Islamic bondholders of Nakheel made four times more returns than global peers this year as the Dubai property developer gains from a rebound in the emirate.
Notes of the company building artificial islands off Dubai's coast have returned 48 per cent this year, according to data compiled by Bloomberg.
That surpassed average gains of 11 per cent for the Bank of America Merrill Lynch Global Real Estate Index. Bonds of high-yielding American home builders increased 23 per cent.
Investors have piled into Dubai debt this year, sending yields tumbling to records, as home sales pick up from a slump of more than 65 per cent.
State-run Nakheel, which received a bailout from Dubai's Government in December 2009 to pay a sukuk, is resuming projects put on hold during the crash. The company said last month it sold Dh419 million of land plots at projects including the Palm Jumeirah.
"The company is making all the right noises," said Ahmad Alanani, the Middle East director at Exotix, an investment bank. "It's selling down its land bank, finishing off stalled projects, delivering finished units and enhancing its recurring revenue capacity. This, along with the backstop it has from the Dubai Financial Support Fund, is giving investors a lot of confidence."
Nakheel said in a sales announcement last month that the land purchases were "evidence of heightened investor confidence in the Dubai real estate market". Since then, the yield on its 10 per cent Sharia-compliant bonds maturing in August 2016 has fallen 42 basis points to 9.73 per cent, near a four-month low.
The return on the notes this year is more than double that on similar-maturity securities of Emaar Properties, which developed the Burj Khalifa in Dubai.
Nakheel posted an 83 per cent surge in nine-month profit due to "near 100 per cent occupancy" for retail and other leased assets, it said in October.
The company had written down the value of its property by US$21.4 billion from 2008 to mid-2010.
* Bloomberg News