Nakheel illustrated the Dubai dream

Its Palm Jumeirah project showed the world what was possible in engineering and ambition.

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Nakheel once described itself as the place "Where the Vision of Dubai Gets Built", though the slogan is not easily found on its website these days. For a few years, that certainly proved to be true. Its US$12 billion (Dh44.07bn) Palm Jumeirah development transformed the name of a plant that was the source of food and shelter for the Bedouin into the emirate's premier marketing icon, one visible from outer space.

The project, launched off the Dubai coast in 2001, was attractive enough to convince personalities including the property developer Donald Trump and the football star David Beckham into buying in. An aerial view of the island, which now includes lavish hotels, waterfront villas and a monorail, is often featured on international television and in newspapers as an illustration of not just how far engineering can go, but how large were the dreams and ambitions of Dubai.

That same image is now being used to tell a vastly different story. While Nakheel, which means "the palms", may only be part of the Dubai World conglomerate, it remains the best illustration of the Dubai dream. Nakheel and Limitless, another property subsidiary of Dubai World, are top priorities as the conglomerate seeks to restructure. The total value of debt carried by the subsidiaries subject to the restructuring process amounts to about $26bn, of which about $6bn relates to a Nakheel sukuk, Dubai World said yesterday.

When Dubai first set its sights on becoming a globally known financial, trade and tourism centre earlier this decade, a company called Dubai Palm Developers, later Nakheel, came up with the idea to use sand dredged from the expansion of Dubai's ports to create island centres. Such was the demand for the "waterfront lifestyle" in the year-round sunshine of the Gulf that Nakheel's strategy focused on creating more and more shoreline.

Saeed Ahmed Saeed was the company's managing director at the time. He joined Limitless as chief executive in 2005, moving the man-made theme inland with plans for the Arabian Canal, a proposed 75km waterway and a 14,000 hectare city valued at $11bn and $50bn respectively. Construction on the canal began late last year but has since stalled. Mr Saeed, who went on to form Limitless in 2005 and is its current chief executive, expanded the company's portfolio and a string of announcements of projects in Jordan, Saudi Arabia, Russia, India and Vietnam followed.

Meanwhile, James Wilson, a South African who had a good track record of developing holiday resorts, took the helm of Nakheel in early 2005. Its Ibn Battuta Mall had just opened and plans were being made for the company's biggest project ever: Dubai Waterfront, a residential and office community which would cover what it claimed would be "an area twice the size of Hong Kong". Meanwhile, International City, a huge residential development close to Dubai International Airport, was under construction.

The shuffle in the corporate suite continued. Mr Wilson left the company in 2006 and Nakheel was taken over by Chris O'Donnell, an Australian property developer. Even with all the inland activity creating new neighbourhoods out of desert, it was the man-made islands that continued to capture the world's attention. Nakheel's appetite for reclaimed land was whetted with the success of the first of the Palm island trilogy, Palm Jumeirah. The developer went out of its way to keep the island in the spotlight.

The publicity that surrounded Beckham's purchase of an off-plan villa on Palm Jumeirah when he passed through Dubai en route to Japan for the 2002 World Cup finals did wonders for sales on the development, where the first homeowners starting occupancy in late 2007. The hype also boosted property prices, with some homeowners reporting they had doubled their investments in just a few years. Atlantis The Palm, a 50 per cent joint venture between Nakheel and the South African business tycoon Sol Kerzner, also brought attention to the Palm. A fireworks display to mark the opening of the hotel, where guests included the entertainer Kylie Minogue and the actor Robert De Niro, was reported to have cost $20 million.

Nakheel also struck a deal with Mr Trump for a $789m Trump International Tower and Hotel at Palm Jumeirah. With Palm Jumeirah barely finished, Nakheel hatched plans for two more islands, Palm Deira and Palm Jebel Ali. It didn't stop there. Nakheel launched the $14bn The World project, a collection of artificial islands in the shape of a world map off the Dubai coast. Once billed as "the Maldives of the Middle East", construction is yet to begin on the islands, which were fully reclaimed early last year. Both palm projects are now delayed.

Nakheel also tried to outdo its rival, Emaar Properties, with plans to build a tower taller than the Burj Dubai. The structure, which was set to be more than 1km high, was initially to be built at Nakheel's Dubai Waterfront project. After a series of design changes and early consultation costs, thought to have been more than $20m, the location of the tower was planned at a site close to Ibn Battuta Mall.

Set to be the centrepiece of the Nakheel Harbour and Tower development, the tower is yet to make it off the drawing board. The global economic crisis then began to affect the UAE. The Trump project, launched with such fanfare at an extravagant New York press conference a few months before, was put on hold. After being launched on the eve of Cityscape Dubai in October last year, work was suspended on the Waterfront project by the end of the year.

Within the space of a few months, Dubai property prices fell as much as 50 per cent, the off-plan market evaporated and property companies were faced with many buyers who struggled to meet their instalments. Nakheel today struggles with a huge debt and hundreds of people have invested in homes that may never be built. Overzealous expansion plans have also left a significant number of suppliers short of cash and hundreds of people have lost jobs.

How Dubai World will restructure Nakheel and Limitless will now be closely watched, not just locally, but by the world. The success of that process will likely dictate how quickly confidence in Dubai's property market will recover.