Dubai
Dubai-based Union Properties’ (UP) shares tumbled close to nine per cent on Tuesday after its new management team has taken the decision to book provisions totalling Dh2.8 billion, which has subsequently been approved by the company’s board of directors and communicated to the regulator and its shareholders.
The provisions have resulted in a net loss of Dh2.3 billion for the three months to June 30, 2017.
Following the appointment of UP’s new board and senior management in May, an in-depth investigation of accounting practices within the company dating back to 2013 was initiated.
As part of this process an external forensic investigation was commissioned in August. The investigation examined the validity of the Dh503 million fair value gain applied to the unbuilt gross floor area (Unbuilt Gross Floor Area) on a plot of land in Motor City, where UP was the master developer. The gain was recognised in the audited financial statements for the year ended December 31, 2015.
“The actions we have taken this quarter are in line with protecting the intrinsic value of the UP brand and its proud heritage and take a one-time charge for the accounting irregularity by the previous management,” Nasser Butti Omair Bin Yousef, Chairman of Union Properties, who took over only in May 2017 after a board reshuffle.
Following the latest six-monthly assessment by Valustrat Consulting FZCO, an independent registered valuer, the average price per square foot of UP’s land bank has been reduced, resulting in a fair valuation loss and leading the company to take provisions totaling Dh1.2 billion.
Using industry accepted valuation techniques and adopting the IFRS basis of fair value, the independent valuer has determined Dh3,608 million as the fair value of the company’s investment properties as at June 30, this year.
Accordingly, based on the above valuation, a fair value loss of Dh2,070 million has been recognised in the condensed consolidated interim statement of profit or loss.
