Profits skyrocket at Dubai’s Union Properties

Profits at Union Properties rose more than eightfold as the MotorCity developer benefited from Dubai's booming real estate sector.

Net income advanced to Dh1.58 billion from Dh175.8 million a year earlier, the company said in a filing. That boosted the stock by 3.25 per cent yesterday. Its shares have increased by more than a third since the start of the year.

Union Properties, which has spent the past five years tackling a massive debt burden, reported that revenues at the company more than doubled over the 12-month period from Dh1.87 billion in 2012 to Dh4.49bn at the end of 2013.

However, the value of the company’s total assets fell 18 per cent over the same period from Dh9.09 billion in 2012 to Dh7.45bn in 2013. The developer did not respond to calls.

Analysts said that the profit increases were likely to have come from land and other asset sales.

In January 2013 it emerged that Union Properties had transferred Dh1.1bn of property assets, including substantial stakes in key company schemes such as Limestone House and Index Tower to its biggest shareholder, Emirates NBD, as part of a deal to reschedule Dh2.7bn of debt.

And in May Union Properties again reported that it had sold Dh2.2bn of investments to its bank shareholder.

Analysts speculated that a small proportion of the profit increase may have come from the company’s leasing portfolio at its 3 square kilometre MotorCity, scheme which includes the Green Community.

Yesterday the property adviser Asteco published new figures showing that average apartment rents rose 50 per cent over the year, while villa rents increased 20 per cent. Villa rents at The Green Community rose by an average of 10 per cent over the year with three-bedroom villas now fetching Dh210,000 to Dh250,000 a year.

The revival of the Dubai property market has also prompted Union Investments to announce a string of new projects over the past year.

Last month Khalid bin Kalban, the Dubai Investments chief executive, said the company would be tying up with Union Properties to develop pockets of land around Dubai’s Expo site.

And in September Union Properties said that it planned to develop six new projects at MotorCity worth some Dh1.5bn over the next three years, which include a mall, a theme park and a Champs-Elysées- style shopping street.

At the time the developer also said it planned to allow increased ownership of its shares by non-UAE investors. Non-UAE ownership of Union shares is currently capped at 15 per cent.

“Despite all these announcements Union Properties are still not very active at present as a developer,” said Sebastien Henin, frontier markets portfolio manager for The National Investor in Abu Dhabi.

“These guys really suffered during the crisis and have only indicated that they are back in the market very recently so that is not enough time to show through in last year’s results. Until recently investors in Dubai were only putting money into the most trusted brands and the best locations. That is now changing and second-tier developers could start to benefit going forward,” he added.