Union Properties returns to profit on higher revenue

Dubai developer reported a 19% increase in revenue in the second quarter

Union Properties swung to a profit in the second quarter on the back of higher revenue. Pawan Singh / The National

Dubai developer Union Properties returned to a profit in the second quarter on the back of higher revenue, as the company takes additional measures to address its outstanding losses and the UAE’s property market continues to recover from the coronavirus pandemic.

Net profit for the three-month period to the end of June was Dh26.8 million ($8.8m) compared with a Dh38.5m loss in the year earlier quarter, the company said in a statement to the Dubai Financial Market, where its shares are traded.

Revenue in the quarter increased 19 per cent to Dh99m from the same period a year earlier. The company also posted a Dh78.8m gain on fair valuation of investment properties.

Last year, Union Properties implemented a turnaround strategy that helped it finish 2020 with a profit. The company reduced accumulated losses and increased shareholder equity.

Union Properties, whose projects include Motor City and Uptown Mirdif, reached an agreement with Emirates NBD to restructure an outstanding debt of Dh946m. It also agreed to sell a 40 per cent stake in its Dubai Autodrome subsidiary for Dh400m.

Union Properties, whose turnaround strategy also involves diversifying operations and developing recurring revenue lines, is planning to list three of its subsidiary companies to reduce losses and focus on cash-generating activities.

In a separate statement on Sunday, the company said it is taking a slew of measures to address accumulated losses of Dh1.92 billion, including restructuring its outstanding debt to reduce the finance cost. It is also recovering its outstanding receivables through court and arbitration procedures.

Union Properties said it will continue to reduce its operating costs, develop its land bank and assets with recurring cash flow.

The company's net profit for the six-month period to the end of June reached Dh32.3m compared to a Dh160.4m loss during the same period last year. Revenue from contracts with customers rose about 1 per cent to Dh197.4m, while the gain on fair valuation of investment properties was Dh79m. Finance costs also dropped during the period.

Like its peers in Dubai, Union Properties faced headwinds amid a slowdown in the emirate’s real estate market in the wake of a drop in oil prices that began in 2014 along with concerns about an oversupply of properties and the Covid-19 pandemic, which affected sales.

However, the property market is showing signs of recovery as people upgrade to larger homes with outdoor amenities amid an uptick in working and learning remotely. Economic support measures and government initiatives – such as residency permits for retirees and remote workers and the expansion of the 10-year golden visa programme – have also helped to improve sentiment.