Union Properties in talks to sell 50% Emicool stake

Vice chairman says firm might take losses on revaluation of its property portfolio in Q4.
Union Properties in talks to sell 50% Emicool stake
By Jason Benham
Tue 24 Nov 2009 02:09 PM

Dubai's Union Properties, which fell into the red in the last two quarters, may take a revaluation loss on its property portfolio and provisions in the fourth quarter, its vice chairman said.

"The company may take some revaluation loss in the fourth quarter. We may be forced to take provisions on contracting activities," Khalid Kalban told reporters on Tuesday.

Operating profit for the fourth quarter would be better than the previous quarter and the fourth quarter of 2008, he said.

The third-largest real estate developer in the Gulf emirate is in talks with two investors to sell its 50 percent stake in its subsidiary, Emirates District Cooling (Emicool), Kalban said, adding the value of the firm as a whole was AED400-500 million ($108.9 million).

The company made a net loss of AED152.3 million in the third quarter, its second consecutive loss, blaming lower revenues and provisions against contracting-linked losses.

Kalban said he expected the firm to make AED500 million from its rental portfolio in 2010, up from between AED160-180 million currently, boosted by the transfer of around 2,500 unsold homes to the portfolio.

He said the company had recently rescheduled a syndicated loan of around AED2.5 billion and would push back first repayment by a year, adding it is borrowing at least AED1 billion ($272.3 million) from Emirates NBD to finance the completion of its projects.

He said his firm had already received AED350-400 million of this sum.

Kalban said that consultants Ernst & Young were "about to go to the market" to raise funding for its suspended Formula One theme park, adding that the firm needed another a further AED1.2 billion for the project.

"They are looking for investors, so they will be part owner, but they are also flexible on this," he said.

The theme park, part of the multi-billion dollar MotorCity project in Dubai, was suspended in February.

The company currently has a land bank of "not less than 9 million square feet" which is land for future development.

"Once we finalise those major projects the company will look into developing these land parcels," he said.

Union Properties would benefit from the handover of two major projects - Index, an 80 story multi-purpose tower, and Linestone House - in the first quarter of 2010, Kalban said.

The company's default rate is about 15 percent, he said, adding that most of these were customers who had taken out mortgages with troubled Islamic mortgage lenders Amlak and Tamweel.

Union Properties' shares closed 2.13 percent lower in earlier trading on Tuesday. (Reuters)

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