Dubai developer Nakheel in talks to extend Dh8bn loan

Nakheel is in talks to extend an Dh8 billion loan due in 2015, said the company's chairman, Ali Rashid Lootah.

Nakheel, developer of the Palm Jumeirah, says it is in talks to extend an Dh8 billion loan due in 2015. Pawan Singh / The National
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Nakheel is in talks to extend an Dh8 billion (US$2.17bn) loan due in 2015, said the company's chairman, Ali Rashid Lootah.

The revelation comes a month after Nakheel, which received financial assistance from the Dubai Government following the city's property downturn four years ago, posted annual profits of more than Dh2bn.

Exotix, a boutique investment bank with offices in Dubai, cut its rating last month on Nakheel's sukuk due in August 2016, warning the developer may fall 70 per cent short of the funds needed to repay.

But in an interview with The National, Mr Lootah dismissed concerns over the company's ability to honour the debt, saying Nakheel was "not worried" about the sukuk. "We are talking to financial institutions to restructure our loan, which is a normal part of business because the original tenure is very short," he said.

"We have time but we are talking to them from now and engaging them from now to get a longer term. We are not worried about the sukuk. Our strategy first will be deal with the lenders. The sukuk is a secondary issue to that."

Ahmad Al Anani, the senior executive officer for the Middle East and North Africa at Exotix, said the timing of the talks was interesting, coming more than two years before the loan is due. "Maybe the logic is to capture on this positivity that is surrounding Dubai and the real estate sector again and to try and lock in funding on lower rates and more favourable terms. I think it will probably be a challenge, unless of course they are enhancing the collateral," he said.

Mr Lootah added the developer still had some issues with contractors, but that was a "normal part of business". The board, he said, was determined to put Nakheel back on track. "I think we have been successful so far. We have sorted all the old issues, most of the old issues."

It was an ongoing process, but the company was meeting its commitments and promises, and he pointed to the 57 per cent growth in profits last year, which "speaks for itself".

"Nakheel will grow and grow and grow in a more careful manner and with a more well-studied strategy and plan." The developer would focus on leisure and retail projects over the next couple of years. "Tourism is booming in Dubai so people are looking for more options, so we are looking at that."

But Mr Lootah said the developer had no plans to build on the Palm Jebel Ali "for the foreseeable future", as it would require heavy investment to develop the required infrastructure.

Construction is under way to double the size of Dragon Mart, which is already the largest trading hub of Chinese products outside mainland China, while work is continuing to build two community malls.

In addition, building work will begin this year on three Nakheel projects in Dubai currently at the design stage: the doubling of Ibn Battuta Mall, the Nakheel Mall, and The Pointe, which will overlook the Jumeirah Beach Hotel and the Atlantis resort. The Pointe will include shops, restaurants and computerised dancing fountains.

The long-awaited Nakheel Mall on the Palm Jumeirah will include 1 million square feet of retail space, but there was potential for it to become even larger, said Mr Lootah.

"It could go up to maximum 1.2 million sq ft. We are looking at doing more value engineering and proper use of a plan to enhance it. We see huge demand.

"That's why we said let's find more areas because people are excited and everybody wants to be part of this. Also we are looking to see whether we could do more at The Pointe also."

But 2013 is also a year of deliveries for Nakheel, said Mr Lootah.

The developer would hand over 3,000 properties, most of which are on the Palm Jumeirah, Al Furjan, International City, Jumeirah Village, Jumeirah Park and Jumeirah Heights residential development areas.

"We are part of Dubai and we want to continue that. Hopefully we will add more and more new projects which will enhance the economy of Dubai," said Mr Lootah.

"Nakheel is here to stay."