Live in a themepark? Dubai developer’s Dh1.5bn plan to get back in the big time

Union Properties is set to return to large-scale property development in Dubai with projects worth Dh1.5 billion planned for the next three years.

The company behind developments such as Motor City and the Green Community was hit hard by the 2008 property crash. Now it is back with plans for at least six new projects that include a mall and a theme park.

The first phases of a new retail development called The Ribbon and the expansion of the Green Community will start immediately.

Other projects include a new theme park project that will also include residential units, an expansion of the Uptown Mirdif retail district, and a new retail development called The Link.

Union Properties was in talks with several parties for the funding of the projects, and did not need to tap the capital markets to raise funds, said Khalid bin Kalban, the Union chairman.

The company, which has spent the past five years tackling a massive debt burden, would use Dh150 million of its own cash for the projects, he said.

Mr bin Kalban said Union was already in discussions for the sale of two of the projects to ­local banks.

“We may resolve to sell these projects before we begin construction,” he said, declining to name the banks.

The value of the two projects under discussion was between Dh700m and Dh800m, he said.

Union was also in further discussions with European contractors, backed by local export agencies, who would provide some funding for some of the residential projects, he said.

The new projects mark a return to prominence for one of Dubai’s most prominent property developers, that was brought to its knees by the collapse in the emirate’s real estate market in 2008.

The company, which suffered losses of Dh1.56bn in 2011, was forced to sell many of its prestigious assets, including the Ritz- Carlton Hotel and substantial stakes in Limestone House and Index Tower.

However, Union shares have rebounded since the start of the year, bolstered by a buoyant property market in Dubai, the restructuring of key debt agreements with Emirates NBD last year, and the successful renegotiation of debt with Abu Dhabi Commercial Bank (ADCB) in April this year. Profits recovered to Dh175.8m for last year.

For the first six months of this year, the developer reported profits of Dh130.2m, up from Dh106m for the same period last year. Profits for the first nine months of this year were forecast to reach Dh250m to Dh260m, said Mr bin Kalban.

Emirates NBD remains the largest Union shareholder, but it has reduced its stake from about 48 per cent to 15 per cent.

Since the bank’s sale of its shares, a second local shareholder has accumulated a stake of 6 per cent to 6.5 per cent in the company, according to Mr bin Kalban, who declined to elaborate.

The developer also announced plans yesterday to allow increased ownership of its shares by non-UAE investors; it is seeking to benefit from an increased interest in UAE shares following the country’s upgrade to emerging-market status in June.

“The board has requested that management look at increasing the position for non-UAE shareholders,” said Mr bin Kalban.

Non-UAE ownership of Union shares is currently capped at 15 per cent.

No decision had been made on the new level of participation for foreign shareholders, said Mr bin Kalban.

Union would study the issue and report back to the board by the end of the year, he said.

The move is in response to foreign investors’ increased interest in equities in the UAE and Qatar following the MSCI Index’s decision to upgrade both markets from frontier to emerging-market status in June.

Union’s announcement follows Mashreq‘s decision last week to increase the proportion of its shares that can be owned by foreigners from 1.9 per cent to 20 per cent.

Yesterday, Union shares closed down 2.22 per cent to 88 fils, up from 40 fils at the start of the year.

jeverington@thenational.ae