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Dubai developer takes over struggling properties, projects

Adam Schreck
AP Business Writer

Dubai, United Arab Emirates— Dubai is giving oversight of a sprawling complex of partially built high-rises to the struggling developer of the sheikdom’s palm-shaped islands as the government works to bring its skidding property market under control.

In a Monday e-mail attributed to property developer Nakheel and the Dubai Multi Commodities Center, the developer announced it will take control of all of DMCC’s real-estate operations. Both companies are part of state-owned conglomerate Dubai World, which also controls port operator DP World and investment firm Istithmar World.

“DMCC’s property-related operations have been integrated with Nakheel to better accommodate current market conditions and optimize resources and expertise,” according to the e-mail.
No further details were provided.

DMCC’s property holdings primarily consist of a 500-acre Dubai development known as Jumeirah Lakes Towers as well as three skyscrapers within the project.

Several of the approximately 80 high-rise buildings in the complex are at least partially occupied, but others remain under construction. The development remains a building site clogged with cranes, cement mixers and other equipment.

Besides controlling the complex, Nakheel will be responsible for the Almas, Au and Ag Towers, a DMCC spokeswoman said. The nearly complete Almas is Dubai’s second-tallest building, rising about 1,200 feet — almost as high as the Empire State Building.

Dubai, one of seven semiautonomous sheikdoms that make up the United Arab Emirates, grew rapidly over the past decade into a booming commercial and tourism hub thanks to easy credit and rising regional oil wealth. Many foreign buyers, particularly from Britain, Russia and parts of Asia, made quick profits by investing in one or more properties.

But the city’s real-estate market has turned from boom to bust with the onset of the financial downturn.

HSBC said in a report Sunday that asking prices for property in Dubai have fallen about 65 percent from their September peak.

The bank reported there are signs the market is bottoming out, though David Lepper, the country’s head of equity research, said the UAE economy remains under pressure, and it is too early to “discern a sustainable trend” in property prices.

Dubai authorities recently merged the operations of another state-run company, Leisurecorp, into Nakheel as part of what the developer said was a broader consolidation of Dubai World real-estate businesses.

Leisurecorp runs a number of golf courses in Dubai and elsewhere, and will host the finals of the PGA European Tour.

Nakheel, meanwhile, is grappling with daunting financial challenges after years of debt-fueled growth.

The company has cut jobs and shelved numerous projects and said last month it took a share of $10 billion in government bailout funds as it struggles to repay suppliers. It must still find a way to repay $3.5 billion worth of Islamic-financed debt coming due later this year.

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