Union Properties takes provisions of Dh2.8b

Union Properties (UP) has announced that the company's new management has decided to book provisions totalling Dh2.8 billion, which has resulted in a net loss of Dh2.3 billion for the second quarter of 2017.
"The actions we have taken this quarter are in line with protecting the intrinsic value of the UP brand and its proud heritage and take a one-time charge for the accounting irregularity by the previous management," said Nasser Butti Omair Bin Yousef, chairman of Union Properties who took over in May 2017 after a board reshuffle. "We are confident that with the developments we are planning this year, we will quickly bring back the recognised value for the long-term sustained growth of the company."
Following the appointment of UP's new board and senior management, an in-depth investigation of accounting practices within the company dating back to 2013 was initiated. As part of this process, an external forensic investigation was commissioned in August 2017. The investigation examined the validity of the Dh503 million fair value gain applied to the unbuilt gross floor area (Unbuilt GFA) on a plot of land in Motor City, where UP was the master developer. The gain was recognised in the audited financial statements for the year ended December 31, 2015.
In 2015 UP's Board approved the recognition of a fair valuation gain of Dh503 million in the audited 2015 financial statements. At the time the ownership of the full GFA for the plot was under dispute and unresolved. The interim report of the external forensic investigation concluded that the fair value gain for the Unbuilt GFA should be reversed as it continues to be wrongly included in the assets of UP. As a result of the external interim report and its own investigations, the Board of Union Properties is restating the 2015 financial statement to reflect the correct treatment of Dh503 million. The results of the full forensic investigation will be disclosed when completed.
Following the latest six-monthly assessment by Valustrat Consulting, the average price per square foot of UP's land bank has been reduced, resulting in a fair valuation loss and leading the company to take provisions totalling Dh1.2 billion. UP has also taken provisions totalling Dh196 million in relation to the managed wind down of Thermo, a subsidiary of the company that undertakes contracting work.
- business@khaleejtimes.com