With work set to recommence at Al-Furjan, and following the announcement that construction is to restart on at least six projects after Nakheel's massive debt restructuring, has the beleaguered developer finally turned a corner?
The contractor Arabtec had been forced to suspend work at the 60-hectare projects after building on 500 of a planned 4,000 homes due to delayed payments. Now that Nakheel has restructured $10.5bn of debts owed to banks, contractors and service providers, construction is expected to restart on at least six projects. These include Jumeirah Park, Jumeirah Village, Jumeirah Islands Mansions, Jumeirah Heights Clusters and Al-Badrah.
'We expect that all short term projects will be fully mobilised by October 2010,' Nakheel said in a statement.
Under the restructuring agreement, contractors are to be repaid up to 40% in cash, with the remaining 60% issued in the form of a sukuk.
Nakheel made its name with the iconic Palm Jumeirah, which opened in 2005 to international acclaim and came to define the Dubai's ambitions. This was followed by increasingly vast and expensive projects such as Palms Deira and Jebel Ali, and The World, which were designed to capitalise on the influx of capital and interest from a curious global audience, but have failed to attract significant interest. The World is one such project that remains partially on hold.
When the global recession hit, construction ceased almost overnight. Nakheel with a portfolio of projects spanning billions of dollars found itself struggling financially. Its nadir was launching its 130 square-kilometre Dubai Waterfront, which would include the world's tallest tower, in 2008 just as the global financial crisis hit.
In March Nakheel announced a comprehensive recapitalisation plan of its debt and liabilities. The plan enables Nakheel to offer creditors 100% of agreed amounts owed and to fulfil its obligations to customers through the prompt completion of near term projects.
Of the $9bn being pumped into Dubai World (which is restructuring $23.5bn of debts), Nakheel's parent company, $8bn was earmarked for the developer. This follows the $2bn that propped up the company last year after the UAE Central Bank stepped in with a $10bn bail-out in February. Under the restructuring plan, customers in deferred projects can swap their existing investments for properties at the near-term projects, or recover their money with no interest after five years.
'Today's plan is the result of the extensive discussions between the government, Dubai World, Nakheel and stakeholders. It offers a fair and equitable solution for creditors and customer.' said Aidan Birkett, chief restructuring officer of Dubai World. 'If agreed, this plan will provide Nakheel with a stable, financial footing, enabling it to meet its outstanding obligations to customers and to continue its role in the ongoing development of the UAE real estate market.'
Mixed economic signals
Despite these encouraging movements, elsewhere in the UAE, the signs are mixed. In October, AMEinfo.com's sister publication, Meed, revealed that Mubadala has cancelled the tender for the $1.36bn football stadium in Abu Dhabi. The 65,000 capacity stadium had received five bids and was due to be built as part of the new Capital City District next to Khalifa City between Mussafah and Abu Dhabi International Airport.
Official statistics from Dubai's Real Estate Regulatory Agency (Rera), meanwhile, point to almost half of all planned real estate projects in the emirate having been cancelled.
Of 980 registered projects, 495 were scrapped or in the process of being cancelled the agency said in a bond prospectus posted on the London Stock Exchange website at the end of September. The cancellations were due to 'liquidity shortages for developers, decreasing headline real estate prices and rental rates, and increasing market uncertainty and negative sentiment,' the prospectus noted.
One major UAE contractor tells AMEinfo.com that the recent announcement surrounding Nakheel's restructuring and subsequent payments are a positive sign for both the developer and contractors in the emirate.
'The whole issue with the credit restructuring is a positive. And the sign that projects are beginning to unfold is clearly encouraging. I think contractors will be happy to work with Nakheel again, now that these immediate issues have been resolved. The worst is over.'
However, he added a caveat: 'Projects are flowing again, but it is still nowhere near at the level it was. Yes, there is work coming on line but the majority is in Abu Dhabi, with projects such as Baniyas Island and Saadiyat Island moving forward and tenders being issued. In contrast there is very little work in Dubai.'