Index Atlas alpha per annum 61.4% 36.4% 25.0% 49

50 Table of Contents Section Page What is Saraya? Saraya Real Estate MENA Fund The MENA Region The Real Estate Sector 29 The Tourism Sector 34 Country Snapshots 39 Fund Manager Profile 44 Property Adviser Profile 50 50

51 Saraya Real Estate Development Group (SDG) Saraya Real Estate Development Group (SDG) Property Adviser s Mission Property Adviser s Competencies Real Estate Developer and Asset Manager, with offices in Amman and Dubai Provides advisory and management services to Saraya Projects Acts as Property Adviser to the Saraya Real Estate MENA Fund To provide high quality, tailored advice in all investment, technical, and operational aspects related to Saraya Projects To manage the investment appraisal and project development process and deliver on investors objectives To maximise shareholder value through the asset management role Management overall project and program management Technical master planning, architecture, technical liaison, working with and managing technical specialists (marine, geotechnical, environmental, etc.) Financial undertaking financial analysis and investment appraisal; working with appointed financial advisers and lead arrangers to raise the necessary equity and/or debt capital Commercial extracting optimum returns and entering JV agreements that enhance operational and financial performance Marketing and PR establishing site branding via an integrated communication plan and a route map for events and announcements; working with agencies and journalists to deliver successful events and PR 51

52 SDG Methodology SDG has established a methodology for evaluating opportunities to invest in real estate developments and to deliver and oversee projects that it chooses to invest in. This is illustrated in the sequence shown below. SDG will mandate specialist companies in the areas of market research, architecture, urban planning, engineering, communications, etc., to work on Saraya Projects as necessary. Strategize Originate Secure Develop Business Opportunity Execute Realize Value Exit Concepts and Strategies Potential Deal Deal (e.g. MOU) Structured Funded Deal Developed Assets and Business Readiness Steady Cash Capital Appreciation 52

53 SDG Methodology Strategize Originate Secure Develop Business Opportunity Execute Realize Value Exit Source Leads To generate an initial list of potential deals, sourcing activities are conducted based on the strategic business plan First Stage Screening To screen the initially identified potential deals, a first stage screening process in conducted where Pro-activity allows for opportunistic leads to be channelled The screening output is an analysis report on which the Go or No Go decisions are based The screening criteria for this stage are: Vision, mission, and core values Strategic business plan Location Attributes Market potential Strategic fit and alignment of potential partners Potential Deal Source Leads First Stage Screening Second Stage Screening Second Stage Screening To analyze the output of the first stage screening, a stage two screening is conducted The screening output is a second stage analysis report on which the Go or No Go decisions are based The screening criteria for this stage are: Strategic fit and alignment of identified partners including: Financial due diligence Legal due diligence Saraya brand attributes Potential returns Ability to repatriate profits Ability to reach MoU quickly 53

54 SDG Methodology Strategize Originate Secure Develop Business Opportunity Execute Realize Value Exit Established Principles The first step is to sign a confidentiality and noncircumvention agreement to govern the relationship between the parties going forward. The established principles include: Identified site Initial development ideas Investment requirements and sources Branding and PR strategy guidelines Seed capital requirements Established MoU roadmap Concept Site To identify a specific site, the site boundaries and possible phasing To develop a high level master plan To define operational strategies and high-level execution timetables Deal (e.g. MOU) Established Principles Concept Site Signed MOU Project Announcement Signed MOU To finalize the signing of an MoU the following must be finalized: Technical and development ideas and principles Operational strategies Investment principles Commercial terms Legal terms Project Announcement An announcement of the agreement and signing of MOU are established once the founders agree the definition of the event. The following are usually incorporated in the event: Visuals Branding Boards showing design intent Speeches, etc. 54

55 SDG Methodology Strategize Originate Secure Develop Business Opportunity Execute Realize Value Exit Market Studies To define the characteristics which affect the project type and economic yield To recommend a proposed use of the site Technical Development To identify key technical opportunities and constraints and integrate them into master plan and program options To identify technical requirements that link with operator requirements and the site operating strategy To develop technical data that can be used for financial appraisal and presentation material that can be used in launching and funding the project Operating Strategies To define a site-wide operating strategy To define terms of operator involvement To obtain/negotiate operator-specific requirements Structured Funded Deal Market Studies Technical Development Operating Strategies Revenue Assessment Cost Assessment Marketing & PR Financial Evaluation Due Diligence & Capital Raising Revenue Assessment To evaluate revenue projections for the various products and services offered by the project. Cost Assessment To evaluate the project s capital and operating costs Marketing & PR To define the brand and brand attributes for the destination To establish a route map for announcing the project To support a successful launch and fund raising exercise Financial Evaluation To evaluate the rate of return, peak funding requirement, optimum capital structure and fund raising stages of the project Due Diligence & Capital Raising To mandate and supervise the process of raising the equity and/or debt capital required for the project 55

