Dubai real estate developer Union Properties is in the final stages of a deal to sell its entire stake in district cooling company Emicool, as it looks to generate additional revenues and expand into new markets.
The company has received several offers for its shareholding in Emicool from UAE firms, it said in a statement on Wednesday to the Dubai Financial Market, where its shares are traded. Union Properties is finalising the necessary legal formalities, and will be announcing the buyer in the coming days, it said without identifying the potential buyer or the financial details of the deal.
Emicool, which provides chilled water for residential, commercial and industrial air conditioning systems around Dubai is a joint venture with Dubai Investments. Union Properties' share of net assets in the company was valued at Dh355 million, according to the annual report.
"The sale of Union Properties' stake in Emicool is another important milestone for us, and will contribute to our new strategy to enhance our investments, diversify our revenue streams, expand our business, and venture into new markets," Ahmed Khouri, the group chief executive of Union Properties said. "At a time when Union Properties is undergoing a new phase of growth, this move further strengthens our focus on core operations, and tapping into new sectors."
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Union Properties, which restructured its board in May, has struggled to maintain profitability amid sliding real estate prices in the UAE. It is looking to diversify income streams, expand its footprint outside its home market and enter new business lines.
The developer, in the second quarter of 2017, posted its biggest-ever quarterly loss of Dh2.3 billion after a Dh2.8bn write-down of asset value by its new management team. It also reported a Dh45m loss in the third quarter of last year.
The company in December said it will sell shares in its facilities management unit through an initial public offering in the second half of 2018. Union Properties will float 100 per cent of ServeU by listing the unit on the Dubai index and will use the proceeds from the sale to boost its investment portfolio and operations, it said at the time.
The developer is launching new projects to expand its portfolio of properties, with a focus on assets that could generate recurring revenues. The company has set up Union Malls to provide retail and leisure options at its developments and launched its inaugural mall in Motor City in 2017. It also established Al Etihad Hotel Management, a wholly-owned unit to develop and manage luxury hotels and furnished residences in Dubai, and also launched an investment arm, UPP Capital Investment, that will focus on direct and indirect property investments.
The company, which already has three hotels under development in its flagship master development Motor City, plans to extend hospitality and facilities management services for around 3,000 serviced apartments and 3,500 hotel rooms and later expand the scope of business to other developments in Dubai.
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
