Palm-island builder plans foreign push

By Jason Benham

DUBAI (Reuters) - Nakheel, developer of palm-shaped islands off Dubai's coast, plans big investments in listed property firms in Asia, the United Kingdom and the United States as the credit crunch offers opportunities to snap up bargains.

Nakheel also plans to raise its stake in Australia's Mirvac Group Ltd MRG.AX from 12.5 percent to just under 20 percent to expand its operations there, the company's chief financial officer told the Reuters Global Real Estate Summit on Wednesday.

"Because of the credit crisis, we have many investment banks knocking on our door with big piles of opportunities in the United States, UK, Australia and China," Kar Tung Quek said.

"We are looking for partners in Asia, Europe and maybe the U.S. We like the company to be listed," he added.

Quek said the company is planning to launch one or two real estate investment funds worth up to $5 billion in the next two months to finance projects in Dubai.

Building conditions are improving with sales booming, inflation cooling and profit margins widening dramatically due to soaring demand for luxury homes in the seaside emirate, viewed by some as a safe haven in a turbulent Middle East.

The group sold 20 billion dirhams ($5.45 billion) in properties in 2007 in Dubai. That sum has soared to 35 billion dirhams in the first five months of 2008 alone, he said.

"Marina apartments on the Palm are selling for 3,500 dirhams per square foot now, compared with 2,500 just six months ago and 1,300 two years ago," he said.

Quek said the company is mulling plans to build a tower that would be "higher than the competition", to eclipse rival Emaar Properties' EMAR.DU Burj Dubai and cement the commercial centre of the Gulf Arab region's position as an international hub.

The Burj Dubai, the tallest tower in the world, reached 636 meters earlier this month and is due to be completed in September 2009 after Emaar Properties said it would increase the tower's height.

Developers like state-owned Nakheel have had to face soaring inflation for items such as steel and concrete needed to build office and apartment towers.

"Construction costs could stabilize now given global economy is softening...I don't see it rising more than 10 percent from now on," he said.

Asked whether Nakheel was planning new borrowing, Quek said the debt market was tight at the moment and that the company was partly funding its projects through land sales.

Nakheel issued $1 billion worth of Islamic bonds in May to finance expansion. The developer has held at least three Islamic bond sales, including one worth $3.52 billion in 2006, the world's largest.

Bankers say the Gulf's Islamic bond market is coming back to life after a nine-month lull as issuers seek to tap Gulf currency revaluation speculation and regional low interest rates by selling bonds in local currencies.  Continued...