Aveng and developer at loggerheads over Sandton skyscraper
The developer of the R3bn Leonardo mixed-use development in the heart of Sandton has terminated infrastructure and resources group Aveng’s contract to build Africa’s tallest building, in a dispute about delays.
Aveng said on Thursday it had received a notice to terminate the contract for the construction of the Leonardo, a high-rise residential, hotel and retail complex in the centre of Johannesburg’s financial district, from property company Seventy Five on Maude — a partnership between Nedbank and real estate developer Legacy Group.
The cancellation could deal a financial blow to Aveng as the developer has called on a R87.4m construction guarantee it put in place to provide the client with security should it underperform or not complete the work as agreed in the contract.
The 234m skyscraper, superseding the Carlton Centre in central Johannesburg as Africa’s tallest building, has been in the spotlight for its height and proximity to the headquarters of some of SA’s biggest companies and the Sandton City shopping mall, but it has faced delays.
Aveng said it would challenge Seventy Five on Maude’s decision to call on the contract performance guarantee as the “responsibility and the consequence of such delays are the subject of various disputes, dealt with in terms of [an] agreed dispute resolution mechanism”.
“Aveng’s position is that the grounds for termination relied on by the employer are incorrect, inaccurate and ill-conceived, and are accordingly denied,” it said in a statement.
“Furthermore, Aveng is of the view that the employer is itself in material breach of the contract, which precludes the possibility of a valid termination. Therefore, the action taken by the employer amounts to a clear repudiation of the contract.”
The company, which has accepted what it calls the repudiation of the contract, plans to seek to recover damages from the developer resulting from the termination.
The skyscraper towers over Sandton, Africa’s richest square mile, and is within walking distance of the JSE. It has a mix of residential and commercial space: 200 apartments, 15,000m² of office space, and a hotel and a small retail section. The development includes restaurants, a bar, a crèche and a gym.
“The building is practically complete for the purposes of its intended use. Large elements of that building are ready for use,” Aveng CEO Sean Flanagan said on Wednesday.
Seventy Five on Maude could not be reached for comment.
Aveng, a former construction giant, is quitting the troubled local construction industry, which is a shadow of itself as a result of a lack of government infrastructure spend.
The group has sold a number of noncore assets after a review of its strategy in 2018. The sold assets include Aveng Grinaker-LTA Construction which the group sold to the black-owned Laula Consortium in 2019 for R100m.
Aveng Grinaker-LTA Construction comprises Aveng GLTA Buildings Inland, Aveng GLTA Buildings South, Aveng GLTA Buildings KZN, Aveng GLTA Civil Engineering, Aveng GLTA Plant and Yard, and Aveng GLTA Training School.
The disposal of Grinaker-LTA Construction and other assets enable the group to focus on the core assets of McConnell Dowell, an Australian specialist infrastructure contractor, and subsidiary and surface mining contractor Moolmans.