Condev collapse: Construction giant to call in liquidators after failing to secure $25m bailout
Condev has told subcontractors not to come to work today, as liquidators are called in to secure a critical $25m bailout. Read the email co-founder Tracy Marais sent to staff.
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Condev Construction will call in liquidators after the company failed to secure a critical $25m bailout.
In a email to staff and supports on Tuesday night, co-founder Tracy Marais confirmed the company had lost its lifeline.
It came just hours after the Bulletin revealed two key developers had terminated their contracts with the construction giant.
“It is with the heaviest heart that we advise that we have not been able to achieve the outcome from yesterday’s meeting with developers that we’d hoped and the decision to proceed to the liquidation of Condev Construction is now a matter of course,” the email reads.
“Liquidators will be appointed (today).
“It’s heart breaking to advise that there is no requirement for you to come to work (today).”
Ms Marais said she was devastated.
“We never dreamt this would be possible but we also never dreamt the world would be affected by a coronavirus and price hikes that would put us out of business,” she said.
“We wish you all the very best. We love you guys. You’ve been family.”
Condev, which has more than 100 staff, is currently involved in more than $500m worth of development projects on the Gold Coast across six sites.
It was named the business of the year at the Gold Coast Business Awards just 18 months ago.
In an emotional statement to the Bulletin just an hour after announcing the company’s collapse, Steve Marais said he was “devastated” for everyone affected.
“We are absolutely devastated for the Condev family of employees, our tradespeople and our affiliates,” he said.
“Unfortunately, we were not able to reach the unanimous support we needed to keep the business operational in the future.”
The Marais’ lawyer, Derek Cronin, of Cronin Miller Lawyers, said plans were being finalised to appoint a liquidator.
“Our clients have considered that the only option open to Condev is to appoint a liquidator to manage Condev’s affairs,” Mr Cronin said.
“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.
“Their charity arm Condev Cares has raised hundreds of thousands of dollars over the last decade for those in need in addition to being an employer of choice, and it is just simply a sad time for the industry generally.”
EARLIER: Developers pull out: Condev ‘will struggle to survive’
Gold Coast construction giant Condev’s fate is hanging by a thread, with multiple developers cutting ties with the struggling company today.
The Bulletin understands at least two major developers have cancelled their contracts just a day after Condev made an eleventh-hour plea to a dozen developers for a $25m bailout.
“Based on this, we do not think they will have the chance to get the number they need to keep going,” a source told the Bulletin.
“It would be very hard for them to get through this.”
One subcontractor said he was owed at least $1m, but was sympathetic to Condev’s position.
“They’ve never done anything wrong by us and have been pretty good with payments historically,” he said.
“Obviously, now they owe us money and it’s not ideal, but they didn’t do this on purpose. They’ve gone in too keen (underpriced) on some jobs and it hasn’t worked out.”
The subcontractor called for a “quick resolution”, so that “other builders can take over the jobs” if Condev collapsed.
“The sooner life gets back to normal, the better,” he said.
Condev maintain all staff, suppliers and contractors have been paid.
The company, which just 18 months ago was named the city’s best business, said it was struggling under the financial weight of spiking material costs, supply chain issues and a pandemic hangover.
The local giant, which helped build much of the 2018 Commonwealth Games infrastructure and employs more than 100 staff, has 13 projects under construction in southeast Queensland, six of which are on the Gold Coast.
The Gold Coast projects are valued at more than $500m alone.
Condev building sites across the city were largely deserted on Tuesday as word spread of the company’s woes. Some had a skeleton staff of builders.
Bosses from the struggling construction company met with a dozen of Australia’s most prominent developers for nearly two hours late Monday afternoon.
The developers were asked to pour millions into the company’s coffers to keep it active.
Condev urgently sought a commitment from the developers late Monday night.
The building company was seeking $25m to stay afloat. The money was to come from sympathetic developers and Condev offloading assets.
Master Builders Gold Coast boss Adam Profke, who has been ringing alarm bells for months about the dangers increasing costs had for local builders, said uncertainty surrounding Condev’s fate had cast a “dark cloud” over the city’s construction sector.
“This matter needs to be resolved as quickly as possible, just to build confidence in the industry and give everyone certainty, from employees to subcontractors,” he said.
“If things have gone south and their staff have been paid then it will be sad but it will be better than the Probuild situation. The knock-on impact (of Condev failing) will not be as bad.
“But right now the uncertainty is really damaging.”
The talks are the result of months of ongoing concerns about the company’s financial state.
Material costs have increased by 1.5 per cent every month for the past year, putting pressure on the company’s coffers.
According to the company‘s latest financial report lodged with ASIC, Condev made a loss of $358,772 in 2021 compared to a profit of $536,332 the previous year.
Revenue climbed from $175m to $181m over the period with the company noting it continued to procure work from national developers despite the impact of Covid-19.
Condev: Every site, where it’s at and what went wrong
Greed, too much money and a complete misunderstanding of the property market are threatening to erode the city’s second-largest sector, a leading developer says.
Sunland Group founder Soheil Abedian has seen five major slowdowns in the 40 years he has been building on the Gold Coast.
His comments come as Gold Coast building giant Condev desperately hunts for an 11th hour financial lifeline.
The firm faces liquidation unless it can come up with $25m to keep the doors open after a “perfect storm” of spiking material costs, flood damage and the effects of Covid.
While the market is not facing the same “hard landing” it experienced following the global financial crisis, the man behind Q1 said there were “too many cowboys” with too much money and “too little sense”.
“It’s nothing like 2008 because of the low interest rates and other circumstances but the slowdown is happening. However, it will be a soft landing this time,” he said.
