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Dubai's Union Properties reports 2.29b dirham loss, cites accounting errors
[DUBAI] Shares in Dubai-based real estate developer Union Properties plunged on Tuesday after it said provisions taken to cover accounting errors pushed it to a second-quarter net loss of 2.29 billion dirhams (S$848.70 million).
The firm said it was revising its 2015 financial statements to correct the treatment of 503 million dirhams which was wrongly booked as a fair value gain on a plot of land at Dubai's Motor City, where Union Properties was master developer.
This follows an in-depth investigation of accounting practices within Union Properties as far back as 2013. The probe was initiated by a new board and senior management who were appointed in May, the company said as its share price sank 7.8 percent in early trade.
Union Properties, which made a net profit of 71.7 million dirhams in the second quarter of 2016, is 10.1 percent owned by the government of Dubai, according to Thomson Reuters data.
It booked 2.8 billion dirhams in provisions for the second quarter of this year, reflecting a "one-time charge for the accounting irregularity by the previous management", Union Properties chairman Nasser Butti Omair bin Yousef said in a statement.
The company also said it had informed United Arab Emirates regulatory authorities of the irregularity in its accounts. It did not say whether the authorities would take any action.
The plot of land at Motor City, which included a partially built hotel, was sold to another developer in 2013 and excluded from the company's 2013 financial statements.
But in 2014, Union Properties management decided it still held the rights to around 156,000 square metres of unbuilt gross floor area in the plot. A year later, the board approved recognition of a fair value gain of 503 million dirhams to cover that area, despite an unresolved dispute over ownership of the plot.
The investigation by the new board and management concluded that important information was not fully disclosed to the auditors who signed off on Union Properties' 2015 accounts, the company added.
After recovering strongly from a 2009 crash, Dubai's property market has been weak in the past couple of years as a decline in oil prices and concern over oversupply have dragged on market sentiment.
Union Properties also said on Tuesday that following an assessment by Valustrat Consulting, an independent valuer, the average price per square foot of the developer's land bank had been reduced, resulting in a fair value loss.
It took provisions totalling 196 million dirhams for the managed wind-down of Thermo, a subsidiary that undertakes contracting work.