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Dubai’s Union Properties Targets First Dividend Since 2009

Union Properties PJSC (UPP) may pay its first dividend in five years in 2014 as the Dubai developer heads toward its biggest quarterly profit since 2008, Chairman Khalid bin Kalban said. The shares rose as much as 3.7 percent.

Fourth-quarter profit is expected to reach 300 million dirhams ($81 million), the most since the second quarter of 2008, after the company cut borrowing costs and started projects, bin Kalban said in an interview. Dubai’s smallest publicly traded developer may report annual profit of more than 600 million dirhams, more than triple the 2012 figure, he said.

Union Properties reported a profit for last year after posting net losses totaling 3.6 billion dirhams in the three years through 2011 after Dubai’s property market crashed in 2008. The company sold hotels and swapped assets for debt as it sought to lower financing costs and meet creditor obligations.

Union Properties is in talks with investors including Emirates NBD PJSC (EMIRATES) bank to develop two residential projects in Dubai, Bin Kalban said. The company will charge a fee for project management and sales as well as selling the land and design, while the investors will finance construction.

Less Risk

Such an approach reduces the company’s risk and “shows the profit immediately without having to wait until the project is delivered,” Bin Kalban said on Nov. 24. “It’s a move to boost the profitability of the company so we can pay a dividend, hopefully in 2014,” he said.

If a deal is concluded this year, 2013 profit could reach 850 million dirhams, he said.

Union Properties was up 3.1 percent to 0.95 dirhams as of 1:22 p.m. in Dubai. The stock has more than doubled this year, lifting the company’s market value to 3.21 billion dirhams.

Union Properties is set to start work on four residential developments and two retail projects valued at around 1.5 billion dirhams, the chairman said. All the projects will be extensions of existing communities.

The company paid down 5.5 billion dirhams to 6 billion dirhams of debt over the last three years and its borrowings excluding subsidiaries now stand at about 360 million dirhams, due over the next five years, Bin Kalban said.

Property sales in Dubai are recovering after the 2008 crash caused values to drop by about two-thirds. Home prices surged at the fastest pace in the world in the second quarter, prompting the city’s government to double property-transfer fees and the central bank to impose limits on mortgage lending to stave off another bubble.

“People are buying real estate to settle; they are end-users,” Bin Kalban said. “The market will sustain itself over the next three years and will be driven by growth in population and tourism.”

To contact the reporter on this story: Zainab Fattah in Dubai at zfattah@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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