Nakheel PJSC, Dubai’s biggest developer by assets, told creditors it wrote down its real estate by 78.6 billion dirhams ($21 billion) after property values in the Persian Gulf emirate fell by more than half.
The state-owned company wrote off 301.4 million dirhams in the first half of last year, 73.8 billion dirhams in 2009 and 4.44 billion dirhams in 2008, according to its Islamic bond prospectus issued last month and obtained by Bloomberg News. After the write-offs, the company’s share capital dropped to 10.6 billion dirhams as of June 2010 from 87.1 billion dirhams in 2008. Nakheel declined to comment.
“This shows Nakheel is cleaning up its balance sheet,” said Matthew Green, head of United Arab Emirates research at real-estate broker CB Richard Ellis Group Inc. (CBG) “The company has restructured its debt and is moving toward a more sustainable business model that relies more on income-generating assets, such as malls and leasing.”
Dubai’s property market had one of the world’s biggest reversals following the global credit crisis three years ago, with home prices slumping 64 percent since they peaked in mid-2008, Deutsche Bank AG estimates. Nakheel cut jobs and halted projects including the man-made islands of Palm Deira and Palm Jebel Ali.
Dubai World, Nakheel’s former owner and one of the emirate’s three main state-controlled holding companies, roiled global markets in November 2009 when it tried to stop repayments on about $25 billion of debt. The company signed a restructuring agreement with its creditors in March.
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