The clash between Aveng and the Legacy Group over the contract to build the R3bn Leonardo in Sandton came after the infrastructure and resources group refused to transfer completed portions of the building to the developer, says Aveng.
Aveng said on Thursday last week it had received a notice terminating the contract to build the Leonardo — a mixed-use development that includes 254 apartments, a three-floor penthouse, five floors of office space, shops and restaurants.
Aveng, which entered into a contract to build the Leonardo in October 2015, said its client, Seventy Five on Maude Limited, which is part of property firm Legacy Group, wanted to take possession of the building.
However, according to the agreed contract, Seventy Five on Maude was only entitled to take possession when a certificate of practical completion was issued for the whole building, the company’s spokesperson said.
In construction projects, a project engineer usually issues the certificate of practical completion to the contractor, allowing a client to occupy and use the building.
Partial possession
According to previous reports, the building was supposed to officially open in November 2019.
“Partial possession of the building is not supported by the letters of appointment or the terms of the contract, and the only way partial possession can be achieved is when a suitable commercial arrangement is reached between the two parties and no such agreement has been reached,” the spokesperson said.
Aveng has not revealed how much it stands to lose due to the cancellation of the contract.
“As the building is partially complete, there is very little revenue outstanding that will be generated from the contract. There are, however, a number of matters in dispute and this will be resolved in a manner determined by the contract,” the spokesperson said.
Aveng said Seventy Five on Maude had called on the R87.4m construction guarantee, which is a surety bond Aveng put up when it signed the contract. The company said it is seeking advice on its client’s call on the construction guarantee, saying the move is incorrect.
Highest bridge
The cancellation of the contract is the latest blow for Aveng, which has lost more than 99% of its value in the last five years, in the SA construction industry.
The company was part of a joint venture with Austria’s Strabag International that terminated a contract to build Africa’s highest bridge on the N2 Wild Coast in the Eastern Cape in 2019 after threats of violence from community members who wanted to be part of the R1.7bn project.
In March 2019, the high court in Pretoria ruled that Aveng’s client in that project, the SA National Roads Agency (Sanral), could institute claims relating to the project.
Aveng, a former construction giant that reported a R1.1bn net operating loss in the 2019 financial year, has decided to exit the troubled local construction industry.
The company, which has a market capitalisation of R387.9m, has been disposing of a number of noncore assets, including Grinaker-LTA Construction, which it sold to black-owned consortium Laula Consortium in 2019.
Attempts to get comment from the Legacy Group failed.
Aveng shares on Tuesday closed unchanged at 2c.
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