Kuwait Financial Centre “Markaz” (KSE: Markaz, Reuters: MARKZ.KW, Bloomberg: MARKAZ:KK) reported strong financial performance with revenues of KD 15.12 million during 9M 2018, an increase of 14% on a y-o-y basis. Management fees and commissions increased by 36% y-o-y to KD 6.94 million while Net Profit attributable to shareholders of parent company was KD 4.14 million (EPS 9 Fils per share) for 9M 2018, at a margin of 27%.
Mr. Manaf A. Alhajeri, CEO of Markaz, said in a statement, “At the outset, I am delighted to announce that our Investment Banking Team has recently been named Best Investment Bank in Kuwait 2018 by the Global Finance Magazine. This is a reflection of the quality of our strategic advice, innovative structuring and execution capabilities delivered to our clients during the course of the year.
For the period ended September 2018, Markaz delivered a strong and sustainable financial performance across our asset management, investment banking and principal investments. Asset management fees reached KD 5.15 million up by 19% and investment banking fees increased to KD 1.79 million compared to the same 9 month period in 2017. Our principal investments delivered revenues of KD 8.17 million and returns of 10% on an annualized basis. As part of our conservative approach to asset valuation, Markaz booked a consolidated impairment provision of KD 2.75 million to reflect the current real estate cycle in some of the GCC markets. The AUM at the end of the quarter was up by 4.0% on a y-o-y basis to KD 1.06 billion.
GCC markets ended the third quarter of 2018 with generally a positive performance with Kuwait, UAE and Qatar markets delivering gains of 6.5%, 4.8% and 9.2% respectively. However, the Saudi market, holding the biggest weight in the S&P Pan Arab benchmark, declined by 2.7%. With these market conditions in mind, most of our active equity funds have outperformed their relative benchmark indices for the year to date. Markaz Investment and Development Fund (MIDAF) led local equity funds investing on Boursa Kuwait in terms of performance by posting returns of 19.70% during the first nine months of 2018, and it was followed in second place by Markaz Mumtaz Fund, which posted returns of 11.11% for the same period.
On one hand, Markaz real estate projects in the GCC region enjoy superior quality, cost, and financial discipline standards compared to their peers and the industry’s standards. Markaz was able to maintain a weighted average occupancy level of around 96.0% across its portfolio of income generating properties in Kuwait, UAE and KSA. The recently developed and completed residential projects such as Al Maha in Kuwait and Boardwalk in the UAE have reached occupancy levels of 85% and 100% respectively.
On the other hand, the negative sentiment and economic slowdown across the region which commenced in the second half of 2014 with the drop in oil prices and was later exacerbated by political instability still prevails and continues to adversely impact the real estate market across the GCC region. The market remains weak exerting further downward pressure on rental rates and sale values, which has resulted in the delay of previously expected exit dates. During the course of 2018, both metrics have dropped by approximately 10% in the UAE and KSA while they have remained relatively stable in Kuwait.
Given the prevailing market conditions and high quality of our assets, we plan to continue operating our GCC properties as income generating assets and await the optimal exit opportunity once markets recover. This strategy will provide the optimal returns and ensure that our investors are achieving the maximum value out of their investment. As for our other real estate portfolio optimization plans in the region, we fully exited from our commercial building development in Jordan during the course of Q3 2018, achieving an overall ROI of 29%.
Globally, commercial real estate continued its positive trend in 2018, albeit at a slower pace with property prices increasing by approximately 2% as commercial property price index (CPPI). During the past nine months, we started construction on three new industrial development projects in the U.S. and Europe. We have been very selective in focusing on projects with strong anticipated fundamentals such as attractive supply / demand dynamics, positive rent growth and stable occupancy rates. Markaz has also realized its investments in three development projects within the U.S. consisting of two industrial facilities and one self-storage facility, achieving a weighted average ROI of 27%.
During the period, our Investment Banking division has successfully executed and advised on numerous transactions across corporate advisory, M&A, restructuring and equity capital markets. Two particularly notable transactions include the debt restructuring of The Sultan Center and M&A advisory to ACICO in connection with its sale of a minority position in a subsidiary. On the business development side, we continue to build a strong pipeline of new clients and potential transactions by leveraging our successful investment banking track record.
Recent geopolitical and economic developments across the world have resulted in heightened volatility across capital markets. During this period, Markaz senior management team is staying particularly close to core corporate and investor clients to address and reduce any adverse impact on their investments. We will also continue to actively manage our internal business operations by refining procedures and lowering costs without compromising quality. With over 40 years of client trust built on a successful track record, Markaz is one of the leading wealth management and investment banking financial institutions in the region.”