Condev Construction collapse: The inside story and what really went wrong
The collapse of Condev came as a “complete shock” to hundreds of subcontractors and workers on the building giant’s Gold Coast sites, who feared for their future as liquidators moved in.
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The collapse of Condev came as a “complete shock” to hundreds of subcontractors and workers on the building giant’s Gold Coast sites, an industry advocacy group says.
Shell-shocked subbies across the city face an uncertain future following the company’s swift move into liquidation on Wednesday.
John Goddard, founder of the Oxenford-based group Subbies United, said more builders were on the brink.
“(Condev) have paid them up to January but they are facing losing 45 days of work, plus their retentions.
“Subbies are shell-shocked and there are other big builders who are shaky right now – I’d say at least three others are also on the brink.
“There are some subbies who have to work for everyone to keep the turnover going and they manage the risk but the smaller ones hitched their wagon to Condev.”
Condev maintained it was solvent until it went into liquidation and all subcontractors, staff and suppliers had been fully paid to date.
However, a subcontractor who worked across multiple Condev sites and spoke on condition of anonymity, said they had not been paid since January and were “mentally rung out”.
“We have just lost more than 50 per cent of our work. Half our work came from Condev but right now we do not know if we can keep our employees.
“There is now a large amount of money we don’t stand to get from February or March which is really upsetting.
“We have worked incredibly hard over a number of years. We haven’t done a thing wrong but the rug has been pulled out from under us.
“There are people with families and mortgages who we are going to have to let go.”
Mr Goddard said he feared the liquidation of Condev would be worse than that of Cullen Group, which collapsed in late December 2016 owing millions to subcontractors.
He said he hoped to fight the liquidation and instead have an administrator appointed to ensure all tradies received their remunerations.
Several of the dozen developer partners that declined to bail out Condev said they would take over their construction sites.
Company co-founder Tracy Marais said the developers had agreed to pay any outstanding money to the subcontractors.
“They are formally going to pay subcontractors as per invoices which are in the system, including retentions,” she said.
“This remains to be seen but we have gone to considerable length to make it happen.”
Ms Marais said the company had enough money to pay its bills until June, but had chosen liquidation to “not hurt people more”.
Fellow co-founder Steve Marais paid tribute to the work of the subcontractors who had stuck with the company.
“Developers and financiers need to give builders more respect,” he said.
“Subcontractors too, I don’t believe builders get their due respect and subcontractors either.”
WHAT HAPPENS TO CONDEV’S TOWERS
Construction of at least two of the Gold Coast towers being built by Condev will resume as early as next week after their developers rapidly move to appoint new builders.
The fallen builder had six Gold Coast tower projects valued at more than $500m before it went into liquidation.
Among them are Homecorp’s $200m Capital Court towers at Varsity Lakes, SPG Land’s Brooke Residences at Robina, the $140m Alegria at Palm Beach, Spyre Group’s $77m Natura at Burleigh Heads, Macquarie York’s $76m Allure at Chevron Island and Marquee Development Partners’ Cannes One at Surfers Paradise.
Homecorp boss Ron Bakir said he would appoint his own builders and hoped to resume building his towers next week.
“The site should hopefully be back on track next week and we will complete the development as planned,” the Benowa-based developer said.
“Our brand is important to us and so are the subcontractors who have worked on these sites, so we will honour the commitments made to them.
“We will also employ a number of current Condev staff members.”
All sites were quiet on Wednesday following Condev’s collapse. The company’s bunting has already been removed from the near-complete Natura site.
Macquarie York on Wednesday appointed Descon Group Australia to take over the Chevron Island site, where work is expected to resume on Monday.
Descon has committed to take on all the site’s laid-off subcontractors.
Its managing director, Roy Skaf, said the decision meant the luxury tower would still be completed by December.
“Everyone will be paid, the project will go on and we will ensure that all buyers will move in before Christmas,” he told the Bulletin.
“It’s been a very difficult period and we have lost a lot of money in the process, but we are keeping our eye on the prize, which is making sure our stakeholders come out the other end.
“Losing Condev is a sad time for the construction industry and we thought they were a safe option for us considering their history.
“We were very surprised with what transpired but Covid and other economic factors have really caused a lot of grief, not only for Condev but the industry across Australia as a whole.”
Announcements about other sites are expected to be made later this week.
The moment it all went wrong for construction giant Condev
Most of the developers affected by the fall of Condev have vowed to take over its construction sites and employ subcontractors.