56 SDG Methodology Strategize Originate Secure Develop Business Opportunity Execute (Support Work Stream) Realize Value Exit Procurement Strategy The procurement strategy defines the project description and scope, the objectives of the business strategies, the approach, form of contract, and the selection criteria for the selection of suppliers Client Brief A client brief is produced to mainly cover the following: Description of project, its products and services Functional, operational, technical, and special requirements Constraints (physical, financial, time, legal, etc.) Communication protocol Project organization Design Brief The design brief builds upon the client brief and includes design development guidelines which enable the master plan to be developed into concept and schematic designs for the different project areas and spaces Developed Assets & Business Readiness Procurement Strategy Client Brief Design Brief Design Development Construction Closure Soft Running Architecture and Engineering Design To produce: Schematic designs Design development Construction documents Detailed cost estimates (architectural, structural, mechanical, electrical, and civil) Total/unit prices Required cash allowance including amount and contingencies: (Testing allowance, Contingency, Utility connections, etc.) Construction In construction, further design requirements and drawings are captured to enable execute-ability. Commissioning and Handover To complete the construction project 56

57 SDG Methodology Strategize Originate Secure Develop Business Opportunity Execute (Support Work Stream) Realize Value Exit Business Strategy & Partner Strategy To lay the foundation for selecting the remaining strategic (key) partners and the approach tactics and negotiation principles To confirm partner position relating to conflict of interest To establish Memorandum of Understanding/Heads of Terms that would go to partner To compile approach to involving operators and technical advisors as partners in the development strategy Business Planning To produce a Business Plan which covers the market studies, legal and political issues, technical development, customer strategy, development and operational strategy, and financial evaluation Business Structuring To establish structuring principles; Value Chain Analysis and Organization Structure To develop organization blueprint (structure, processes, policies & procedures) To identify resource requirements (manpower planning, IT, etc.) Developed Assets & Business Readiness Business Strategy & Partner Strategy Business Planning Business Structuring Execution (Setup and Recruitment) Training and Dry Running Soft Running Execution To commence the project execution by registering the company, recruiting, setting up the offices, facilities and associated infrastructure, acquiring the furniture, machinery, equipment, vehicles, etc. Training and Dry Running To train the employees To conduct end-to-end business process testing, endto-end system testing (iterative) To identify gaps and produce snagging lists To suggest and validate fixes Soft Running: To final-validate and QA the project once the physical and business work streams are fully conducted 57

58 SDG Methodology Strategize Originate Secure Develop Business Opportunity Execute (Support Work Stream) Realize Value Exit Program Management To manage project vision and brief To manage project strategy To manage project organization To manage master scheduling To manage project delivery within time and budget To manage all produced documents Marketing and PR To further develop the brand and brand attributes for the destination To create a consistent portfolio to safeguard and increase brand equity To establish a route map for announcing the milestones of achievement during the course of the project and build up the hype to support a successful soft opening and official launch Developed Assets & Business Readiness Program Management Marketing and PR Sales Accounting and Finance Sales To commence off-plan sales To manage the sales operation Accounting and Finance Budgeting Procurement Payables Receivables Financial reports and statements 58

59 SDG Methodology Strategize Originate Secure Develop Business Opportunity Execute (Support Work Stream) Realize Value (Asset Management) Exit Site-wide operating strategies Site-wide operating strategy consisting of a set of support business entities which provide services to the site as a whole. Operating Agreement & Operating Entities To ensure obtaining value for money and in place effective and robust agreements. Mobilized Asset Management Set Up To decide organization structure for site To establish procedures for the oversight role To establish financial systems to be used on the site To ensure proper documentation (drawings, operating manuals, warranties, operator agreements, etc.) To establish meetings, plan and service Level Agreements, and mode of conduct between the various legal entities To establish an industrial relations scheme for uniform and consistent terms and conditions across the site Steady Cash Site-wide operating strategy Operating Agreements & Operating Entities Mobilized Asset Management Set Up Asset Management Asset Management To oversee entire operations To manage payables and receivables To plan and undertake marketing activities To manage relationships between entities especially service level agreements To seek further synergies and operating efficiencies To study any expansion or exit scenarios and undertake necessary financial modeling and investment/divestment strategies To monitor performance of operators To agree actions that will improve KPI s 59

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