Dubai Property Developer in Talks to Settle 386m Debt Via Measures Including Assets Swaps
Union Properties to Cut “The Biggest Expense at the Company”
Dubai property developer Union Properties PJSC is in talks with banks, including Abu Dhabi Commercial Bank PJSC and Emirates NBD PJSC, to settle debt totaling Dhs2.2 billion (386 million) through measures which will include asset swaps, in an effort to reduce the company’s biggest expense – its cost of borrowing.
As reported by Bloomberg on 18 February, citing an interview with Union Properties’ chairman Khalid bin Kalban, the real estate company is considering a range of options, including the sale of real estate assets to the cited banks orto interested investors. Kalban was quoted as saying that”[w]e are trying to reduce the company’s costs.” He added that borrowing is “the biggest expense at the company”, accounting for around Dhs150 million (26 million) in interest charges last year.
The chairman further revealed that Union Properties plans to reduce its liabilities to Dhs400 million (70 million). The value of the developer’s assets will be about Dhs5 billion (877 million) after the debt reduction plan is completed.
Picture Looking Brighter with Future Developments in Sight
Since the collapse of the Dubai property market in 2008, leaving the emirate with a mountain of debt, real estate developers have struggled to credit drying up and customers defaulting on purchase obligations, Union Properties had to halt some projects in 2009 with, in particular, suspension of work on F1-X, a Formula One theme park in the Motor City development at the Dubai Auto drome race track. Union Properties posted annual net losses in the three years following the Dubai property market crash but, according to Kalban, the developer turned around with a Dhs170 million (29.8 million) profit last year, highlighting the improving real estate market conditions in the emirate.
With recovery in the Dubai property market gathering pace and after its profit results improvement, Union Properties is now planning future real estate developments. The company is set to spend about Dhs60 million (10.5 million) in expanding there tail space in its Uptown Mirdif shopping center development in Dubai by adding 200,000 square feet to the existing floor-plan. And according to chairman Kalban, Union Properties is also considering building new residential property units at its Green Community development, located within the Dubai Investments Park.