m2 to Finish Suspended Constructions of Center Point Development Company
Two development companies of Georgia, Center Point and m2, have signed a memorandum which envisages that m2 will finish all suspended constructions of Center Point Company, which in the past mishandled $310 million paid by around 6,200 customers for the construction of their flats.
Under the memorandum, m2, which carries out premium-line constructions in prestigious regions of Tbilisi, gave Center Point six months to fulfill their pre-conditions. If Center Point fulfills the conditions, within three years m2 will finish all suspended constructions that were started several years ago by Center Point.
One of the pre-conditions given by m2 is that Center Point must transfer to them free real estate owned by Center Point.
"Free territories on which Center Point did not start construction or were not going to build residential flats should be separated from the problematic land and handed over to m2. In return, m2 will undertake the responsibility to finish all suspended constructions of Center Point,” said Irakli Burduladze, General Director of m2.
The Head of the construction company Center Point board, Guram Rcheulishvili, met with developers and informed them about the memorandum signed with m2.
“In return for giving them our real estate, we are hiring m2 to finish all the constructions launched by Center Point years ago,” Rcheulishvili told the developers.
The affected developers claim they will not sign any agreements with m2 until they receive guarantees that all of them will be provided with flats.
The Center Point Case is the biggest construction scandal in Georgia. The company was established in 1999 and aimed to raise capital from citizens to implement construction projects. It was a conglomeration of 70 companies, 55 Limited Liability Companies (LLC) and 15 individual partnerships, owned by the three well-known people in Georgia: Vakhtang Rcheulishvili, Maia Rchuelishvili, and Rusudan Kervalishvili.
The company went bankrupt following the 2008 war. Dexus, a company which had been managing Center Point Group’s assets since September 2010, pledged to finish suspended constructions within three years. The company was established on 23 August 2010, just two weeks before undertaking the management of Center Point Group’s construction projects.
However, Dexus worsened the initial conditions for the affected customers by asking them to pay burdensome taxes and additional costs for their construction projects. According to NGO Transparency International Georgia, Dexus became involved in an allegedly illicit deal through which the founders of the Center Point Group claimed customers' valuable property.
In early April 2017, Tbilisi City Court sent the founders of the Center Point Group construction company, former Vice-Speaker of Parliament Rusudan Kervalishvili and her sister Maia Rcheulishvili, to prison for four years for embezzlement and misspending of clients’ money.
The case has been ongoing for more than four years. The sisters are accused in misspending $5,548,341 and 20,692,408 GEL.
Guram Rcheulishvili was also detained on charges of embezzlement of 19 million GEL.
He was released on April 7, 2017, after paying bail worth 30,000 GEL.
m2 was established by JSC Bank of Georgia in 2006 and since then has been a significant player in the real estate market in Georgia.
By Thea Morrison