Nakheel tenants’ air-con to be switched off for non-payment

Tenants of Discovery Gardens, a large apartment complex owned by Dubai World real estate subsidiary Nakheel have been served with a notice that their air-conditioning systems will be shut down on Tuesday this week because of non-payment of bills, reported Bloomberg today.

Discovery Gardens comprises more than one hundred low-rise apartment blocks on the southern edge of the city. Palm Utilities has said it will shut off the chilled water supply to its air-conditioning systems on June 15th.

Switch off

‘Due to the building owner’s continuing failure to enter into a legally binding contract with us, we have served on the building owner a ‘Notice of Disconnection’ of chilled water supply,’ said posters located in Discovery Gardens Building 107. ‘Chilled water supplied to this building to service the building’s air conditioning will be disconnected on Tuesday 15 June 2010′.

Nakheel is the in the process of restructuring debts totalling $23.5 billion and has yet to agree terms with 66 local banks although the main creditor group has reached an agreement in principle. In the meantime cash flow issues remain for the group responsible for building the vision of Dubai, including three palm shaped islands off the Dubai coast.

Surely the Dubai Government will step in to sort out this problem. It would be highly embarrassing to leave thousands of tenants without air-conditioning in the mid-summer, although this happens frequently in the neighboring emirate of Sharjah.

This also underlines the fact that the rescheduling in principle agreed with the main creditor group is not the same as an actual signed deal which would include the release of $8 billion in cash to Nakheel to pay its contractors and suppliers.

DFM bottoms out

The Dubai Financial Market is presently trading near the lows of December 2008 and there are indications of a capitulation bottom as trading has virtually dried up.

But fresh blows to confidence continue to appear. Today the Sunday Times reported that Sameer Al Ansari, the non-executive chairman of Dubai International Capital has resigned because of the ‘poor performance’ of the Dubai sovereign wealth fund’s investments.

If Nakheel tenants are left without air-conditioning in the middle of the Arabian summer this would definitely be a new low in the history of the crisis in Dubai.

Postscript: Nakheel has told Gulf News this was an administrative ‘error’ and nobody will be cut off. But some buildings in the Shoreline apartments on The Palm have received similar notices. Residents are understandably furious, and both Nakheel and Palm Utilities are part of Dubai Government’s Dubai World conglomerate. It appears therefore to be an internal dispute among government-owned companies.