x Abu Dhabi, UAESaturday 22 July 2017

Nakheel completes exit from Australia's Mirvac

The property developer Nakheel sells the last of its stake in the Australian developer Mirvac Group.

Palm Jumeirah, one of the projects built by Nakheel.
Palm Jumeirah, one of the projects built by Nakheel.

Nakheel has sold its stake in the Mirvac Group, realising just a fraction of its original investment in the Australian real estate concern as it builds funds to repay lenders in December. The Dubai government-controlled developer agreed to sell 172 million shares in the property investment trust for A$200 million (Dh615.2m) to Deutsche Securities Australia, according to a regulatory filing posted to the Australian stock exchange Wednesday. That represent a price of about A$1.16 a share or almost 80 per cent less than the value of the stock when Nakheel made its original investment in 2007. Analysts say the developer may consider further disposals to raise cash before a US$3.5 billion (Dh12.85bn) Islamic bond matures in December. "Right now they are looking for more liquid assets they can sell quickly," said Bobby Sarkar, vice president, equity research, of Al Mal Capital. Nakheel needs to repay billions of dollars in debt that it accumulated during the boom years by building the world's largest man-made islands including Palm Jumeirah along the Dubai coastline. Other government-related companies in the Emirate have been forced to sell assets and restructure as the global financial crisis forces a reappraisal of expansion plans conceived during the bull market. Dubai's total debt may stand at $84.7bn, EFG-Hermes estimated this week. Dubai World, the conglomerate that owns Nakheel, is believed to account of about half of this sum. Nakheel disclosed its initial 6.51 per cent stake in Mirvac in December 2007, near the peak of Dubai's six-year building boom when developers across the Emirates were seeking to expand their global footprint. But the value of those shares have since slid by almost 80 per cent as investor sentiment towards property stocks has faltered. The developer bought more of the company's stock in Januaryof last year, almost doubling its stake in Sydney-based Mirvac. But Nakheel has been gradually selling down its shareholding in the company over the past year. On Tuesday, Mirvac reported a full-year net loss of A$1.08bn, but forecast a lift in earnings in the current financial year as conditions improved within Australia's residential property market. Reduced sales and falling property prices across Nakheel's home and international markets since the onset of the global credit crisis has cut its revenues significantly and forced it to shed jobs and trim its asset portfolio. "Nakheel is selling its non-core assets given that its debt refinancing is coming due," said a Dubai-based analyst who declined to be named. "Buying at $5 and selling at $1 reeks of a distressed sale to me." How Nakheel and Dubai World handle the repayment of forthcoming loans and bonds is being widely seen as indicative of how the emirate plans to deal with its overall debt burden. Al Mal's Sarkar believes the developer may now consider selling off more of its assets to raise capital. "I think there are other assets earmarked for sale. Restructuring or delaying in paying this bond is the absolute last option," he said. Other analysts have suggested that money raised from a possible sale of part of DP World to a private equity firm could be redirected through Dubai World, which owns both DP World and Nakheel, to help pay off the sukuk and other borrowings. Dubai could also finance its debts by tapping a bond programme it launched in February in which it is borrowing $20bn in two tranches. The first $10bn came from the Central Bank, while the second $10bn may come from the Central Bank, international investors or a combination of the two. Nakheel has received funds from the programme but the developer has not disclosed how much. A Nakheel spokeswoman declined to comment on the sale of the company's stake in Mirvac. tarnold@thenational.ae