Stringent Cash Management Credited for Dubai Property Developer’s Recovery

A stringent cash management programme has been credited as driving a recovery at Dubai-based real estate developer Nakheel Properties, which suffered from a downturn in the property market after the 2008 global financial crisis.

The government-owned developer was pushed close to default and forced to restructure its debt as a result of the downturn. However, the company said that it will repay all its outstanding debt to banks by this August, four years ahead of the schedule mandated by its restructuring plan, chairman Ali Rashid Lootah announced at a news conference.

The repayments will total 5.54bn dirhams (AED), equivalent to US$1.5bn, and will be funded from Nakheel’s own resources rather than support from the Dubai government.

Following the 2008-09 property market slump, a new board of directors was appointed in March 2010 to drive a turnaround for the debt-laden company through a full-scale financial restructuring. They were tasked with devising and implementing a new business plan, which involved resolving outstanding issues with trade creditors and investors.

Under the cash management programme, Nakheel was able to secure savings of nearly AED23bn. This was achieved through a combination of cash received from property handovers, sales proceeds from new projects that were not there in the original plan, as well as steady income from leasing and retail activities.

By February this year, Nakheel was able to announce that it had initiated early repayment of AED2.35bn of bank debt 18 months ahead of maturity in September 2015. In April, the company reported a 28% year-on-year (YoY) increase in first-quarter net profit to AED629m, on revenues of AED1.37bn.

Lootah said the early debt repayments were made possible by cash collections of AED25bn between 2010 and 2014 as it delivered properties. He added that Nakheel was now planning to build new properties in the hospitality, retail and leasing sectors.

“We have healthy cash flow and we expect it to remain positive,” said Lootah. “We’re not restricted by the restructuring.” He added constraints on lending by local banks were easing, making funding more accessible.

Nakheel will look at raising new funding by the end of this year and explore all options, including conventional bonds, sukuk and an initial public offering (IPO) of its shares, Lootah said

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