Dubai developer Union Properties reports sharp profit drop

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

Union Properties reported a sharp drop in third quarter profit despite several high-profile project launches during the period.

The developer behind Dubai’s Motor City development said third-quarter profit fell 26 per cent to Dh127.9 million from Dh171.9m for the same period the previous year.

The stock lost 1.3 per cent. Sales for the period fell 63 per cent to Dh445.7m from Dh1.2 billion a year earlier.

Revenues from property management and sales fell to just Dh19m in the third quarter of 2014 from Dh964m last year

However, the lack of revenue was partly compensated for with a Dh211m gain on the valuation of properties and a Dh37.9m gain on the sale of investment properties.

On Monday UP said it had not approved its third quarter results at a meeting on Sunday and that it would publish the figures only after making some amendments, prompting the Dubai bourse to briefly suspend trading in the stock pending the publication of the results.

The developer said profits for the first nine months of the year stood at Dh833.9m – up 171.5 per cent compared with Dh307.0m during the same period a year earlier.

But revenues for the nine- month period fell 18.7 per cent to Dh1.73bn from Dh2.13bn a year earlier. UPP declined to elaborate on the sharp decline in third quarter revenues. A spokeswoman said that the company’s profits should be judged on its full nine-month results.

“From the management point of view, the financial report was issued based on the overall results and it is not measured by each quarter,” a company spokeswoman said.

“As the selling processes vary from one month to the next the quarter profit results are changeable.

“However, Union Properties has increased profitability [for the nine-month period] in comparison with 2013, which is the most significant value,” she added.

Like many Dubai developers Union Properties was hit hard by the global financial crisis. The developer has spent the past six years tackling a massive debt burden, forcing the company to sell many of its key assets including the Ritz-Carlton Hotel and substantial stakes in Limestone House and Index Tower to major shareholder Emirates NBD.

At the Cityscape property exhibition in September, UPP unveiled three new projects worth a total of Dh2.15bn including a five-tower complex in MotorCity as well as phases two and three of the Green Community at MotorCity and phase three of the Green Community at Dubai Investment Park.

Analysts have repeatedly pointed to the fact that Union Properties’ profits in recent years have been boosted by sales of the company’s assets rather than individual sales to investors, prompting Egypt-based Naeem Brokerage to downgrade the company from “accumulate” to “hold”, earlier this year.

“The sale of income-generating assets boosts quarterly performance but is not positive for the long-term,” said Harshjit Oza, an analyst at Naeem Brokerage in a market note in May.

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