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OVERSEAS Union Enterprise (OUE) said it will report a net loss for its second-quarter results as it writes down two development properties in its portfolio.
In its profit warning yesterday, the group said that it expects a 'material net loss' for the quarter ended June 30, 2009 because of a 'significant allowance' for impairment losses for the two properties.
OUE did not specify the properties involved, but last month, it announced that it had obtained a secured term loan facility for up to $300 million.
The facility was secured by, among other things, first legal mortgages over 21 Angullia Park (the former Parisian site) and Grangeford, fixed and floating charges over all the present and future assets of the borrowers, and the assignment of insurance in respect of the two properties.
The company's announcement yesterday follows an earlier warning in May, when it said that it was arranging banking facilities for two development properties, which could be used within Q2 2009. 'In connection with the proposed banking facilities, the group may have to assess the recoverable amounts of the development properties, and where appropriate, may have to consider providing an allowance for impairment losses,' the property group said then.
The writedowns come on the back of valuations obtained for the two properties in connection with the banking facilities secured for them.
But OUE also added that the group's business and operations continue to make a positive contribution.
Separately, OUE unit Cove Development said it has obtained a court order to recover possession of 171 apartment units at Grangeford.
The firm had leased out the units to Ideal Accommodation under a master lease agreement. However, the Urban Redevelopment Authority (URA) then discovered that Ideal had illegally partitioned apartments to collect more rent.
In response, Cove Development terminated Ideal's two-year lease. Some of Ideal's former tenants have since signed lease agreements with Cove Development for entire units. However, others have refused to clear out.
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