Possible Nakheel IPO could meet investor resistance

A potential initial public offering (IPO) by the Dubai government-owned developer Nakheel will have to overcome a lack of investor interest, analysts say. Reports earlier this week said Nakheel was considering an IPO to shore up its cash position, and that it hoped to raise Dh55 billion (US$15bn) to fund some of its projects that form part of its total portfolio of Dh294bn. "It will be difficult to find people interested in the IPO - and the valuation won't be as attractive as it might have been previously," said Robert McKinnon, the managing director of research at Al Mal Capital. Nakheel is the developer of Dubai's Palm Islands, iconic developments that are the cornerstone of the emirate's property market. However, the swiftness of the downturn of the local property market - a consequence of a shortage of capital as banks hold back lending due to the international credit squeeze - has caught many developers by surprise. This week, Nakheel said it would lay off 500 staff and slow down work on several key projects. Nakheel has yet to confirm whether it will go ahead with a listing, but Chris O'Donnell, the chief executive, said yesterday that a number of funding options were being considered. "We've got different options and an IPO is one of the options. It doesn't mean that an IPO is imminent," he said. Nakheel had intended to sell as much as Dh2.7bn in real estate investment trusts in the first and fourth quarters of this year, but the plan is on hold until stability returns to the market. It had planned to list the securities in Dubai, and in either London or Singapore. The company said in a statement: "A company as large as Nakheel is constantly exploring a number of capital raising options, be it traditional debt issues, private equity, real estate investment trusts and direct project financing from banks." Key Nakheel projects including Palms Deira and Jebel Ali, Waterfront and The Universe have been hit by the slowdown. Work on the Trump International Tower and Hotel, Gateway Towers and Frond N villas, all on Palm Jumeirah, has also been delayed. But the company is expected to push forward with the Nakheel Harbour and Tower development, which was launched at Dubai Cityscape in October. The Dh140bn project will feature a tower more than 1km high. At least five contractors including the Burj Dubai builder Samsung Engineering and Construction, a South Korean firm, have been invited to submit bids for the tower's main construction. Soletanche Bachy, a French company, has been carrying out groundwork at the site, near Dubai's Ibn Battuta Mall, since the beginning of this year. At the time of the project's launch, Mr O'Donnell said it would be financed through a combination of pre-sales of apartments, the sale of 270 hectares of land surrounding the tower and bank loans. He said he was confident the project would be built successfully, owing to the fact that it would be developed over 10 years. "We will monitor the economic climate over that period when determining funding for the project." agiuffrida@thenational.ae