Bringing Nakheel to heel

"There are more than 50 per cent of the world's cranes currently located in Dubai, which makes the new position I have taken up an extremely exciting one," said the Australian, freshly installed as chief executive of the emirate's state-backed developer Nakheel.

That was mid-2006. By October 2008, when a contagion of debt had engulfed much of the world, Mr O'Donnell was still bullish.

"There won't be a crash," he declared as he revealed plans for the world's tallest building, Nakheel Tower, a rocket-shaped concrete wonder that would soar more than a kilometre into the sky.

The crash came to Dubai, after all. Its property values halved in a year, the cranes fell silent and Nakheel Tower was scratched as the company suddenly struggled to pay its bills.

Now Mr O'Donnell has become another casualty of Dubai's ruptured bubble. Nakheel has dumped him from its board. While he remains as CEO, reports suggest that several fresh faces appointed to the board, including a new chairman, will want to replace him.

The Dubai government has announced it will spend $US9.5 billion ($A10.2 billion) restructuring the Dubai World conglomerate, of which Nakheel is a subsidiary. Dubai World carries a $US23.5 billion debt burden, and $US10.5 billion of that is Nakheel's. About $US8 billion of the government money will go straight to Nakheel to settle its liabilities, repaying creditors in full over five to eight years, and to ensure "near-term" projects proceed.

Under the deal, Nakheel will be extracted from Dubai World and become wholly government-owned.

The Financial Times said: "The ruler's lieutenants behind Dubai's real estate boom-to-bust years are being gradually replaced by established names from the city's mercantile elite."

Before heading to Dubai, Mr O'Donnell was managing director of Investa Property Group in Australia for five years. Under his leadership, it lifted its funds under management from $800 million to $6.2 billion.

In December 2007, back when the future was bright for Nakheel, the O'Donnell-led company took a $400 million stake in the Australian developer, Mirvac. Mr O'Donnell had said it made sense to consider joint developments "with a like-minded company".

But last year it pulled out of a joint bid with Mirvac to develop Barangaroo, a multibillion-dollar project for the NSW government. And in August, the debt-stricken Nakheel sold its final 12 per cent stake in Mirvac.

That was only 10 months after Mr O'Donnell had said Dubai's "fundamentals" were too strong for a crash. Now that the Nakheel restructure has been announced, Mr O'Donnell has thanked "our customers, suppliers and contractors for their patience during these difficult times".

He did not reply to a request for an interview.