Union Properties to restructure operations after posting 2021 loss

Dubai developer says fraud and misconduct by the company’s former management severely impacted financials

Union Properties booked a loss from the valuation of its properties amounting to Dh1.11bn in 2021 versus a gain of Dh743.6m in 2020. Pawan Singh / The National

Dubai developer Union Properties swung to a net loss of Dh966.76 million ($263m) in 2021 from a net profit of Dh200.98m the previous year despite a rise in revenue after it rectified the value of its property portfolio that “had been inflated in prior years” and the company is now restructuring operations.

Revenue from contracts with customers rose 6 per cent annually to Dh398.7m last year, largely driven by the recovery in the UAE’s real estate market as the country rebounded from the coronavirus slowdown, it said in a statement to the Dubai Financial Market, where its shares are traded.

A new board, appointed in December, changed the company’s independent valuer and found that the carrying value of its property portfolio “had been inflated in prior years".

Union Properties booked Dh1.11 billion in 2021 losses from the valuation of its properties compared with a Dh743.6m gain the previous year, leading to an overall loss last year.

The company also faced an impairment of Dh154.64m relating to investments in quoted funds and quoted equities, which are “suspected to have been misappropriated by the company’s former officials”, the developer alleged.

Union Properties' shares were down 4.12 per cent to 23 fils on the DFM at 10.31am UAE time. They are down 28 per cent since the start of the year.

“2021 has been a difficult year for Union Properties, as we uncovered widespread fraud and misconduct by the company’s former management involving forgery, misappropriation of funds and various other financial violations,” said Amer Khansaheb, board member and managing director of Union Properties.

“These have negatively affected the company’s financial health and been a severe breach of shareholder confidence.

“We have commenced the implementation of an emergency business restructuring programme to restore shareholder value, and negotiations are continuing with our two major creditors banks to restructure the loan facilities. Good progress has been made with one of the local Islamic banks, and we remain in constructive discussions with other major creditor bank.”

Mr Khansaheb said the company will continue to review its entire portfolio to determine where it could generate further value and liquidity through the disposal of non-core assets.

The Securities and Commodities Authority (SCA), the UAE's markets regulator, filed a complaint against Union Properties' senior executives in October last year, accusing them of selling one of the company's property assets at a price below its real value, forgery, abuse of authority, fraud and damage to the interests of the company.

A new board was appointed in December, and a complete financial and accounting review was conducted by a third party.

The preliminary findings included “violation of accounting standards and manipulation of records as well as misappropriation of funds and properties along with other violations, which took place over several years”, Union Properties said.

In a separate filing to the DFM, the company said it is taking measures to address the accumulated losses, including presenting a recovery plan to the SCA; developing a business plan that focuses on closing out existing projects and refocusing on core business activities to win new projects; improving efficiency; recovering misappropriated funds through legal measures; restructuring outstanding debt to reduce financial costs; recovering outstanding receivables through court and arbitration; developing its land bank; and focusing on cash generating activities, among others.

Union Properties' new management team is also developing a growth strategy to generate shareholder value, the statement added.