Dubai property developer Nakheel became a debt-free company on 25 August when it paid its AED4.4bn ($1.2bn) trade creditor sukuk (Islamic bond).

 Ali Rashid Lootah, chairman of Nakheel

Ali Rashid Lootah, chairman of Nakheel

“We will be a debt-free company,” said Nakheel chairman Ali Rashid Lootah, speaking on 22 August. “It was a challenging period we went through, we achieved it in a quick manner and managed to deliver on all of our commitments ahead of time and to launch new projects.”

Nakheel’s journey to clear its debts began in January 2014, when it shocked many in the market by saying it would pay off its bank debt four years ahead of time.

This was made possible by outperforming the restructuring plan drawn up for the developer in 2010, after it was forced to default on its debts following the global financial crisis and Dubai’s property market crash in 2008. “We achieved the initial restructuring plan years ahead of time with significant savings of AED25bn,” said Lootah.

Nakheel outperforms business plan

Nakheel outperforms business plan

Profit hike

Over the six years since the restructuring plan was drawn up, Nakheel’s profits have grown five-fold, from AED900m in 2010 to AED4.4bn in 2015, and as construction projects were completed, net assets increased by 1.6 times to AED36.5bn – a figure Lootah said could be even higher. “This is book value, not as per fair market value,” said the chairman. “I will not be exaggerating if I say the actual value is double this; it could go up to three times.”

Nakheel net profits

Nakheel net profits

More assets are being built. “We awarded AED22bn of [construction] contracts since the start of the restructuring period,” said Lootah. “We have pumped AED38bn into the economy if you include payments to contractors, the sukuk, and payments to lenders.”

Nakheel net profits

Nakheel net profits

This year Nakheel plans to make payments of more than AED10bn, of which some AED8bn will be for construction projects. “For 2016, up to AED7.6bn already and I think we will cross AED10bn hopefully by the end of this year,” said Lootah.

Steady revenues

Over the past two years the developer’s focus has been building assets that will give it steady long-term revenue streams. “Our focus is to enhance our portfolio and we are aiming by 2020 to have recurring incomes of AED7bn,” said Lootah.

Retail is a key component of Nakheel’s plan to boost its recurring revenues and the developer has more than 5.6 million square feet of retail space under construction. Most recently it awarded a AED1.5bn construction contract to the local Dhabi Contracting to build its Al-Khail Avenue mall in Dubai.

Nakheel Retail Growth

Nakheel Retail Growth

Another major ongoing project is the AED1.2bn Nakheel Mall on the Palm Jumeirah, awarded to local construction companies United Engineering Construction (UNEC) and Actco General Contracting Company in 2014.

About 6.8 million sq ft is in the planning stages, some of which will be launched later this year. “We will be announcing new projects on the retail side this year,” said Lootah. From 2018 the developer plans to have 16.5 million sq ft of retail space.

Nakheel Retail Projects

Nakheel Retail Projects

Residential leasing

Another source of recurring revenue will be Nakheel’s residential leasing properties. In 2010, the firm had 16,363 units. This number grew marginally in 2016, with another 440 units added, and will grow again in 2018 with another 132 units. The figure will then more than double after 2018 when 18,742 units are delivered, with most coming from Nakheel’s Palm Jumeirah, Nad al-Sheba, Jebel Ali Gardens and Deira Islands developments.

Nakheel Residential Leasing Projects

Nakheel Residential Leasing Projects

Hospitality has been another focus. In 2010, the developer did not have any hotel rooms. Today it has one hotel, and with another opening in October this year, Nakheel will have 623 rooms by the end of this year. In 2018, it will add another 836 rooms, and another 3,675 rooms after 2018.

Anticipating Dubai’s property trends

Ali Rashid Lootah

Ali Rashid Lootah

Interview: Ali Rashid Lootah, chairman, Nakheel

Nakheel chairman Ali Rashid Lootah has made some big calls over the past five years. In late 2011, the Dubai developer appeared to be overwhelmed with debt and unlikely to develop any new projects ever again. But Lootah decided that Dubai’s property market had bottomed out and launched new development schemes.

In mid-2016, Nakheel is making another big call Read More