Kuwait's Markaz raises real estate exposure

Bassam Al-Othman, senior vice president Kuwait Financial Centra, (S.A.K.), speaks at the Reuters Middle East Investment Summit in Riyadh October 27, 2009.

RIYADH (Reuters) - Kuwait Financial Center (Markaz) (MARKZ.KW) is raising its exposure to real estate, focusing mainly on Syria, Saudi Arabia and Egypt, after the global market turmoil slashed the value of its assets by more than a third.

Markaz also fancies investing in residential units in Abu Dhabi, while a "scary amount of supply coming into the market" makes Dubai uncertain investment territory, said Bassam Al-Othman, the firm's senior vice president.

Othman, who was speaking at the Reuters Middle East Investment Summit in Riyadh, said Markaz's real estate portfolio made up of property in the Middle East and the United States is worth $800 million, out of $3.5 billion in total assets.

"Our assets were worth $5 billion before the crisis," he said.

"We are shifting some of our investment in public equity to more private equity and real estate," he added.

Othman declined to say by how much Markaz plans to increase its allocation to real estate, but said that access to financing was a major blurring factor.

"It's not easy to raise capital today ... The dust has settled a little bit but it's not totally clear yet".

The firm will rely more on private placement and institutional investors and could seek a mezzanine loan to help raise cash, Othman said.

Markaz has yet to close the 500 million riyals ($133.3 million) capital raising for its Saudi joint-venture, although the Kuwaiti firm has already bought 500,000 square meters of land in the Saudi Eastern province.

"We were placing this company before the crisis and then stopped and now it is back on track," Othman said.

He cited the implementation of a long-awaited mortgage law as one of the catalysts that can encourage lending to flow into the Saudi real estate sector.

"And no more surprises like Saad and Algosaibi," he said.

Regulators and bankers are grappling with up to $22 billion in debt restructurings at Ahmad Hamad Algosaibi and Bros Co, and Saad Group, viewed by some experts as the biggest financial blow to that region since the global credit crisis began.

Markaz hopes to invest up to 300 million riyals in Saudi Arabia once it completes with its other Saudi partners -- which include the local Alfanar Co -- raising the joint venture's capital.

Markaz also plans next year to start developing a $40 million office tower in the Syrian capital Damascus, and hopes to invest in residential or hotel units in Aleppo.

"In Syria we are bullish more and more: The economy is opening up," he said.

Egypt is -- for the moment -- the only investment focus in North Africa. "We are not looking at luxurious residential units, we think this segment is oversupplied. Our focus will be more on office buildings, logistics and some retail in cities other than Cairo".

Markaz "also likes Abu Dhabi, because there is a mismatch between supply and demand. It will be a good thing to invest there now," he said.

The firm hopes to deploy between $20 million and $30 million in a residential project in the emirate, Othman said.

"In Abu Dhabi, you don't have that scary amount of supply coming into Dubai".

($1=3.750 Saudi riyals)

(Reporting by Riyadh newsroom; Writing by Souhail Karam, Editing by Rupert Winchester)