Union Properties has hired Ernst and Young to raise finance to complete its Formula One theme park at the Motor City development in Dubai. The move comes as investors become increasingly cautious about Dubai's property sector after Dubai World asked creditors last week for a six-month reprieve on debts totalling US$26 billion (Dh95.49bn), the bulk of which is owed by its property units, Nakheel and Limitless.
Union Properties, Dubai's third-largest property developer, has so far paid Dh950 million towards the theme park, which was half complete before being suspended in February, when the developer ran out of funds. Ernst and Young, a professional services and auditing company, will try to raise the remaining Dh1.2bn needed to complete the theme park, which was due to open in the last quarter of this year.
Khalid bin Kalban, the vice chairman of Union Properties, said the fund-raising campaign would mainly target investors to become part-owners of the attraction, which was set to include roller coasters, water rides, car-racing simulators, Formula One car displays, shops, restaurants and a copy of an F1 grid. "Construction depends on funding," he said. "But our first priority is to complete projects for handover. The theme park is priority number two because there is no commitment on behalf of the company to deliver."
Analysts say a rebound in confidence in the property sector will largely depend on negotiations regarding the $4bn payment on Nakheel's sukuk due on December 14. Some 566 construction projects have either been shelved or postponed in the UAE, mostly in Dubai, since the global financial crisis hit, according to figures from Proleads, a market research firm based in Dubai. Property prices have also declined 50 per cent from their peak in the third quarter of last year, and could fall a further 30 per cent, UBS bank says. Raising finance to resume stalled projects is extremely difficult in the current environment as most investors have adopted a "wait and see" approach, said Nicholas Maclean, the managing director of CB Richard Ellis Middle East, a property consultant.
"I suspect at the moment, at least before December 14, it's going to be very difficult," he said. "If the sukuk is paid and there's a satisfactory outcome, then that could lead to recovered sentiment. "But since the Dubai World announcement, investors will view Dubai more cautiously going forward." Union Properties had a better chance of raising finance due to its large and diversified portfolio of projects that were either complete or near completion, Mr Maclean said.
Union Properties is also trying to raise finance by selling a 50 per cent stake in Emicool, its district cooling unit. @Email:firstname.lastname@example.org