NAKHEEL, the troubled Dubai developer restructuring $10.8 billion in debt, has confirmed it is no longer selling real estate units in the emirate. The state backed company, which overstretched itself building islands in the shape of palms and other ambitious projects, said it is to focus instead on offering swap options to existing investors. Nakheel has stopped selling properties currently, and is focusing on consolidations and swaps options, a spokesperson said in a statement. Nakheel offered credit swaps in the wake of Dubais real estate crash, to enable buyers to transfer cash from unfinished or halted developments to completed real estate. The company was one of the biggest casualties of Dubais real estate downturn, which saw prices halve from their 2008 peak and almost half of developments in the emirate cancelled. The developers inability to meet its debt obligations, in the wake of a property collapse and the global credit crunch, helped trigger Dubais debt crisis in 2009. Real estate analysts are divided on news the developer had stopped pursuing property sales, with some seeing it as a sign Nakheel was keen to restore confidence in its projects. In good times and bad, looking after existing clients before pursuing new ones makes smart business sense, said Michael Michael, director of sales and leasing at Landmark Properties told Arabian Business. The announcement to stop selling properties and focus on consolidation and swap options may restore a degree of customer confidence in Nakheel and its projects. I believe the announcement shows a sign of commitment which is always good for the market, he added. Delays are also affecting other parts of Dubais real estate markets. Business Bay is struggling to attract tenants as an upsurge in construction activity across Dubai squeezes rental rates and occupancy levels, according to real estate consultancy firm CB Richard Ellis. Despite a prominent location adjacent to the existing central business district (CBD), Business Bay faces a battle to reverse huge vacancy rates, the firm said in its latest report. Rental rates for one bedroom apartments in the development average around AED55,000 ($14,974) per annum, around 36% lower than those in the nearby Downtown Dubai district, which average around AED75,000 ($20,419).Tenants have proved unwilling to contend with ongoing infrastructure issues and facility shortages, the report says. The 64 million square feet Business Bay is set to become home to about 191,000 people across 240 towers when completed. Meanwhile, the recapitalization plan enables Nakheel to offer creditors 100 percent of agreed amounts owed and to fulfill its obligations to customers through the prompt completion of near term projects.Under this proposal, the Government of Dubai, through the Dubai Financial Support Fund (DFSF), will commit to providing approximately $8 billion of new money directly to Nakheel to fund operations and settle liabilities. In addition, the DFSF has proposed to convert its existing $1.2 billion debt claim in Nakheel into equity. A statement by the said: Nakheel will work with its creditors over the coming weeks to secure agreement for the recapitalisation plan. The support from the Government is conditional upon this agreement. However, ahead of a final agreement on the recapitalisation plan, an initial $1.5 billion of the new funds from the DFSF will be made available as required to Nakheel to fund contractors to continue building near-term development projects. Going forward, Nakheel will work closely with the Government to carefully plan and evaluate future projects, ensuring that Nakheel fulfills its important role in the development of the Dubai economy.The plan provides customers and creditors with a fair and equitable recovery. It has been developed through complex and lengthy discussions with stakeholders and the Government. Nakheel will use a significant proportion of the funds provided by the DFSF to complete the construction of near-term projects. Nakheel will provide customers with clarity on completion and handover dates of those projects; Nakheel will continue to offer customers invested in longer-term projects the option of receiving credit equivalent to 100 per cent of their installment payments and swap into projects nearing completion at todays market value.Those customers invested in longer-term projects that do not want to exchange their property for a property in a development nearing completion will be offered the option of a revised payment schedule or the option to hold the assignable credit for five years. Customers would be able to swap the credit during this period for property or land, or for cash at the end of five years.
Click here to read full news..
