Nakheel turns to retail for cash

Nakheel plans to restart work on at least four shopping malls next year, including the Palm Mall Village Centre. Karim Sahib / AFP

Nakheel plans to resume work on at least four shopping malls next year as it shifts its focus to generating cash from retail ventures, says Ali Rashid Ahmed Lootah, the company's chairman.

The developer, owned by Dubai World, has scaled back ambitious plans announced in 2008 to build 100 shopping malls over 20 years and will instead concentrate on developing shopping facilities within its developed communities and expanding malls including Ibn Battuta and Dragon Mart.

"We have to enhance Nakheel financially and look for new cash. This is the best option, I think, to have fresh cash," Mr Lootah said at the opening of Homes R Us in the Ibn Battuta Mall yesterday. "We're looking at all the areas where we have existing communities and medium and short-term projects. All these areas will be fully serviced."

Among the projects set to restart are Palm Mall Village Centre, a 68,000 square metre shopping facility on Palm Jumeirah, which stalled at the end of 2008 as the financial crisis took hold.

Shops will also be built at The Circle and The Triangle, the retail and residential components of Jumeirah Village, while Dragon Mart and Ibn Battuta Mall will be extended.

"I wish I could do it today," Mr Lootah said. "Hopefully early next year we'll kick-start all these projects." Nakheel's restarted projects would be the few retail developments in the Dubai pipeline.

A wave of new retail space has opened in the emirate over the past five years, including Dubai Mall, one of the largest in the world, in late 2008, and Mirdif City Centre in March.

Total gross leaseable retail space grew from 10.5 sq feet per capita in 2006 to nearly 14 sq ft per head this year, according to Jones Lang LaSalle. There are no shopping centres scheduled until 2013, apart from Mall of Arabia, now under construction in Dubailand, which was scheduled for completion in 2013. But it may be delayed further since retailers remain cautious, said Jones Lang LaSalle. David Macadam, the regional director of retail for Jones Lang LaSalle in the MENA region, said that by the time the restarted Nakheel projects come online there would be sufficient consumer demand to sustain them.

Nakheel would also be likely to tweak its original plans to suit the new economic situation, he added.

"They will not build the same projects they originally envisioned," Mr Macadam said. "They will be modified in some way to really reflect the market reality."

Mr Lootah said funds to complete Nakheel's short-term projects, which include about eight residential developments, would come from the US$8 billion (Dh29.38bn) committed by the Dubai Government in March under a recaptalisation plan, along with payments from property buyers.

Nakheel said last week it had so far paid Dh3.4bn to contractors and other trade partners. Mr Lootah said the company was in preliminary talks with NASDAQ Dubai to list Islamic bonds, known as sukuk, on the exchange and that he was confident a debt restructuring agreement would be reached with its bank creditors "in the near future".