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One of Union Properties' key assets - Motor city. Image Credit: Gulf News Archive

Dubai: Union Properties will hold a Board of Directors’ meeting later today, with any decision taken having an outsized influence on the developer’s future.

In particular, investors and  other entities with exposures in Union Properties will be particularly interested to know what the plans are for Dubai Autodrome. In a filing with Dubai Financial Market last week, UP said one of the topics on the agenda at the board meeting will be a “study regarding the development of Dubai Autodrome”.

Informed sources, however, said UP will need to fast-track any decision on this and other assets it holds if it wants to improve its dire financial position. As of the third quarter of 2019, UP had accumulated losses of just over Dh2 billion after it lowered the value of land it held by Dh1.2 billion. (There was a further loss of Dh690 million after it revealed that a parcel of land was “undevelopable”.)

It’s not known when UP will be announcing its full-year 2019 numbers, but if accumulated losses are more than 50 per cent of the share capital, then it would trigger certain regulatory requirements, including calling an extra-ordinary general meeting of shareholders.

“As per the law, the SCA (Securities and Commodities Authority) can suspend the listing of a company if the net value of shareholders’ equity falls below 50 per cent of issuers’ capital,” said Sameer Lakhani, Managing Director at Global Capital Partners. “Or if it falls below 60 per cent of the nominal value of securities.

“In this event, the company may raise capital by issuing rights shares – of course, subject to SCA approval – be bought over by another company, and/or engage in asset disposals to raise the net asset value of the company.”

Much rides on Autodrome

Which is why in the short-term at least, any progress at the Dubai Autodrome is crucial on the company’s near-term numbers. There had been some intense speculation that the Autodrome could be sold in full or partially. Even the adjacent Automall has been mentioned in this regard.

Market talk at the time also said some developers were interested in the asset, but nothing came of it.

Investors will be expecting the UP Board to come up with some guidelines on what it plans to do to script a turnaround.

On DFM, the share had been getting a pummelling for a while – it dropped 4.29 per cent on Sunday to 22 fils on trading volumes of 31 million plus. The share is down 44 per cent over the last 12 months.

This is what one disgruntled investor had to say – “The share will never see the Dh1.17 number from way back in 2017. Shareholders want to know how the management is going to fix the company.

“They have had two-three years to provide corrective steps.”

At the Board level, UP has seen the departure of Hamad Abdullah Al Mas, who resigned as vice-chairman. There had been a series of high-profile entries and exits in the recent past.

A makeover for subsidiaries

Monday’s Board meeting will also take up the proposal to “convert certain subsidiaries into private joint stock companies”. This could be a prelude to selling stakes if the conversions happen.