Union Properties reported a record Dh1 billion (US$272.2 million) loss for the third quarter as the Dubai developer continued to write down the value of its property portfolio in the emirate.
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The builder behind the Green Community and MotorCity said revenue for the third quarter rose 75 per cent to Dh955 million, up from Dh545m from the same period a year ago, as it continued to hand over units in the Index Tower and Limestone House, its projects in the Dubai International Financial Centre.
But the company cut the listed value of its development property by a total of Dh1.1bn in the quarter, citing the market conditions. In total, the company devalued its property by Dh1.7bn in the first nine months of the year.
The write-down "reflects a cautious management approach over the group's asset portfolio, particularly in providing against all known contingencies and any anticipated impairment of real-estate assets", the company said.
Union Properties said it was in the "final stages" of rescheduling Dh1.4bn of loans due in the next 12 months. The company needs to repay Dh1.7bn of its existing Dh6.1bn of financial commitments in the next 12 months.
During the third quarter, the company applied its statutory reserve of Dh1.4bn to partially offset losses of Dh1.6bn accumulated as of June 30, according to its financial report.
A "significant shareholder", a bank, has agreed to provide funding for Union Properties to complete projects under way, the company reported.
It did not name the bank, but Emirates Bank Group is a major shareholder.
Union Properties has been particularly hard hit by the slowdown in the Dubai property market, where residential property prices have fallen by more than half since the peak of the market in 2008.
In recent months "it hasn't been all that bad", said Richard Paul, the head of valuations for the property firm Cluttons. "All the sectors have been at the bottom of the trough for some time now."
Union Properties' decision to write down the value of its portfolio may reflect that "different companies are feeling the effects at different times", Mr Paul said. "And different companies are going public with the effect at different times."
Union Properties' revenue for the first nine months of the year rose to Dh3.2m, compared with Dh2.1bn from the same period a year ago. Operating profit for the period rose 122 per cent to Dh264m for the nine months, compared with Dh119m a year earlier, and net margins for the nine-month period rose 8 per cent from 6 per cent.
But the company reported a net loss of Dh1.5bn for the nine months, due to the provisions for the value of its property. Last year the company reported a Dh751m loss for the first nine months.
The company also said it had reduced its bank debt by Dh741m in the past year, from Dh6.5bn at the end of the third quarter of last year to Dh5.8bn.
But it is still unclear how the "extreme instability" in the global financial market will affect Dubai pricing, the company said. There are "few transactions taking place in the market", it added.
Writing down the value of the property was a "prudent approach … premised on the basis of the current real-estate market, which as it stabilises in the near term will provide a platform for the company to progress without further hindrance," the company said.
kbrass@thenational.ae
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'Young girls thinking of big ideas'
Words come easy for aspiring writer Afra Al Muhairb. The business side of books, on the other hand, is entirely foreign to the 16-year-old Emirati. So, she followed her father’s advice and enroled in the Abu Dhabi Education Council’s summer entrepreneurship course at Abu Dhabi University hoping to pick up a few new skills.
“Most of us have this dream of opening a business,” said Afra, referring to her peers are “young girls thinking of big ideas.”
In the three-week class, pupils are challenged to come up with a business and develop an operational and marketing plan to support their idea. But, the learning goes far beyond sales and branding, said teacher Sonia Elhaj.
“It’s not only about starting up a business, it’s all the meta skills that goes with it -- building self confidence, communication,” said Ms Elhaj. “It’s a way to coach them and to harness ideas and to allow them to be creative. They are really hungry to do this and be heard. They are so happy to be actually doing something, to be engaged in creating something new, not only sitting and listening and getting new information and new knowledge. Now they are applying that knowledge.”
Afra’s team decided to focus their business idea on a restaurant modelled after the Leaning Tower of Pisa. Each level would have a different international cuisine and all the meat would be halal. The pupils thought of this after discussing a common problem they face when travelling abroad.
“Sometimes we find the struggle of finding halal food, so we just eat fish and cheese, so it’s hard for us to spend 20 days with fish and cheese,” said Afra. “So we made this tower so every person who comes – from Africa, from America – they will find the right food to eat.”
rpennington@thenational.ae
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Common OCD symptoms and how they manifest
Checking: the obsession or thoughts focus on some harm coming from things not being as they should, which usually centre around the theme of safety. For example, the obsession is “the building will burn down”, therefore the compulsion is checking that the oven is switched off.
Contamination: the obsession is focused on the presence of germs, dirt or harmful bacteria and how this will impact the person and/or their loved ones. For example, the obsession is “the floor is dirty; me and my family will get sick and die”, the compulsion is repetitive cleaning.
Orderliness: the obsession is a fear of sitting with uncomfortable feelings, or to prevent harm coming to oneself or others. Objectively there appears to be no logical link between the obsession and compulsion. For example,” I won’t feel right if the jars aren’t lined up” or “harm will come to my family if I don’t line up all the jars”, so the compulsion is therefore lining up the jars.
Intrusive thoughts: the intrusive thought is usually highly distressing and repetitive. Common examples may include thoughts of perpetrating violence towards others, harming others, or questions over one’s character or deeds, usually in conflict with the person’s true values. An example would be: “I think I might hurt my family”, which in turn leads to the compulsion of avoiding social gatherings.
Hoarding: the intrusive thought is the overvaluing of objects or possessions, while the compulsion is stashing or hoarding these items and refusing to let them go. For example, “this newspaper may come in useful one day”, therefore, the compulsion is hoarding newspapers instead of discarding them the next day.
Source: Dr Robert Chandler, clinical psychologist at Lighthouse Arabia
UAE currency: the story behind the money in your pockets
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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