|26 September, 2017

INTERVIEW: Island owners keen to sell off-plan plots on Nakheel's The World

Owners motivated to offload assets after nine years adrift at sea and no sure return in sight

A development is seen on one of the islands of The World Islands project in Dubai January 7, 2012. Master developer Nakheel completed the islands in 2008, but only a handful of owners have begun construction work on the islands since.

A development is seen on one of the islands of The World Islands project in Dubai January 7, 2012. Master developer Nakheel completed the islands in 2008, but only a handful of owners have begun construction work on the islands since.

REUTERS/Jumana El Heloueh

Nearly ten years after Nakheel’s The World master development was completed, a Dubai-based developer says island owners have been offering to sell him their land parcels at a loss. A landmark off the coast of Dubai emirate, The World is made up of 300 islands reclaimed from the sea and set in the shape of the world’s continents.

The chairman of Kleindienst Group, the developer behind The Heart of Europe, a six-island cluster on The World, said he has purchased an island for his latest project for “less than the original price”.

Josef Kleindienst told Thomson Reuters Projects in an interview earlier this month that he “recently” acquired Venice island on The World, where he plans to build ‘The Floating Venice’, a 2.5 billion UAE dirham ($680 million) underwater luxury resort.

“Including all the fees, we paid 40 million UAE dirhams ($10.8 million),” he said. “The original price for this island was higher.”

Kleindienst did not disclose the original price for Venice island or the percentage price difference, but said he believed that he got a good deal.

The value of all the island deals was not disclosed but a Nakheel spokesperson told Gulf News in 2007 that about half of the islands were sold for prices ranging between $20 million and $50 million.

It was also reported in October 2007 that a Chinese investor had acquired Shanghai island for $28 million, while Greece fetched $15.5 million and Tokyo sold for $45 million.

The World, Nakheel’s ambitious, $3 billion boom-time master development off the coast of Dubai, was completed in 2008. But projects on the man-made archipelago were cast off in the wake of the global financial crisis. Owners struggled to secure financing to develop their islands amidst the downturn, and later lamented the lack of essential infrastructure to support their plans.

Nine years on, hardly any buyers on The World project have developed their islands, with Kleindienst’s Heart of Europe and Lebanon island being notable exceptions. More recently, work has also started on part of South America.

A spokesperson for Nakheel said: “Nakheel delivered The World’s 300 islands and 27km breakwater in 2008, ready for development by individual investors.  All of the 210 islands released for sale have been purchased.  A number of islands are currently at various stages of development in terms of construction and design proposal assessment.”

Island owners ‘running behind us’

Kleindienst said that owners have been hounding him with the hope of disposing of their depreciated assets or partnering with his company to develop their plots.

“We have 50 owners running behind us to buy their islands or they want to enter in a joint venture,” he said.

He added that the owners are willing to offer deals at below already-discounted asking prices.

“The value for the islands available right now is less than the original price,” Kleindienst said. “Some island owners would have given us more of a discount… we could have bought a similar-sized island (as Venice) for less money, but we wanted a direct neighbour to The Heart of Europe.”

Venice island is close to Kleindienst’s six other islands that make up The Heart of Europe, which includes Germany, Monaco, Sweden, Switzerland, St Petersburg and the Main Europe islands. The development is currently under construction, with three islands – Germany, Sweden and St Petersburg – expected to complete in 2018.

“The other parts will complete in 2019 and the first half of 2020,” Kleindienst said.

“The entire project will complete in mid-2020, because the Expo starts in October and we need to be fully completed prior to it,” he added.

Construction of The Floating Venice is also scheduled to begin early next year and complete by the end of 2020.

One island at a time

Last year, Thomson Reuters Projects reported that Kleindienst was also in talks to develop another new, mixed-use project on The World islands. The five-island development called the ‘Pearl of Asia’ was meant to be a joint venture.

However, those plans are currently in limbo, due to unforeseen circumstances.

“It’s a little complicated,” Kleindienst explained. “What we did not know at the beginning (was that) it originally had a project with investors. It takes quite a while to find a solution with the original investors. If this can be sorted, then we will build Pearl of Asia.”

Asked if he was considering other joint ventures or island deals, Kleindienst said: “I personally have appetite for more projects on The World, but one-by-one.”

Meanwhile, UAE developer Seven Tides is also due to start construction on a 100-villa luxury resort at The World.

CEO Abdulla bin Sulayem told Thomson Reuters Projects earlier this month that the project is due to start construction early next year.

“Our next big project will be a boutique resort on The World islands,” bin Sulayem said. “It’s (an island in) South America – we have a few islands. We will start one as phase one. It’s the most premium island, which faces the coastline of Jumeirah and nothing is in front of it other than the breakwater. And then we will start with the island behind it and so on.”

The project is expected to complete before the end of next year.

Bin Sulayem said the company had been waiting for “the right time” to start its development on The World, while focusing on delivering its other projects.

Seven Tides is the developer behind luxury hospitality developments such as Dukes Dubai and Anantara The Palm Dubai Resort.

“The World islands is a unique project,” bin Sulayem added. “For someone to start building (on) that project, he needs three things: courage, passion and knowledge.”

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