Return to basics may help restore prosperity

Chairman plans to restore the focus for Union Properties

Back to basics may be a formula for success for Union Properties, the Dubai developer whose chairman acknowledged this week that the company became "distracted" by other opportunities during the property boom. Union also said it was close to selling the Ritz-Carlton in the Dubai International Financial Centre (DIFC), a divestment that could go a long way towards helping Union complete stalled projects.

Union climbed 4.3 per cent to 38 fils yesterday on the Dubai Financial Market General Index, leading the property sector. In the past two years, the company's market value has fallen from more than Dh15 billion to barely more than Dh1bn. Yesterday, Bloomberg quoted Khalid bin Kalban, the chairman, as saying the company "got involved in so many businesses that were not core ? I don't understand the rationale".

Mr bin Kalban, who took over as chairman in December, is aiming to restore the company's focus. He has got his work cut out for him, however, as Dubai's third-largest developer has about Dh1bn of debt coming due this year alone. Mr bin Kalban said he expected to raise about half that amount via property sales, although those are no sure thing in this market. The sale of the Ritz-Carlton, while expected, would ease investor concerns about Union's cash flow. Mr bin Kalban said he was talking with seven potential buyers.

"The market knows suitors have approached Union Properties for some time,"said Saud Masud, a property analyst with UBS. "Now we just know they're getting closer. Hopefully this will provide more visibility for investors, to see what the company will be like one year from now." The company needs to find buyers for some of its better-performing assets in parts of Dubai where property values have remained strong. Those sales would allow Union to finish projects such as the Limestone House apartment building in the DIFC, which would be almost impossible to sell at the moment.