Union Properties finalises $162m deal to restructure its debt

Creative Commons/Anaajibicho

• The developer of Dubai’s MotorCity has repaid $60.7m to lenders
• Deal follows a turbulent year for the company, after fraud allegations
• Union Properties’ new board launched a turnaround strategy in Q1

Union Properties, one of Dubai’s oldest developers, has completed a $162 million debt restructuring, including a $60.7m repayment to lenders, it said on Tuesday.

The move is part of a comprehensive restructuring that follows a turbulent year for the company. In October 2021, the Securities and Commodities Authority, the UAE’s markets regulator, accused senior executives at Union Properties of forgery, abuse of authority, fraud and damage to the interests of the company.

An investigation was launched and, in November, prosecutors ordered the detention of the developer’s then chairman.

Union Properties appointed a new board in December and launched a turnaround strategy in the first quarter of 2022.

In March, the company unveiled its debt plan, adding that it was planning legal action to recover $42m allegedly “misappropriated” by the former executives. They have not commented on the claims.

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On Tuesday, the developer said in a filing to Dubai Financial Market that the restructuring, which is expected to reduce financing costs, would provide “significantly improved profitability and cash flow generation”.

Its announcement came as the Dubai real estate sector recorded strong growth in the third quarter of 2022, according to a JLL report.

Union Properties, which was founded in 1987 and built the MotorCity development, said its strengthened balance sheet “unlocks its ability to raise additional financing for future real estate developments whilst also enabling the company to consider new value creation opportunities”.

Amer Khansaheb, its managing director, described the debt restructuring as an “important milestone” that placed the company “on a firm foundation to drive future growth and value creation for our shareholders”. 

He added: “The strong performance and outlook for the UAE’s real estate market provides significant opportunities for Union Properties, including the potential for new real estate developments.”

The developer made a net loss of $263m in 2021 but reported a net profit of $77,600 in the three months to the end of June.

The JLL report published on Tuesday said average residential prices in Dubai grew 9 percent year-on-year in the third quarter, while average rental rates increased by 25 percent year-on-year.

Across the UAE, price growth is being fuelled by investor and end-user demand. Off-plan sales are high, while secondary market sales are also improving, in light of increasing yields, according to Khawar Khan, head of research for the Middle East, Africa and Turkey at JLL.