Union Properties looks to be part of 'support fund'

Union Properties has welcomed the recent Dubai Government's announcement that it has set up a $10 billion (Dh36.7bn) "support fund" for Dubai entities, including property firms, to meet their financial requirements for the current year, a top company official said yesterday.

"We would love to be part of the support fund. Although we have not approached the government directly, I am of the view that loans need to given directly to the industry, mainly to publicly-listed real estate companies, which are more transparent and adhere to regulations," Union Properties Chief Executive Officer Simon E Azzam told Emirates Business.

"At the end of the day, it [support fund] will benefit every body, especially the real estate market."

In mid-February, Dubai launched a $20bn sovereign bond programme as part of its long-term financing strategy. The first tranche, valued at $10bn, was fully subscribed by the UAE Central Bank. The government said recently it plans to utilise the proceeds from the support fund to help government-linked entities meet their financial commitments and among the first beneficiaries would be real estate firms.

Union Properties is 49 per cent owned by EmiratesNBD, which is 56 per cent owned by the government.

Currently, the developer is working with financial institutions on finalising the Dh2.5bn non-convertible bond issue that was approved by company's board of directors in January.

"We are going ahead with it. The bond issue was to raise money to fund our current projects and other future potential projects. And a part of it was to continue the F1-X project, as we believe it is a vital project not only for Dubai, but also for the UAE."

However, the CEO believes the company may not go ahead with the non-convertible bond issue if it gets loan from the Dubai government.

SYNERGY

Ruling out plans for a merger, Azzam said: "We are not looking for any merger nor are we in discussion with anyone."

"Should there be any merger, we first have to look at synergies between the two companies, their future plans, strategies and benefits that accrue to the shareholders. The key is to have a synergy."

Although Azzam believes if a merger brings in liquidity then it may be a way of moving forward, but currently the company was working on plans to tackle the liquidity crisis.

NON-CORE UNITS

According to Azzam, the company is not planning to sell stakes in its non-core business units at present, but may look at an exit strategy in the long term. "We currently don't have plans to sell stake in our non-core units. We will look at it on a case-by-case basis, depending on the market conditions.

"We may either sell part of the units, bring in strategic partners, or sell the units fully. It is very difficult to say which one will be the first, but the idea of developing these business units, is to one day bring in strategic partners or even take them public."

PLAN ON BACK BURNER

Union Properties has also put on back burner all its new plans, which includes a planned joint venture with the Dubai government that would have helped it double its land bank size.

"At the moment, everything new has been put on the back burner. The struggle now is to continue with what we have and to complete our real estate projects.

"We are not looking for anything new. However, we will review the situation in the next six months to one year. We are in the real estate business and we believe that the potential of growth still exists in Dubai," Azzam said.

In August 2008, the company had said it was in talks with the Dubai government to acquire 50 million square foot of land so as to double its land bank size

LEASING

Union Properties is emphasising on building a strong rental portfolio and so it will be adding more units to the leasing operation. "We are increasing our rental portfolio as we believe that the rental market is one of the strongest markets in Dubai. And we want to grow with it," he said.

The firm holds back some of the units in each of its project, which is subsequently added to the rental portfolio.

"We hold back some of the units in every project that is developed by us. Now, we will see those units coming into the market this year."

PRICE FALL

According to Azzam, it was quite difficult task to predict price fall in the property prices across Dubai.

"It is very difficult to judge the price of properties just across the board. One has to look at the location, the property value and how much it has appreciated over the years. I believe those, which appreciate beyond imagination, will be the ones to fall hard. In some places, it might fall by 50 to 60 per cent decline and only 10 to 15 per cent in cases we appreciation has been reasonable."

Union Properties has been working closely with the Dubai Land Department and Real Estate Regulatory Agency since its inception.

"We have been working with the DLD and Rera, and have met all their requirements. We follow all their directives and we see that regulations have actually brought confidence back into the market," he said.

Company shares on the Dubai Financial Market fell 5.26 per cent yesterday to close at Dh0.72.

Stronger Year Ahead

Union Properties is likely to see a strong 2009 compared to 2008, says its CEO.

"I believe 2009 will be a stronger year than 2008 in our case because we will be delivering units and therefore recognising profits in our accounting standards," said Simon E Azzam.

The firm will start delivering units between now and end of September in the MotorCity followed by units in Limestone and Index in Dubai International Financial Centre. A total of about 3,500 units will be delivered.

According to the CEO, the company has not incurred any loss in the fourth quarter and it was only the provisioning of Dh500 million that had resulted in showing a "negative figure."

"We haven't incurred a loss in the fourth quarter. Our overall profit year-on-year and before provisioning in fourth quarter, is 85 per cent higher than 2007, and after provisioning year-on-year, it is 12 per cent," he said.

F1-X Project

Union Properties will begin work on the F1-X theme park as soon as it gets funding, says its Chief Executive Officer Simon E Azzam.

"We had to postpone the project purely due to lack of financing. In the past, we had arranged for funding, but due to the credit crunch some of the banks have withdrawn the facilities. And so we had to put it [F1-X] on hold," the CEO said.

However, as soon as the situation improves and "we are able to raise finance, we will immediately start work on the project," he said. About 50 per cent of the construction in F1-X project is already completed.

The company has already received a few of the rides for the F1-X project, which will be moved to the site as and when it gets ready. It has even assembled a team to manage the theme park, which includes experts from all over the world. The $950 million MotorCity development covers an area of 38 million square feet and includes five components – Dubai Autodrome, F1 Theme Park, Business Park MotorCity, Uptown MotorCity and Green Community MotorCity.

Dubai Autodrome, which is operational, has a 5.39km track with support facilities including pit garages, a grandstand, a race administration and medical centres.

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