Union Properties has agreed to transfer to Emirates NBD Dh1.1 billion (US$299 million) of assets in two of the Dubai financial district's most dramatic buildings as it seeks to restructure its debt.
The bank, the developer's largest shareholder, will now own a "significant" percentage of the homes and offices in the two properties - The Index Tower, an 80-storey residential and office building designed by Foster + Partners, and Limestone House, a luxury apartment development.
Emirates NBD is also extending the repayment terms on Dh2.7bn of debt until 2017.
"It's a move that makes sense," said Ian Albert, the regional director of the property consultancy Colliers International. "Union Properties rationalises its debt and puts themselves in a better position."
The developer's shares rose 12.2 per cent yesterday on the Dubai Financial Market General Index to close at 26.5 fils, down from a high of 40 fils in August.
Union Properties was hit hard by the downturn in the Dubai property market, where property prices have fallen by more than 50 per cent in some areas since the peak in 2008. For the past two years the company has been working to relieve its debt burden.
In November 2010, the company sold the Ritz-Carlton hotel in the Dubai International Financial Centre to an undisclosed private company in Abu Dhabi for Dh1.1bn. Ten months earlier it had announced an asking price of Dh1.5bn.
In its financial statement released last November, the company listed Dh6.1bn of obligations, including Dh1.7bn due this year. At the time, the company said it was in the "final stages" of rescheduling Dh1.4bn of loans.
The company reported a record Dh1bn loss in the third quarter, after writing down the value of its property portfolio by Dh1.7bn in the first nine months of the year.
A "significant shareholder" - presumed to be Emirates NBD - had agreed to fund the company's ongoing projects, Union Properties said.
The new deal with Emirates NBD "reinforces the bank's role in reanimating the company and pulling it up from the repercussions of the global financial crisis", Khalid bin Kalban, the Union Properties chairman, said in an interview with Al Bayan.
Extending the loan-payment period also provided the company "with protection against more liquidation of assets", he said.
The Union Properties portfolio of residential and commercial developments includes the Green Community and Motor City in Dubailand, and Jumeirah Park Villas.
But Index Tower and Limestone are considered the jewels of the portfolio. Index was named the best tall building in the Middle East and North Africa last year by the Council on Tall Buildings and Urban Habitat.
"It's a good deal for both parties," said Richard Paul, the associate director for the property firm Cluttons. "They are units and developments that are doing well in the market."
Developments in the DIFC are performing better than in many other areas of Dubai, analysts say.
"Yes, there are a lot of units coming to the market," Mr Paul said. "But it's an area that people are keen to live in."
Several UAE developers have moved in recent months to pare down their short-term debt load.
Last month, Aldar Properties sold Dh16.8bn of assets to the Abu Dhabi Government. The deal included Central Market and hundreds of homes on Raha Beach. And Emaar Properties arranged Dh3.6bn of long-term financing from a trio of UAE banks, using Dubai Mall as collateral.