UP may sell some assets to generate liquidity

Dubai's Union Properties is considering the sale of some of its completed property assets to generate liquidity and enhance revenues, said its chairman, as the company struggles amidst a real estate downturn.

Khalid bin Kalban said in an interview there were many debt-free assets available for sale.

"We are looking at selling some of the assets of the company to generate further liquidity to complete the second phase of the projects and look at growth," he said late on Tuesday.

"The most important part of the agenda for 2010 is how we can grow the revenues of the company."

Union Properties is the third-largest real estate developer by market capitalisation in Dubai and has a land bank of around 836,000 square metres for future development.

The company is negotiating for the sale of some property assets, Kalban said, adding he hoped to complete a deal in the next two months.

"Most buyers want to buy an existing building with an existing income and make seven-eight per cent return on their investment," he said.

The firm suffered from poor results in the second and third quarters of 2009 and said it expected to take a revaluation loss on its property portfolio and provisions in the fourth quarter.

The developer made a net loss of Dh152.3 million in the third quarter, due to lower revenues and provisions against contracting-linked losses. Union Properties shares fell as much as 4.3 percent during yesterday's session, before closing 2.86 per cent down.

"While not a surprise and understandable, I don't believe investors view asset sales as an outright positive," said Saud Masud, real estate and construction analyst at UBS, commenting on market reaction.

"There is significant uncertainty when asset sales are involved.

"Investors look to understand the impact on existing business model synergies, adjustments to financial estimates and overall the strategic direction of the company – what will the company look like if market stresses continues and other non-core assets are parted with down the line" said Masud.

Kalban said in November the company would benefit from the handover of two major projects – Index, an 80-storey multi-purpose tower, and Limestone House º in the first quarter of 2010.

He said on Tuesday the company has already started delivering some of the units.

"There is a land bank available and we need to build," he said.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

Follow Emirates 24|7 on Google News.