Dubai: With its next shopping and entertainment destinations all set to open, Nakheel expects to generate an additional Dh500 million to Dh1 billion in “recurring income” this year itself.
These include The Pointe — the Dh800 million, 1.5km promenade on the Palm that will be dominated by F&B brands — the Nakheel Mall (also on the Palm) during the fourth quarter, and also the Night Souq on Deira Islands. In addition, there will also be the villas — eventually totalling more than 1,500 homes — that it will lease as part of its Nad Al Sheba community.
Currently, recurring income — generated from leasing out its properties rather than outright sales — makes up 25 per cent of Nakheel’s revenues, according to Ali Rashid Lootah, chairman.
The developer’s target is to push this contribution to the 50 per cent mark by the end of the decade. This way there is less of a risk from any extended decline in the freehold space.
This is where its Deira Islands strategy could pay off big time for the developer, which reported net profits of Dh1.55 billion in the first quarter of 2018.
“You can never go wrong in real estate when you have water around,” said Lootah. “What we are doing at Deira Islands is making it a fully-fledged tourist destination, but with three- and four-star hotels and resorts.
“Dubai currently does not have hotels that cater to this visitor profile — those that do are hotels based in the city and the guests have to be bussed out to the beach every morning. That’s not how it should be.
“Deira Islands will set that right. The way I see, it beach is king.”
Work on the first hotel-resort on the new island has started, while it is expected to start shortly on the second. Nakheel has either sold a majority of the plots right by the water or is retaining some for projects of its own. So far, it has struck alliances with three hotel operators, such as RIU and Centara. Another two joint ventures are in the pipeline.
“We are bringing in partners who are serious about committing to our idea of what Deira Islands should be,” said Lootah. “They are bringing in their share of the funds — it’s not as if we are building them and someone comes to manage.”
Hotels are just part of it... Deira Islands will also host what will be Dubai’s largest mall, at 10.3 million square feet of built-up area, of which 4.5 million square feet is leasable. (A Dh4.2 billion contract for the mall’s main works was officially signed with UNEC earlier this year.)
This will be followed by project awards for the Deira Boulevard, which will encompass the areas surrounding the mall.
Outside of Deira and its islands, Nakheel is going all out for community themed malls, and where possible, through joint ventures. It recently struck one with Sharjah’s Shurooq for such a facility in the northern emirate and another with the owner of Al Nasr sports club for another in Dubai.
Will there be more such projects?
“If someone has the land and makes an approach, I say ‘Why not?’ It could be in the other emirates, it could be outside of the UAE as well,” Lootah added.
“We have had some reaching out from interested parties in south Asia. Anything that interests us, we will pursue.”
Keeping a 360-degree perspective on freehold
Nakheel might have assigned top priority to bulking up its leased portfolio, whether it is in retail or residential projects such as the Nad Al Sheba community, where all of the 1,500 plus villas will be available on rent. But it is not as if Nakheel wants to ignore freehold altogether.
The flagship Palm360 twin towers will ensure that. One half of the project will be taken up by a Raffles hotel, while the other will feature serviced residences that will be put on sale.
“We are going to kick off a major campaign in key overseas markets before we actually start the sales process,” said Ali Rashid Lootah. “The campaign should begin later this year.”
current contribution of recurring income to Nakheel’s revenue
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