Sunland Group has pulled out of the Dh2.3 billion (US$626.1 million) Palazzo Versace resort in Dubai five years after it announced the project.
The Australian developer yesterday said it had agreed to exchange its stakes in the Palazzo Versace hotel and the D1 residential tower, both being built next to Dubai Creek, for 100 per cent ownership of the Palazzo Versace Gold Coast hotel in Australia.
Sunland said the agreement represented a "swap" and that no cash would be exchanged in the deal.
Emirates Investment Holdings (Enshaa), Sunland's partner in the Emirates Sunland joint venture, has taken on the Australian developer's 51 per cent interest in the Dubai resort and its 50 per cent share of the D1 tower.
In return, Enshaa has handed over its 49 per cent share in its Australian counterpart.
"Although the market is considered to be in need of new brands, designer and fashion hotels have been developing relatively slowly, especially in the current financing restrictions," said Chiheb Ben Mahmoud, the senior vice president at Jones Lang LaSalle Hotels, Middle East and Africa.
"This said, the region boasts two strong fashion brand flags: the Armani Hotel in Dubai and the Missoni Hotel in Kuwait."
The Dubai resort was planned as the second Versace property after the launch of the Gold Coast property in 2000. The master plan included 169 private homes and 213 hotel rooms.
The main structure of the Dubai building is nearly complete, but there is little surrounding the development and much of the basic infrastructure has yet to be put in place in the wider Culture Village area, being developed by Dubai Properties.
Work on the hotel project slowed and completion dates were repeatedly pushed back as cash flow through property sales failed to materialise.
Building on the project started in 2007.
Eighty per cent of the residences were sold before the financial downturn. But many buyers did not follow through with payments, Soheil Abedian, the managing director of Emirates Sunland Group, told The National in March.
"More than 50 per cent of [the apartments sold] have not performed," said Mr Abedian at the time, when he explained that he was in the process of cancelling about 40 contracts through the Real Estate Regulatory Agency.
He said that the company had switched from property sales to equity and bank loans to finance completion.
When the apartments came on the market, prices started at Dh17.7m.
But prices were slashed by about half following the downturn in the Dubai property market. Plans for an air-conditioned beach for the property were also considered, but this idea was eventually scrapped, with environmental concerns cited as the main reason.
Sunland said the transaction with Enshaa would have no effect on Sunland's other Dubai interests, the Nur residential tower, Waterfront 1 and Waterfront 2.