Warnings signs of Privium collapse surfaced months ago

The $30m collapse of building giant Privium Group this week has left 760 homes around the country unfinished, but the warning signs were clear for months.

The $30m collapse of builder ­Privium Group this week sent shockwaves through the construction sector but the warning signs were clear for months.

Privium, one of the country’s biggest home builders, was losing money on hundreds of its projects, hit by rising material and labour costs.

The final straw came last week when the Queensland-based company missed a payment to its main financier, the Bank of New York Mellon, which is owed $23m.

Other warning signs have been flashing for some time, with ­Privium reporting a $27.5m loss in the 2019-20 year. These accounts were signed off by Ernst & Young.

Privium, which has not filed its accounts for the most recent ­financial year, has operated with an interim chief financial officer since 2019.

Director Rob Harder, a former carpenter who built Privium into one of the top 20 detached home builders in the country, called in administrators FTI Consultants on Wednesday after realising he could not keep the doors open.

Documents reveal the collapse came on suddenly for Mr Harder, with FTI Consulting’s declaration of independence, relevant relationships and indemnities showing the insolvency administrators first heard of the looming crisis on November 8.

The formal discussion between Mr Harder and FTI Consulting took place on November 15, before the business was placed into ­administrators’ hands.

The collapse blindsided Privium’s customers, with many r­eporting they were only made aware of the scale of the failure when they inspected their properties to find subcontractors had returned to remove doors, windows and fittings.

Subcontractors are understood to be owed about $1m, while building suppliers are out of pocket to the tune of $5m.

Privium’s collapse has left 760 homes unfinished, mainly in NSW and Victoria where customers are attempting to find new builders. In Queensland, contracts for about 166 homes have been transferred to privately owned homebuilder Torsion.

The Victorian Managed Insurance Agency, which has almost 300 contracts for Privium in the state, has scrambled to support customers. The collapse has also triggered high level action at the NSW Home Building Compensation Fund iCare.

Annie and Raf Solomon were waiting for a year for their house to be built by Privium.

However, the collapse does not end at homebuilders, with an estimated 7000 Privium customers in NSW caught up in the chaos. Talks are under way at high levels in government in how to respond to the homebuilder’s collapse, with a response expected in the coming week.

The failure of Privium imperils the future of the business and threatens any rescue plan.

The role of state-based regulators in the collapse is now under the spotlight, with claims they did not do enough to stop Privium, which had a turnover of $250m, racking up more debt.

The Queensland Building and Construction Commission said it started receiving complaints from Privium clients on October 25, while the NSW Office of Fair Trading was aware of problems in early November.

A closer look at the finances raises several red flags that are expected to be the subject of closer scrutiny by the administrators. They include a reliance on Bartercard to fund running costs, an ­almost $12m investment in a company linked to Mr Harder and $22m of dividends paid out in the year before the collapse. Privium had $3.4m of Bartercard “currency” at cost on its books as of June last year, which it intended to use to run the company.

Brighter days: A Privium display home complete with a brand-new giveaway MG 3.

In the 2020 financial year, Privium, which also traded under the name Impact Homes, purchased 18 per cent of a company called Growme (Aus) for $11.9m.

However, at the end of last year Privium slashed the value of the investment to $600,000, meaning that in 12 months the value of Growme went from $67m to $3m.

Originally published as Warnings signs of Privium collapse surfaced months ago