Dubai: Union Properties - the Dubai developer which recorded a near Dh1 billion loss for 2021 – will soon present a ‘recovery plan’ the UAE Securities and Commodities Authority.
This plan will address a way out for the developer, which built the Motor City and other prime residential communities in Dubai, to emerge from the accumulated losses that now stand at Dh2.92 billion.
In addition, Union Properties will come up with a business plan that focusses on closing out existing projects and “refocussing the company on its core business activities in order to win new projects”.
Simultaneously, UP will pursue efforts to acquire “more projects in UAE”.
The new team at UP will also restructure operations to be a 'leaner' organisation and try and recover "misappropriated funds through legal procedures".
Amer Khansaheb, Managing Director of Union Properties, said in a statement: “2021 has been a difficult year for Union Properties as we uncovered widespread fraud and misconduct by the company’s former management involving forgery, misappropriation of funds and various other financial violations which has negatively impact the company’s financial health and been a severe breach of shareholder confidence.
"Our focus as the new Board is on addressing these challenges head on and rebuilding shareholder trust. We have commenced the implementation of an emergency business restructuring program to restore shareholder value and negotiations are ongoing with our two major creditors banks to restructure the loan facilities.
"Good progress has been made with one of the local Islamic banks and we remain in constructive discussions with other major creditor bank. We will also continue to review our entire portfolio to assess which assets are core and where we could generate further value and liquidity through the disposals of non-core assets”
A 'thorough' forensic financial and accounting review was conducted by a third-party.
The preliminary findings include violation of accounting standards and manipulation of records as well as misappropriation of funds and properties along with other violations, which took place over several years.
Will the plan work?
2021 had seen listed property developers in Dubai and Abu Dhabi netting major profit gains. Or when they did not, the developers managed to bring down their losses substantially.
Union Properties had recorded a profit for 2020, but it will be the magnitude of the 2021 losses that will sting. The company says that the high losses stem from providing adequate provisioning.
This is how UP assigns for the Dh2.92 billion in accumulated losses:
• Fair value loss of Dh2.07 billion related to investment properties recorded in 2017;
• Fair value loss of Dh1.10 billion related to investment properties in 2021;
• Loss on disposal of an associate of Dh250 million recorded in 2020;
• Losses and impairments from financial instruments, totalling Dh337 million;
• Disposal of assets to related parties, which recorded a loss of Dh62 million in 2020 and Dh45.5 million in 2021.
• Provisions amounting to Dh90.5 million against advances to contractors in 2021.
A little help from banks
For any recovery to click, UP’s banks and lenders will need to chip in. Recently, Emirates NBD had restructured its payment tenor on a near Dh1 billion exposure.
The way forward for UP is quite straight-forward, according to market watchers. “Union Properties should start restructuring its debt, recover outstanding receivables, and cut operating costs. That’s in addition to developing an extensive landbank and improving assets with recurring cashflow,” said Mohamed Shaheen, CEO of Seven Capitals. “The company should focus on its operating subsidiaries through a potential listing of certain ones and other cash-generating activities.”