Nakheel Chairman Ali Rashid Lootah
Still, in the absence of clear company data, Nakheel’s fortunes are seen as being largely tied to Dubai’s. It has benefited from a surge in investor confidence towards the emirate in the wake of the Arab Spring unrest, as Dubai underscored its safe haven status. Nakheel’s sukuk has rallied dramatically in recent weeks, yielding roughly 10.1 per cent at the time of writing, down from levels above 21 per cent last August.
“Dubai has made significant progress in the last six months or so. It has repaid all its public obligations coming due to date; DIFC Investments’ bond, Jebel Ali Free Zone’s bond,” says Chehayeb. “Investors have confidence in Nakheel’s sukuk being repaid at maturity and believe the government stands behind it, so it can at least meet its coupon payments.
“Importantly, we’re also seeing signs of a bottom in the real estate market here and that is Nakheel’s sweet spot. If prices were still falling, there’d be questions over the viability of their business model.”
A bigger refinancing hump lies in 2016, when Dhs8 billion of restructured bank debt will come calling. Under the terms of its debt revamp, Nakheel offered bank creditors an interest rate of four per cent over the London Interbank Offered Rate (Libor) and repayment after five years.
The developer is already in early-stage talks to discuss refinancing the debt on new terms.
“It’s a question of financial and economic decisions. We’re looking at different borrowing opportunities, to see if we can get a better deal. We’re in early-stage talks about that,” Lootah says. “To renew [on the same terms] would be our last scenario. Libor plus four is even good [for the banks], we’re giving them a good deal.”
In the interim, Nakheel hopes to boost its bottom line with a clutch of strategic project launches.High on its list is bolstering its retail portfolio, in a bid to diversify revenue streams and tie itself more closely to one of Dubai’s fastest-growing industries. The developer plans to double the size of its Chinese retail park Dragon Mart, already the largest mall of its kind outside the Chinese mainland, and build community malls in existing real estate schemes.
Also on the cards is an extension of Nakheel’s Ibn Battuta mall and a Dhs300 million retail and residential project on Palm Jumeirah.
“Retail is a golden opportunity. We have a captured community and we need to capitalise on that,” says Lootah. “My target by 2014 is to see our retail income double to touch $500 million. We want to enhance our assets so if we have to return to the market to reschedule our payments, we have more valuable assets in our hands.”
Nakheel has also been quick to tap a fledgling recovery in Dubai’s premium real estate, unveiling two residential projects on the Palm. The first, a collection of 104 townhouses, has closed 40 sales since its launch in April, worth around Dhs250 million. In a nod to Nakheel’s newly cautious business model, Lootah says, the development is self-funding.
“Buyers have to put down 40 per cent, which covers the fund for the contractor. I’m a conservative guy. I won’t sign a contract without the money in the bank. To me, it’s priority number one that we are able to pay our contractors on time.”
Strong sales in an offplan project are also an indication to Lootah that Nakheel is moving away from its role as the villain of Dubai’s real estate bust. The company’s reputation received a battering in the downturn, but its chairman hopes it has entered a new chapter.
“We’ve gained the trust of serious buyers, and the proof of that is we are selling new properties and the prices of our prime properties are going up,” he says. “At the end of the day, if people are paying me, if they trust my offplan sales, or my new retail developments, what more trust do I want? I don’t expect any more than to be paid.”