Dubai World will transfer two of the emirate's biggest property developers to the Government as it completes a debt restructuring in the wake of the financial crisis.
Agreements have been signed on the terms for the separation of Nakheel and Limitless "operationally and financially" from Dubai World, the board of directors said in a statement.
"Legal ownership will transfer to the Government of Dubai upon completion of Nakheel and Limitless's financial restructuring," the statement said.
In addition, Nakheel said it had secured unanimous approval from banks for its US$10.9 billion (Dh40.03bn) debt restructuring, which will trigger the issuance of a Dh6bn Islamic bond.
As the transfer into government hands draws closer, the emirate last month created the Dubai Real Estate Corporation "to own and manage the properties registered in the name of the Government or any of its departments", according to a report from the official news agency WAM.
Nakheel and Limitless were behind some of the largest and most aggressive developments conceived in Dubai during the boom that preceded the financial crisis. Nakheel put its stamp on the emirate with a trio of palm-shaped islands and The World, an archipelago of man-made islands in the shape of a map of the globe. In 2007, Limitless announced plans for the Arabian Canal, a Dh224bn project that was to include a 75km channel cut into the desert near Dubai's south-western border.
"Effectively, both of these companies along with Emaar [Properties] laid the landscape for the new Dubai," said Ian Albert, the regional director at the consultancy Colliers International. "They weren't just property developers. They were developers that changed the landscape of Dubai and the shape of Dubai with the scale of their developments."
He said the two companies from Dubai World, a government-owned conglomerate that recently completed a $24.9bn debt restructuring begun in late 2009, retained a sizeable stake in Dubai's property market.
"The companies still exist," he said. "They're still players in the market. They may be on hold for now but they have existing projects that are going forward. I think when the market improves significantly enough, you will see Nakheel return to the market with some of its plans."
Nakheel has said it is prioritising a few of its projects for completion as it finalises its debt restructuring and settles the claims of contractors and other creditors left in the lurch when the crisis cut off the company's financing lifelines.
Nakheel has paid out more than Dh5bn to trade creditors as part of the restructuring offer which has now been approved.
Analysts predict further property price declines in many areas of Dubai this year, although many neighbourhoods have shown signs of stabilisation. Still, a further 18,000 homes are expected to hit the market by the end of the year, according to Jones Lang LaSalle, which could put further pressure on prices.
Yesterday's announcement of the final terms for the separation of Nakheel and Limitless, along with appointments of two senior managers to help oversee day-to-day operations at Dubai World, put the conglomerate "on a solid financial footing", said Ahmed Humaid Al Tayer, a member of the board of directors and the governor of the Dubai International Financial Centre.
"The formal completion of financial restructuring is a great achievement for Dubai World and UAE, and we continue to be grateful for the support of the various stakeholders throughout the process," he said.
The board also named Andy Watson as Dubai World's managing director and Junaid Rahimullah as its chief financial officer just a week after the formal completion of its financial restructuring on June 29. Mr Watson is also the chief executive of Istithmar World, Dubai World's investment arm. Mr Rahimullah was Dubai World's director of corporate finance.
"With the appointment of two senior and experienced managers to the management committee, and with the restructuring process behind it, Dubai World and its portfolio of companies are well positioned to build on the very real value of its businesses and continue to grow to the benefit of the company, Dubai and the UAE," said Sheikh Ahmed bin Saeed Al Maktoum, Dubai World's chairman.
