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The top brass of Dubai developer Nakheel recently announced plans to settle the company's bank debt almost four years ahead of schedule. Nakheel, which owes a total of Dh7.9 billion, will pay the remaining balance of Dh5.54 billion next month, after making an early repayment of Dh2.35 billion in February.
Famed for projects such the Palm Jumeirah, Dragon Mart and Ibn Battuta Mall, Nakheel was a key part of the Dubai World conglomerate that asked creditors to freeze debt repayments in the aftermath of the global financial crisis in 2009. After being taken over by the Dubai Government in 2011, a debt-restructuring package was agreed wherein Nakheel would pay bankers in stages beginning next year. The company also agreed to issue to trade creditors a sukuk that is due in August 2016.
But with Dubai's property market on the up, the developer says it has been able to clear its bank debts completely. This has been due to savings of around Dh23 billion on the company's business plan.
Ali Rashid Lootah, Chairman of Nakheel, has emphasized that the company has been able to repay its loans without outside financial assistance and that it has no intention of slowing down, announcing a raft of new mega projects such as Deira Islands Mall, Palm West Beach, Nakheel Mall and a brand-new gated villa community at Nad Al Sheba.
- What has been the most important factor in Nakheel's fast recovery?
The early repayment of Dh7.9 billion in bank loans is perhaps the most significant milestone in the history of Nakheel. The most important factor in our remarkable journey and achievements is the support, trust and belief that the Dubai Government, investors, business partners, regulatory authorities and employees placed in Nakheel during its restructuring exercise and throughout the four years since the implementation of our new business plan in August 2011.
- What does this mean for investors?
Nakheel has reached an amicable settlement with the majority of customers who invested in deferred projects and we continue to work towards settling the remaining customers. Nakheel remains committed to its long-term projects to a schedule that meets market needs.
- How has reports about the financial health of Arabtec, one of Nakheel's partners, affected the progress of your projects?
We do not expect any change in or impact on our construction progress. There are a lot of new Nakheel projects on the horizon.
Nakheel has launched more than 20 new projects — including master-planned communities, malls, homes and hospitality and tourism related projects — since the completion of its financial restructuring in 2011. We recently announced our plans for Deira Islands Mall, a 620-sq-km shopping, dining and entertainment destination, and a diverse range of exciting projects in the pipeline, details of which will be released soon.
- Nakheel will build 1,000 new villas at Nad Al Sheba to rent out as a way of boosting recurring income. Do you think there is enough demand for these?
Expansion of the leasing portfolio is key to our business strategy. We continue to witness almost 100 per cent occupancy of units within our current range of leasable units and we are confident that our new villa complex will be in demand just as much as our existing units.
- How much involvement will you have with the World Expo 2020 construction projects?
Dubai's winning bid to host the World Expo 2020 was one of the proudest moments in the history of the UAE, and Nakheel will be honoured to play its part in the delivery. Our projects such as Palm Jumeirah and The World have already helped put Dubai on the map, and we aim to deliver a range of innovative, sustainable destination developments that will contribute to the government's targets. Among them are Deira Islands, a 15.3-sq-km waterfront city that will pave the way for the development of dozens of hotels, resorts and serviced apartment complexes.
Our own investment in projects in the hospitality sector is expected to reach some Dh4 billion in the next five years, during which we plan to build ten hotels with 3,000 rooms between them, ranging from five-star, luxury establishments to budget style accommodation.
We are also developing a range of tourist attractions, including major shopping, dining and entertainment destinations such as Deira Islands Mall and Night Souk and, on Palm Jumeirah, The Pointe, Nakheel Mall, The Boardwalk and Palm West Beach.
Settling debt - Original payment schedule:
Dh6.8 billion due in September 2015
Dh200 million due in March 2016
Dh900 million due in March 2018
Dh2.35 billion paid in February 2014
Early repayment of Dh5.54 to be made in August 2014
The trade creditor sukuk is due in August 2016
Overview - Nakheel timeline:
2010 March: Appointment of new board of directors, led by Ali Rashid Lootah
2011 August: Launches Dragon Mart 2; implements financial restructuring and new business plan
2011 September: Launches Palma Residences
2012 February: Launches The Pointe, Palm Jumeirah; receives Restructuring Deal of 2011 award at the Islamic Finance Awards
2012 March: Launches Ibn Battuta Mall expansion
2012 May: Launches Palm Views
2012 July: Starts construction of Jumeirah Park Community Centre
2012 November: Opens Al Ittihad Park, Palm Jumeirah
2012 December: Launches 90 villas at Jumeirah Village Circle
2013 January: Announces Dh2 billion profit for 2012, up 57 per cent on 2011
2013 February: Launches Nakheel Mall, Club Vista Mare and Azure Residences, Palm Jumeirah
2013 June: Launches Jumeirah Park Legacy Nova Villas and breaks previous records by selling all 350 homes in five hours; launches Jumeirah Islands town houses
2013 August: Launches International City Community Centre
2013 September: Launches Warsan Village
2013 October: Launches 400 homes at Al Furjan Phase 2; launches Deira Islands, Palm West Beach and Palm Jumeirah Boardwalk
2014 January: Reveals plans to prepay half of its bank debt 18 months early; announces Dh2.57 billion profit for 2013, up 27 per cent on 2012
2014 February: Launches The Palm Tower Residences; prepays Dh2.35 billion
2014 March: Launches shopping centres at Jumeirah Village Triangle and Jumeirah Village Circle
2014 June: Announces plan to repay its remaining loans by August 2014
Source: Kirsty Savage, Special to Property Weekly