Dubai-based developer Union Properties has reached an agreement with its creditors to restructure Dh595 million ($162m) of debt that it says will help it recover and grow amid the UAE property market's strong rebound.
The deal agreed by all parties includes repayment of Dh223m to company lenders, Union Properties said in a statement to the Dubai Financial Market, where its shares are traded.
Union Properties did not give further details of its “comprehensive restructuring plan”, but said it marks a major milestone in its turnaround strategy.
Its restructuring agreement, which “effectively reduces financing costs” for the company, will help it significantly improve its profitability and cash flow generation.
Union Properties' strengthened balance sheet will also allow it to raise additional financing for future real estate developments consider new value creation opportunities, it said in the bourse filing.
“With a bolstered balance sheet and improved free cash flows, we are now in a strong position to leverage our deep expertise, reputation and highly sought-after land bank locations,” Amer Khansaheb, managing director of Union Properties, said.
“The strong performance and outlook for the UAE’s real estate market provides significant opportunities for Union Properties, including the potential for new real estate developments.”
This latest debt restructuring is the company's second such deal in a little over two years.
In August 2020, the Union Properties reached an agreement with Emirates NBD, its biggest creditor at the time, to restructure Dh946m in bilateral debt.
The company launched a revised turnaround strategy in the first quarter of this year to cut costs, boost profitability and restore shareholder value and said it was in negotiations with two of its major creditor banks to restructure loan facilities.
Union Properties is also reviewing its entire portfolio to determine where it can generate further value and liquidity through the disposal of non-core assets, Mr Khansaheb said at the time.
The company ran into problems after the UAE's market regulator, the Securities and Commodities Authority, filed a complaint against its senior executives in October 2021, accusing them of abuse of authority, fraud and causing damage to the interests of the company.
A new board was appointed in December and a complete financial and accounting review was conducted by a third party.
With a bolstered balance sheet and improved free cash flows, we are now in a strong position to leverage our deep expertise, reputation and highly sought-after land bank locations
Amer Khansaheb,
managing director, Union Properties
This uncovered “widespread fraud and misconduct by the company’s former management involving forgery, misappropriation of funds and various other financial violations”, Union Properties said at the time.
The company reported a sharp drop in its second quarter net income to Dh285,000, down from about Dh27m recorded for the same period in 2021, as financing costs related to legacy debt weighed down earnings.
However, the developer remains focused on improving the efficiency of the business and driving cost synergies across its subsidiaries and is confident in its debt servicing abilities going forward, it said on Tuesday.
Union Properties will continue to capture emerging opportunities created by the positive momentum in the UAE’s economy and the bounce back in its real estate market, it said.
“The strong performance and outlook for the UAE’s real estate market provides significant opportunities for Union Properties, including the potential for new real estate developments,” Mr Khansaheb said.
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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.”
Ziina users can donate to relief efforts in Beirut
Ziina users will be able to use the app to help relief efforts in Beirut, which has been left reeling after an August blast caused an estimated $15 billion in damage and left thousands homeless. Ziina has partnered with the United Nations High Commissioner for Refugees to raise money for the Lebanese capital, co-founder Faisal Toukan says. “As of October 1, the UNHCR has the first certified badge on Ziina and is automatically part of user's top friends' list during this campaign. Users can now donate any amount to the Beirut relief with two clicks. The money raised will go towards rebuilding houses for the families that were impacted by the explosion.”
