Thursday, Dec 29, 2011

-- Luxury Pentominium project launched near market peak

-- Trident says contractor still on site, committed to project

-- Trident says facing cashflow issues due to tighter bank finance, customer defaults, collateral demands

By Tahani Karrar-Lewsley

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Trident International Holdings, the developer of a high-profile residential project in Dubai, has defaulted on a 75 million U.A.E. dirhams ($20 million) overdraft facility extended by Dubai's Noor Islamic Bank to back construction work on the project, according to a bank spokesperson.

Noor Islamic Bank also said that work on the project, the Pentominium Tower in Dubai Marina, has been halted since March, though Dubai-based Trident said the contractor for the project is still on site "operational, not demobilized and in amicable dialogue with us for a viable long term solution along with other parties."

Residential property prices have more than halved since the Dubai real estate market peaked in 2008, leaving many developers and apartment owners facing large losses. A total of $958 billion of construction projects in the United Arab Emirates were delayed or cancelled in the 12 months to October 2011, according to a recent analysis by Citigroup.

Trident launched the Pentominium Tower project in 2007, near the market peak, saying it would have 120 floors of luxury apartments, with interiors to be designed by Italy's Salvatore Ferragamo SpA. At the originally-planned 516 meters, it was billed as the second tallest building in Dubai after the 830-meter Burj Khalifa, the tallest building in the world.

"Trident is now in default on their profit payments by more than 200 days," the Noor Islamic Bank spokesperson said in an emailed statement to Zawya Dow Jones. "Despite the bank's best efforts, it has not been possible to make any contact with Trident's directors," the spokesperson added.

Trident declined to respond to questions about its overdraft facility with Noor Islamic Bank, but said the company is in "active" talks with all stakeholders in the project, including banks. Trident also said it is "actively seeking to raise money from international sources."

Trident said it remains committed to the Pentominium project, but is facing cashflow issues due to restrictions in bank finance, customer defaults and demands for additional collateral from the main contractor on the construction project, the Lebanon-based Arabian Construction Co.

A spokesperson for Arabian Construction Co. in Dubai declined to comment.

Construction work on the Pentominium "had been progressing well and is nearly at the 30th floor, however, (it) has been scaled back significantly recently," Trident said in an emailed statement to Zawya Dow Jones.

"In keeping with its past track record of delivering and handing over four out of the five launched projects in Dubai, Trident is fully committed to the Pentominium project and is working on a comprehensive solution which ensures it completes the entire Pentominium project even if at the expense of diluting its own profits," Trident said.

Noor Islamic Bank said it provided an AED200 million ($55 million) overdraft facility to Trident in 2008 to cover any mismatch between payments from investors in the apartments and expenditure on the construction project. In August 2009, the overdraft facility was scaled back to AED75 million due to the downturn in the Dubai real estate market, the bank said.

In its statement, Trident said a "prominent bank" involved with the project had cut back project financing by more than 60% despite additional equity and collateral provided by Trident. Other factors included customer defaults of around 30% during the financial crisis, and "onerous late demands for additional collateral" from the main contractor on the project.

Noor Islamic Bank said the AED75 million overdraft it agreed with Trident was a 54-month facility "during which time Trident agreed to make profit payments to Noor." Because NIB is an Islamic bank, repayments are classed as a share of profits, rather than as interest. Trident fully utilized the AED75 million overdraft and came back to the bank for additional money but "failed to provide a credible financial plan for the bank to increase its support," Noor Islamic Bank said in its statement.

Trident has completed four projects in the Dubai Marina area including The Waterfront, Marinascape, Bayside Residence and Trident Grand Residence. In 2008 it said it would be franchising the Pentominium brand and was in talks with developers in Europe, Asia and North America and similar towers could be brought to the UK, France, India, Russia, Singapore and the U.S.

-By Tahani Karrar-Lewsley, Dow Jones Newswires; +9714 446-1692; Tahani.Karrar@dowjones.com

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

29-12-11 0608GMT