Developer hits wall owing $2.5m

A Brisbane development company has collapsed owing almost $2.5 million, the latest victim of surging building costs in the troubled construction sector.

A Brisbane development company has collapsed, owing almost $2.5 million, after soaring building costs hit one of its major projects.

Liquidators BRI Ferrier have been appointed to Canlux, formerly Parity Developments, after a multimillion-dollar deal to build a cold storage warehouse in NSW turned sour.

BRI Ferrier partners James Taplin and Stefan Dopking in a report to creditors said Canlux signed a contract with ICM Constructions in March last year to build the cold storage facility near Newcastle, with BDD Australia planning to take a 10-year lease.

However, a dispute soon arose between Canlux and ICM Constructions resulting in the termination of the contract. ICM later obtained a judgment against Canlux for $1.3 million.

“At the time of the termination, limited work had been undertaken on the site,” the report said.

“We understand the dispute was the result of escalating costs in the construction industry.

“The company sourced quotes from alternative builders to complete the project however due to uncertainty around the development and the tenant’s commitment to the project further works did not proceed.”

Troubled sector

The proposed lease was then terminated, with the director advising that the company was no longer in a position to advance the development.

The report, which has been lodged with the Australian Securities and Investments Commission, said the company also had received revenue from an unrelated firm for performing development and management for a project on the Gold Coast.

The BRI Ferrier report said that unsecured creditors are owed about $2.5 million, including $1.53 million claimed by ICM Constructions.

The liquidator estimates creditors are likely to see less than $70,000 in returns.

A creditors’ meeting to be held on Monday will likely see creditors vote to wind up the company.

Canlux director Russell Browning was not available for comment.

Association of Professional Builders co-founder Russ Stephens said the collapse of a growing number of firms in the construction sector showed that companies were making the calculated judgment that they could not continue in the current conditions.

Mr Stephens said building companies were advised to renegotiate unprofitable contracts before construction began rather than try and force through variations once work had started.