Nakheel settles $2.72bn of claims in stalled projects

Nakheel has settled about 60 percent of liabilities linked to buyers in its stalled real estate projects, representing about AED10bn ($2.72bn), the company’s chairman said Wednesday.

The property developer behind the palm-shaped islands off Dubai’s coast said it will deliver 7,982 homes in nine developments across the city in the 15 months ending Dec 2012, in projects including Jumeirah Islands, Al Furjan as well as Badrah and Veneto in the Waterfront project.

[To see Nakheel's schedule for its short-term projects, check here]

“Our liability on the long-term projects is approximately AED10bn and we’ve managed to solve and find and accommodate people for a value of AED6bn in 1.5 years,” said Ali Rashid Lootah.

"It's been a tough 18 months ... we have managed to complete a complex restructuring.”

Nakheel was one of the biggest casualties of Dubai’s real estate crash, suspending at least 100 projects in the wake of a property collapse that more than halved house prices in the emirate.

Investors in stalled projects deemed “long-term” by Nakheel, such as Palm Jebel Ali and Palm Deira, which do not have any planned construction schedules, were offered homes in completed Nakheel projects or to transfer their payment to another investor or project.

In March, buyers in the Palm Jebel Ali project – where five and six-bedroom villas sold for AED16m at their peak – were offered credit swaps for properties on Palm Jumeirah or a refund.

Lootah said Wednesday the developer planned to build new villas on Palm Jumeirah to accommodate a rise in demand, and to begin work on a dedicated mall for the offshore island.  “We are reviewing-  and hopefully before the end of year, after doing internal evaluations-  the Palm Jumeirah Mall, which is going be an added value to Palm Jumeirah and the rest of the area,” he said. “And also hopefully we will be launching new villas on Palm Jumeirah and will go out for engineering very shortly.

“We are seeing transactions are increasing and there is high demand and that has encouraged us. Details will be announced, numbers and design will be announced before the end of the year.”

At Nakheel’s offshore project The World, Lootah said the developer was in talks with a company to offer day tours for visitors from Palm Jumeirah out to the islands.

“We are trying to develop a new tour and cruising business to The World islands from Palm Jumeirah, we see a lot of demand for tour agencies for such things,” he said.

“We have a lot of people who come to Dubai for short stays and people asked us to develop that… for some packages for short-term tourism.”

Construction on the offshore project ground to a virtual standstill in the wake of the economic downturn and Nakheel is embroiled in at least 12 legal suits related to the islands.  

Active work is only continuing on one island – Lebanon – where a beach club is due to open in the fourth quarter of the year.

Nakheel has claimed a number of island owners are in default, while a source told Arabian Business in July the developer had changed terms on payment schedules previously agreed with buyers of islands to fast-track the collection of fees.

The new demands were allegedly issued after a revamp of Nakheel’s chairman and board in March 2010, as the developer sought to restructure millions of dollars of debt.

Nakheel said Wednesday it is restructuring some AED59bn ($16.1bn) of liabilities, including AED32bn to Dubai government, AED19bn to trade creditors and AED8bn to banks.

Nakheel is today expected to issue the first tranche of a twice-delayed AED4.8bn Islamic bond to trade creditors at a profit rate of 10 percent.

The company offered trade creditors repayment of 40 percent cash and the remaining 60 percent in the form of an Islamic bond, or sukuk as part of its restructuring program.

The Islamic bond will not be backed by the government but by Nakheel's assets, the chairman said, adding no assets had yet been sold as part of the restructuring.