The fact that Dubai-based developer Nakheel still exists at all is perhaps surprising, given the perilous state it got itself into in 2009. That it is now planning more developments, approaching banks for additional funding, and the fact that it expects to report an increase in its profits in 2011 could strike some as miraculous.
But it is not miraculous. The incredible turnaround at Nakheel is partly due to a massive injection of cash from the Dubai government, the goodwill of property buyers and banks worldwide, as well as the work done by the company and its advisers in rooting out inefficiencies and boosting income.
Making improvements after the slump of 2009-10 was always going to be easy though. The value of the firm’s assets fell by 50 per cent between the end of 2009 and mid-2010.
A more difficult prospect will be a sustained growth in profit. Nakheel’s short-term strategy is to target the retail sector, expand successful malls and build new ones to serve captive communities such as those on the Palm Jumeirah. The firm’s retail arm is small, so this strategy may be achievable. The question is, does Nakheel have the cashflow to pay off its restructured debt and provide homes for people who purchased property in stalled developments such as the Palm Deira?
The firm’s chairman Ali Rashid Lootah says business is better than expected under the restructuring plan, but the hard work is far from over.