Financial backers of a Dubai developer that aimed to build towers named after German sports stars including the Formula One driver Michael Schumacher and the tennis champion Boris Becker have declared bankruptcy in Germany.
Dubai-based investors in properties from the developer Alternative Capital Invest (ACI) have received notices in the past week to file claims as part of the liquidation of several funds in Germany set up to allow investors to take advantage of Dubai's property boom.
The bankruptcy proceedings of those funds will provide an important guide for how property developments with complex financing arrangements and ownership structures are dealt with as thousands of legal cases over property go through the courts here and abroad, lawyers say. It will also shed light on how successfully foreign courts can compel UAE companies to hand over assets.
ACI was known as one of the brashest developers in Dubai's property boom. It launched several celebrity-endorsed buildings, including towers named after Schumacher and fellow F1 driver Niki Lauda. But none of its 17 projects have been completed.
ACI funded its projects through direct sales and several investment funds in Germany, where a founder of the company, Robin Lohmann, is from. Since 2008, cases have been filed against those funds and ACI in Dubai as investors clamoured for the return of their money or completion of the buildings in which they invested.
Valeri Babak, an investor in the stalled Victory Bay tower in Business Bay, said he received a letter from the liquidator of the fifth of seven funds in Germany asking him to file a claim for what he is owed. The fifth fund, called Alternative Capital Invest GmbH & Co. V. Dubai Tower KG, was associated with Victory Bay.
The letter said the "insolvent" fund was being liquidated and the local court of the city of Bielefeld in Germany was overseeing the distribution of the company's assets.
Mr Lohmann, the managing director of ACI Real Estate in Dubai, did not answer calls or e-mails yesterday. German prosecutors told The National in September that they were investigating the management of ACI amid allegations of fraud and breach of trust.
Ludmila Yamalova, a managing partner at HPL Yamalova & Plewka in Dubai, said the impact of the case was still unclear, but the fact that Dubai buyers were starting to receive notices meant legal progress was being made.
"We are trying to understand what this means for people who invested in these buildings," she said.
"What is interesting is that the fund in Germany is being liquidated, but direct buyers of properties in Dubai are being notified as well. We interpret that as ACI Dubai also being insolvent."
Ms Yamalova said the courts were beginning to see the first official bankruptcy proceedings for property developers.
Investors were closely watching the first liquidation in the country for guidance on how the system woud handle redistributions of assets from insolvent companies. Al Murjan Real Estate in Umm al Qaiwain filed for liquidation in November, blaming an inability to get government planning approvals. It collected millions of dirhams in deposits from investors for the US$3 billion (Dh11bn) White Bay project on two islands in the emirate.
Mr Babak, the investor in Victory Bay, said he would file a claim with the liquidator in Germany but did not believe he would see any of the $800,000 he paid to ACI.
"I've been talking to them for two years and nothing has happened," he said. "I don't think they have any more assets. All we have been able to do is send letters."