Union Properties net loss widens

Dubai: Real estate developer Union Properties posted a full year net loss of Dh1.57 billion in 2011, up from the Dh1.53 billion loss it reported a year earlier.

"Total assets reduced to Dh9.1 billion while shareholders' equity decreased to Dh2.4 billion.

The company made an operating profit of Dh196 million and net loss after provision for loss on valuation of properties of Dh1.6 billion," Union Properties said in a statement posted on the Dubai Financial Market website.

The developer, however, reported an increase in revenues from Dh2.9 million in 2010 to Dh4.9 million in 2011.

Incomplete projects

"It is surprising the revenue has gone up but their profits show they have made a loss. This may be because they have put more money into incomplete projects and they must have allocated some of their finances through their Emirates NBD loan. The extra loss is the price they have to pay to get those projects completed," Craig Plumb, head of research at Jones Lang LaSalle (JLL), a property consultancy, said.

Union Properties recently announced that it had secured a loan of Dh400 million from Emirates NBD to complete two stalled hotel projects in its MotorCity development.

"We will start repaying in two years. The loan will help us complete the two hotels and also spend as we need to," Khalid Bin Kalban, chairman of Union Properties, told Bloomberg.

The developer will soon tender a contract to finish the Renaissance Hotel and the Courtyard by Marriott in MotorCity.

Dubai MotorCity was among the many projects stalled during the property slump which saw prices drop more than 65 per cent in 2009. The development, which is 70 per cent complete, comprises Uptown MotorCity, Green Community MotorCity, Dubai Autodrome and Business Park MotorCity.

Union Properties finalised the sale of the Ritz-Carlton Hotel at Dubai International Financial Centre in November 2010. The developer recently completed a commercial building — Index Tower — at a time when commercial rents are expected to decrease due to upcoming supply.

Commercial rents

According to JLL's Q4 [fourth quarter] 2011 Market Overview, average asking rents for prime office buildings have remained stable over the past year. However, with a vacancy rate that now stands at around 30 per cent, office rentals are likely to face downward pressure as further supply enters the market in a period where many tenants are optimising or rationalising their space requirements.