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Istithmar weighs up sell-off

Istithmar World is considering selling its share in the Victoria and Alfred Waterfront shopping and entertainment development in Cape Town.
The V&A Waterfront development could fetch as much as 10 billion rand.
The V&A Waterfront development could fetch as much as 10 billion rand.

Istithmar World is considering selling its share in the Victoria and Alfred Waterfront shopping and entertainment development in Cape Town as property companies show interest in South Africa's biggest tourist attraction.

A source at Dubai World, the parent company of Istithmar, confirmed talks had taken place but said no deal was imminent and added it would sell only at an attractive price. It said it would otherwise strive to hold on to the site, reckoned to be one of the country's most valuable.

The site could fetch as much as 10 billion rand (Dh5.36bn) with potential buyers including Growthpoint, a publicly traded South African property investment company, among those interested in the asset, according to a person familiar with the situation. "People are pushing to buy [the V&A Waterfront]," said a Dubai World source familiar with the discussions. "But we aren't pushing a sale. There is always a price difference … We are just looking at maximising returns," he said.

Dubai World has extended its bank debt maturities to five and eight years, giving it more time to raise cash as it restructures US$24.9bn (Dh91.45bn). Istithmar purchased a 37.5 per cent stake in V&A Waterfront in a $1bn joint venture with London and Regional Properties, based in the UK, four years ago.

"Now that the Dubai World immediate panic is over, I think they will be able to hold out for a decent price on it," said Victoria Barbary, a senior analyst at Monitor Group in London. "Ultimately, Istithmar is a private equity company and it's going to want to keep assets that it thinks are good for its portfolio, that are going to go up in price. My feelings about South African real estate, particularly where that development is, is that it is likely to go up in price and it may not be something that they would be looking to dispose of in particular."

It has also emerged that Dubai World last year sold its stake in the $254 million historic former Metropole Hotel building in London prior to the shock announcement that it would request a standstill for its debt.

As it grappled with its debt issues, the Dubai investment company also exited a $50m fund to develop and own 30 no-frills Tune hotels, a brand created by the founders of Air Asia. Then, in April this year, it reduced its stake in International Hotel Investments (IHI), also a co-owner of the Metropole building, by a third to 22 per cent.

The Tune Hotels joint venture was announced in 2007, with plans to develop budget properties across Asia, and Istithmar Hotels taking a 40 per cent stake.

Tune Hotels and a source at Dubai World confirmed that Istithmar exited the venture last year.

IHI purchased the Metropole hotel building at Whitehall Place for $254m from the Crown Estate of the UK in February 2008 in a joint venture with the Libyan Foreign Investment Company, and what was then known as Nakheel Hotels - the name given to Istithmar Hotels after Dubai World consolidated its hotel business. IHI's portfolio includes luxury hotels in Budapest, Prague and Tripoli.

A spokesman for Istithmar World said his company also had "an extensive international portfolio of hotel investments that we are managing to maximise value". "We do not comment on individual assets," he added.

Dubai World amassed a global hotel property portfolio during the boom times valued at $4bn, with assets including the Fontainebleau Miami resort and the Turnberry golf resort in Scotland. It lost control of the W New York Union Square hotel last December in a foreclosure auction, and handed over the Knickerbocker Hotel building in New York to its lender Danske Bank, after defaulting on a $300m mortgage.

Other assets include the Queen Elizabeth II ocean liner, purchased for $100m in June 2007, which Dubai was at one stage hoping to sail to Cape Town to be moored as a floating hotel for this year's football World Cup. Those plans were abandoned after port authorities refused to accommodate the ship. Another high-profile purchase was the US luxury retailer Barneys.

The value of Dubai World's portfolio declined amid the global economic downturn and falls in property prices.

"Istithmar remains a substantial shareholder in IHI with 122 million shares amounting to 22 per cent of its equity," said Alfred Fabri, the company secretary.

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Published: December 12, 2010 04:00 AM


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