Nakheel offers refunds to Palm Jebel Ali buyers

Investors on the stalled offshore island offered refunds, credit swaps under debt restructuring
Nakheel offers refunds to Palm Jebel Ali buyers
The Palm Jebel Ali was planned to be 50% larger than Palm Jumeirah upon completion
By Shane McGinley
Wed 09 Mar 2011 01:10 PM

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.

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