Union Properties third quarter net loss widens as costs rise

Union Properties reported a third-quarter net loss as direct costs, finance charges and administrative expenses ballooned for the Dubai developer as it restructures its business.

The net loss attributed to the shareholders of the company widened to Dh61.8m for the three months to the end of September from a Dh44.1m drop recorded for the same period a year earlier, the company said in a statement to the Dubai Financial Market, where its shares are traded.

Direct costs rose to Dh123.12m at the end of the third quarter from Dh98.8m. Expenses climbed to Dh50.6m from Dh48.2m, while finance charges came in at Dh33.7m, up from Dh14.3m for the same period in 2017, it added.

Union Properties, which restructured its board in May last year, has struggled to maintain profitability in the wake of a softening real estate market in the UAE. The company is responsible for Index Tower, UP Tower and Motor City developments, among others in Dubai. It is also looking to diversify income streams, expand footprint outside home market and enter new business lines to boost revenues.

In the second quarter of 2017, the company posted its biggest-ever quarterly loss of Dh2.3 billion after a Dh2.8bn write-down of asset value by its management team that took over last year.

The company, however, swung to profit in the first nine months of the year. Net income for the period climbed to Dh145.6m from a Dh2.3bn loss at the end of September 2017, it said in a separate statement to the bourse.

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The profit was achieved by increasing “recurring revenues and profit from financial investments”, it said.

The nine-month total income rose by 18 per cent to Dh617m, while the property management and sales revenues surged 46 per cent to Dh112.3m.

The company plans to sell shares in its facilities management unit through an initial public offering in the second half of this year. Union Properties will float 100 per cent of ServeU, a subsidiary for facilities management, by listing the unit on the DFM and will use the proceeds from the sale to boost its investment portfolio and operations, it said in December.

Union Properties' shareholders approved the board’s plan to shore up finances through the issuance of up to Dh1bn in sukuk and increase the company’s foreign ownership limit, as it continues to re-organise business amid tough market conditions.

The developer in May said it will privately place the Islamic bond to one or more qualified investors.