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 Dubais property market bottomed out and he decided to launch new development projects.
The decision to start new schemes facilitated one of the greatest corporate reversals of fortunes in recent times. The new projects, together with the handover of existing schemes, allowed Nakheel to announce just three years later that it was free of bank debt. Five years later, in August this year, the firm will be completely debt-free when it repays its trade investor sukuk (Islamic bond).
In early 2014, another important call was made when Nakheel turned to strengthening its recurring revenues to make the business better-placed to weather any potential downturn in Dubais property market.
This was done by focusing on building revenue-generating assets such as hotels, shopping malls and residential units for leasing instead of development projects for sale. As the company appeared to be effectively turning its back on off-plan sales during an uptick in property prices, the move left many in the market somewhat perplexed.
In the two years that followed, low oil prices and concerns about oversupply have dampened investor sentiment and other developers, keen to make their own cash flows more robust, have followed Nakheels lead and have focused on building out their own assets rather than launching new schemes.
In mid-2016, Nakheel is making another big call as Lootah decides to launch new development projects later this year. Although it may initially appear that this move is ignoring the prevailing market conditions, it should be remembered that he has been able to call the market right over the past five years.
It is also worth remembering that property prices over the past year have fallen by more than 10 per cent, and if an investor thinks the market is turning, it may now be the right time to buy just before a wholesale recovery starts.