Mahercorp proposes rescue plan but customers face price hike

The founder of the Melbourne home builder says if customers pay about 6.5 per cent more their houses can still be completed and subbies will be paid.

Under the proposal sub-contractors are to be paid in full for pre-appointed purchase order claims against Mahercorp and associated companies.

The founder of Melbourne home builder Mahercorp, which fell into the hands of administrators Cor Cordis last month, has put up a rescue plan that would see customers chip in more to have their homes completed and subcontractors that stop working with the firm take a hit.

Company director Steve Maher has won the backing of the administrators for the plan as no other proposals for the company, which in April put home-building on hold for more than a month, affecting more than 700 homes, have emerged.

The move follows Mr Maher declaring last month that he would take back control of the company from administrators. The company is the parent of two Melbourne builders – Urbanedge Homes and Eight Homes – that focus on the city’s northern and western suburbs.

Mahercorp is one of a series of home builders to hit the skids as pressures mount on the industry, which has been slugged by higher interest rates, rising labour costs, and subcontractors hitting the wall.

Mr Maher told customers that he had worked on a restructure plan, via a Deed of Company Arrangement, to get their homes built, and blamed harsh industry conditions for the administration.

“I want you to know that we have fought hard over the last two years to honour our fixed price contracts, despite spiralling labour and material costs coupled with supply shortages that have affected all builders in the industry,” he said in a letter obtained by The Australian.

“I strongly believe that we are in the best position to complete your home, with the least amount of disruption, delay and limited financial costs to you,” he wrote.

But he said that customers had to cop a “price variation charge” of 6.5 per cent on their contract values, including post contract variations.

Mr Maher also warned of delays saying that due to the administration period and construction industry challenges it needed 90 additional working days to finish homes. “Without these variations, we will not be able to complete your home,” he wrote.

The changes for part built homes will affect about 707 customers and the company will honour the contracts of the 710 customers who have paid deposits, where building has not started. Another 416 customers with signed contracts would also have their pricing and terms honoured.

The administrators expect to release their independent findings in the coming days and Mr Maher wrote he was “personally confident” his plan was the best outcome, and called on customers and creditors to back it.

Sub-contractors are to be paid in full for pre-appointed purchase order claims against Mahercorp and associated companies invoiced in the last four months, if the works are complete.

Mr Maher said the company would pay subbies 100 cents in the dollar for the balance of standard purchase orders owed, less any amounts received under a DOCA. This would be paid in equal instalments over four months, or faster, at the company’s discretion.

But if they stop work for Mahercorp before the end of October, it would only pay 50 per cent of the debt owing. The rescue plan partly hinges on subcontractors agreeing to keep working for Mahercorp at the same volumes.

Mahercorp’s administration came just weeks after rival builder Porter Davis Homes went into liquidation, leaving more than 1700 incomplete homes across Victoria and Queensland, and a series of high-rise builders also collapsing.

The Mahercorp home builds are believed to be insured, unlike in the liquidation of Porter Davis, where the Andrews government had to step in to help cover uninsured customers, and has unveiled new laws to stop the problem arising again.

Mahercorp’s final accounts highlight the hit from Victoria’s lockdowns. The 2021 accounts show it was profitable but pressures were mounting from the state’s strict pandemic lockdowns.

Mahercorp made a $1.45m profit in the year ended June 2021, a bump on $783,385 in 2020. The company called out the volatile impact of the coronavirus pandemic on its operations.

Originally published as Mahercorp proposes rescue plan but customers face price hike