City Developments Ltd (CDL) said it is open to explore possibilities in raising its stakes in the South Beach project, wherein Dubai World also has a share.

“South Beach is an iconic development and one which has excellent potential,” said a CDL spokesperson.

She noted that the joint venture company that owns the project site may also issue notes if more funds are required. It is also open to any shareholder or note holder to subscribe for the notes.

CDL purchased the South Beach site for $1.69 billion in 2007 through a joint venture with El-Ad Group and Dubai World. In June 2009, JV Company refinanced a $1.2 billion land loan through a $400 million five-year secured convertible notes and an $800 million two-year secured bank loan. HK’s Nan Fung group subscribed for $205 million while CDL got the remaining $195 million.

Dubai World is now asking all the providers to finance itself and Nakheel to 'standstill' and extend the debt maturities until 30 May 2010.

The South Beach project will be comprised of residences, retail space, hotels and offices. Several market watchers suggest that aside from the options given by CDL yesterday, another way for the JV Company to finance the site’s development is to sell part of or the entire project. If the residences are launched and sold, its sales would help in funding some parts of the developments’ construction. The hotels could also be divested to CDL’s Hospitality Trusts, to its Millennium & Copthorne Hotels or even to a third-party buyer.

Alternatively, the said project, when completed, could become a real estate investment trust. A rough calculation showed that El-Ad and Dubai World would have pumped in around $200 million each of equity in the project.

CDL had cash equivalents of about $979.5 million as of 30 September 2009. Market watchers think the project consortium partners may have received proposals for their shares from potential buyers.

CDL said the South Beach's construction is more likely to start in the third quarter of next year, with Nan Fung and CDL to invest more money for the project.