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United Arab Emirates federal prosecutors say they have launched a major investigation into Dubai-based real estate developer Union Properties

DUBAI, United Arab Emirates – UAE prosecutors on Sunday announced they have opened a major investigation into Dubai-based real estate developer Union Properties, saying they will investigate allegations the ailing company committed fraud and d other offenses while trying to get out of debt.

Union Properties, known for building Dubai Motor City, has not responded to repeated requests for comment.

Prosecutors’ announcement renewed questions about the broader stability of Dubai’s burgeoning real estate market, which saw Union Properties rack up some $ 2 billion in debt during the city-state’s financial crisis more than ten years. The company had nearly $ 500 million in debt at the end of last year, according to their financial records.

A statement released by the state-owned WAM news agency said the investigation involved allegations that the company sold a property for less than its actual value and withheld the name of the beneficiary of the sale, as well as the forgery of documents and other violations.

“The investigation relates to complaints filed by the Securities and Commodities Authority over allegations of financial violations committed by Khalifa Hassan al-Hammadi, chairman of the board of directors of Union Properties, as well as some of its officials,” said the Minister. WAM press release.

Neither Amna nor Khalifa al-Hammadi could be reached for comment. The Union Properties filing sought to explain the sale by noting that it had occurred amid “the spread of the COVID-19 pandemic and the negative effects that accompany it – and in light of the ‘commitment of the company to settle its debt to its lenders “.

Other documents filed on Sunday with the Dubai financial market showed shareholders wanted a vote later this week to possibly remove its board of directors. Separately, the company said one of its subsidiaries was involved in a lawsuit targeting nearly $ 1 billion, without giving further details.

Union Properties shares fell more than 9% on Sunday in the Dubai financial market before closing down 4.83% at 26 fils per share, or 7 cents.

The company’s current shareholding structure was not immediately clear, although a profile from data company Refinitiv showed its main investor to be the Bluestone Fund.

Union Properties, like other companies, struggled to emerge from the shadow of Dubai’s financial crisis in 2009 when its real estate market collapsed. The city ultimately received $ 20 billion in bailouts from Abu Dhabi, the oil capital of the Emirates.

Union Properties scrapped construction of a $ 460 million Formula 1 theme park in Motor City during the crisis, with its then CEO saying banks were no longer willing to lend money. Creditors, including state-owned Emirates bank NBD, sued the company over $ 2 billion in loans. Even today, Emirates NBD advertises dusty buildings in Motor City as available for sale or rental.

“Today’s news was shocking, but we have to be clear that it’s a good thing that there is a system, a system that adheres to the punishment of those responsible,” said Waleed al- Khatib, Managing Partner of Abu Dhabi. Global For Shares and Bonds based trading company.

However, Dubai still faces impending debt payments stemming from its 2009 financial crisis. Dubai and its government-linked companies face a massive bill of $ 30.6 billion by 2023, according to Capital Economics, based in London. Dubai itself insists that it is able to cover its debts and that state-related businesses should be seen as separate from the Sheikh’s business.

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Follow Jon Gambrell and Lujain Jo on Twitter at www.twitter.com/jongambrellAP and www.twitter.com/lujainjo.

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ABC News

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