Deyaar considers dumping Flamingo Creek project

Ben Roberts , August 17th, 2010

Deyaar Development is considering abandoning the Flamingo Creek project it bought for AED372 million on concerns that the master developer, Sama Dubai, will not complete the infrastructure.

The Dubai-based property company told the stock exchange in its financial statement that on the back of this expected failure by Sama Dubai, “the contract has become void and therefore should be reversed… the ultimate outcome of the matter cannot be determined at this stage and accordingly no provision that may result has been made in the financial statements.”

It added that, due to arbitration proceedings with Sama Dubai, it made no provision for the project on its financial results, released last week, which revealed an AED243 million net loss for the second quarter compared with a profit of AED76.4 million for the same period last year.

Sama Dubai is one of three Dubai Holding property developers that have consolidated into Dubai Properties Group.

The Flamingo Creek project, a low-rise development built next to the Ras Al Khor road, was started by National Properties, a subsidiary of National Bonds Corporation, in the summer of 2007. Designs by Sama Dubai had been drawn up within three months and construction contracts were announced by November of that year.

Al Meraikhi General Contracting was awarded the main contract and construction began in April 2008.

Deyaar bought the development before ground had been broken last year. Last year National Bonds stated that half of its investors’ money goes into long-term projects like Flamingo Creek as well as Skycourts, a six-tower development in Dubailand. It has since told The National that, due to the sale of the project to Deyaar last year, it has no impact on the company or its bondholders.

At the end of June this year Deyaar walked away from the chance to manage the Skycourts project after a two-year association.

Al Meraikhi General Contracting no longer acknowledges the project on its website. Its general manager was unavailable to comment.

Chet Riley, an analyst at Nomura International in Dubai, recommended investors to ‘reduce’ their holding of Deyaar stock on 5th July, which yesterday rose 0.6% to close at 30 fils. The company did not get back to CW to elaborate on their position.