Closure of complexes, suspension of projects cited reasons
KUWAIT CITY, Sept 6: The real estate companies listed on the Kuwait Stock Exchange are the most affected by the negative consequences of the corona pandemic unlike other companies listed on the bourse, since the real estate companies depend mostly on revenues generated by rent from commercial complexes and real estate projects (commercial and investment) and from trading in real estate, reports Al-Anba daily. According to real estate sources, the first half of 2020 was bad for real estate companies because the government had to take several drastic measures to prevent the spread of the virus in the country like the rest of the world, which led to the closure of commercial complexes and stores and suspension of the real estate projects during the second quarter of the year.
According to the daily the first half of 2020 was very difficult and unprecedented for real estate companies, as most of these recorded losses and the combined net losses for the sector was about 11.8 million dinars, compared to the net profits recorded during the first half of 2019 which was 71.3 million dinars.
The daily said 18 companies recorded losses in the first half of 2020, out of 30 real estate companies listed on the stock exchange, which means 60% of real estate companies in the market recorded losses in the first half. In terms of the financial position of the real estate sector companies, their total assets at the end of 2019 was 5.81 billion dinars, led by buildings and real estate urbanization with assets valued at more than 965 million dinars, respectively, while the total shareholders’ equity was 2.79 billion dinars which decreased during the first half of this year to 184 million dinars as a result of realized and unrealized losses from the valuation of real estate investments.
Most companies enjoyed an acceptable ratio (less than 100%) of the financial leverage (debt-to-equity ratio), as the overall rate of the sector at the end of 2019 which was about 79%. The total debt of the sector reached about 2.2 billion dinars at the end of 2019, without any change from the end of 2018. As for the liquidity of real estate stocks, it is still weak, as the value of transactions on the sector’s shares since the beginning of 2020 amounted to only 249 million dinars, while its market value constituted 6% of the market value of the Kuwaiti stock exchange, which in turn amounted to 30.7 billion dinars.