Zimbali developer in fight over millions

is jse-listed luxury property developer the latest to run into trouble?


a public battle over millions of rands in debt has erupted around the r350m hotel and resort project at zimbali, being developed by ifa hotels & resorts which is listed on the kuwait and johannesburg stock exchanges (jse: ifh).

the principal contractor, liviero building, has stopped work at the zimbali fairmont hotel and resort at zimbali coastal resort, kwazulu-natal, accusing ifa zimbali hotels and resorts ltd of a "litany of broken promises and a breakdown in trust". this is after ifa allegedly failed to make an r18m payment, said liviero's chairman luca liviero.

liviero released a public statement about halting work on the project on wednesday in a bid to "recoup money owed".

a growing number of south african luxury property developers are in financial difficulty thanks to falling property prices, flagging sales and mushrooming debt.

pinnacle point (jse:png) is searching for a white knight to come to the financial rescue, while the r1,5bn debt woes of zunaid moti and abalengani - developer of nondela in the drakensberg - have been publicised too.

ifa hotels & resorts' president in south africa wessel witthuhn let out a hearty laugh when realestateweb.co.za - property news provider of the listed moneyweb group - called him to ask him for comment about the matter. he said he was with lawyers and later asked a public relations officer to pass on the message that his organisation has "taken advisement".

she, meanwhile, denied that the company had any financial woes and pointed to a recent multi-million rand funding deal with nedbank as a sign that all is well with the company. she declined to comment further when it was put to her that the company issued a trading statement earlier this month through the stock exchange news service warning shareholders of worse-than-expected losses.

the company is trading under a cautionary statement.

liviero said it has stopped work on the project "in protest at non-payment on the part of developer, ifa zimbali hotels and resorts (pty) limited".

mr liviero said his "company had halted all work on the project with immediate effect and would not move from the site until the developers had paid r18 million it owed his company for work completed and resolved various disputes that had arisen over the course of the project".

he said: "the matter came to a head on tuesday after the developers breached their agreement with liviero by failing to make an r18m scheduled payment. we took the decision to halt work after much soul searching and with great reluctance. we believe this is the only way we will be able recoup the money owed to us."

liviero claimed it was not his company's intention to seek publicity, saying: "after we were approached by the media for comment on our decision, we decided it was important to release a statement detailing the reasons for our action."

it said it was appointed by ifa zimbali hotels and resorts in 2007 as the principal contractor for the project which comprises hotel, condos, fractional units and garden suites. ifa zimbali, a subsidiary of kuwait-based ifa hotels and resorts, is developing the project as part of a joint venture with fairmont hotels and resorts, north america's largest luxury hotel management company, and kingdom hotel investments.

penalties for delays

adding to the tensions, it seems, are developers' penalties for delays to the schedule

liviero said his company's decision to halt work "had followed months of frustration at ‘prejudicial' actions on the part of the developers. these had included lengthy delays in appointing sub-contractors, changes to the design of the project when work was already well underway and repeated delays in payment for work completed."

"as a direct result of the developer's actions, the project fell behind schedule as sub-contractors repeatedly walked off site over non-payment. to keep the project going we were forced to carry its costs to the tune of tens of millions of rands," liviero said

liviero claimed his company had "salvaged the project with its own funds" yet "the developers had subsequently insisted on applying substantial penalties for delays to the schedule". "this was in spite of the fact that these delays were clearly caused by the developer's own intransigence and failure to make timely payments to sub-contractors," liviero said.

payment in property instead of cash - claims

liviero said in his statement that the developers had also made several requests to pay his company with units in the development in lieu of cash. his company had declined these requests.

the "final straw" had been the developer's failure to make the august 25 scheduled payment. "this was just the final in a series of broken promises which has led to a complete breakdown in our trust in the developers.

"these tactics on the part of the developer are classic signs of a company that has run out of funds. despite widespread speculation to this effect, we sincerely hope that this is not the case. the developers can easily end this worrying speculation by paying us promptly and resolving its disputes with us," said liviero.

liviero said he hoped the work stoppage would be temporary and that it would not jeopardise next month's official opening of the project. "the last thing we want is for this fantastic project to be delayed further, or for it to receive negative publicity. but the developers have simply left us with no choice in the matter. we trust they will now do the right thing so we can continue work and finish on schedule.

"in the meantime, we apologise to workers and sub-contractors on the project for any inconvenience caused by our action," liviero said.

jackie cameron and denise mhlanga