Prosecutors in the United Arab Emirates announced on Sunday that they have begun a massive investigation against Dubai-based real estate developer Union Properties, saying they will look into allegations that the company committed fraud and other crimes while seeking to get out of debt.
Union Properties, the company behind Dubai Motor City, has yet to reply to calls for comment.
Prosecutors’ announcement raised additional concerns about the long-term viability of Dubai’s boom-and-bust real estate market, which saw Union Properties amass $2 billion in debt during the city-financial state’s crisis a decade ago. According to its financial reports, the corporation had approximately $500 million in debt at the end of last year.
The probe, according to a statement released by the state-run WAM news agency, contained charges of the firm selling land for less than its true value and concealing the name of the sale’s beneficiary, as well as forging paperwork and other infractions.
The Securities and Commodities Authority filed accusations alleging financial crimes by Khalifa Hassan al-Hammadi, chairman of the board of directors of Union Properties, and some of the company’s officials, according to the WAM statement.
According to a stock market filing by Union Properties, Amna al-Hammadi paid 30 million dirhams ($8.1 million) for a property that had previously been appraised at 49.5 million dirhams ($13.4 million). Amna al-Hammadi was described as Khalifa al-sister Hammadi’s in previous London Stock Exchange filings.
Amna al-Hammadi and Khalifa al-Hammadi were unavailable for comment. The transaction happened amid “the expansion of the COVID-19 pandemic and its related negative repercussions — and in light of the company’s determination to settle its debt towards its lenders,” according to Union Properties’ application.
Other filings to the Dubai Financial Market on Sunday indicated that shareholders planned a vote later this week on whether or not to dismiss the board of directors. Separately, the business stated that one of its subsidiaries was embroiled in $1 billion litigation, but did not elaborate.
Union Properties’ stock dropped more than 9% in trading on the Dubai Financial Market on Sunday before finishing down 4.83 percent at 26 fils a share, or 7 cents.
The company’s current shareholder structure was not immediately obvious, although a profile from data provider Refinitiv revealed the Bluestone Fund as its largest stakeholder.
Union Properties, like other businesses, has battled to emerge from the shadow of Dubai’s financial crisis in 2009, when the property market crashed. The city will eventually receive $20 billion in bailout funds from Abu Dhabi, the oil-rich capital of the United Arab Emirates.
During the financial crisis, Union Properties halted the building of a $460 million Formula One entertainment park in Motor City, claiming that banks would no longer provide money. Creditors chased the company for $2 billion in loans, including the state-linked bank Emirates NBD. Even today, Emirates NBD lists dusty buildings in Motor City for sale or rent on its website.
“Today’s news was upsetting, but we must remember that it is a good thing that there is a system,” said Waleed al-Khatib, managing partner of the Abu Dhabi-based trading business Global for Shares and Bonds.
Dubai, on the other hand, still has debt obligations due to the financial crisis of 2009. According to London-based Capital Economics, Dubai and its government-linked enterprises would be hit with a hefty $30.6 billion debt by 2023. Dubai claims that it can pay its obligations and those state-owned companies should be treated apart from the sheikhdom’s concerns.
