State-owned property firm Dubai Real Estate Corp (DREC) has taken over management of troubled Zabeel Investments, which is owned by the crown prince of Dubai, two sources familiar with the matter said on Thursday.

Zabeel, which has hospitality, property and private equity assets, owes approximately Dh6 billion ($1.6 billion) to mostly local banks.

In January, several sources involved in the process told Reuters that talks with banks to restructure Zabeel's debt had ground to a halt, with multiple loans in limbo and few assets available for sale, leaving banks facing the possibility of steep losses on their loans.

Officials at DREC, which builds and invests in commercial and industrial properties, were not immediately available for comment. Telephone calls to Zabeel's office were not answered.

The bank, Abu Dhabi's third-largest by market capitalisation, filed the action on September 19 in the Dubai International Financial Centre Courts, claiming breach of contract due to Zabeel's failure to meet repayment obligations, the document said.<!--Reuters-->