Union Properties nets 30m dirhams as sales fall, projects get delayed
(DUBAI) Union Properties PJSC, the Dubai-based developer that suspended work on a Formula One-themed park, said that first-quarter profit plunged 87 per cent as the global financial crisis hurt real-estate sales and caused projects to be delayed.
Net income fell to 30 million dirhams (S$12 million), or one fil a share, from 238 million dirhams, or 7.8 fils, a year earlier, the company said in a statement yesterday. Sales dropped 40 per cent to 572 million dirhams.
The worst financial crisis since the 1930s has weakened the property market in Persian Gulf states as banks curtailed mortgage lending and speculators sold assets.
Union Properties was hurt by lower revenue at its largest business segment, contracting to build projects for other developers, it said.
Union Properties declined two fils, or 2.7 per cent, to 73 fils at 1.02pm in Dubai trading. The shares have gained 12 per cent this year, while the six-member Dubai Financial Market Real Estate Index has risen 4.6 per cent.
'The drop today isn't severe, which suggests the market is bottoming out,' said Samer Al-Jaouni, general manager at Middle East Financial Brokerage Co in Dubai, referring to Union Properties stock.
Emaar Properties PJSC, the largest developer in the United Arab Emirates, last week said that first-quarter profit dropped 74 per cent as the liquidity crunch and falling house prices cut off growth in Dubai's real estate market.
Emaar is reducing costs and delaying projects after demand fell in Dubai.
Dubai house prices may slump as much as 70 per cent from their peak late last year as demand drops and banks fail to resume mortgage lending, prompting mergers, UBS AG said in a report on April 22.
Union Properties suspended its planned Dubai Formula One theme park because of the financial crisis, it said on Feb 26.
The company had 6.2 billion dirhams in bank debt at the end of the quarter, giving it a debt-to-equity ratio of 34 to 66, according to yesterday's statement. Union Properties agreed to refinance 1.1 billion dirhams of short-term debt this quarter.
The company started handing over properties in the MotorCity development at the start of the current quarter and will book revenue as the properties are delivered to clients. -- Bloomberg
Source: Business Times, 5 May 2009
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