I am pleased to report to our shareholders that although 2008 was a challenging year across the globe, Mabanee overcame many of the challenges and enjoyed a positive year. We have been able to successfully pursue our strategy, and the Company today has the necessary foundation to continue its growth.
Financially, the Company weathered the turmoil in equity markets and remained profitable. Revenues grew by 32% from KD33.2 million in 2007 to KD43.9 million in 2008. This was due to an increase in our investment property assets from KD100 million in 2007 to KD145 million in 2008 following the opening of Phase II of the Avenues. The increase in rental revenue compensated for the drop in investment income this year. To better prepare the company for 2009, the Board of Directors adopted a conservative approach and decided to take a KD21 million provision on the unrealized losses from our equity investments. This is a protective measure and Mabanee’s equity investments remain in stable and solid companies. Our expectation is that these equity investments will recover once market conditions improve. Going forward, the Board of Directors has decided to dispose of the investment portfolio to focus on real estate development, our core business.
The opening of Phase II of the Avenues adds to the success of our flagship mall and reinforces Mabanee’s position as the leading real estate developer in Kuwait. Phase II brings a new target segment to the mall with a focus on mid to high-end customers and a unique tenant offering that is new to Kuwait and the region. Gourmet food, mid range fashion and kids entertainment (Magic Planet) are all part of that exciting customer proposition.
Plans for Phase III are moving ahead. We have finalized the masterplan for Phase III with Gensler, the #1 architectural firm in the world. The construction of Phase III will be staged in light of current market conditions and awaiting regulatory approval for the various elements. Phase III will be a lifestyle offering in addition to a mall that is unique not only in the region but also globally.
I expect Mabanee to continue to weather the storm in 2009. We continue to strengthen the management team, which will help us grow the company and turn Mabanee into more than a local leader. Our growth plans will proceed, albeit with caution, and we expect the year ahead to bring about attractive opportunities that we can benefit from in the medium to long term.
Objectives and strategy
Overview
Mabanee’s primary objective is to create sustainable long-term value for shareholders from development in Kuwait and across the region.
Our strategy aims to create value by developing quality real estate in attractive locations. The key elements of the strategy are:
• Develop mixed use real estate that includes retail, office, residential and hospitality components in regional markets
• Own the majority of the retail and office properties as investment properties (land and buildings) to ensure a steady cashflow for the company
• Explore opportunities across the value chain
• In the medium term, the Company will be cautious in its growth and look for attractive opportunities in the region
The execution of our strategy focuses on:
• Securing greenfield land at strategic locations by partnering with leading entities across the Middle East
• Developing high-quality assets with long-term leases and attractive demand/supply profiles
• Leveraging our strategic relationships with major retailers to create value in our retail developments. This is expected to create value in the surrounding land, which we will capitalize on
• Attracting a high caliber, experienced and well-rounded team with an entrepreneurial spirit
Growth story
Going forward, the company is looking to expand its presence in Kuwait and in other markets. In Kuwait, we are proceeding with Phase III of the Avenues. We will, of course, stage this expansion in light of the market dynamics. The Avenues model has proven to be a success and Mabanee is looking to replicate this success in other markets. Our strategic relationships allow us to build on this success not only in commercial development but also in residential, office and hospitality offerings.
Mohammed Abdul Aziz Al-Shaya
Chairman & Managing Director