DIFC unit cuts losses and defers $1bn loans

Dubai International Financial Centre Investments reported losses of $247.7 million in 2010, but said it was reducing its debts and planning to sell assets to get on track.

Dubai International Financial Centre Investments, the commercial arm of the financial free zone, suffered losses of US$247.7 million last year compared with a loss of $561.4m in 2009.

Dubai International Financial Centre Investments, the commercial arm of the financial free zone, posted losses of US$247.7 million last year compared with a loss of $561.4m in 2009, as it wrote down the value of property.

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The company has been trying to lower debts and sell off assets this year, it said, adding it had renegotiated $1 billion (Dh3.67bn) worth of loans with the Government of Dubai as it looked to sell assets and lower its debts.

The Government has deferred principal and interest payments on the two loans, which are worth $500m each. One was due in total in 2013, but repayment has been postponed until April 2014. The other was due in two payments - this month and in May 2013, but interest payments have been changed to later this year.

Dubai International Financial Centre (DIFC) Investments has a broad range of financial assets but derives most of its revenues from leasing out property in the free zone, including prominent offices such as those in the Gate Building.

Ahmed Humaid al Tayer, the chairman of DIFC Investments and governor of the DIFC, attributed the loss mostly to "the devaluation of the real estate portfolio due to the market conditions".

The DIFC is one of the best-performing property zones in the emirate but during the economic boom the centre's investment arm took on debt and invested in assets far from its core business of operating a financial centre.

It is now seeking to sell those assets, such as the high-end fashion retailer Villa Moda that closed last year and the business data and utility manager DClear.

The greatest challenge for DIFC Investments is its debt. It has almost $3bn due over the next five years, including government loans, bank borrowings and a $1.25bn Islamic bond, or sukuk, issued in 2007.

Shahli Akram, the chief executive of DIFC Investments, said yesterday the company might "divest certain of its investment portfolio to create robust liquidity streams across the business", but planned to hold on to some strategic assets.

"We believe that this strategy will assist us to better position our financial resources to withstand the various economic variables both on regional and global scale," Mr Akram said.

The company settled debts of about $265m last month, he said. Standard & Poor's said in a report last year that DIFC Investments had pledged to reduce its debts by $1bn by the end of this year.

It would do this through selling "non-core" assets, which is thought to mean its smaller foreign shareholdings, investments in properties outside the DIFC and financial technology companies.

Debt issuances were not planned, but Mr Akram said the company was monitoring its "debt management and liquidity strategy to be in a position to service the debt obligations as and when they fall due".

DIFC Investments recorded revenues from its investment properties, which are made up primarily of the offices in and around the Gate Building at the centre of the free zone, of $126.1m for the year - up from $124.9m in 2009.

These revenues could be affected by the DIFC Authority's announcement in December that it was cutting this year's rents and fees. The changes primarily affect companies that are seeking to rent out additional space by providing a pricing "matrix" of discounts.

Rents will range from Dh160 to Dh280 a square foot of office space, depending on the amount leased and location.