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Union Properties finalises plans for Saudi joint venture

Union Properties is finalising plans for its entry into Saudi Arabia. It represents the first international foray for the Dubai-based developer behind projects such as Motor City and The Green Community.

It aims to nail down plans to establish a joint venture with Naif Al Rajhi Investment Company in the first quarter of next year, said a company official.

The new company would be a 50:50 joint venture based in Riyadh, said the general manager Khalaf Al Marri on the sidelines of an event to launch the developer’s Dh750 million Green Community West project in Dubai yesterday.

Initially, it will use Naif Al Rajhi’s land bank to develop mixed-use, residential and commercial communities in the kingdom.

He added that the business could subsequently buy its own plots.

“They have huge lands – I don’t know how many square kilometres they have. But they want our name,” he said. The partnership is evaluating a number of potential schemes, including one high-rise development.

“There is a tower, but we are not starting with this,” said Mr Al Marri, adding that its first project was likely to be a mixed-use, community scheme.

The pair struck an initial agreement in April which paved the way for the partnership.

Mr Al Marri said that it will consider other projects overseas, but that many countries in the Middle East were viewed as high risk.

Closer to home, Union Properties aims to develop its Green Community West development in three phases, completing in 2017.

Enabling works are already being carried out by Wade Adams and a Dh460m construction contract was awarded to the contractor Shapoorji Pallonji in June.

In total, it will contain 210 town houses and 16 apartments.

Phase one will involve 76 units being built within 18 months, phase two will contain 93 units and phase three the remaining 41 town houses and 16 apartments, with 6,000 square feet of retail.

The chairman Khalid bin Kalban said that he expects the company to make a net profit of between Dh400m and Dh450m for its full year in 2015.

Although its first-quarter profit fell by 84 per cent year-on-year to Dh28.1m and second quarter profit fell by 96 per cent to Dh5.1m, Mr bin Kalban said he expected third-quarter profit to be in the region of Dh100m.

Speaking at the Country Risks Conference organised by the trade credit insurance specialist Coface yesterday, Emirates NBD’s head of Mena Research, Khatija Haque, said that Saudi Arabia would soon need to address a budget deficit incurred as a result of the decline in oil prices. She said that recent reports of payment delays and asset sales to fund budget deficits were likely to continue, but that there have not been any major project cancellations.

“There have been reports both in the UAE and Saudi Arabia that public sector entities are delaying payments to corporates where projects are under way.

It’s clearly having a strain, but it’s not a case of ‘we no longer want to continue with this project’.

“These are things that can be managed, but clearly going forwards it’s not sustainable for GCC economies to continue drawing down reserves to fund budget ­deficits.”

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