By Alex Delmar-Morgan
Developer announces restructuring plan in bid to progress with Dubai scheme.
Cirrus Developments has become the latest property company in the UAE to help cash-strapped investors by offering a stake in one of its projects.
Dubai-based Cirrus plans to create the New Project Company, which will develop the $817m commercial and residential Aquarius Gate project at the Nakheel Waterfront in Jebel Ali.
The new company will be 30 percent owned by the developer and 70 percent by investors and will be registered with RERA (Real Estate Regulatory Authority).
Shareholders will be consulted on the building of the scheme and will be entitled to profits, paid out in a dividend on completion of the project.
The offer will only be available to investors who have paid or are willing to pay 30 percent of the purchase price of the property.
While the developer has admitted this is a loss-making initiative, it said it was necessary to prevent widespread defaulting on the project, particularly off-plan units launched in 2008 at the height of the property boom.
“The purchasers of units in these projects run the greatest risk of default,” Behnam Eshragh, chairman and CEO of Cirrus said.
“Our proposal will allow us to maintain our relationship with our purchasers which is very important for us, and ensures the project will be completed successfully through a collaborative profit scheme for all purchasers involved in the project,” he continued.
With banks charging high interest rates making loan repayments more expensive and widespread job cuts, the risk of default in Dubai has risen sharply.
Last week, another Dubai developer, Deyaar, said it would slash prices on some of its projects and soften payment plans to mitigate against the risk of defaults.
Classis case of avoiding defaults on land payments by the builder. A Break Even proposition.
This is not an innovative or novel way to "help" the investors. It is exactly as ik says, it is the next payment that Cirrus require to make the next land payment. firstly is it not illegal to sell off plan projects without fully owning the land as a developer? Secondly this supposed investor scheme being offer is a way to shift the liability from the developer to the investor. so the poor investor takes yet another liability hit. For example, if Cirrus were to default on the project gpong forwards, the poor investorsa who own the 70% of the project would surely be the ones also liable for the claims agains the project company? Or are Cirrus going to go ahead and underwrite that? and if so with what? This company needs to be man enough, grow up ,and pay back the investors with what little they have remaining in their supposed Escrow account. treating investors like dirt will not endear Cirrus to any future investor, and asking for further monies from the investor in this climate - these guys need to go get a reality check done!
Every one has sooo much to say about this why isn't anyone meeting up or getting Cirrus to set up a meeting so everyone can come together and have a final say?