Nakheel PJSC, the Dubai developer
bailed out by the government in 2009, will start selling
townhouses on Palm Jumeirah next month in its first new
residential project since the property market crashed in 2008,
Chairman Ali Rashed Lootah said.
The state-controlled company will develop mid-range homes
on its Palm Jumeirah artificial island, alongside the apartments
and villas already built there. Nakheel, Dubai’s biggest
developer by assets, announced a plan to construct 102
townhouses on the island in September.
“Not everyone wants a villa or an apartment,” Lootah said
in an interview at his office in Dubai. “There’s demand for
townhouses on the beach, but we’re being careful not to increase
the density on the palm.”
The Palm Residence project will test demand for property in
a market where prices have plunged by more than 65 percent since
their mid-2008 peak. The slump forced Nakheel to write down the
value of its real estate by 78.6 billion dirhams ($21 billion)
and prompted the bailout.
Most of the Palm project will be financed by sales agreed
before construction begins, a method that was common before the
property slump. Lootah, who declined to comment on the expected
cost of the development, said it won’t be financed through bonds
or loans from international banks.
Stalled Projects
Nakheel plans to spend 1.4 billion dirhams this year to
complete nine projects across Dubai that had been suspended
after the property crash, according to an Islamic bond
prospectus obtained by Bloomberg News in September. Nakheel
plans to complete 7,982 homes in 2012, the document showed.
“My main challenge is to deliver to buyers the homes they
bought,” Lootah said. “The banks and the contractors made a
lot of money off us during the boom days, but the buyers have
been patient and we want to deliver the homes they paid for and
dreamed of. That’s my main goal.”
Nakheel settled 6.6 billion dirhams of claims related to
property sold in projects that were halted indefinitely, Lootah
said. The buyers have been offered alternative homes in projects
nearing completion or credit notes that can be redeemed in five
years. Nakheel has about 3.4 billion dirhams of claims left to
settle, he said.
The yield on Nakheel’s 3.8 billion-dirham, 10 percent sukuk
maturing in August 2016 has fallen 153 basis points, or 1.53
percent of a percentage point, this year to 16.777 percent,
according to data compiled by Bloomberg.
Revenue from retail will probably double by 2014, lifted by
an additional 3 million square feet (278,709 square meters) of
space, Lootah said. The company reported revenue of 1.5 billion
dirhams for the first half and is due to release 2011 results in
March.
International Unit Revival
Limitless LLC, the international property developer put
under Nakheel’s management in July 2010, has almost restructured
a $1.2 billion loan, Lootah said. The company, which halted
projects across the world following the crisis, plans to resume
work on developments in Moscow and Saudi Arabia, where housing
demand is highest, Lootah said.
Before the crisis hit, Limitless was developing Khimki, a
villa and low-rise apartment project on 114 hectares (1.14
million square meters) to house 14,000 people alongside the
Moscow River Canal. The company’s Al Wasl project in the Saudi
Arabian capital, Riyadh, was designed to include more than
50,000 homes as well as offices and retail space on 1,400
hectares, according to the company’s website.
To contact the reporter on this story:
Zainab Fattah in Dubai on
zfattah@bloomberg.net.
To contact the editor responsible for this story:
Andrew Blackman at
ablackman@bloomberg.net.
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