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A focus on cost control and striking favourable contractual agreements was reflected in Nakheel reporting a 43 per cent gain in net profit for 2014, totalling Dh3.68 billion against the previous year's Dh2.57 billion.
Another boost to the bottom line was the removal of the Dh460 million provision it had been making for a legal issue involving the Golden Mile development on the Palm Jumeirah. The issue was favourably resolved recently and the master-developer confirmed that leasing of the retail area there was 65 per cent done.
Revenues last year weighed in at Dh7 billion, albeit lower than 2013's Dh9.3 billion. ''The 2013 numbers were boosted by payments received on deliveries for older projects — and that was a different pricing altogether and the margins (derived then) were lower,'' said Ali Rashid Lootah, Chairman. ''For 2015 and next year, we expect revenues to be around the same levels, but expect to maintain similar growth as achieved in 2014 built around healthier margins.''
The next breakout period in terms of higher growth would be end of 2017, which is when Nakheel is looking to deliver many of its ongoing projects and also built up a substantial retail, hospitality and leasing portfolio. ''That's when retail, hospitality and leasing would contribute Dh7.5 billion from Dh1.3 billion last year,'' said Lootah.
''We have a lot of ideas whereby Nakheel can increase recurring revenues and it's a fact we want this income to play a major role in our financials. For instance, the Deira Islands Mall with its 2.8 million gross leasable area should net us around Dh1 billion.'' (The project, one of the key attractions of the in-development Deira Islands, is scheduled for completion before the end of the decade.) By late 2017, its residential leasing portfolio would total 30,000 units and retail area would be 10 million square feet.
While dismissing the notion of a stock market flotation for now, Lootah said: ''We will continue with a mix of our own resources and bank financing for all existing projects. So far, we have been successful in financing all of our malls through banks and that will continue.'' (Last year, the developer cleared its historical obligations to the banks, totalling Dh7.9 billion, which was a full four years before they were due.) According to Lootah, there was a slowdown in sales during the second half of 2014, but that has not been reflected in Nakheel's pricing. ''We are still selling development plots at the old prices — and most of these are mortgage-free (transactions). It means customers who are buying from us are in a healthy situation (financially).
''The market is quite different from the old days. Whether these buyers remortgage later on is their business... but we are not even seeing that happen.''
A new revenue stream could open up by providing project consultancy/management services for overseas developers. But Nakheel will not look to an overseas exposure until August 2016, by which time it would have met all ''restructuring conditions by paying off all debts''.
Limitless, the Dubai Government owned master developer, has submitted a revised business restructuring plan to its creditors and which should form the basis for a workable solution, according to Ali Rasid Lootah, who is also its Chairman.
''No one has come back questioning what we put forward... it's a good proposal,'' said Lootah. ''We have won 85 per cent approval from the lenders. Some of the others may need more time for further clarifications, etc.'' The developer has also sought a three-month extension on its debt repayment which was due at the end of last year.
On the project and development side, things are looking up for the developer. ''We are selling Limitless [owned land plots] at prices much higher than what they have been collateralised for,'' said Lootah. ''The revised masterplan for the development in Vietnam is awaiting go-ahead and we are also in talks to take Moscow project forward.''
Source: Manoj Nair, Associate Editor, gulfnews.com