Union Properties investors vote in favour of revised turnaround strategy

Union Properties shareholders voted for operations to continue and approved a revised turnaround strategy at the Dubai developer’s annual general meeting as it struggles to stem losses.

The company intends to tap into its existing property portfolio and subsidiaries offering adjacent services to capitalise on the current momentum in the Dubai real estate market.

Union Properties aims to return to profit “by optimising its cost base and restructuring its debt”, the developer said on Thursday in a filing to the Dubai Financial Market, where its shares are traded.

Managing director Amer Khansaheb said the AGM marked a “significant step towards resolving the company’s legacy issues and progressing with the company’s rejuvenation, as shareholders endorse our new turnaround strategy and affirm their support for legal action against the previous board and management”.

The new strategy aims to “create a leaner organisation in order to achieve profitability”, he said. The developer’s shares were up 1.06 per cent at 29 fils on the DFM at at the end of trading on Thursday.

The company swung to a net loss of Dh966.76 million ($263m) last year, from a net profit of Dh200.98m in 2020, after it rectified the value of its property portfolio that “had been inflated in prior years”, it said in March.

The AGM was convened to adhere to the UAE federal law on commercial companies, which requires a board to convene a general meeting within 30 days from when it is disclosed that a joint stock company’s accumulated losses are half of its issued capital.

The meeting is expected to “consider a decision regarding the continuity of the company’s activity or to dissolve the company prior to the expiry of its term”, according to the federal law.

The developer’s accumulated losses as a share of capital amounted to 68.3 per cent, requiring the approval of shareholders for business activities to continue.

Union Properties ran into trouble with regulators last year after the Securities and Commodities Authority filed a complaint against its senior executives in October, accusing them of forgery, abuse of authority and fraud, in addition to damaging the interests of the company.

A new board was appointed in December, and a complete financial and accounting review was conducted by a third party, which uncovered “widespread fraud and misconduct by the company’s former management involving forgery, misappropriation of funds and various other financial violations”, Union Properties alleged.

The developer said in its latest update that the board was granted the authority to appoint legal and financial experts to file and follow up on legal proceedings against previous board members, who were dismissed.

Shareholders also approved the appointment of new auditors for the 2022 financial year, the regulatory filing said.