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MALL LANDLORD ADDS UP COST IN WAKE OF LEBANON WAR

By Curt Hazlett

Crises are common enough when you manage a mall, but Beirut resident Rony Aoun, ASM, has seen enough of them to last a lifetime.

As City Mall, which Aoun manages, was nearing completion last year in northeast Beirut, Lebanon was thrown into turmoil by a car bomb that killed former Prime Minister Rafik Hariri. That was in February, and Aoun spent the next month struggling to keep tenants focused on the scheduled March opening. “It would have been very easy for them to drop out,” he said, “but we managed to keep them all on track.”

The assassination was followed by other killings, and the growing political upheaval caused one of the mall’s major anchors to repeatedly push back its opening because of worries about the business climate.

But those problems paled against the crisis that began in July of this year. That is when long-simmering hostilities between Israel and the Lebanese-based Hezbollah erupted into open war. In response for Hezbollah’s abduction of two soldiers in northern Israel, Israeli forces invaded southern Lebanon and conducted what eventually amounted to over 7,000 air strikes on targets in the south and in Beirut. Hezbollah responded with an estimated 4,000 rockets, many of which struck Haifa, Nazareth and other northern Israeli cities. By the time a cease-fire was declared a month later, some 1,200 people were killed in Lebanon and nearly 200 in Israel.

For civilians on both sides of the border, it was a time of chaos and fear. For Aoun it was that and something else: an exercise in crisis management. It was also the biggest setback so far for Beirut’s recovery from the bloody, 15-year civil war that ended in 1989.

City Mall is the newer of Lebanon’s two North American-style malls. The other, ABC Mall, opened in Beirut in 2003. At 2.1 million square feet, City Mall is by far the largest shopping center in the country. It is anchored by a Géant hypermarket (owned by France’s Groupe Casino) and a soon-to-open BHV (owned by France’s Galeries Lafayette). Both anchors are franchised in Lebanon by Admic, the developer of City Mall.

The war caused no physical damage to either mall, both of which are located in northern sections of Beirut. Though a preliminary analysis by the European Union found that 333 buildings in Beirut had been damaged or destroyed, nearly all were in southern neighborhoods or at the airport, also in the south. The vast majority of damage in Lebanon as a whole was in the southern region of the country. Lebanon’s infrastructure was hit especially hard, with the destruction of roads, bridges and power stations.

But even without battle damage, the mall business was badly affected when the war began, Aoun says.

“We are in the northern end of Beirut,” said Aoun. “The southern end was heavily bombarded, so we are not far away from it. We could see and smell the smoke and feel the impact of the bombs that were hitting. As you can imagine, a lot of people fled Beirut and the area we’re in and went to the mountains or to safer areas. So we were left with an empty building, with no people coming in — not even traffic on the roads.”

With no customers, the mall closed for two days. When it reopened, operating hours were shortened to reflect the pattern of the air strikes. “The bombing normally closed down in the morning and became heavier in the late afternoon, then carried on all night,” Aoun said. “So you couldn’t get people into the malls in the late afternoon or when it got dark.”

Even so, City Mall was more fortunate than the traditional street shops, especially those in south Beirut. Most of them were closed entirely throughout the war. Electricity distribution was interrupted, so City Mall operated with generator power. The shortened hours proved to be an advantage on that front, because less diesel fuel was needed as a result, Aoun says.

When the fighting ended, Aoun moved quickly to draw customers back. “We managed after a huge business loss to restart the mall by doing a big shopping-fair promotion, which brought a huge number of shoppers back in,” he said.

Slowly, the normal patterns are returning. “We have a cease-fire now, and there is no more bombing,” said Aoun. “And we have international forces coming in a little each day. Being Lebanese people, we are used to these kinds of wars. People tend to forget that. So life is coming back little by little to normal.”

Aoun’s next goal is to finally open the BHV store. Given the turbulence of the past year, “we never had a healthy period, and we could not launch such a huge mall all at once,” he said. “Now we have almost everything open except the BHV anchor store and a children’s entertainment area. We’re aiming to open the BHV in December because Christmas is a big season here in Lebanon.”

Aoun is an American citizen, trained as a civil engineer at Boston’s Northeastern University. He entered the shopping center industry five years ago and moved to Beirut almost three years ago when Admic hired him to set up the management team and get City Mall running. “And I’m still here running it,” he said. He recently earned his ASM (Accredited Shopping Center Manager) designation.

Of course, the war brought suffering and disruption to Israel too. In the northern Israeli town of Kiryat Shemona, nearly 1,000 missiles damaged some 1,600 homes, officials say. With shopping centers, factories and ports closed or disrupted, the economies of both countries suffered enormously. Israel estimates the cost of the war, including defense spending, battle damage and disrupted economic activity, at $5.3 billion, while the Lebanese government calculates its losses at $6 billion.

But the cease-fire appears to be holding, and Aoun is allowing himself to feel a little optimism that Beirut’s recovery will continue and that business will flourish once again. “We cannot afford to feel otherwise,” he said. “We have to stay focused. We have a huge investment at stake, over $120 million. We have to keep on plugging and keep it running. We only show a happy face to all our tenants and suppliers.

“But I will not hide from you that we’re really scared. In terms of our investment and our families, we don’t know what’s next. The country is definitely not stable. But we have to keep on going.”