UPDATE 1-Dubai's Nakheel '07 profit surges on land sales

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By John Irish

DUBAI, April 17 (Reuters) - Dubai-government owned property developer Nakheel, which is building palm-tree shaped islands in the Gulf, said profit last year surged almost five-fold to $1.28 billion after selling more land, and building fewer homes.

Nakheel is capitalising on surging demand for property in Dubai, whose economy is booming on a near six-fold increase in oil prices during the last six years.

Nakheel competes with Emaar Properties (EMAR.DU), the largest Arab real estate company, and is looking to raise about 5 billion dirhams ($1.36 billion) of equity to finance housing and infrastructure projects via an initial public offering of two real estate investment trusts (REITs). [ID:nL21299873]

In contrast, Emaar profit last year rose 3.5 percent.

At Nakheel, net income in the year to Dec. 31 rose to 4.69 billion dirhams, or 5.66 dirhams per share, compared with 1 billion dirhams, or 1.42 dirhams per share, in 2006, Nakheel said in a statement on Thursday on the website of the Dubai International Financial Exchange (DIFX).

Nakheel lists about $1.7 billion of Islamic bonds, or sukuk, on the exchange. It mandated banks on Thursday to sell two-year dirham-denominated Islamic bonds. [ID:nL17314313]

Revenue from the sale of land surged almost nine-fold to 10.5 billion dirhams, while costs associated with building apartments fell by almost three-quarters to 1.53 billion dirhams and for houses by the same magnitude to 1.12 billion dirhams, Nakheel said.

The sale of land includes a collection of islands Nakheel is building in the shape of the map of the world just off Dubai's coast. The company had $26.4 billion of projects under construction in January last year, according to its statement.

Loan debt more than doubled in the year to Dec. 31 to 10.16 billion dirhams, with the biggest facility, for 6.7 billion dirhams, maturing in 2012, according to the statement.

Two sets of Islamic bonds, one for 3.52 billion dirhams and another for $750 million, are convertible to shares in any Nakheel IPO at a 5 percent discount. The bonds mature in 2009 and 2011 respectively.

Nakheel Chief Financial Officer Kar Tung Quek told Reuters in February that the company was in talks with banks about creating two REIT companies, one to help finance infrastructure schemes and the other to fund residential projects.

Between them, the REITs would aim to hold assets worth between 8 billion and 10 billion dirhams, Quek said.