Amazon threatens to end contract with HQ developers

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(Image by: Liesbeek Leisure Properties Trust)
(Image by: Liesbeek Leisure Properties Trust)

Liesbeek Leisure Properties (LLP), developer of Amazon’s planned African headquarters, has received threats from the tech giant, after over a year of delays to the R4.6 billion River Club re-development, based in Observatory, Cape Town.

In the latest development, Amazon has warned that further postponement of the construction could result in termination of the development and the lease agreements signed with LLP.

According to a report in Sunday Times, the US retail giant is sick and tired of the endless postponements of the construction project, which is expected to see Amazon become the anchor tenant, along with other large commercial businesses – if completed.

The delay is the result of the ongoing legal tussle between LLP and the Liesbeek Action Campaign, which includes Goringhaicona Khoi Khoin Indigenous Traditional Council and environmentalists. The parties have taken the developer to court due to concerns that the construction on the floodplain between the Black and Liesbeek rivers would lead to the land losing its historical significance and result in increased risk of flooding and environmental exploitation.

A court interdict was granted to the plaintiffs in March; however, the defendants − consisting of the LLP, City of Cape Town, Department of Environmental Affairs and Development Planning and First Nations Collective − launched separate appeals to continue construction of the site.

The judge dismissed the applications, noting she had considered all of their arguments and found them without merit.

In the latest development, Sunday Times reports LLP has filed an affidavit expressing its concern that any further delay of the construction could warrant a penalty of R450 000 a day, payable to Amazon.

The affidavit, reportedly filed by LLP spokesperson James Tannenberger, reveals LLP was advised by its legal counsel that if the court rules in favour of further work stoppages, it could take between 12 to 24 months for a final ruling to be made by the court – a delay which would see all contractual agreements with Amazon Development Centre (ADC) South Africa terminated.

ADC is the tech giant’s software arm that develops computer systems and related services.

“Any such delay would certainly see ADC terminating the development agreement, and the lease agreements as it would be entitled to do. Indeed, even a reduced delay of six months would result in termination,” wrote Tannenberger.

While ADC had agreed to reset the initial timelines and set a practical deadline for the lease commencement date, given the current circumstances – this consequently meant reducing the company’s tight tenant work programme, continues Tannenberger.

Other financial implications listed in the affidavit include Rand Merchant Bank Penalties amounting to R23 million in the event of cancelled loan agreements, and a R115 million ‘standing time’ to construction contactor WBHO.

The LLP previously complained that thousands of jobs are at stake, should the project be permanently halted.

LLP confirmed to ITWeb that it filed the latest affidavit on 18 July. The application has not been heard and the file is with the judge president for a directive. Further affidavits will be filed, according to LLP.

The latest development comes after the Goringhaicona Khoi Khoin Indigenous Traditional Council and the Observatory Civic Association served contempt of court papers on LLP two weeks ago, accusing the developer of being in contempt of court. This, after LLP allegedly refused to abide by judge president Patricia Goliath’s decision to interdict construction of the re-development.

They also alleged illegal construction procedures were followed by LLPT without the approval of all parties involved, in an attempt to hasten the building of the site.

“The LLPT will learn that this site is not their playground to do as they wish. It is a ground zero site that is sacred to indigenous people and should be a heritage park that recognises it as a cultural landscape of infinite possibility from which reconciliation and restitution should flow,” according to a statement from Goringhaicona Khoi Khoin Indigenous Traditional Council and the Observatory Civic Association.

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