The construction company appointed liquidators after failing to secure a $25m bailout.
Liquidation papers were signed at 11.20am Wednesday at the firm’s Scottsdale Drive offices.
Co-founder Tracy Marais said the market circumstances had “broken the camel’s back”.
“Almost without exception we have been in discussions with developers and almost without exception they said they have put up their hands to take over the sites,” she said.
“They have chosen or undertaken to not pay Condev this month and we will provide developers of all the payment plans and invoices.
“They are formally going to pay subcontractors as per invoices which are in the system, including retentions. This remains to be seen but we have gone to considerable length to make it happen.”
Ms Marais admitted the company had “bit off more than it could chew”, but insisted it did not see the market slowdown coming.
“We have been very conservative, we have no overdraft, we have always bit off exactly what we could chew.
“We do not do more than we are permitted to do
“Did we take on more than we could chew? If we had a crystal ball you would say yes, but we didn’t have one.”
Ms Marais said the financial bite did not hit property until the Omicron wave of Covid arrived at Christmas.
“We were optimistic about coming back from Christmas this year,” she said.
“We came back to a depleted staff because of Covid. In some sites we had just 10 per cent staff.
“Then the floods came.”
An emotional Condev co-founder Steve Marais admits he’s struggling with the collapse of his company.
“I tried to take some pictures down earlier.I just couldn’t. I can’t,” he said, holding back tears.
“It’s very difficult at the moment. The industry has its challenges, we are a symptom of that.
“We have attempted to find a solution which considered others.
“I’ve been in the industry 42 years and loved every minute except the last 15 months. It has its problems but it substantially needs recalibration.
“Developers and financiers to give builders more respect. Subcontractors too, I don’t believe builders get their due respect and subs-contractors either.
Worrells has been appointed as liquidator.
The inside story, what really went wrong
It’s late 2021: Queensland’s borders are about to reopen after two years of wrestling Covid-19, the Gold Coast is in the midst of an unprecedented property boom and developers are falling over themselves for projects to be approved at Gold Coast City Council.
But behind doors at one of the city’s largest builders, however, private phone calls are being made.
A storm is about to hit Condev Construction.
The employer of more than 100 workers is buckling. It is reaching out to partnership developers to secure capital as the reality of low margins and soaring material costs bite.
Tight margins of 3 per cent – lower than the 5 per cent many other builders were working off – and disruption caused by the unprecedented Covid-19 shutdowns had cut the company to the bone.
The Robina-based company had only managed a profit of 0.003 per cent in 2020.
“They had multiple issues with their asset position and were suffering losses on some of their jobs,” a source with knowledge of the company’s manoeuvres told the Bulletin.
“There was discussions about giving them money at the time and some said yes.”
It bought Condev time.
It continued to pick up new projects – including the $140m Alegria tower at Palm Beach despite its increasing precarious financial position.
The construction giant had 13 projects on the go across southeast Queensland – including six on the Gold Coast worth $500m. Material costs were rising on average 1.5 per cent a month. Insiders estimate this had added an unbugeted $40m to Condev’s books. They were crumbling.
By March 9, Condev was in deep financial trouble and it again reached out to developers for money.
Some were approached on March 10 and 11 and locked in for a meeting at the offices of the Marais’ lawyers – Cronin Miller Legal – in Surfers Paradise.
Sources say Condev would have known the depth of its financial woes last week. Developers would find out soon enough.
“We were contacted late in the week and were told there were issues which needed to be discussed,” a source told the Bulletin.
“There was a lot of goodwill from the developers, many of whom were prepared to chip in a few million but everyone wanted to crack the books open and see just how bad it actually was.
“They wanted to help them get through it but once we saw the numbers and it became clear the other developers were not going to come to the party, I think most determined they did not want to put good money after bad.”
The at-times emotional meeting started at 2.30pm on March 14 and lasted nearly two hours. It was here Condev dropped the bombshell that it needed $25m.
It was willing to sell off assets, but needed help from the developers.
Condev, through its lawyers, said an answer was needed within hours.
By late Monday night, most of the developers in the room confirmed they were unwilling to bail the builder out.
Two of the major players cancelled their contracts on Tuesday morning, putting the final nails in the coffin.
With no way back, Condev bowed to the inevitable and announced that Condev would be put into the hands of liquidators.
“It’s a sad end,” the Bulletin was told.
“Nobody wanted it to go down this way.”
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