Oceans developer faces R35m headache
Durban businessman Vivian Reddy is being sued personally for almost R35m by one of the construction companies involved in his stalled R4.2bn Oceans Umhlanga development in Umhlanga.
The upmarket KwaZulu-Natal development - touted as having two luxury residential towers, a shopping mall and a five-star hotel - was effectively shut down in October.
The promised "10 cranes" which, according to the developers, were supposed to dominate the popular seaside village's skyline from February, are still absent.
Though the company has previously blamed the lack of activity on site on the financial woes of two contractors, Liviero and Group Five - the former now in liquidation and the latter in business rescue - court papers reveal that late last year Reddy stood as personal surety in a "revised" payment plan for what was owed to a joint venture of JSE-listed construction firm WBHO and Sibonele Africa.
In an application lodged with the Pietermaritzburg high court, which has been set down for hearing in early June, the joint venture is now demanding immediate payment of R34.4m plus interest since March.
WBHO MD Craig Jessop said in his affidavit: "The debt is undisputed, due, owing and payable."
He said it was for work done and completed and that the necessary certificates had been issued and approved by Oceans' principal agent.
Reddy, the chair of Oceans Umhlanga, said the issue of legal action by the WBHO Sibonele Africa joint venture was being resolved.
"We are making payment upon an agreement linked to negotiations in terms of pricing and we have a meeting scheduled for next week. The R34m payment is insignificant on a R4.2bn development."
He added: "I have confirmation from the joint venture partner that the summons will be withdrawn and they have apologised. This is an issue of undertakings and negotiations and not about the payment, which is easily affordable, hence we also opposed the action."
Because of ongoing nonpayments, WBHO suspended work on site last year when the amount owing had risen to R75m.
In early December, Reddy entered into a "repayment" agreement with the joint venture and bound himself as surety.
Jessop said R30m and R10m had been "paid timeously", but the balance of R34.4m, which was due on March 15, remains outstanding.
It had been agreed that work would remain suspended until the total amount was paid and a new payment guarantee, to the value of R40m, was in place.
Attorney Peter Barnard, for WBHO, confirmed that the application papers had been served on Reddy this week.
A notice of opposition was filed on Friday, he said.
"My client has afforded both Oceans and Reddy various indulgences," he said.
"We have written letters demanding payment, but payment hasn't been made. They didn't want to have to go this route, but cannot keep carrying this debt on behalf of the developers.
"My client does not want to scupper the project, but it cannot continue on site until it is paid."
Business Times understands that Group Five also claims to be owed money, but this has been disputed by developers. Group Five entered into a similar repayment agreement with the company last year after it too stopped work on site.
This was prior to Group Five going into business rescue.
Asked to confirm this, Group Five spokesperson Heidi Geldenhuys said: "At this stage in the business rescue we cannot provide comment on contract-specific matters."
Reddy said: "All matters with Group Five have been resolved and the agreed negotiated payment made. There is a matter of a claim against Group Five that is sub judice.
"We will be dealing with the business rescue practitioner and discussed it with the CEO."
When the development was launched in 2017, the completion date was set for 2020.
Because of the scale of the project - said to be the largest mixed-use development in SA - various joint ventures were entered into.
When work stopped, the blame was laid at the door of Liviero, which was in business rescue at the time. But business rescue practitioner Dawie van der Merwe said this was not true.
Construction had already been suspended twice due to "nonpayment", well before Liviero had its own financial issues, Van der Merwe said.
Reddy denied this and said dozens of flats, which were selling for between R2.5m and R50m, had already been sold.
On Friday Reddy said demand for the apartments was "still very strong and we sold 12 units in the past month. Hence 97.5% of all apartments have been sold. An amazing fact for investors is that their investments are now worth 30% more.
"We are considering applying for more floors to cope with the demand as the development progresses."
In October, Reddy and his business partner, Rob Alexander of Ducatus Property, said contracts were being renegotiated and the project would resume in a week.
Last month, Oceans Umhlanga development director Pregan Naicker told Times Select that compromised contractors had been replaced and the new contractors were "busy with site establishment".
Reddy said "work has commenced on the residential apartments on an accelerated basis to ensure timeously delivery".
He added that "the entire funding and major equity injection of this R4.2bn development has been fully secured".
He promised that construction would soon "steam ahead".