An Australian modular apartment business that won $20 million of Government state housing agency contracts has gone into liquidation, abandoning two Auckland sites with partly finished homes.
Integrated Modular Build, wholly owned by an Australian, was building 50 new apartments for state house developer Kāinga Ora Homes and Communities.
But the company is now forecast to have a $1.6m deficit and construction sector experts said it had left sites in sorry states with unfinished buildings.
Kāinga Ora said it had awarded $10m of construction contracts to the company on Kervil Ave, Te Atatu and $10m of work for a superlot on Tonar St, Northcote.
One of New Zealand's biggest statehouse urban renewal projects is under way in Northcote but Integrated's failure has left industry experts shaking their heads.
"Another one bites the dust. It's a bit of a sad tale: prefabricated timber components flat-packed from Australia, meant to fly together, be high-quality and cost about $4000/sq m," said one industry source.
Instead, the cost was around $8000/sq m, had taken two years since piling and because buildings leaked during construction without the roof going on fast enough, parts of the prefab timber components needed replacement, he said.
Nick Seymour, Kāinga Ora programme delivery director, said the Northcote project "has experienced some delays including Covid, then latterly by the liquidation of the head contractor, IMB. We are working with a build partner to progress the unfinished parts of the project and to ensure the integrity of the building with independent experts and the supplier of the off-site manufactured materials".
Payments have been made throughout the contract to various contractors and subcontractors.
"The Tonar St build was originally priced at over $12m. The various parties, depending on their roles for example IMB as head contractor, have received directly, or indirectly, approximately over $8m and the remainder of the overall sum will paid to the relevant company or companies who complete the work," Seymour said today.
"The remaining projects that IMB was engaged as head contractor on are either complete or near completion and IMB has no other work with us," he said referring to the Te Atatu apartment scheme.
Another construction chief said the Government state agency should be awarding building contracts to New Zealand, not Australian, builders.
The Government business has expressed strong interest in modular homes, despite a string of financial failures which continue to dog the sector, and sent officials overseas to study it.
Liquidator Craig Young of Restructuring Services said Integrated Modular Build had stopped trading because it was unable to incur continuing costs. The shareholder made a recommendation to liquidate it, Young said.
He estimated a $1.6m shortfall: unsecured creditors are owed $1.9m but the company only has assets of around $258,000.
He cited Kāinga Ora in his report, saying creditors were here and in Australia. Supplies came from there.
One of New Zealand's biggest crane hire businesses headquartered in Christchurch and shipping businesses were named as claiming money.
Auckland businesses named are Cargo Co-ordinators International NZ, Hamburg Sud, Kaizon Engineering, Miles Construction, Miller Mountfort, Smith Crane & Construction, The Building Excellence Group and Xfire trading as Crossfire.
An industry source said offsite manufacturing "is no silver bullet for medium density ... housing typologies, unfortunately. It's so predictable I reckon I can name the next company to go into liquidation in this field."
Integrated Modular Build creditors must claim by November 26 and the liquidation notice was placed in the New Zealand Herald.
The state agency responded to an Official Information Act request, asking how many New Zealand contracts had gone to overseas businesses.
"Since Kāinga Ora was established in 2019, 399 civil works or building contracts have been awarded worth over $1.6b. Of these, the five projects listed below have been awarded to Australian-owned companies," it said.
1. Integrated Modular Build: Kervil Ave, Te Atatu, Auckland, approx. $10m;
2. Integrated Modular Build: Superlot N20 Northcote, approx. $10m;
3. Hawkins: Rolleston St, Mount Cook, Wellington, approx. $30m;
4. Hawkins: Rolleston St, Mount Cook, Wellington (civil works) – approx. $1m;
5. Icon Co Pty: Greys Ave, Auckland, approx. $115m.
Integrated's website claimed an 80 per cent average on-site waste reduction and 33 per cent average construction time save with its systems.
Northcote's Tonar Rd site was 3027sq m and 29 apartments are partly finished there.
The Te Atatu site has 21 apartments on a 2122sq m site: "The residences will benefit from continued improvements to the external facade, enhancing design and durability. Environmental benefits are being realised during construction with significantly less on-site waste and emissions," Integrated said.
"Build time is scheduled for completion within 11 months seeing continued efficiencies in the use of the prefabricated panel system.
"A primary benefit of engaging IMB as your development partner is their ability to seamlessly co-ordinate all the facets of a development for the betterment of the project, without compromising on quality," Integrated said.
"Our team provide total oversight and management of all technical consultants and stakeholders involved in delivering housing projects on time and on budget."
Kāinga Ora says modular housing is "an innovative solution to New Zealand's housing problems".
The Herald has reported on financial failures in this field. Around 90 per cent of homes are not built off-site, nor are they modular, kitset or container-style.
Integrated's sole director is Damien Ellis of South Australia. The company is owned by Integrated Modular Build Pty of South Australia.
Ellis is angry about the statehouse builder: "Absolutely ostracised as a head contractor despite a partnership arrangement."
Modular off-site home company failures include eHomes of Kumeu, Matrix Homes of Trentham and Amalgamated Building Systems with a factory at Glenfield.
Two transportable home businesses failed in June even after forging Government connections: NZHousing and Affordable Homes Construction of Dairy Flat, owned and directed by Ian Ralph Fotheringhame of Orewa, hit liquidation and receivership.
Fotheringhame claimed his tiny homes were the answer to the Ministry of Social Development's "$100m problem" but a ministry spokesperson said in June it had cut ties due to concerns about the viability of the business and following complaints about his failure to deliver the cabins.