Lost your password?
Don't have an account? Sign Up

Govt of Kuwait orders Agility to vacate logistics parks

Share This News Story:

KUWAIT CITY : Government of Kuwait has decided not to let the renewal of five contracts for huge warehouse properties of Agility, the second-largest shareholder in logistics giant DSV and new owner of global airport services company Menzies, which will absorb a significant financial hit.

The government intends to rebid the contracts, which a source in Kuwait says will allow the state to maximize revenue on distribution centers that were leased 20 years ago at rates far below today’s market value. The loss of the contracts is noteworthy because they represent Agility’s most lucrative, highest-margin logistics properties, according to the source.

Agility, with roots in logistics real estate, filed suit to remain the incumbent master lease holder for the state-owned logistics parks, but a Kuwait court recently dismissed the case.

“Agility believes that the … contracts of the sites that the Public Authority of Industry requests to be vacated have been renewed, since Agility has sent notification to the PAI with its willingness to renew those contracts as per the terms of the contract,” the publicly traded company said Jan. 3 in a statement on its website. It plans to appeal the court ruling.

Agility is one of the largest private owners of industrial real estate in the Middle East and Africa. It started in 1979 as the state-owned Public Warehousing Co. providing basic storage services and was privatized in 1997. Over the years it acquired many logistics companies — including Geologistics, Transoceanic Shipping, and Global Express Line — and unified its services under the Agility brand in 2004. Agility Logistics became a major global contract logistics provider, managing warehouses and supply chains for multinational corporations. In 2021, Agility sold its global logistics business to Denmark-based DSV, the third-largest logistics service provider in the world by gross revenue, for an 8% share in the company.

Today, Agility’s holdings include companies involved in fuel logistics; customs clearance consulting, inspection and digitization; remote camp site operations for mining and other purposes; property and parking management at Kuwait’s airport; commercial real estate; defense and government logistics support; e-commerce logistics technology; and metal recycling.

The most recent figures show the company had $590 million in net revenue during the first nine months of 2022.

Last summer, Agility acquired Menzies Aviation, a provider of ground, fuel and air cargo services at 250 airports worldwide, for about $928 million. Menzies is now the world’s largest aviation services company after combining with Agility’s National Aviation Services, which grew from its home in Kuwait to serve other airports in the region.

Kuwait’s Public Authority of Industry late last year announced it was not going to renew contracts with Agility to manage nearly 38 million square feet of warehouse space, citing new procurement laws that require expiring contracts to undergo an open bid process for all interested parties to submit proposals. Under the concession agreements, PwC/Agility built and operated the warehouses on public land and then must transfer them back to the government if the contract is not renewed.

Agility has continued to manage some blocks of logistics property after its contracts expired in recent years while Kuwaiti officials considered their strategy and the company’s request for an extension. Changing leadership at the top of the Industry Authority also may have contributed to the delay in taking back the land. The government recently ordered Agility to vacate the property.

Agility warehouse contracts were priced years ago, at rates that are now extremely beneficial to the tenant, when demand was limited, according to the source, who asked not to be named because of the political sensitivity of the situation. The government has been raising rent on new industrial properties offered in recent years because it wants better returns to further its goal of diversifying national income away from oil. Officials are under pressure to follow the new procurement law after public criticism that expensive warehouse rates have contributed to higher consumer costs.

“The government doesn’t want to run anything. They just want a bigger chunk of the pie,” the source said.

The Kuwait government will manage the properties relinquished by Agility until it conducts a bid and transfers them to new lease holders, according to notices published in local newspapers. Agility subtenants have been instructed to simply switch payments to the government while it temporarily serves as their landlord. They are not expected to experience any impact from the transfer of control.

Agility is eligible to participate in the bidding process for the logistics parks it previously managed.

Share This News Story: