After taking write-offs on the value of its properties the company has Dh325m of short-term debt and Dh1.2b of long-term debt.
Union Properties announces Dh751m post-devaluation loss
Union Properties, the third-largest developer in Dubai, reported a Dh751 million (US$204.4m) loss in the third quarter after it lowered the value of its properties.
The announcement comes days after Union Properties announced it had sold the Ritz-Carlton hotel, next to the Dubai International Financial Centre (DIFC), for Dh1.1 billion, 26.7 per cent less than its asking price.
Despite the losses, Union Properties, which has lost more than 40 per cent of its value this year, gained 0.4 per cent on the Dubai Financial Market yesterday.
The company is being forced to sell its assets as it tries to raise enough cash to pay debts coming due in increasing numbers from next year.
It has Dh325m of short-term borrowings and Dh1.2bn of long-term debt, the company reported yesterday.
During the property boom, developers made money from selling off-plan property with large profit margins, but now the market for homes and offices has died down they are trying to craft their business model around managing income-producing assets.
Jad Abbas, an analyst at EFG-Hermes, said that is why the sale of the luxury Ritz-Carlton is a sign of the company's troubles.
"The sale of the hotel is a good step forward when it comes to dealing with its debt," Mr Abbas said. "They don't have many options right now.
"They have to unlock the value in their assets to meet their debt obligations. Upon the completion of the DIFC projects, [Union Properties's] business model will shift towards an investment properties management model."
The major milestones on the horizon are the delivery of two of its projects, the huge Index Tower and Limestone House, which will boost revenues later this year.
Mr Abbas said the company was likely to sell its stake in Emirates District Cooling, known as Emicool. While it is valued by Union Properties at Dh188m, EFG-Hermes believes it is worth Dh140m.
Emirates NBD, which owns nearly half of Union Properties, has played a critical role in helping the company reschedule debts, analysts said.