Damac hints at backtrack on Palm Springs axe

INVESTOR ANGER: Buyers of Palm Springs units face millions of dirhams in losses after Damac cancelled the project.

Under fire developer Damac Properties on Sunday showed the first signs it may backtrack on its decision to axe the Palm Springs project on the Palm Jebel Ali following a backlash from investors around the world.

Investors have said they stand to lose million of dirhams after the Dubai-based developer cancelled the 25-storey beachfront development last month, offering compensation well below current market value.

The saga has been widely reported in the international media, creating bad publicity for Damac in key markets it is looking to attract investment from, such as the UK.

"We have had a number of representations from investors on the decision to cancel the Palm Springs project," Niall McLoughlin, senior vice president of corporate communications, said in a statement emailed to ArabianBusiness.com.

"We are looking at various scenarios and will make a statement in due course."

Damac said last month the cancellation of the project five years after launch was due to "redevelopment of the plots", stating that the development "cannot be situated on the re-allocated plot".

However, this explanation was brought into question last week when Palm Jebel Ali master developer Nakheel said it had informed investors of changes to the masterplan over 10 months ago.

Nakheel also said it had "positive" correspondence with Damac as recently as February, in which the developer gave no indication that it would not be going ahead with the project.

A group of more than 60 UK-based investors in the project are threatening to take Damac to court unless the developer reverses its decision and continues with construction.

The group, which last month stormed the London launch of Damac's Jumeirah Village South project, has given the developer until April 11 to change its mind or face legal action.

The saga seems to have reduced confidence in the Dubai property market, according to a recent ArabianBusiness.com spot poll.

Two-thirds of respondents said news of the cancellation had made them think twice about buying property off-plan, stating that it had made them "very cautious about the Dubai property market".

Dubai has a massive secondary market for off-plan real estate, with units passing through numerous hands before a development is finally built as investors capitalise on soaring prices in the sector to make quick profits without putting up huge amounts of capital.

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READERS' COMMENTS

Damac reconsidering offer
Posted by wavering invester, Great Britain on Thursday 10 April 2008 at 00:30 UAE time

Is it true the that under intense pressure Damac are going to build Palm Springs after all?

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