By Ed Attwood
Final villas in Jumeirah Village Circle project to be completed by middle of 2013
Contractor Arabtec has picked up a $76m contract to work on 523 townhouses and villas in Dubai for Nakheel’s delayed Jumeirah Village Circle development.
The firm will finish off 346 partially-built houses and build 177 new units, it said in a statement to the Dubai bourse on Wednesday. Work on the project is scheduled to be completed by the end of the first half of 2013.
Work on Jumeirah Village Circle stalled during the Dubai real estate correction, as developer Nakheel sought to restructure around $10.8bn in debt.
But the project was one of seven on Nakheel’s priority list for the resumption of construction once the period of debt restructuring had been completed. The firm invited bids from contractors to finish the work in February this year.
When completed, Jumeirah Village – Nakheel’s largest inland project - will have over 6,000 villas and townhouses, surrounded by residential towers.
Earlier this month, Arabtec posted a 74 percent drop in net profits to $7.9m in the second quarter. The construction major also saw revenue drop by 5.1 percent to $331m.
It has a backlog worth $4.08bn in all of its markets, and has been focusing on diversifying away from Dubai to focus on countries such as Saudi Arabia, Qatar and Egypt.
Arabtec, the UAE’s biggest builder by market value, is one of Nakheel’s largest trade creditors.
The developer behind the man-made islands off Dubai’s coast admitted earlier this month that it had again delayed its planned Islamic bond due to administrative problems.
Nakheel had been expected to issue the $1.63bn sukuk – a 60 percent part payment to its trade creditors, with the remaining debt payable in cash – by the end of June.
The bond is already being offered at a 20 percent discount in the secondary market by some trade creditors.
Nakheel was one of the biggest casualties of Dubai’s real estate collapse, which saw prices halve from their 2008-peak and almost half of developments in the emirate cancelled.
The developer’s inability to meet its debt obligations in the wake of a property collapse and the global credit crunch, helped trigger Dubai's debt crisis in 2009.
I imagine that the sage words of Dubai's Police Chief have fallen on deaf ears, in this respect. The implied moratorium on new building, which while perhaps not universally palatable, did make sound sense.
So another 6,000 villas and townhouses to add to the inventory and drive declining property values. We must assume that sufficient numbers of properties have been sold, or reassigned to in credit customers persuaded to swap from other projects, to suggest a decent return in terms of final payment receipts due on handovers.
Although, Arabtec themselves, thwarted on so many other projects with dramatic plunge in profits are certainly deserving of the $76 million work award, considering the delay in issuing an Islamic bond for 60 per cent of what they are owed.
The problem is rents will undoubtedly fall as well as sales prices, I imagine Jumeirah Village will also take trade away from the Springs and Meadows districts of Emirates Hills.