By Shane McGinley
Island owner is latest to try to exit investment in stalled offshore Nakheel development
An owner in Nakheel’s floundering ‘The World’ development has become the latest to put his island up for sale as buyers seek to offload assets in the stalled project.
The atoll located in the Asia group of islands has an initial asking price of AED105m ($28.6m), but comes with outstanding payments due to developer Nakheel, the broker behind the sale said.
“The total price is AED105m. This reflects the AED25m that has been paid [by the owner] and AED80m must be paid to Nakheel with a payment plan,” said Oleg Nikitenko, general manager of Sun Coast Real Estate Brokers.
No construction has begun on the island, which spans 36,661 sq m, though the development has been granted permission for a series of hotel and residential developments.
Work on The World slowed to a virtual standstill in the wake of the economic downturn, as owners struggled to secure financing to develop the islands. Just two buyers have begun construction work; Kleindienst Group, the developer behind the six-island Heart of Europe Project, and Indian tycoon Wakil Admed Azmi, who plans to launch an AED68m beach club on the island of Lebanon later this month.
Five islands were put up for sale last July at discounts of up to 17 percent on their original sale prices as investors attempted to exit Dubai’s struggling real estate market.
Nakheel said last August that it had put a number of the islands on the market after their owners defaulted on payment plans. A source told Arabian Business 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 $10.8bn in debt.
The state-owned firm has since become embroiled in a rash of legal battles linked to the offshore project, including one lawsuit against Kleindienst Properties which demands almost $200m in unpaid installments and delay fees.
Kleindienst has halted work on its six islands.
Nikitenko said he was in talks with one potential buyer in the “first step of negotiations” to buy an island, describing the offshore project as a solid long-term investment.
“I know that Nakheel invested a lot of money in The World and most of the islands are sold,” he said. “Most of the owners paid only 15 to 25 percent from the total amount so Nakheel must be interested to receive the rest of the money from owners with payment plans.
“The World has very big perspectives in the future and I am sure we will see this very soon.”
Any forecasts about "service fees", "common areas access fees", "beach access"? and i donno what else?
This means that
1.the World Island owners can now advertise their islands for sale over here and I am pretty sure that most of them want to get rid of this liability.
2. I can see the World Island project from my office very clearly and for some reason I don't see any development on them except a lovely villa which was constructed probably a while back.
I thought there were four islands on The World put up for sale last year at around 18 per cent discount, I don't believe that this advanced their cause in terms of saleability one iota.
There is indeed little future for these islands at the moment, given the economic woes in Europe and the Iranians' water-borne threats surrounding access to the Gulf.
This is almost certainly a case for distressed sale prices, but I suppose for the lumbered owner negative equity is not an option with Nakheel wanting their money!
Will Nakheel charge access fees to use the island beaches also!? As they are attempting to do on their other water based developments... That should be fun.
In fact as a potential user of the island developments, can i request a list of service fees from Nakheel or do i go directly to the island owners themselves? I won't hold my breath. Neither party will have them...
I just imagine the row of investors who want to grab that island.
Dubai, come back down to the ground, the world will never see a future. You are better off leasing the islands for parties.