Markaz Real Estate Fund Up a Record 10% in H1 2008


One of the highest performing funds in its class; Dasman property appreciates 250% Kuwait Financial Centre “Markaz”, one of the Middle East’s leading investment banking and asset management companies, announced that “Markaz Real Estate Fund”, an income generating and Shari'ah Compliant Fund which invests in real estate properties within the state of Kuwait, has achieved KD3.1 million net profit translating to 10% returns since the beginning of the year, making it one of the highest performing funds in its class. Bassam Al-Othman, Senior Vice President – Real Estate, said "Markaz Real Estate Fund (“MREF”) achieved this performance by vacating and demolishing the Dasman building, which enabled us to unleash the full value of the land. This effort took about a year and a half and led to the doubling of the property’s value. Existing properties were also renovated thus adding substantial value while incurring negligible costs. Additionally, Markaz in-house research and constant monitoring of the real estate market’s supply and demand were used as a basis for investment decisions, so we stayed clear of the housing sector and hence avoided losses suffered by other companies.” Mr. Al-Othman added “Dasman property’s value has appreciated 250% since the vacating and demolishing in November 2006. It is currently evaluated at KD 8.6 Million* (compared to the cost of KD 3.4 million in 2006). The land area is 2,872 m2 and faces three streets opposite Al-Seif Palace. It is a mere two blocks away from the Arabian Gulf Road and Sea. Its current permit is “Istithmari” or Investment Property with a maximum floor area ratio of 400%.” Mr. Al-Othman added “Markaz investment in MREF totals KD2.6 million. Different options are being explored including splitting the property in order to sell some of the land and realizing a profit, reinvesting the realized profit into income generating properties or retaining part of the land for the future.” Mr. Al-Othman concluded “Moving forward, our strategy and operational approach will be as follows: Focusing on "Istithmari" or Investment and Industrial real estate segments; Looking for special opportunities in the commercial segment outside the city-center; Developing "istithmari" buildings in the inner-city areas; and trading land in areas with a potentially accelerating demand in the coming few years. The fund is gaining increased interest from both local and international institutional investors including pension funds.” The fund has been recently extended for a second five-year term and adopted a new strategy which consists of more active investment management to generate higher returns; Increased allocation to trading and opportunistic activities to generate higher returns; Increased diversification of asset classes including retail, office & industrial properties; and Increased allocation to outer city areas. MREF was established in 2002 and its net assets of KD38.4 million are invested across a diverse real estate portfolio consisting of 16 properties and 373 units. It currently enjoys a 97.5% occupancy rate and a 98.9% collection rate. The Fund has generated 86.5% absolute returns since inception or 13.8% per annum since inception (CAGR). It distributes stable monthly cash returns of 7% (per annum). Additionally, the fund is listed in the Kuwait Stock Exchange for added liquidity (Ticker: MAREF). Subscription and redemption are monthly/bi-annually, respectively, and the minimum investment is 1000 units. The Net Asset Value (NAV) as of June 30, 2008 is KD1.512. Markaz currently manages five real estate funds with over USD 640 million in assets, encompassing warehouses, office buildings, retail centers and apartment buildings. Its real estate track record goes back to 1978, with the launching of its first syndicated transaction in the US. Since 1988, Markaz has been conducting real estate transactions in the US through Mar-Gulf, the US real estate arm and wholly owned subsidiary of Markaz. In 1998, Markaz Local & MENA Real estate department was established. Kuwait Financial Centre S.A.K. 'Markaz', with total assets under management of over KD1.4 billion (USD 5.32 billion) as of June 30, 2008, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997; and was recently awarded a BBB+ corporate rating by Capital Intelligence Ltd. -Ends- Photo Caption: Bassam Al-Othman, Senior Vice President – Real Estate of Kuwait Financial Centre “Markaz”