Higher provisions eat into Union Properties’ net

A visitor tries his hand on a simulator put up by Union Properties to promote the Motor City project during Cityscape Global 2014..Image Credit: Virendra Saklani/Gulf News Archives

Union Properties took a sharp dip on both 2014 revenues and net profit compared with the robust numbers the developer had put out a year ago. Net profit was trimmed to Dh858.57 million from 2013’s Dh1.58 billion, while revenues were down more than 50 per cent to total Dh2.06 billion (from Dh4.66 billion a year ago). Earnings per share were down to 24 fils from 45 fils, according to filings with Dubai Financial Market.

According to Khalid Bin Kalban, Chairman of Union Properties, “The lower net profit for 2014 had to do with the greater provisions we have set aside. If those provisions were excluded, the net would have been Dh1.28 billion. But we have been conservative in the way we have marked for provisions.”

The UP financials go against type compared with how some of the other leading developers fared last year. Nakheel had reported a net of Dh3.68 billion for last year (up from Dh2.57 billion), while, on Monday, Deyaar reported its 2014 bottom line as Dh231.7 million, up from Dh154.5 million.

Union Properties will need to work on building up its land bank for the future, according to Samer Lakhani, Managing Director at Global Capital Partners. The stock dropped 5.83 per cent to close Tuesday at Dh1.13.

“The exaggerated volatility on UP’s stock could be because investors are concerned over the land bank availability compared with what government-related developers possess in Dubai.

“Investors want to be reassured that UP can deliver more of the upscale developments such as Green Community and Uptown. Until such time, there could be continued volatility in store for the stock and earnings’ prospects.”

Kalban is not willing to be distracted by the numbers for one year.

“This year and the next we have a series of projects are getting completed or were launched that will generate sustained sales and rental income. I don’t think the 2014 numbers should be seen in isolation — in 2009-10 the company was on the verge of bankruptcy. We have managed to put all of that well behind us whether it be through asset sales, raising cash efficiencies or by launching new projects utilising our available land assets.”

Also, “from being in a position completely dependent on banks”, the developer has built up a cash position of Dh400 million plus, the Chairman said. Loans are also being trimmed — some recent payments would have brought down the debts owed by the developer to just over Dh300 million, Kalban said.

In the second-half of last year, the developer had announced new projects in Motor City, including its first step into building high-rises. Developing the retail possibilities within its communities is another priority for the developer, giving as it does the comfort of a recurring income stream for the future.

And just this week, there was the announcement of the third phase at its flagship development, Green Community. The development “retains its considerable influence as an upmarket residential location” and price of around Dh1,000 a square foot would be ideal, according to projections by the real estate firm Banke M.E.


Source: Manoj Nair, Associate Editor, gulfnews.com


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