Dubai developer Union Properties agrees $162m debt restructuring deal with creditors

The agreement includes repayment of $61m to company lenders

A residential project by Union Properties at Motor City in Dubai. Pawan Singh / The National

Dubai-based developer Union Properties has reached an agreement with its creditors to restructure Dh595 million ($162m) of debt that it says will help it recover and grow amid the UAE property market's strong rebound.

The deal agreed by all parties includes repayment of Dh223m to company lenders, Union Properties said in a statement to the Dubai Financial Market, where its shares are traded.

Union Properties did not give further details of its “comprehensive restructuring plan”, but said it marks a major milestone in its turnaround strategy.

Its restructuring agreement, which “effectively reduces financing costs” for the company, will help it significantly improve its profitability and cash flow generation.

Union Properties' strengthened balance sheet will also allow it to raise additional financing for future real estate developments consider new value creation opportunities, it said in the bourse filing.

“With a bolstered balance sheet and improved free cash flows, we are now in a strong position to leverage our deep expertise, reputation and highly sought-after land bank locations,” Amer Khansaheb, managing director of Union Properties, said.

“The strong performance and outlook for the UAE’s real estate market provides significant opportunities for Union Properties, including the potential for new real estate developments.”

This latest debt restructuring is the company's second such deal in a little over two years.

In August 2020, the Union Properties reached an agreement with Emirates NBD, its biggest creditor at the time, to restructure Dh946m in bilateral debt.

The company launched a revised turnaround strategy in the first quarter of this year to cut costs, boost profitability and restore shareholder value and said it was in negotiations with two of its major creditor banks to restructure loan facilities.

Union Properties is also reviewing its entire portfolio to determine where it can generate further value and liquidity through the disposal of non-core assets, Mr Khansaheb said at the time.

The company ran into problems after the UAE's market regulator, the Securities and Commodities Authority, filed a complaint against its senior executives in October 2021, accusing them of abuse of authority, fraud and causing 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.

This uncovered “widespread fraud and misconduct by the company’s former management involving forgery, misappropriation of funds and various other financial violations”, Union Properties said at the time.

The company reported a sharp drop in its second quarter net income to Dh285,000, down from about Dh27m recorded for the same period in 2021, as financing costs related to legacy debt weighed down earnings.

However, the developer remains focused on improving the efficiency of the business and driving cost synergies across its subsidiaries and is confident in its debt servicing abilities going forward, it said on Tuesday.

Union Properties will continue to capture emerging opportunities created by the positive momentum in the UAE’s economy and the bounce back in its real estate market, it said.

“The strong performance and outlook for the UAE’s real estate market provides significant opportunities for Union Properties, including the potential for new real estate developments,” Mr Khansaheb said.