(MENAFN- Khaleej Times) Nakheel has a slew of projects under development across the residential, retail leisure and hospitality segments, but its immediate focus is to deliver around 3,000 units of near-term projects this year, a top official said.
The builder of the world famous islands of Palm Jumeirah is confident it will continue the 'strong growth trend' this year after posting a 57 per cent surge in first-half profit last week. The region's premier developer sees a brighter outlook for the real estate sector in coming years and will play a constructive role in shaping up the fast changing landscape of Dubai through its quality developments in the pipeline.
The real estate firm, which bounced back as a strong industry player after successful debt restructuring, is developing commercial and residential projects in line with market demand and increasing the pool of cash-generating assets to build a sustainable business for the future.
Besides launching construction work on the Dh2.5 billion Nakheel Mall and Hotel project this year, it is evaluating a number of developments that will add value to its existing communities and pave the way for a more sustainable and long-term viable business in post-restructuring period.
The projects in the pipeline include The Pointe on Palm Jumeirah, the extension of Dragon Mart and Ibn Battuta Mall, Palma Residences, Palm Views, Jumeirah Park, Jumeirah Islands, Jumeirah Village and community centres at Discovery Gardens and Jumeirah Park, among others.
"We have successfully launched new developments and are looking to deliver approximately 1,500 units in new projects to the tune of about Dh6 billion in sales value in subsequent years," Sanjay Manchanda, chief executive officer of Nakheel, told Khaleej Times in an interview at his office.
He said the company has returned to growth path after passing through a successful restructuring process and now has a clear vision to move forward in Dubai's fast-growing and competitive market.
"When we restructured, we had a number of projects that we had started to work on. We had about 9,300 units in near-term projects and I'm happy to report that we've delivered almost 6,000 of those units since the restructuring was completed in August 2011.
Manchanda acknowledged that the company had not completed some of its projects as per schedule due to factors beyond its control, but vowed to meet its commitments in future developments. "There have been some delays in past, but most of them have been addressed. We are now working to clear all backlogs and complete new projects to meet our commitments with customers."
He said the company is expected to finish its first new project - Palma Residences on Palm Jumeirah - soon.
"Development projects worth between Dh8 billion and Dh9 billion are in the pipeline," he said, adding that the company remains focused on implementing a sustainable and realistic long-term business strategy that is fundamental to the growth of Dubai's real estate market.
Robust growth
Manchanda said strong first-half results posted by Nakheel are a clear indication that the Dubai real estate market is strengthening while investor confidence returns in line with positive economic indicators and social environment in the emirate.
"Dubai as a market has definitely improved and continues to strengthen with every passing day because investor confidence is back," he said.
Manchanda said the retail market has posted robust growth, hospitality continues to perform at very good levels and the meetings, incentives, conferences and exhibition (Mice) industry is equally contributing its due share in boosting the tourism and economy.
"There is no second opinion that investors' confidence is back and things are moving in the right direction. We've had very good six months of business so far this year. The recently-launched Jumeirah Park development recorded historic sales of Dh1.7 billion in a single day - that is a sure reflection of investor trust in Nakheel and its projects," he said.
Last week, Nakheel announced Dh1.2 billion net profit and Dh4.23 billion revenues for the first half of 2013 as it delivered approximately 1,400 units to customers in the January-June period this year.
"We are seeing an appreciation not only in the property market, but also in rentals. We've seen a fair amount of demand for leasing as the community malls and expansion projects that we are developing are pre-leased, so there is an appetite on all fronts of real estate market," he said, adding that this 'healthy trend' in the property sector is expected to continue in the coming years.
Referring to Nakheel's newly set up hospitality and leisure division to supervise the company's growing business segment, he said: "We have entered into the hospitality sector because we believe there is definite room to grow in this segment and develop our asset base as well."
Manchanda said there is demand for quality developments in the emirate, but investors are very cautious and careful while investing in the real estate projects. He was of the opinion that the proposed mortgage rules will help check speculative elements in the market. However, it is not possible to completely eliminate 'flipping' in free market economy, he added.
"The banking industry is looking to make sure that the credit exposure can be managed well and controlled. We are playing our part by ensuring that investors give us post-dated cheques for the entire value of the property," he said.
"We are operating in a free market. Each one of us - whether we are a developer, regulator or an investor or a customer - is taking the steps in the right direction to keep the market stable," he said.
Asked about the upswing in property prices in 2013, he said: "We are seeing very gradual signs of higher price trends only in established locations where there is demand for good products and people are willing to consider the market pricing for it."
"We need to follow the trends in market. We need to listen to the market and respond accordingly. We believe that only serious investors are taking part or investing in real estate projects," he said.
Regarding 'flipping', he said it is difficult to have an effective check on property transactions in a free market economy. "We cannot eliminate trade completely, there is bound to be some transactions happening in real estate market. However, we should keep the speculative element to a minimum to keep the sector stable," he said.
To a question about permanent residency status to property investors, he said: "I'm in no position to comment on matters that are not in my domain. I represent a real estate development company and welcome every initiative that the government has taken and it is very encouraging to see that the government is open to make the necessary changes that will help the real estate sector and grow the economy."
About building another landmark in Dubai after the palm-shaped islands, he said this is a matter of constant review and involves a number of factors to make a 'policy decision' on such major initiative. "What may be an iconic structure for someone like us may not be iconic for others. We are constantly listening to market forces, what investors prefer and accordingly we will make our move," he said.
Despite healthy growth signs, he said the property sector is passing through a consolidation phase and only serious players will survive in the competitive market of the UAE.
"The first major merger happened in Abu Dhabi as Aldar Properties and Sorouh Real Estate have merged into one unit. If you look at the landscape in Dubai today, there are only three major developers that are currently in business and launching new projects," he said.
"I think there is room for only serious players in the market and that is evident from what we are seeing in the marketplace today," he added.
Debt restructuring, IPO
Manchanda said Nakheel has enough funding resources to finance its development projects and pay back its debt liabilities. He also ruled out an immediate initial public offering (IPO) and said no decision has been made in this regard.
"IPO, debt financing or loans adjustments". these things are reviewed constantly with our board and shareholders. It is a strategic decision and we will let the financial market know what we're doing and what we plan to do," he said, and adding that number of alternatives are available in the markets.
"We are paying all our interests and profits on time and sometimes even ahead of time to ensure that we can maintain and abide by the terms and conditions of our restructured financial obligations," he said.
Under the restructuring commitments to its stakeholders, Nakheel paid Dh206 million interest payments to its bank lenders in the first half while it also cleared Dh210 million profit payments to its sukuk holders in second quarter of 2013. The property developer has so far paid over Dh1.3 billion in loan interest and sukuk profit payments since its restructuring in August 2011. It has also made Dh11.3 billion cash payments to trade creditors and contractors since the restructuring began around two years back.
"Nakheel is a well-known established real estate development company. Whenever the debt payments are due, we will have to meet those requirements. So currently every aspect of the terms and conditions are being fully complied with," he said.
To a question about securing new loans to clear $2.2 billion debt liability due in 2015, he said that some financial institutions have approached the company to explore some business opportunities in the wake of growing real estate sector.
"A number of financial institutions are approaching us to see how they could participate in the growth and development of the real estate sector as the market is picking up in a surprisingly short period of time. We are listening and keeping an eye on what we have to do to create a sustainable long-term business for Nakheel," he concluded.
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