By Shane McGinley
Investors on the stalled offshore island offered refunds, credit swaps under debt restructuring
Debt-hit developer Nakheel, the real estate arm of state-owned Dubai World, has confirmed it is offering refunds to investors on its stalled Palm Jebel Ali island development.
Buyers on the project, where five and six-bedroom villas sold for around AED16m at their peak, have been given the option of credit swaps or receiving a refund, Nakheel said Wednesday.
“Long-term project customers are invited to swap their funds into available inventory or consolidate their funds. A long-term refund option is also available as part of the overall Nakheel restructuring,” a Nakheel spokesperson told Arabian Business.
Investors are reportedly being invited to swap their funds to units in sister project, Palm Jumeirah, receiving a credit note to be offset against an alternative Nakheel project, or a full refund in 2015.
The developer launched credit swaps in the wake of the property downturn, to enable buyers to transfer cash from unfinished or suspended developments to completed real estate.
Nakheel, the biggest casualty in Dubai’s real estate crash, has struggled to restructure around $10.9bn in debt after project funding dried up following the financial crisis.
The developer, whose debt woes forced Dubai World to announce a shock debt delay in 2009, is struggling to negotiation with contractors who hold the keys to its many delayed projects.
At its launch, Palm Jebel Ali was billed as a manmade residential and tourism hub set off the coast of Dubai. The real estate development was expected to be 50 percent bigger than the Palm Jumeirah, Nakheel’s first offshore project.
As part of the now-suspended Dubai Waterfront project, the island was expected to house around 1.7 million by 2020, Nakheel claimed in 2007.
Nakheel CEO Chris O’Donnell told Arabian Business last year that the project would not be scrapped, but admitted no work would take place on the development in the near future.
“It is a project that short-term we are not recommencing. But in the long-term it will have a lot of attraction as a real estate project,” he said.
Dubai’s government said in March last year it would provide $8bn in cash to Nakheel to help it pay contractors and complete stalled property projects. The government said it will also convert $1.2bn of loans to the company into equity.
Nakheel chairman Ali Rashid Lootah said in January the developer would issue a $1.63bn sukuk, or Islamic bonds, in the first quarter.
The developer said on January 2 it paid a total of AED3.9bn ($1.06bn) to its trade creditors.
I think Nakheel is the only sensible Organisation to take this step. Well Done.
Bravo Nakeel. It is a wise decession for a people who put hard earned money. How about other developers like Omniyat, ACI so on who sold property papaer on Water front? Did they follow the same decession like Nakeel?
SENSIBLE???? FAR FROM IT,
PLAYING WITH PEOPLES MONEY WHO HAVE PAID ALMOST 3-4 YEARS AGO, MILLIONS OF $ BUT THEY WILL REFUND IT IN 2015. AND THE SHORT TERM PROJECTS AND NOWHERE SHORTEM. THE HANDOVER WAS SCHEDULED TO BE IN 2009, AS ALL THE INVESTORS RECEIVED LETTERS FOR HANDOVER. BUT TILL TODAY NOTHING HAS BEEN HANDED OVER, AND THERE IS NO WORD ABOUT IT ALSO.
NAKHEEL IS A STATE OWNED COMPANY, BUT THAT DOESNT MEAN THAT THEY CAN EAT THE INVESTORS MONEY AND MAKE THEM SUFFER.
THE RESPONSIBLE PEOPLE SHOULD BE PUNISHED!!
I wish Nakheel and Dubai world all the best. Though I have not invested in property and have nothing to do with this project.
I would say its a good gesture Nakheel has shown and I am sure Dubai will come out of its cricis much sooner then people think.
Wish you all very best.
I think that a refund several years form now is poor. Refunds should be available now. After all they have not fulfilled their contractual obligations and have held investors money for too long
just a little clarification. Nakheel is not paying the amount now.. they will refund after a specific period after discussing with the customers.. we can be very sure that will be just a discounted amount they will refund and not the full amount..
Sounds fair on paper BUT what about the people that have purchased land or units from the secondry market.
Also what about ALL the cost incurred eg: planning ,design, sales and financing,
A land compensation or refund after the initial purchase is financially unacceptable.....
Nakheel to pay in 2015..I also have liabilites owed to the bank can the state government provide me the same option..I will feel enlightened!
Not for me, I go to jail if I can not pay..the state government should atleast being in the same shoes understand that if an individual,business or government can not pay..then amicably work out a solution and defer payments so one can stablize one's cash flow..
The article tries to bring confidence into the market but fails to show with an example how Nakheel intends to swap. The "swap" used by some developers consists of moving the money spent by investors into a finished project. The only problem is that the financial advantage is only for the developer. In fact his sales price is far over then the market price and knowing that he is unable to sell he gets rids of headaches of those investors who are asking for their money back. The whole RE Dubai bubble has also been a PR fiasco, the worst ever. Correct would be if Nakheel swaps against Oil barrels, I want to see that.
you forgot one important factor. When you are referring to the waterfront projects or palm jebel ali itsself, you need to bare in mind that the masterdeveloper, in that case Nakheel, has not put the infrastructure, or dry soil in this case, in place until date. Therefore, sub developer like any of those real esate experts you just named, are not able to start construction even if they want to.
But after all they just sold paper, like you rightly pointed out
Maybe it is just me, but can someone please inform us what is going to hapen with PJB? We understand that there is errosion at the world Islands, does the same apply to PJB? If so, the marine life in the entire area will be doomed