Union Properties (UP) said it is open to receiving financial support from the Dubai Government but is not in need of any such immediate assistance.
UP’s new chairman Bin Kalban said that "the Dubai Government recently initiated the exercise to understand the financial position of various real estate companies. And we too have indicated our financial position to them".
Bin Kalban added that UP had “secured funding from Emirates NBD and have rescheduled (their) syndicated loan. "We will be generating enough cash from next year to meet our obligations, but we are not averse to receiving any financial assistance."
In November, Bin Kalban said the company had secured Dh1 billion in funding from Emirates NBD to complete its Limestone House and Index projects in Dubai International Financial Centre. UP is 49 per cent owned by Emirates NBD, which in turn is 56 per cent owned by the government.
In a separate development, over 1000 construction workers from Robust Construction, due to unpaid salaries. They said that they have not received their dues for several months, despite threats by the Dubai government for penalties against Robust if they did not meet their obligations.
December 23, 2009
Analysis and Forecast: Increasing Risk
The statements by the new chairman of UP, one of Dubai’s major master-developers, reinforces Political Capital’s view of the difficulties faced by major developers who are partly owned by the government. Although UP is not directly owned by Dubai government, it is indirectly partly owned through Emirates NBD and other institutions. The statement in itself taken in isolation, does not carry major negative implications. However, given UP’s position, its timing and content both show a communication and governance problem, not only limited to UP.
The standstill on repayments announced by Dubai World last month does not cover developers like UP. However, PC sources indicate that UP has unpaid debt to contractors and possibly creditors. Robust Construction, is one of the companies that UP owes.
Although Robust is now subject to government penalties, it’s predicament is mainly brought about by non-payment of fees by UP, which is indirectly government-owned. The statement by Bin Kalban about UP’s ability to survive without government assistance calls into question why such statement was made in the first place, particularly at a time when Robust is facing collapse, partly due to non-payment of dues by UP. If UP was indeed not in need of government assistance, problems like those of Robust would not occur. UP is in need of assistance both to complete ongoing projects and also to pay fees to private contractors.
Both items of news, although unrelated, are an indication that developers like UP have and will continue to face difficulties without government help. With this help very unlikely to come in the short term, it is expected that further fall-out from the Dubai crisis is yet to come as third parties become unintended victims of the crisis.