Union Properties bucks the trend with first cash dividend in 13 years

Union Properties became the only listed UAE developer so far to offer dividend cheer to investors when it announced that it would be paying out its first cash dividend in 13 years.

The developer behind Dubai’s Motor City reported that it was proposing to pay a 3 per cent cash dividend and 5 per cent bonus shares for 2014.

UPP opted to pay the dividends despite full-year profits for 2014 dropping 45 per cent to Dh864 million from Dh1.57 billion a year earlier.

Shares in UPP rose 5.88 per cent, closing at Dh1.08 as investors cheered the dividend news.

The announcement comes during what has been a disappointing reporting season so far for real estate shareholders looking for payouts.

Last week Emaar Properties disappointed the market by offering a cash dividend of 15 per cent – the same amount it paid the previous year. And on Monday Deyaar said it had opted not to pay a dividend for 2014.

But despite the decision, analysts were not impressed with UPP’s strategy.

“Union Properties shareholders tend to be retail investors who look closely at dividends but not at the financial results or the strategy behind them,” said Sebastien Henin, the head of asset management at The National Investor.

“When you look at Emaar’s dividend decision you can take a view that the company has opted to retain cash because there is less visibility in the market at the moment than there was a few months ago,” he said. “However, with UPP’s decision there is little information about why the company has chosen to pay out.”

Like many Dubai developers Union Properties was hit hard by the global financial crisis. The developer has spent the past seven years tackling a massive debt burden, forcing the company to sell many of its key assets including the Ritz-Carlton hotel and substantial stakes in Limestone House and Index Tower to major shareholder Emirates NBD.

At the Cityscape property exhibition in September, UPP unveiled three new projects worth a total of Dh2.15bn including a five-tower complex in MotorCity as well as phases two and three of the Green Community at MotorCity and phase three of the Green Community at Dubai Investment Park.

Analysts have repeatedly pointed to the fact that UPP profits in recent years have been boosted by sales of the company’s assets rather than individual sales to investors, prompting the Egypt-based Naeem Brokerage to downgrade the company from “accumulate” to “hold”, last year.

“The sale of income-generating assets boosts quarterly performance but is not positive for the long-term,” said Harshjit Oza, an analyst at Naeem Brokerage in a market note last year.

Last month UPP announced it was selling its auto mall development in Motor City for Dh525 million to Texture Global Investment.


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Lucy Barnard

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