When Ali Rashid Lootah was appointed chairman of Dubai government-owned developer Nakheel in 2010, he took on an impossible challenge. He was charged with reversing the fortunes of a developer that was billions of dollars in debt and trying to sell properties in a market where no one was buying.

Three years later, Lootah’s priority for 2013 has shifted from survival to growth. “The big challenge is to continue the growth, we had an excellent result last year and we have to continue,” he says. The chairman’s comments reflect the turnaround Dubai and Nakheel have enjoyed over the past year, as investors returned to the emirate’s real estate market – something that seemed almost unthinkable during the dark days of 2009.

Many observers cite the influx of people and funds from countries affected by the Arab Uprisings as the catalyst for the growth Dubai experienced during 2012. For Lootah, however, the answer lies closer to home.

Honouring financial commitments

“It was a wise decision the Dubai government took to deliver all that it had promised and to find solutions for everybody,” he says. “The government of Dubai and Nakheel met their commitments. They did not walk away from them, [there was] commitment from all parties, lenders, trade creditors, contractors and suppliers. If we did not have [their] cooperation … everyone would [lose]. It was a wise solution and it is paying back.”

In 2012, Nakheel was able to report profits of AED2bn ($545m), a rise of 57 per cent on the previous year, while revenues were 91 per cent higher at AED7.8bn. “We are doing much better than the original five-year restructuring plan,” says Lootah. “There is confidence in the company and that is noticeable in the price of the sukuk [Islamic bond] we gave to our trade creditors. It is above par. There is trust in the company and most of our sukuk is held with well-established companies, so [our creditors] know what we are doing. If [the sukuk] was not worth holding, they would not keep it.”

Nakheel’s Islamic bond has been issued over several tranches beginning in 2011 and currently amounts to AED4.1bn. Before the sukuk matures in 2016, there is a AED7bn five-year loan maturing in 2015 that Nakheel hopes it can restructure as confidence in the firm improves.

“[Nakheel] is performing well and so far we have received positive feedback. We don’t see any problem restructuring our loans,” says Lootah. “The priority is the maturity, to get a longer tenor and better conditions as per the current market situation. It must be a commercially sensible solution and a win-win for both parties.”

Lootah’s confidence is underpinned by strengthening real estate prices – particularly for high-end products. “I think [real estate growth] will continue,” he says. “I don’t see anything to worry about in 2013 because demand is very good. The good thing is demand is still at the high end and that gives some comfort – it is people with access to financial resources.”

Dealing with cash-rich customers will shield Nakheel from proposed changes to the UAE’s mortgage law that could limit the value of mortgages given to expatriates at 50 per cent of the value of the property. “We don’t deal with any mortgages, so it is not going to affect us,” says Lootah. “Mortgages [relate to] middle and lower-end [buyers]; they are people that go for mortgages.”

Nakheel strategy for new projects is to develop high-end products at established locations that capitalise on infrastructure already in place, rather than the ambitious masterplanned projects for which the developer became renowned before 2008.

“We are trying to consolidate and concentrate on the most commercially sensible areas,” says Lootah. “We are selective. We do all of our new [projects] in [areas with] developed infrastructure, to maximise  and develop incomplete communities, such as Jumeirah Park and Jumeirah Village.”

Nakheel’s development pipeline

The developer is preparing to tender AED6.5bn of construction contracts this year, which will make it one of the most active clients in Dubai. The biggest packages to be floated are for the estimated AED2.5bn mall that will be built on the trunk of Palm Jumeirah. The first contract will cover construction of the mall, while the second will involve building the hotel tower that will enjoy commanding views over the Palm and across the Dubai skyline.

They will be joined by tenders for the contract to build the AED800m retail promenade The Pointe, also on Palm Jumeirah, together with contracts for villas at Jumeirah Circle and other community centres.

For future projects to be a success, Nakheel needs to continue selling property. So far this year, that has not been a problem. The developer has launched its Vista Mare and Azure Residences on Palm Jumeirah capitalising on the growing demand for property on the manmade island. “We recently launched a new beach club, with some studios, it was really a great success. It is proof to us that the Palm is the place for further development,” says Lootah. “The Palm is the jewel in the crown.”