SJSC “State Real Estate” (SRE) invites the general partnership “SBSC” (“Skonto Būve” and “Skonto Construction) to look for another source of financing to solve its current assets problems, informed SRE Board Member Jelena (Jeļena) Gavrilova.
On Monday, 23 January, SRE met again with representatives of the general partnership “SBSC” to discuss the possibility of granting another advance for the reconstruction of the New Riga Theatre (JRT) building complex.
“Understanding that the consequences of the geopolitical situation are causing problems throughout the construction industry and despite the challenges for both the developer and the builder, we have been able to find solutions in other projects, but in this project, there is insufficient justification for the builder’s claims,” added Gavrilova.
SRE pointed out that, first of all, the financing of the construction of JRT can only take place within the framework of the law, as JRT is being built with the funds of the State budget and the European Union funds.
Secondly, as the available information shows that “SBSC” has not been settling with its subcontractors for a long time, from now on SRE wants to pay third parties directly on the basis of completed and handed over work.
Thirdly, SRE insists that the builder must complete the remaining works as quickly as possible, to the highest quality and in accordance with the contract, so that the theatre can return to its home as soon as possible.
SRE informed that “SBSC” will not be granted an advance payment, because so far no sufficient justification has been provided for the repayment of the advance payment “SBSC” has not provided the missing justification for the impact of exceptional circumstances, i.e., documented what exactly has changed in the few months since the agreement on compensation for the impact of the war caused by Russia, Covid-19, etc. was concluded in the summer of 2022. At a meeting on Monday “SBSC” undertook to provide such information shortly.
SRE also points out that the payment for the unprocessed materials requested by the builder cannot be made, as it is contrary to the Public Procurement Law.
The contract provides for payment only for fully completed works, i.e., materials and equipment that have been incorporated, inspected, tested and of good quality, and not for materials in stock. Although the guidelines of the Public Procurement Law would allow for the possibility to negotiate a change in payment arrangements, this would require documented information on the impact of unforeseen circumstances beyond the agreement concluded in summer 2022. Last summer, the general partnership “SBSC” confirmed that the support provided was sufficient to complete the contract within the deadline. However, at the moment “SBSC” has long been unable to justify changes in unforeseen circumstances.
It has already been reported that the SRE insists that “SBSC” should name a specific deadline for the completion of the works and reminds that for each day of delay until the site is handed over, “SBSC” will be charged a penalty of 30 thousand euro per day according to the contract.
The general partnership “SBSC” has repeatedly approached SRE with various demands that SRE has provided. In addition, the builder has been compensated for price increases in line with inflation in the amount of EUR 2.18 million, and an additional advance of EUR 1 million has been granted at “SBSC” request. In addition, invoices submitted by the builder for payment of the actual works are paid several times a month within one to two days of submission, instead of once a month within 30 days as originally foreseen. SRE has taken all these steps to facilitate the builder's situation and to deliver the project on time.
SRE has already warned the builder that it will not meet the deadline if the pace is not increased. Around 100 people currently work at the site. In order to complete the work within the specified period, according to the initial work execution program of the builder “SBSC”, approximately 240 people were planned, the builder has not reached such intensity of work so far.
On the restoration of the New Riga Theatre complex
The aim of the renovation and construction project of the New Riga Theatre is to create a modern theatre of European standards. The development of the construction project started from 2018, and the construction – from 2020. The construction of the New Riga Theatre is contracted to the general partnership “SBSC” for EUR 32.4 million (including indexation or payment for the increase in construction costs). Cooperation with the builder – general partnership “SBSC” takes place according to the “Design and Build” principle, which means that the contractor has overall responsibility for the construction work and allows technical challenges to be resolved more quickly.
On SJSC “State Real Estate”
SRE successfully implements 44 projects of national importance, 24 of which are under construction. The total implementation budget for the projects is more than EUR 336 million. SRE provides professional real estate management and administration for 365 building and construction properties, comprising 1100 buildings with an area of 0.95 million m2, as well as land under buildings with an area of 602 ha, and 3536 land properties with a total area of 903 ha. SRE is one of the 23 Latvian companies that this year received the highest platinum award in the Corporate Responsibility and Sustainability Institute’s “Sustainability Index”, demonstrating good governance and sustainability of its operations. The company was founded in 1996 and is 100% owned by the Ministry of Finance.
