Gabby Investments Adds to Long List of Suits Filed against the Forlorn Access With an increasing number of legal suits being filed, homeowners are losing hope in revitalising the company Ermias T. Amelga Gabby Investments Plc, a grade one contractor, has become the latest party to wage a court battle against the nearly-defunct Access Real Estate S.C. (ARE). It filed a suit at the Federal High Court on September 16, 2013, requesting 72.9 million Br in damages for unpaid work and business costs, along with interest. The case is yet to be assigned to a judge. Gabby, which agreed, in 2011, to build eight condominium blocks for Access’s Megenagna Freedom (Nyala Motors) site, in Bole District, states in the suit that it did construction work worth 220 million Br, but only received 193.3 million Br in payment. It is now petitioning for the balance owed along with a 10.5pc interest- calculated for 25 months- which amounts to 33.18 million Br. Gabby is also requesting 39.4 million Br for losses incurred in overhead costs, lost business opportunity and waste of input materials, as well as 220,000 Br for payments advanced to workers. These liabilities come for ARE at a time when it does not even have enough money left in the bank to run its day to day activities, as the company’s most recent audit report by Kokeb & Moges revealed. It is a company that has been unable to sustain its early successes after being founded in 2008 by five shareholders, with the now infamous Ermias T. Amelga, majority shareholder, board chairman and CEO, at the helm. Promising to deliver luxury homes and apartments at an affordable price, Access and its subsidiary real estate companies were able to mobilise close to a billion Birr (according to recent reports) after selling a little over 2,000 homes at 19 in-demand locations around the city. One of these, and its first project, was Megenagna Freedom (Nyala Motors), located across from Anbessa City Bus Enterprise S.C, where 283 homes were sold to customers for prices ranging from 795,000 Br to 985,000 Br. Most of this site is under Me’eraf Real Estate – a sister company where Access controls 90pc of the shares. The other partner is Eskinder Kassa, a returnee businessman who brought the 6,000sqm plot he leased from the city government into the project. Adjacent to this plot is another owned by the family-operated Laura Trade & Industry Plc. This plot also makes up the Nyala Motors site, but is under ARE, as Laura, unlike Eskinder, did not partner to form a sister real estate company, but instead entered into a joint venture agreement. On the Me’eraf plot Gabby was first contracted to build five blocks of seven-storey apartments, complete with two basements and a mezzanine floor, for 174.7 million Br, on February 22, 2010. In May of the same year, it took another contract to erect three blocks of similar apartments at Laura’s part of the site, for 108.2 million Br. These prices were later revised to 224.1 million Br and 136.1 million Br for Me’eraf and Laura respectively, and ARE agreed to make a 20 million Br monthly payment to Gabby. As Gabby – whose major shareholder and general manager Binyam Mebrhatu was once a shareholder of ARE – began construction, however, payments have come sporadically and there was a 25 million Br overdue balance, it claimed in the suit. Binyam’s stay with ARE was a short-lived affair; he had left the company after withdrawing his share shortly after ARE launched a project at the CMC site. Gabby requested to end the contract in August 20, 2012, unless payments were made. ARE accepted the overdue claims, but asked Gabby to continue with the project, promising to pay 10.5pc interest as soon as the company mobilised some funds, according to the suit. Gabby then continued construction works, for which it billed Access another 5.2 million Br. The promised payments were not forthcoming, however. Instead, Gabby received five cheques worth 1.5 million Br, which failed to clear, it claims in the suit. This led them to finally terminate its deal with Access on March 17, 2013, although Access has banned the company from moving its machinery out of the sites, the suit also claims. As Gabby’s relationship with ARE was souring, so too was the latter’s dealings with homebuyers, who were increasingly frustrated by its failure to make good on its promises and the apparent lack of construction. While Gabby has erected the structural works at Nyala Motors, finishing 50pc of the cost, there are other sites where there has been no visible construction activity. The frustration of homebuyers reached a fever pitch last April, after Ermias was arrested for signing a bounced cheque to a homeowner who asked for his money back. He subsequently left the country. Homebuyers stormed the company demanding a refund and, finding this futile, organised themselves into committees for their specific sites. A steering committee, represented by one or two committee members from each site, was also set up to deal directly with Access. However, homebuyers are divided about which course of action is best to get their lost money. The steering committee and most of the site committees suggest that going to court would just lead Access to file for bankruptcy. They propose making additional investments and partnering with shareholders to revive the company, instead. While ARE is sitting on valuable assets, this would hardly compensate stakeholders when divided to every homebuyer and contracted party owed money by the company, they argue. Others, doubting the mandate or ability of the committee in reviving the company and worried about losing their money to others who already filed claims in court, are quick to rush to legal battle themselves. Indeed, the ever-increasing number of suits is sure to make the bid of committee members to revive the company difficult. The suit by Gabby is the 18th filed against ARE at the Federal High Court alone. Another 29 petitioners have sued its sister company Access Capital Services S.C., which was a recipient of funds collected from homebuyers at ARE, according to the latter’s audit reports. This is without counting suits filed against subsidiary companies where Access owned controlling shares, such as Pacific Link Plc. Prior to Gabby, Laura Trade & Investment Plc also filed a suit against ARE, claiming 20 million Br in punitive damages and petitioning for an injunction against ARE from using its property. The injunction was granted by the Federal High Court.
Posted on: Fri, 04 Oct 2013 02:14:25 +0000
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