CDL open to raising South Beach stake

Source : Business Times – 1 Dec 2009

City Developments Ltd (CDL) says it is open to exploring the possibility to raise its stake in the South Beach project – in which Dubai World also has a share – if such an opportunity arises.

‘South Beach is an iconic development and one which has excellent potential,’ a CDL spokesperson noted.

She added that the joint venture company that owns the South Beach site may also choose to issue further notes if more funds are required in due course and it is open to any note holder and/or shareholder to subscribe for the notes.

CDL bought the South Beach site in 2007 jointly with Dubai World and El-Ad Group for $1.69 billion. In June this year, the JV company refinanced an earlier $1.2 billion land loan through an $800 million two-year secured bank loan and $400 million five-year secured convertible notes. Hong Kong’s Nan Fung group subscribed for $205 million of the notes while CDL mopped up the remaining $195 million.

Dubai World is now asking all providers of financing to itself and its unit Nakheel to ’standstill’ and extend debt maturities until at least May 30, 2010.

South Beach will have offices, hotels, residences and and retail space. Some market watchers suggest that in addition to the options outlined by CDL yesterday, another avenue for the JV company to fund the site’s development would be to sell all or part of the project. If the apartments are launched and sold, sales proceeds would help to fund part of the development’s construction. The hotels could also be divested to CDL’s hotel units Millennium & Copthorne Hotels plc and CDL Hospitality Trusts, or a third-party buyer. Alternatively, the entire development, when completed, could be spun off into a real estate investment trust. Rough calculations show that Dubai World and El-Ad would have pumped in about $200 million each of equity in the project. As at Sept 30, 2009, CDL had cash and cash equivalents of about $979.5 million at group level. Market watchers reckon the South Beach consortium partners may have received offers for their stakes from potential buyers.

CDL said in August that South Beach’s construction is likely to begin around Q3 2010, with CDL and Nan Fung probably the ones that will pump in further money. El-Ad and Dubai World are likely to be passive investors who may see their share in the project diluted.