Union Properties to book AED2.8 billion provisions

Dubai / WAM

Union Properties PJSC (“UP” or “The Company”), one of the leading property investment developers in the UAE, has reported its financial results for the second quarter of 2017.
Following a thorough accounting review and in the long-term interests of the company, UP’s new management team has taken the decision to book provisions totalling AED2.8 billion, which has subsequently been approved by the Company’s board of directors and communicated to the regulator and UP shareholders. The provisions reflect the new management team’s prudent approach to risk and in its treatment of unbuilt or floating Gross Floor Area (GFA) from an accounting standpoint. The provisions have resulted in a net loss of AED 2.3 billion for the three months to June 30, 2017.
Commenting on the results and provisions taken, Nasser Butti Omair Bin Yousef, Chairman of Union Properties who took over only in May 2017 after a board reshuffle, said: “Union Properties is one of the most respected companies in the UAE and has gained a reputation for the highest quality in both its developments and in every aspect of its business operations. The actions we have taken this quarter are in line with protecting the intrinsic value of the UP brand and its proud heritage and take a one-time charge for the accounting irregularity by the previous management.
“We are confident that
with the developments we
are planning this year, we
will quickly bring back the recognised value for the long-term sustained growth of
the company.”
Following the appointment of UP’s new board and senior management in May 2017, an in-depth investigation of accounting practices within the company dating back to 2013 was initiated. As part of this process an external forensic investigation was commissioned in August 2017.
The investigation examined the validity of the AED503 million fair value gain applied to the unbuilt gross floor
area (Unbuilt GFA) on a plot of land in Motor City, where UP was the master developer. The gain was recognised in the audited financial statements for the year ended 31 December 2015.
The plot of land which included a partially built hotel was sold to another real estate developer in 2013 and derecognised in the company’s 2013 audited financial statements. In 2014, the management of UP reassessed the land bank and available GFA and concluded it still held the rights to approximately 156,000 square metres (1.68 million square feet) of Unbuilt GFA.