Property shares fall amid Dubai crisis fears

  The share market has seen its second day of falls today amid fears the Dubai financial crisis could worsen.   In early trading, the FTSE 100 index dropped more than 1% to 5140, with worries the economy could see another downturn.   However, stocks have climbed back slightly this morning and are now 0.15% lower.   The fall was sparked by an announcement that the Dubai government had begun restructuring one of its main investment companies, which is centred on its property activities, because it could not pay its debts.   On Wednesday, the government said it would ask for a standstill agreement from providers of $4bn (£2.4bn) of debt, which is due to mature next month, and is hoping for an extension until May.   Companies within the Dubai World portfolio include: Nakheel, which is building the high-profile Palm Islands and World developments off the coast of the emirate; Limitless, the development company that made a £250m bid for Minerva last year; Economic Zones World, which bought shed specialist Gazeley in June 2008; and DP World, which bought P&O in 2006.   On Thursday, the government took further action by ring-fencing its profitable ports unit DP World, excluding it from the debt standstill.   The news about Dubai World raised fears that Dubai investors could be forced into a fire sale of assets, which include high profile London properties, to raise funds.   Dubai World’s investment arm, Istithmar, sold its stake in two properties on Regent Street and another on Oxford Street to Great Portland Estates last month.   It also owns the Adelphi on the Strand and the Grand Buildings in Trafalgar Square.   Dubai World has another investment arm, Dubai Investment Capital, which owns a 17% stake in Merlin Entertainments. Merlin owns Alton Towers, Madame Tussauds and the London Eye. It also owns the budget hotel chain, Travelodge.   London shares dived almost 3% yesterday in response to Dubai’s debt woes.   michael.phillips@estatesgazette.com nathan.cross@estatesgazette.com