The developer behind Motor City has suffered a decline amid continued sales of its assets with a 2.2 per cent drop in net profits.
Earnings in decline for Dubai developer Union Properties
Earnings have fallen at Union Properties, the developer behind Motor City, amid continued asset sales.
In its financial results published yesterday,the property developer announced a 2.2 per cent drop in net profits to Dh21.9 million for the first three months of this year compared a year earlier.
The company added that since the end of March it had sold Dh2.2 billion of investments to a bank shareholder, understood to be Emirates NBD, to settle a Dh2bn loan.
The properties are understood to include land at the company's 3 square-kilometre flagship Motor City scheme, close to Emaar's Arabian Ranches development off Sheikh Mohammed bin Zayed Road in Dubai.
During the three months to the end of March the developer sold another Dh362m of investment properties in what is understood to be further sales to Emirates NBD, which owns a 47.59 per cent stake in the company. The deal helped Union pay back Dh169.9m of loans.
The moves follow news in January that Union had transferred Dh1.1bn of property assets including substantial stakes in key company schemes such as Limestone House and Index Tower to Emirates NBD as part of a deal to reschedule Dh2.7bn of debt.
With the company developing little new stock, revenues from the sale of homes and property management fell from Dh159.8m the previous year to Dh25.8m.
The developer, which during the boom years was behind many of Dubai's high-profile projects, including the Ritz-Carlton hotel in DIFC, was hit hard by the global financial downturn. It has been left with a Dh3.5bn debt pile - Dh515m of which is due to be repaid within the next 12 months. The company also said it had Dh1.1bn of accumulated losses on its books.
Union Properties added that it had extended a Dh400m loan that was due to be repaid on January 20 until April 20. But Union added that it was still in the process of finalising repayment terms of the loan with the bank.
"Emirates NBD inherited its ownership in Union Properties [during the bank's merger in 2007]." said Wadah Al Taha, the chief investment officer at Al Zarooni Group.
"The company has been in an uncontrollable situation and the bank has had to do this to reduce exposure.
"But they should not continue with this as it will significantly affect income generating activities, especially at a time when the market is rising."
"We believe that towards the third quarter of this year things will look more certain as pressure eases on current liquidity and enable the company to focus again on money generating projects," he added.