Dreams can still come true in Dubai’s property scene

By Angela Giuffrida  www.thenational.ae

In 2003, Robert Miller dreamed of escaping the cold winters of the UK and set about looking for a second home in Dubai.

After coming to the emirate on several holidays, it did not take the company director long to settle for a flat in Palm Springs, a 25-storey beachfront property proposed by Damac Properties at Palm Jebel Ali.

The home was going to be a winter retreat for the father of three and his family and possibly, further down the line, a retirement home.

Seven years later, instead of soaking up the sea views from his balcony, Mr Miller is still awaiting the day Nakheel, the Dubai World-owned master developer of Palm Jebel Ali, releases the land for Damac to build on.

“I still have that dream, but who knows if it’s ever going to be fulfilled,” he says.
Mr Miller was among hundreds of investors who, in early 2008, protested when Damac said Palm Springs would be shelved, blaming changes in plot sizes by Nakheel.

Against mounting pressure, Damac later reversed its decision, saying it had been offered a new plot of land.

But by the end of 2008 investors were dealt another blow when the onset of the financial crisis in Dubai forced Nakheel to suspend infrastructure work on the reclaimed island. Like thousands of other investors across projects that have been affected by the developer’s debt problems, Mr Miller has little choice but to wait.

“Damac offered us the right to transfer our investment to another project, but the offers are more expensive so it’s a non-starter,” he says. “As long as the island is built, Damac has an obligation to build … but the island might not be operational for another three years and then Damac will need two more years.”

But with US$9.2 billion (Dh33.79bn) of fresh funds being pumped into Nakheel by the Dubai Government, there is a glimmer of hope that projects such as Palm Jebel Ali will eventually see the light of day.

Last week, Nakheel started negotiations with contractors, many of whom have waited more than a year to be paid, across all of its projects in an effort to revive stalled projects.

Under the Dubai World restructuring plan, each of the developer’s trade creditors would receive a cash payment of up to Dh500,000 soon after an agreement was reached, with the remainder settled later.

Riad Kamal, the chairman of Arabtec Construction, which stopped work on the Al Furjan villa community in January because of unpaid bills, hopes to resume work soon.
“Creditors should consider the offer very carefully, and I see no reason why they should not accept it and move on,” Mr Kamal says.

A shake-up of Nakheel’s board last week, resulting in Sultan bin Sulayem being replaced by Ali Rashid Ahmad Lootah as the chairman, is also aimed at bringing the company’s property developments to completion.

Nakheel plans to expedite delivery of projects that were partly constructed, although it is still unclear which ones will take priority.

Last May, the developer said it had about $31.5bn worth of properties under construction in Dubai, including 2,200 villas at Jumeirah Village and 900 at Jumeirah Park, which had been due for completion by the end of the year.

A further 2,000 homes at the Al Furjan development are expected to be delivered by the end of this year. Arabtec was appointed in June 2008 to build 1,500 homes, and had completed 550 before it stopped work in January.

“Currently, all project schedules are being reviewed as part of the current restructuring process,” Nakheel said. “This process needs sufficient time to ensure that the interests of all stakeholders are taken into consideration.”

Ian Albert, a regional director at the property consultancy Colliers International, says the developer will probably weigh up the risks of each project before deciding which ones to complete first.

“They’re probably going to look at projects that are in the mid-to-late stages of completion in terms of the actual properties themselves,” Mr Albert says.

“Following that, they’ll probably look at those that are the least exposed in terms of market oversupply and therefore carry less risk … so they might ask: ‘How many properties at a certain project have already been sold off-plan?’

“So if they sold 90 per cent and had only just come out of the ground, then they’d probably complete that development. If, however, only 10 per cent was sold and it’s in highly contentious market conditions for that particular property type, such as offices for example, then they’d probably freeze that development.”

Nakheel still has commitments to complete infrastructure on some of its larger projects, such as The World islands, Palm Deira, and the Waterfront, so plots of land can be handed over to sub-developers.

The same is true for Palm Jebel Ali where, apart from 1,300 villas that will be built by Nakheel, sub-developers have bought plots.

“Nakheel could, theoretically, progress on these developments and provide infrastructure, but if the developers can’t build because they can’t obtain financing and there’s no demand for their product, then why should Nakheel push to complete at this point in time?” Mr Albert asks.

“The problem with Waterfront, for example, is that it’s a major project but because of the nature of the sales to sub-developers there is a shared risk element.”

It also remains to be seen if plans for The Universe, another collection of reclaimed islands, and the Nakheel Harbour and Tower development, which was expected to include a skyscraper taller than the Burj Khalifa – the tallest tower in the world – will ever get off the ground.

agiuffrida@thenational.ae