Inside the collapse of Qld’s broken building companies

Queensland could be the centre of a new wave of building sector collapses following the failure of more than a dozen firms around the country in the past year.

Queensland could be the centre of a new wave of building sector collapses following the failure of more than a dozen major construction firms around the country in the past year.

Insolvency expert CreditorWatch has identified Brisbane, the Gold Coast and western Sydney as high risk areas for builders amid soaring material costs and labour shortages.

GM Advisory director Ginette Muller says she has also heard about problems in Queensland where large builders such as Privium and Condev have collapsed in the past year.

“There appears to be an increase in smaller builders and subcontractors going under along with some larger entities,” Muller says.

Russ Stephens, co-founder of the Association of Professional Builders, says some builders are being hit by material cost increases of up to 40 per cent.

Stephens says south-east Queensland has been particularly impacted as recent flooding affected roof truss production. “More big builders are set to fail,” Stephens says.

Privium Homes’ former HQ at Underwood.

Revive Financial director Jarvis Archer says construction-related businesses now represent one in every four insolvencies, up from one in five pre-pandemic.

“It is no secret that building companies have led the insolvency numbers over the year,” says Archer, pointing to the failure of Privium Homes, Probuild and Condev over the last year.

“It seems the Queensland building industry has found some reprieve, with no major builder collapses for a couple of months. However, experts have warned that a wave of construction industry failures is still expected.”

Open Analytics chief executive James O’Donnell says he expects credit risk in the construction industry to worsen with builders hit by cost pressures and labour shortages.

“We have seen some big-name failures in recent months and the fallout from these events on smaller players is yet to be fully realised,” he says.

“Cost pressures and compressed margins don’t appear to be going away soon, so expect more insolvencies in this sector over the next 12 months.”

Here’s a breakdown of some of the major Queensland building firms to go under so far:

Privium

Underwood-based Privium Homes collapsed last December owing an estimated $80m and leaving hundreds of homes unfinished. Queensland’s construction watchdog this week said it has paid out more than $2m to victims of the failed building company.

A Queensland Building and Construction Commission (QBCC) spokesperson says it had received 155 claims from Privium customers under the home warranty scheme. They included 147 for refunds of deposit and eight non-completion claims.

Liquidator FTI Consulting says it is still attempting to recover funds following the collapse of Privium The Brisbane company had made a series of transactions before its collapse including a $3m investment in cryptocurrency and a transfer of more than half a million dollars to a Christian charity Love YourWorld.

In a report to creditors, FTI said Privium had acquired $3m in Bartercard dollars that was later converted into a cryptocurrency called Qoin.

Condev

The Gold Coast construction giant was found to be haemorrhaging up to $1.5m a month in the 10 months before its collapse in March and had been entering into “unprofitable contracts” Debts to subcontractors, staff and other creditors have been revealed as more than $56m, sharply higher than what was initially disclosed in the director’s report.

Condev building site at Main Street, Varsity Lakes. Picture: NIGEL HALLETT

BA Murphy

Subbies caught up in the collapse of Sunshine Coast builder BA Murphy are unlikely to see a cent with liquidators reporting the company may have been insolvent for almost a year. FTI Consulting says preliminary investigations indicate that BA Murphy, which entered administration in December, was insolvent from at least July 2021 and potentially from February that year. BA Murphy, founded by director Ben Murphy in 2016, owes in excess of $19m to employees, subbies and secured creditors. FTI says it still attempting to recover funds for creditors.

Pivotal Homes

The Gold Coast-based construction firm went under in May with more than 200 new home builds thrown into chaos. Managing director Michael Irwin revealed at the time rising labour and construction costs were the main reason the company was forced into liquidation

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KOALA HABITAT BOOST

The unlisted Koala Farmland Fund is paving the way for more koala habitat to be developed and protected in South East Queensland – using part of a $10m purse it secured from investors and lenders last year to buy its first Greater Brisbane property.

The sprawling 35.65ha property in Mt Cotton could be used for several biodiversity and carbon offsets but the linchpin is creating protected habitat for koalas given the site joins one of the largest remaining eucalypt forests in Brisbane’s coastal lowlands – Venman National Park. The fund, which is expected to reach maturity in eight to 10 years with first distributions as soon as next year, is managed by Chinchilla-based Country Asset Management. CAM managing director Rob Hart says they were set to take over the Mt Cotton site on July 25. “We’re still doing our due diligence on what its potential is. Ultimately it’s koala offsets because of its location right next to Venman but other species as well would be eligible.” It’s the second Qld property the Koala Fund has bought, with a much larger 1,000ha site at South Kippa near Esk added in September last year, just months after the fundraising drive. “We targeted $6m to raise with the idea to be between $10-11m. We were successful. We had a lot of support for the fund and completed the raise quite easily and we borrowed over $4m.” He says they’d just signed a heads of agreement to develop part of the South Kippa site for koala habitat, as well as greater glider and flying fox.

Hart said once the sites were planted via biodiversity offsets it was permanent.

“Yes it’s forever. What you have to do for an offset is you have to change the vegetation status or zoning on the property so it goes from essentially being able to do lots of different activities to one which is essentially like a nature refuge.”

“That’s why you get paid for the offset because you’re changing what you used to do on the country to now preserving that in perpetuity.”

The unlisted Koala Farmland Fund is paving the way for more koala habitat to be developed and protected in South East Queensland.

LEGAL EAGLE SOARS

Brisbane criminal and family law specialists KLM Solicitors are taking it up to the big boys. Since the opening of its CBD office in the middle of last year, the firm has picked up a string of professional awards.

Most recently managing partner Kelli Martin travelled to Sydney for the Australasian Law Awards where she was announced as the 2022 law firm leader of the year for practices with fewer than 200 employees.

This was followed by senior associate Jane Bruxner being announced a criminal law finalist in the Lawyers Weekly 30 Under 30 Awards and Morgan O’Rourke named a finalist in the Lawyers Weekly award for legal support professional of the year.

KLM has grown substantially since Martin launched the business in 2015 with just one other staffer. She now oversees a team of nearly 30 and has four offices in south east Queensland. Martin, who actively supports multiple groups addressing domestic violence, provided legal advice to Hannah Clarke before her horrific murder.

She has remained close with Hannah’s parents and, with the blessing of the couple, named a meeting room in the new offices after her late client.

Kelli Martin, managing partner of KLM Solicitors.

SHAMROCK HOTEL SALE

Toowoomba’s Shamrock Hotel has been sold for more than $6m to investors who plan to make it a centre piece of the Garden City’s CBD.

Geoff Percy, of Ray White Commercial, who handled the sale along with Scott Williams, of Australian Hotel Brokers (AHB), says the new owners include a group from NSW and a local investor who plan a major renovation.

“Over the next few months, the public will see the hotel become a building site where there will be considerable funds injected into the property,” says Percy.

“The hotel bars and gaming facilities will have a complete makeover as will the 35-room motel that will offer a full service to travellers to stay, eat, drink and be entertained.”

Percy and Williams have sold a number of hotels in the area and are currently looking for more stock as the demand for hotels both from within Queensland and NSW and Victoria is strong. “We have sold small country hotels and are currently working with larger hotels along the Queensland coastal area,” Percy says.

The Shamrock Hotel Motel, Toowoomba.