Dubai: Union Properties has confirmed that it is entering a deal with Naif Alrajhi Investment Co to take on large real estate projects in Saudi Arabia, potentially opening up a new revenue stream for the company.

A memorandum of understanding has been reached with the Saudi partner to set up an operating company to handle future projects, with Riyadh being the key operational market. Further details are being finalised, said a top UP official.

Naif Alrajhi Investment comes with a substantial land bank that the joint venture can develop, the official added. These will include options for both mixed-use communities, much like the ones that UP has delivered in Dubai like the Green Community and Uptown Mirdiff, as well as high-rises.

“The plan is to formalise all of the initial details in the first quarter of 2016,” said Ahmad Al Merri, UP’s general manager.

The timing will be eminently favourable for Union Properties which had disappointed the local market with declines in its 2014 numbers, as well as during the first-half of this year.

The developer is aiming for a Dh400 million to Dh450 million net profit for 2015, while for the third quarter, it’s projecting a net of Dh100 million plus.

On whether 2016 could provide the turnaround the company is looking for, Khalid Bin Kalban, UP’s chairman said: “Look, we turned the corner three years ago if you ask me. I challenge anyone who say that UP has not done well since the new board took over. I want to ask them how many times they think UP made more than Dh600 million [in annual profits] in all the years since 1993 when the IPO took place. And I’m talking about even during the period when the market was booming.

“Last year we paid out a cash dividend. Through the whole period when the resale market had disappeared and the company had to deal with payment of billions of dirhams in debt, we have gone about our business.”

The developer on Tuesday had the formal launch of the third phase of its Green Community West project, which will add 210 town houses and 16 duplexes.

Prices are an average Dh850 a square foot for the 4,300 square foot homes. These are to be delivered in three phases all the way up to mid-2017, and expected to cost Dh680 million.

The first two phases have delivered 1,500 plus units and now hosts an estimated 8,000-strong resident base.

According to Kalban, UP has the land bank to do more in Dubai — there is Motor City where it is in the final stages of the design for a five-tower cluster.

“If we come across good deals, there’s more we can do on the land side,” said Kalban. “But the land pricing needs to be right to ensure it’s profitable for the company.”

“By mid-2016 the real estate market should start looking up — but the number of projects will not be necessarily high,” said Kalban. “That’s because the local construction sector will be utilising most of its capacity to handle the government related projects for the Expo 2020.

“[The] construction sector will definitely experience a boom and, hopefully, there will be a return of liquidity. Banks may finally have to change their stance of not lending to real estate.

“In a way the slowdown in real estate activity this year is natural — after three years of high growth, a correction phase had to come.”

Fact box: Leveraging the Green Community’s branding and location

The release of 200 plus new homes at Green Community will generate a much needed cash infusion into the company. The soft launch happened during September’s Cityscape Global event.

“This property based at the Dubai Investments Park is close to the new growth corridor, such as the Expo 2020 site and Al Maktoum International Airport,” said Robin Teh, Country Manager at Chestertons Mena.

— M.N.