“People need to understand why this keeps happening. Whenever the market is good, everyone decides to become a developer and we give blanket approvals, which is not something that ultimately leads to a good outcome.
“It’s all driven by greed and a lust for money.
“Do we really have to keep going through this up and down like a yoyo?”
The Gold Coast property sector had its best year on record in 2021, when more 5000 development applications received by the council. All but 2 per cent of them were approved.
In 2020, about 4000 applications were lodged.
There are more than 40 cranes in the sky today.
Pre-Covid, construction was the second-largest sector on the Gold Coast, behind tourism’s $6bn mecca. Given how tourism and small business was decimated by the pandemic, a surging building industry was pivotal to families’ survival.
An Urbis report published last week revealed:
* More than 610 units were sold in the final three months of 2021, and a record-breaking 2492 units sold throughout the year.
* The 2021 sales figure was higher than both 2019 and 2020 combined. There were 905 recorded sales in 2019 and 987 in 2020.
* More than 6200 new apartments have been sold since late 2016, 40 per cent of which changed hands in 2021 alone.
Much of the property boom has been driven by the Covid-19 pandemic which has caused record interstate migration from NSW and Victoria to the Gold Coast
While many new developers or out-of-state companies have rushed to capitalise on the hottest property market since the 1980s, Sunland has sold off its remaining undeveloped sites to focus on completing its two remaining projects – the $250m 272 Hedges Ave and $1.3bn The Lanes residential and retail precinct.
Mr Abedian said many wannabe developers had fatally misread the market.
“Sunland was way ahead of the market about when to get in and when to get out and the success of any developer rests on recognising that when people are buying, you sell,” he said.
“Always work against the cycle and if you do this you get a good outcome.
“Never expand your business when the market is hot because the cycle is a reality and nobody can escape from that.”
The building boom has become a vicious cycle, another construction insider said. People want to live on the Gold Coast and developers and builders sniffed an opportunity. However, margins were too low and rising supply chain costs and labour shortages began to bite.
Many tradies are already booked out until late 2023, while industry figures say rising construction costs were affecting the feasibility of already announced and approved projects. Some had been cancelled and others delayed.
Hubbie and wife to 100 staff
Condev quickly expanded into one of Queensland’s biggest construction outfits after being founded in 2002 by Steve and Tracy Marais.
Based at Robina, it employs more than 100 people and has been involved in some of the Gold Coast’s biggest projects in recent years, including much of the Commonwealth Games infrastructure, the $50m Rydges Hotel at Gold Coast Airport, Sunland’s Magnoli towers at Palm Beach and the $80m Harbour Quays project at Biggera Waters.
The company was named Gold Coast business of the year in 2018 and 2020 by the Gold Coast Business Awards.
Award judges lauded its impact on the construction industry and charity works. “As well as being leaders in the construction industry, the company does an incredible amount of work for the community,’’ awards president Ian Cousins said at the time.
“Year in, year out, Condev contributes significantly to charities, sports clubs and schools, in both time and funding.”
CONDEV GOLD COAST PROJECTS AND STATUS:
ALEGRIA
Location: The Esplanade, Palm Beach.
Developer: Anthony Gordon and Paul Younan.
Value: $140m.
Status: Site works underway.
ALLURE
Location: 25 Burra St, Chevron Island.
Developer: Macquarie York
Value: $76m.
Status: Under construction.
CAPITAL COURT
Location: Capital Court, Varsity Lakes.
Developer: Homecorp.
Value: $200m.
Status: Stage 1 under construction.
NATURA
Location: 112 The Esplanade, Burleigh Heads.
Developer: Spyre Group.
Value: $77m.
Status: Under construction, due for completion 2022.
BROOKE RESIDENCES
Location: 42 Laver Drive, Robina.
Developer: SPG Land.
Value: $40m.
Status: Under construction, faces delays
ONE CANNES
Location: 17 Cannes Ave, Surfers Paradise.
Developer: Marquee Development Partners.
Value: Unknown.
Status: Under construction.
‘GET RID OF PONZI-STYLE OPERATIONS’
THE boss of an alliance set up to help subbies through adversity says companies will keep going to the wall “unless builders can negotiate rise-and-fall clauses” and the industry rids itself of “Ponzi-style operations”.
Subcontractors Alliance founder Les Williams said there had been plenty of work for tradies during the Covid pandemic, “but because builders are working on such razor-thin margins, fixed sum contracts and ever increasing product costs, it has become unsustainable”.
“I would add that for a number of builders their administration and site supervision simply isn’t good enough which doesn’t help,” said Mr Williams, a director of Williams and Kersten Pty Ltd in Coolum.
Asked to comment on the “profitless boom” label being shared by some builders, due to the dramatically increasing material costs and supply chain issues, he said: “I don’t understand why developers would say that as they are the beneficiaries of builders not having rise-and-fall clauses for building products in their contracts.
“They have successfully offloaded all the risk to builders who somehow have let them do it. It should not have been too hard to predict that Covid would cause havoc on building material prices.”
Mr Williams urged tradies to be aware if developments supported Project Trust Accounts, in which money is held in trust for subcontractors until payments are due.
“Project Trust Accounts are still being phased in the private sector – projects over $3m now.
“I am interested to know how many builders are getting out because of them. It would be also interesting how many of these collapsed builders were running Project Trust Accounts for subbies.
“We argued at the start of Covid that they should have been brought forward as builders collapses during the Covid period were entirely predictable.
“Maybe the MBAQ (Master Builders Association of Queensland) could get off their collective arses and help instead of constantly complaining about Project Trust Accounts.”
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