Off-plan sales push Nakheel profits up 58% to Dh1.77 billion

Profits at Nakheel increased 58 per cent to Dh1.77 billion during the first nine months of 2013 as the developer handed over 2,200 homes ahead of a Dh8bn debt deadline in 2015.

Nakheel's recent off-plan sales of villas, such as at Jumeirah Park above, had a significant favourable impact on the company's cash flows. Pawan Singh / The National

Nakheel profits increased 58 per cent to Dh1.77 billion during the first nine months of the year as it handed over more than 2,000 new homes.

It comes as the company prepares to face a Dh8bn debt deadline in 2015. Net profits rose from Dh1.12bn in the same period last year with new off-plan sales providing “a significant favourable impact on the cash flows.”

Nakheel, the master developer behind the Palm Jumeirah and The World man-made islands off the Dubai coast, said that the profits came on the back of a 50 per cent increase in revenues for the same period which stood at Dh6.83bn.

The government-owned company said it had handed over 2,200 homes to purchasers at its Palm Jumeirah, Al Furjan, International City, Jumeirah Village, Jumeirah Park and Jumeirah Heights schemes so far this year and was on track to complete 3,000 homes by the end of 2013.

Nakheel, which was part of the Dubai World conglomerate that spooked financial markets in 2009 when it asked creditors for a debt repayment standstill, is squaring up to refinance an Dh8bn loan that falls due in 2015, while a Dh3.8bn sukuk becomes due in 2016.

On the eve of the Cityscape property exhibition, the company said it remained locked in negotiations with three banks – two local banks and one international entity – over the refinancing ahead of the August 2015 deadline.

“We obviously hope to get it resolved as soon as possible but we have two years to go,” the Nakheel chairman Ali Rashid Lootah told The National. “We started [negotiating] early because we don’t want to be pushed in a corner.”

As property brokers in Dubai report annual price rises in Dubai of as much as 42 per cent for apartments and 26 per cent for villas, Mr Lootah said that prices in Nakheel schemes had increased about 15 per cent over the previous year.

“Compared to last year we have seen an increase in prices,” he said. “Even for the off-plan sales there is a big increase. I think it depends on the location, but it is probably 10 to 15 per cent. I think it’s a good price. I hope it doesn’t go up more. We need a healthy market. If it’s too expensive nobody will buy.”

Nakheel said it was in the process of building 2,800 new homes with an estimated sales value of Dh8.5bn in Dubai as well as 3.6 million square feet of shops worth about Dh6bn and more than 1,200 hotel rooms worth Dh1.5bn.

The company is currently targeting mass-market projects such as its recently announced 942 off-plan townhouse Warsan Village scheme next to International City, which was already 30 per cent sold.

“We are looking at the whole thing from a commercial point of view to maximise our gain. And why not with the mass market?” Mr Lootah said.

He added that Nakheel plans to build a new two-star hotel at the back of its Dragon Mart shopping centre close to International City close to the three-star hotel which is currently nearing completion. Nakheel is also planning to build a second expansion of its Ibn Battuta shopping centre, which will include another three-star hotel.

The company, which built the Palm Jebel Ali, a massive palm-shaped island off the coast of Jebel Ali close to Dubai’s proposed Expo 2020 site, said that it would consider restarting work on the mega project if the city wins next month’s crucial vote and if it sees enough market demand.

“We have to wait and see [if the Expo comes to Dubai],” Mr Lootah said. “It’s a question of supply and demand. I’m a strong believer in the free market. We have to evaluate the reaction of the market to Expo. We have alternatives. To start Jebel Ali it is not easy because you have to provide the infrastructure, which is costly. You have to be careful in what you do. It’s a landbank for us for the time being.”