Stock Union Properties Dubai
Union Properties' is certain that any upcoming turnaround will immediately improve its prospects, and whittle down accumulated losses. Image Credit: Ahmed Ramzan/Gulf News

Dubai: Dubai master-developer Union Properties’ accumulated losses as of end 2020 were Dh1.96 billion – which is 45.7 per cent of the company’s share capital.

It will be a percentage that Union Properties need to be a close watch on. If accumulated losses reach 50 per cent of paid up capital, shareholders will have to decide the future course of action and whether the company should continue as a going concern or not.

But the management at Union Properties is confident enough, and that a general upturn in the real estate sector is all that’s needed to turn things around.

“These accumulated losses are predominantly due to variations in valuations of its real estate portfolio,” the developer said. “These accumulated losses could potentially be recouped in the event of an increase in the prices of land in Dubai.”

The developer reported net profits of Dh200.1 million for 2020, a smart turn from the Dh224.3 million loss a year before.

Plan of action

Union Properties, which has the Motor City project in its ongoing project portfolio, is working on a three-year plan that would:

• Restructure outstanding debt (last year, it did sign one with Emirates NBD for an exposure of nearly Dh1 billion); 

• Recovering outstanding receivables (notably through court and arbitration - last year it filed claims for Dh1.5 billion);

• Continued reduction of operating costs;

• Development of its “extensive” land bank;

• Development of assets with recurring cashflow; and 

• Focus on operating subsidiaries with a potential listing for certain entities. And focus on cash generating activities. 

Where Union Properties' losses come from
• The developer sustained a 'fair value loss' of Dh2.07 billion related to investment properties recorded in 2017 (through correction of gross floor area and decline in fair value of real estate portfolio);

• General decline of the real estate sector in the UAE;

• Impairment of Dh503 million recorded in 2017; and

• Material adverse impact of the COVID-19 pandemic on the overall UAE economy and consequently on the activities of the Group.