Dubai: The biggest German fund for property investments in Dubai declared bankruptcy on four of its seven funds yesterday after it announced the move in a recent letter to investors. The responsible court in Bielefeld, Germany, confirmed to German media that it has received the insolvency application.
Alternative Capital Invest (ACI), based in Gütersloh, Germany, said that "due to the balance of the funds the declaration of bankruptcy is evident and legally required."
German magazine Focus quoted ACI founder Hanns-Uwe Lohmann as saying that "inevitable depreciation of the projects' asset value" has led to the current situation. Lohmann meanwhile has resigned as ACI's CEO. Media reports say that the overall loss amounts to at least 70 million euros (Dh329 million).
ACI is engaged in several development and property projects in Dubai and was best known for its concept of "tower branding".
The fund company was planning towers named after celebrities such as F1 drivers Michael Schumacher and Niki Lauda and tennis champion Boris Becker. Massive advertisement campaigns were running throughout Dubai until 2008 before the property market reached its peak.
The letter stated that the price decline in properties in Dubai has made the move necessary. It mentioned that the funded projects are in an "unfinished state of construction." In detail, ACI's Dubai Fonds II to V are affected, the letter said, but not the latest funds Dubai Fonds VI and VII. Fonds I has been closed at an earlier date; 13.5 million euros (Dh63.1 million) have been paid out to investors.
According to German monthly Manager Magazin, up to 8000 investors have paid a capital of 210 million euros into the funds altogether. ACI expected to realise projects worth more than 600 million euros in Dubai before things turned worse.
Developments of ACI comprise the Dubai Star tower in Jumeirah Lake Towers for which currently a new contractor is sought, according to a statement by ACI Real Estate in Dubai.
The same applies to the Q Sami tower and Victory Bay in Business Bay. The PKS Residences and the Mayfield Gardens projects in Jumeirah Village are on hold, as are the Niki Lauda, Boris Becker and Michael Schumacher towers and the Wings of Arabia project in Dubailand.
There is also no progress with the Ferretti and Pershing Beach Residences projects in Waterfront, although they have been officially slated for completion by 2011. ACI claims that some of the projects have already been sold.
Earlier this year, ACI unsuccessfully tried to sell other assets as potential buyers cancelled deals. Lohmann blamed this on "intrigues" by competitors and unfavourable reports in the media.
However, the German public prosecution has started investigations against ACI months ago after fraud charges have been filed by several investors, spokesperson Klaus Pollmann of the public prosecution in charge in Bielefeld said.