Two cheers for Nakheel
Developer seems to be taking a sensible approach to legacy sites
These are interesting times for Nakheel, with the spectres of its troubled past being laid to rest.
The company, which was laid low by a financial crisis that almost brought parent group Dubai World to its knees, has come out fighting over the past 18 months – albeit with one hand tied behind its back.
Following the crash, Nakheel’s own debts were reportedly $11bn and it was forced to put a stop to a series of projects which, with hindsight, seemed grossly ambitious.
Attempting to simultaneously complete two more Palm projects at Deira and Jebel Ali, and then envelope the latter within the 1.4bn ft2 Dubai Waterfront project, as well as working up a Nakheel Harbour and Tower project with a centrepiece that was meant to dwarf Burj Khalifa, smacks of the kind of hubris that was prevalent among developers during that era. Its high-handed manner hasn’t entirely dissipated, either.
Locking tenants in multi-million dirham properties out of private beaches and pool areas if service charges aren’t paid by landlords may lead to the firm getting its money, but it can also cause reputational damage that is difficult to shake off.
Having said that, Nakheel seems to be moving in the right direction in terms of strategy.
It still doesn’t have the financial firepower to restart the grand projects of yore, despite clearing over $2.15bn of bank debt four years ahead of schedule. But it has taken the cash and profits generated over the past two years (2014 profits were up 43% to just over $1bn) and used it smartly.
Firstly, it prioritised areas that could provide easy wins, such as Palm Jumeirah projects like Palma Residences and Nakheel Mall. This has also helped with ongoing plot sales, with a series of hotel operators announcing new schemes.
Now it is rethinking legacy projects and coming up with alternatives more suited to Dubai’s current needs.
Deira Islands may just seem like a less ambitious version of Palm Deira, but providing a waterfront night souk in an area close to existing tourist attractions in the old heart of the city makes a lot of sense, and the proposed 30,000-capacity amphitheatre is something that is both unique and fairly cheap to build.
Now it is tackling the mammoth Dubai Waterfront site, with the recently-revealed proposal that it plans to build 4,000 homes in apartment blocks in the area. This project, due to be tendered within months and built by the end of 2017, is aimed at mid-market buyers as opposed to the more lucrative (if top-heavy) luxury end of the market.
Jebel Ali is still quite an industrial area, so perhaps lacks the glamour or the location that luxury buyers would want. But, as frequent surveys point out, Dubai needs much more of this type of housing. And the area has massive advantages in connectivity. It is close to Al Maktoum Airport and the Expo site and provides an easier commute for those making regular trips to Abu Dhabi.
If it continues on the same route, Nakheel will start to build a more convincing case to investors should it pursue the oft-debated prospect of an IPO. Now all it needs to do is work on polishing up its image.