Inside construction giant Condev’s shock downfall as firm enters liquidation

Australia’s construction industry is in crisis with yet another giant going bust this week. But here’s what really went wrong for Condev.

Another Aussie construction behemoth has fallen – but insiders fear it’s just the tip of the iceberg, with an industry-wide crisis set to spark a domino effect of collapsing firms.

Gold Coast construction firm Condev officially went into liquidation on Wednesday, after failing to secure a reported bid for $25 million from developers.

The company is in the process of appointing a liquidator, after co-founders Steve and Tracy Marais were unable to find a resolution with impacted developers.

Mr Marais said in a statement he was “absolutely devastated for the Condev family of employees, our tradespeople and our affiliates”.

“Unfortunately, we were not able to reach the unanimous support we needed to keep the business operational in the future,” he confirmed.

The Marais’ lawyer, Derek Cronin, of Cronin Miller Lawyers, said plans were being finalised to appoint a liquidator.

Condev building sites remain in limbo after the company went into liquidation. Picture: Nigel Hallett

“Our clients have considered that the only option open to Condev is to appoint a liquidator to manage Condev’s affairs,” Mr Cronin explained.

“Although we are instructed that the company is currently solvent, the decision was made based on forward projections dictated by increasingly challenging market conditions including the exponential rise in material costs.

“This has been extremely stressful for Steve and Tracy who are highly regarded in the industry and the Gold Coast community as tier one corporate citizens.”

Mr Cronin added the Marais’ charity arm of the business, Condev Cares, had raised hundreds of thousands of dollars over the last decade for those in need “in addition to being an employer of choice”.

“ … it is just simply a sad time for the industry generally,” Mr Cronin concluded.

What went wrong?

News.com.au understands Condev’s collapse was caused by what insiders have described as a “perfect storm” of events, including construction costs skyrocketing by a staggering 25 per cent in just 18 months.

That wreaked havoc with the company’s financial forecasts, given that the firm was locked into fixed contracts that were inked months ago when prices were significantly lower.

With around 18 projects on the go, that cost blowout was expected to hit hard, and while Condev was solvent with no debt as of Tuesday, forecasts factoring in rising process indicated the company would not be able to survive beyond June.

Tradies have reportedly been paid in full. Picture: Nigel Hallett

On Monday, the company had a meeting with developers who were asked to come up with a figure with the understanding that if they failed to agree, it would cost more to complete the jobs anyway – but an agreement was unable to be reached.

As a result the company has officially entered liquidation, with all 120-odd staff members terminated.

However, all tradies have been paid in full and it is hoped they will be able to get back on the tools in future after developers come up with a plan.

Industry in crisis

Condev’s collapse comes hot on the heels of the stunning downfall of fellow construction juggernaut ProBuild, with administrators Deloitte revealing earlier this month they were facing a “nightmarish” situation with at least 2300 individual creditors identified so far and more than $14 million owed to 784 workers.

However, insiders are convinced ProBuild and Condev’s collapse are not isolated incidents, and that the entire construction industry now faces a looming crisis, with more big names likely to fall in the near future as a result of tough market conditions.

Supply chain disruptions, cost pressures, materials shortages and labour shortages are creating anxiety across the sector, with Australian credit reporting bureau CreditWatch recently warning those factors were increasing risk exposure and making large projects unviable.

There are fears the collapse of Condev and ProBuild could be just the tip of the iceberg. Picture: Nigel Hallett

In the wake of ProBuild’s collapse, CreditorWatch said it expected other construction companies to follow suit, with a major flow on effect to subcontractors and suppliers.

“The problem is exacerbated by the banks lowering their appetites for lending for large construction projects,” it added.

The common practice of delayed payments to contractors and suppliers in the construction industry can also make it challenging to detect genuine insolvency risk compared to other industries where delayed payments are considered a red flag, it added.

– with Sarah Sharples

Originally published as Inside construction giant Condev’s shock downfall as firm enters liquidation