Dh2.75 b deal for Union Properties struck at 125 bps margin
The cost of property development in the UAE has gone up by about 30 per cent during the last three to four years thanks to various factors including the substantial increase in construction materials prices, said Simon E Azzam, CEO of Union Properties.
"There was a time, about three to four years ago, when contractors used to bid for jobs under cost. But things have changed and now the same contractors would not look at these projects unless a healthy profit is not available," added Azzam.
At a function convened to announce the signing of a Dh2.75 billion three-year loan facility for Union Properties where Emirates Bank and other 17 banks participated, Azzam said despite a substantial increase in developing real estate properties, the developers are yet to pass on the full cost escalation to the buyers.
The Business Weekly had a few months back broken the news story about Emirates Bank being appointed the financial advisor to a loan deal of substantial size.
The facility for which Emirates Bank acted as the financial advisor, sole bookrunner, mandated lead arranger and joint-underwriter is to partially finance developments in UP's MotorCity project, and a pricing of about 125 basis points above Libor was struck for this facility.
Abu Dhabi Commercial Bank, Gulf International Bank, Lloyds Bank, Mashreq Bank, and National Bank of Abu Dhabi acted as the mandated lead arrangers and Joint Underwriters for the deal. Twelve other local, regional and international banks participated in the debt syndication facility which has been oversubscribed.
Simon E. Azzam, CEO of Union Properties said MotorCity, UP's largest development to date, will further enhance the company's image as a leading developer at the top end of the property development market as it is a project based on a unique automobile and motor sport theme that includes residential, business, sports and leisure components."
The MotorCity development is part of the prestigious Dubailand, located on Emirates Road and covers an area of 38 million square feet. MotorCity's five project components include, Dubai Autodrome, F1 Theme Park, Business Park MotorCity, UPTOWN MotorCity and Green Community MotorCity. Its residential units are being offered on freehold basis with delivery commencing in 2009.
Rajan Khetarpal, senior manager and head of structured finance and syndications said Emirates Bank is strategically positioning itself to be a frontrunner in debt capital markets. "Successful closure and oversubscription of this transaction is evidence of our integrated approach in rendering a gamut of services to our valued corporate clients spanning the breadth of financial, debt capital and advisory solutions," Khetarpal added.By Amit Chettupuzha
The Business Weekly 2007
