The Abdullah brothers made more than Dh1 billion (US$272.2m) worth of investments in property in the UAE using loans and money improperly withdrawn from Damas International, The National can reveal.
The planned sale of these investments is at the heart of an agreement reached last week between Damas, the largest jewellery retailer in the region, the brothers and creditor banks.
About Dh1.2bn of the total Dh1.8bn of debt racked up by the brothers, members of the company's founding family, was ploughed into property investments. Of this, 90 per cent was invested in the UAE, according to Damas.
By signing an agreement to sell the assets over time, the creditors expect to maximise their returns. Most of the investments, which include plots of land, half-built projects and finished property, were made in 2008 at the peak of the market. Prices of some homes and offices have since fallen by more than half, analysts say.
"Because most of the assets we have to realise are properties, we need to allow … enough time to maximise the value of these assets and not end up with an emergency or fire sale," said Anan Fakhreddin, the chief executive of Damas.
The brothers - Tawhid, Tawfiq and Tamjid - were the subject of the strictest regulatory action in the history of the Dubai Financial Services Authority (DFSA) last year after an investigation found they had withdrawn cash and gold valued at Dh614m without shareholder approval.
They were banned from holding executive positions at any company in the Dubai International Financial Centre for between five and 10 years, and fined.
The board of the company was dismissed and the DFSA is monitoring implementation of new corporate governance procedures at Damas.
Mr Fakhreddin said the company expected a full recovery of the Dh614m taken from it for the brothers' private investments, but would seek alternative ways to recover the funds if full payment had not been made at the end of the three-year agreement.
Among the Abdullah brothers' investments were the twin towers formerly known as the Angsana Hotel & Suites on Sheikh Zayed Road, Dubai, and a partly finished hotel in Fujairah where construction has ground to a halt.
A divestment committee would review the Abdullah brothers' assets and sell them when the market improves.
"Currently the value of most of those assets is distressed," said Sanjay Kalsi, the jeweller's chief financial officer. "It may not be the right time or the buyers may not be available. They will be sold as and when the conditions improve."
Damas was also seeking to sell off its "non-core" assets, including properties the brothers developed with Damas funds and then resold to Damas for a premium.
The company said it was also aggressively recovering funds it had lent out or invested abroad. Damas has filed a lawsuit in Sudan against a local company in a bid to exit an investment that had been made in that country.
Now that a final agreement has been reached with Damas creditors, the brothers and their creditors, the company is focusing on repaying debt and expanding its business in Saudi Arabia and India.