Union Properties to tap debt market for its Dh8bn project

At Cityscape Global, developer’s new chairman says building portfolio of leasehold properties remains priority

Dubai, United Arab Emirates - September 11th, 2017: Nasser Butti Omair bin Yousef chairman of Union properties at the 16th addition of Cityscape Global. Monday, September 11th, 2017 at World Trade ceShow more

Union Properties (UPP), a Dubai-listed developer, is considering tapping the debt market with a bond issue or raise finances through bank loans to fund the construction of its Dh8 billion (US$2.18bn) MotorCity development masterplan, firm’s chairman said on Monday.

The company, is already speaking to banks and could take a decision on funding options as early as this year, Nasser bin Yousef told The National at the Cityscape Global in Dubai.

"We are negotiating with lots of banks to engage [for funding the project ]," he said. "We have low ratio of loans to capital and we feel that the market is mature enough that we can use banks, we can use bonds, and we can use international [debt] market."

UPP, one of the oldest property developers in the UAE, has appointed China State Construction Engineering Corporation (CSCEC), among the top contracting firms in the world, to build the mega project. The contractor has an agreement to also help UPP with construction finance, Mr bin Yousef said, adding that the debt-to-equity ratio of the mega development has yet to be decided.

The developer, whose board went through an overhaul in May, reported its worst-ever quarterly loss in August after it wrote down the value of investments and booked provisions to cover accounting errors of the firm’s previous management. The company recorded a Dh2.3 billion net loss for the three-month period ending June, which contrasts with a Dh71.7 million profit for the same period in 2016.

Mr bin Yousef, who took over the firm in July after the impromptu reshuffle said that building the portfolio of leasehold properties remains a priority for the new management. Sale of properties has been the primary source of revenues for the firm in the past but UPP, for the first time, is trying to build its recurring revenue lines, he added.

"We as a new board …. wanted to launch the new master plan for MotorCity and that's what we did. We are going to build all our land bank," Mr bin Yousef said. "The plan is to mix it: some of it to be sold and some of it to be [part of] leasehold portfolio. We will be leasing more than we will be selling but we have not decided the ratio yet."

The firm expects its leasehold portfolio will yield about 10 to 12 per cent returns per year.  “We are talking about a project cost of Dh8bn and income of Dh1bn from rent approximately,” he noted. “We have to start from here and this is our first initiative.

The new MotorCity masterplan will comprise of 44 new high and low rise buildings, more than 150 villas, and a range of residential, commercial, entertainment and hospitality facilities, according to a company statement. It is expected to include more than 11,500 residential units, around 3000 serviced apartments, 3,500 hotel rooms, and a total of 46,000 square metres of retail space and more than 300,000 sq m of office space, taking the grand total of all the units planned to 18,000.