Reddy or not? Oceans Umhlanga takes on water
It's envisaged as the largest mixed-use development in the country, but a row has halted the R4,3bn project
As the construction industry buckles under a stumbling economy, a fallout between the developers and a contractor has grounded a multibillion-rand project in Durban’s upmarket Umhlanga.
Work on the R4,3bn Oceans Umhlanga project, envisaged as the largest mixed-use development in the country, stopped about three weeks ago.
The project is driven by property and business magnate, and ANC backer, Vivian Reddy.
The development comprises a sprawling shopping mall, exclusive residential apartments and a five-star Radisson Blu hotel. There has been no shortage of financial inflow to the development, with hundreds of apartments sold before the building had even risen above eye-level.
The luxury apartments range from R2,5m for a bachelor pad to R50m for a penthouse.
With the concrete shell of the opulent project looming large over the seaside skyline, but no activity on the site, the completion date has been set back. Construction firm Liviero, which was placed in voluntary business rescue in July, was last week blamed on social media for the work stoppage by the Umhlanga UIP (Urban Improvement Precinct).
In a Facebook post, which was later removed, the UIP said construction on the mall and residential site had been halted “due to the business rescue of Liviero Construction”.
This, it said, resulted in the developer having to negotiate with a new construction joint-venture entity.
But the allegation that Liviero was responsible for the delays was strongly rebutted by business rescue practitioner Dawie van der Merwe.
In response to questions from Times Select, he said the original joint venture for the Oceans development was a 50/50 partnership with Group Five and Liviero Building, the latter now in liquidation.
“Prior to its liquidation, the Liviero Building interest in the joint venture was assigned by mutual consent between the construction parties to Liviero Construction, an entity neither in business rescue nor liquidation,” he said.
In July, Liviero Building was placed in voluntary business rescue, stating in support of the process that more than R81m was overdue by government clients.
A business-rescue process is intended to restructure a company and help it to return to profitability. “Oceans Umhlanga elected not to accept the assignment. The assignment process has been successfully adopted elsewhere and many other building projects were thus unaffected by either the business rescue or subsequent liquidation of Liviero Building,” Van der Merwe added. He went on to hit out at developers, saying they had twice suspended construction due to “non-payment”. The current, as well as the previous suspension, is a direct consequence of non-payment by the employer to the joint venture, he said.
“It should further be noted that on both occasions the project was ahead of programme. It seems convenient to blame its (the developer’s) own financial issues on the distress of Liviero Building, whilst factually the employer was unable to meet its own contractual payment obligations well before Liviero Building was placed in business rescue,” he said.
Group Five’s managing director for coastal Eduan van Rooyen said he was bound by a confidentiality agreement and, as such, could not comment.
In a joint statement issued by developers Reddy and Rob Alexander, of Ducatis Properties, the pair moved to allay fears that Oceans was taking on water. “All we can state is that work had temporarily stopped due to certain contractual complications which has resulted in us appointing a new joint venture construction company for the development,” it reads. “Once the new joint venture partners finalise their agreements and negotiations with our professional team, the project will resume, which is expected to be in a week’s time.”
The developers denied that they had failed to honour their financial obligations. “We vigorously deny that work had stopped due to non-payment. In terms of our legal advice, when a company is in liquidation we have to withhold payment until the final account is prepared and agreed by all parties. This is a normal business legal practice for such circumstances.
“Everyone that was due payment – and duly certified in terms of their appointment – has been paid to date unless alternate arrangements agreed or there are disputes. All the funding for the entire R4.3bn development has been fully secured and there is an accelerated programme in place to ensure timely completion,” the pair said. The developers added that the entire building programme for the 250 000sqm development is now synchronised to ensure the timeous and effective opening of the Oceans development.
The development’s website was taken down on Friday. The site says it is “under construction”. Andrew Mclachlan, senior vice-president for Radisson’s development arm in sub-Saharan Africa, said the developer had their support. “From a technical and design point of view, part of the hotel’s services form part of the mixed-use development and for efficiency the hotel and shopping mall share certain back-of-house facilities. It is vital that the hotel building be completed at the same time as the shopping mall,” he said.
Due to the size of the Oceans project the developer appointed three main contractors.
The main contractor responsible for building the Radisson Blu, Mclachlan said, is ahead of the building schedule to date.
“Due to complications with one of the main contractors responsible for building the shopping mall, the programme has fallen a little behind schedule, which I cannot comment on. It has meant that the hotel is now a few months ahead of schedule.
“To align both building programmes so that the hotel and shopping mall are completed and can open at the same time, the work on the hotel has been temporarily stopped, in agreement between the main contractor of the hotel and developer so the shopping mall can catch up,” he said.
Listed construction companies Enscor and Basil Read were also placed in business rescue in the past six months.