Flyt bomb drops on Newlands saga
BREAKING NEWS: The Flyt marriage with the Western Province Rugby Football Union is officially on the rocks.
Flyt CEO Zane de Decker announced on Thursday that his company was to claim ‘damages’ from WPRFU, over the latter’s decision to renege on the deal the two groups signed in June.
As @rugby365com reported recently, a change of attorneys is at the heart of their sudden about-turn in the aeonian and mutable Newlands redevelopment saga.
Marais confirmed to @rugby365com that the agreement with property developers Flyt is with their “legal counsel” for review.
“The bottom line for WPRFU – as per resolutions passed by the shareholders – is that the deal must not only be equal but also be fair and equitable,” Marais told this website.
This about-turn is what resulted in the Flyt statement on Thursday, in which they made it clear they will approach the “appropriate forum” for relief to compel payment of the damages.
“This will include calling up the secured loans that the Flyt Group holds over the Newlands stadium and other properties,” De Decker said.
It would be the third time in less than a year that WPRFU is planning to change ‘partners’.
After walking away from agreements (which included loans) with Remgro and Investec, WPRFU dropped Smith Tabata Buchanan Boyes (the Blouberg-based company that represented them throughout the negotiations and finalisation of the term sheet and loan agreement with Flyt) like a hot potato.
Korbers Inc, a legal firm operating out of Cape Town central, is now acting on behalf of the union and sent a letter to Flyt – claiming the Newlands and Brookside properties were ‘undervalued’ in the agreement and should be valued between ZAR377-million and ZAR390-million, rather than the ZAR112-million of the agreement.
The Flyt boss was at pains to stress that WPRFU had approached his company, not the other way round, seeking the loan of ZAR112-million – which was used to pay off two other loans.
FLYT TO CLAIM DAMAGES AFTER WPRFU RENEGES ON AGREEMENT
10 December 2020
Today, Flyt Property Investment and an associated company Dream World Investments (‘the Flyt Group’) formally lodged a claim with the Western Province Rugby Football Union for damages. The claim arises from WPRFU’s repudiation and breach of the binding agreements it concluded with the Flyt Group in June 2020 for the intended development of the Newlands rugby stadium and other properties owned by WPRFU.
The WPRFU approached the Flyt Group seeking a R112 million loan to settle its looming debts and to conclude a development agreement in June 2020. This was just 30 days before its existing outstanding repayment obligations to Investec and Remgro for R112 million were due. The Flyt Group’s strong balance sheet and ability to fund a deal of this magnitude without bank finance – and the associated delays – meant that it could move swiftly to consider advancing the funds that WPRFU was seeking.
The Flyt Group and WPRFU’s legal teams and advisors worked 24/7 during June to negotiate a deal that suited both parties. It is well known that the development transaction between WPRFU and the Flyt Group that was validly concluded in July 2020 would use the WPRFU assets, including the land on which Newlands rugby stadium and Brookside rugby club are situated, more efficiently for the Union’s short, medium and long-term economic viability. Critically, the concluded deal would provide the WPRFU with a much-needed and sustainable financial lifeline as a 50:50 partner in all economic benefits derived from the development in the future.
WPRFU President Zelt Marais called the successfully concluded transaction “the deal of the century”. It, therefore, comes as a surprise that the WPRFU now appear to be seeking a way out of the deal that it sought and on a land value which it determined, which was also concluded after a comprehensive and transparent approval process.
WPRFU and the Flyt Group concluded valid agreements on 10 July 2020 after all required WPRFU forums supported the deal by an “overwhelming majority”. The WPRFU’s financial advisors presented a comprehensive analysis to the various decision-making bodies of the Union that approved the transaction. This included the Council on 30 June 2020, the Union on 8 July 2020, the Executive Committee on 8 July 2020, and the Trustees on 9 July 2020. The entire process was overseen and guided by the WPRFU’s legal team at STBB, its auditors BDO and its professional advisory team.
The Flyt Group has met all requirements of the agreements to date. These include the payment of the R112 million secured loan to WPRFU; the incorporation of the Newlands and Brookside DevCos; and the appointment of a board of directors for both companies, who had started to conduct meetings of the companies to plan for the intended developments.
Despite compliance by the Flyt Group with the agreements concluded, the WPRFU has inexplicably chosen to replace STBB as its legal advisors with a new litigation attorney, and has deliberately reneged on the transaction. The WPRFU has done so by now objecting to the agreed land value forming part of the substance of the transaction, and through its conduct is acting in flagrant disregard for the binding nature of the agreements.
It is important to point out that the land value agreed on was proposed by the WPRFU, not the Flyt Group. This value has subsequently been incorporated into the Newlands and Brookside DevCo’s that are co-owned by the WPRFU and the Flyt Group. To demand that the price be increased six months after the deal has been concluded is simply outrageous.
The Flyt Group has taken comprehensive legal advice from senior counsel, and is assured of its rights under the agreements duly concluded with the WPRFU. Accordingly, the Flyt Group will now institute a claim for damages under the agreements as it is entitled to do.
The Flyt Group is in the process of quantifying its considerable damages which, in addition to its direct costs, will include the losses sustained as a result of the lost opportunity to develop both the Newlands Stadium and Brookside property as the parties intended.
The Flyt Group had looked forward to working with the WPRFU to co-develop the Newlands and Brookside properties and in this way support the Union’s commitment to bolstering rugby in poorer communities and ensuring a sustainable future for Western Province rugby.
However, If WPRFU fails to compensate the Flyt Group for its damages, it will have no choice but to approach the appropriate forum for relief to compel payment. This will include calling up the secured loans that the Flyt Group holds over the Newlands stadium and other properties.
ISSUED BY ZANE DE DECKER, CEO OF FLYT PROPERTY INVESTMENT
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