A drug-testing business, banks, Auckland Council, accountants, Fletcher Building subsidiaries, Inland Revenue, staff, subcontractors and many others are owed around $12.7 million by failed construction business Build Partners.
Creditors
Build Partners collapse: Who wants $12.7m from construction company?
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That is worse than what was previously announced when Kāinga Ora’s construction and innovation general manager Patrick Dougherty said a few weeks ago the company owed 137 subcontractors at least $5.5m.
Today’s liquidators’ report on Build Partners said total assets were $17.4m but much of that was interrelated company lending.
That lending included an $8.4m loan Build Partners made to Evergreen Modular (also in liquidation), and a $3.1m loan to associate Property Partners.
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Retentions of $1m appear as an asset held within Build Partners’ accounts.
But Build Partners owes staff $164,000 in holiday pay and wages, as well as $195,000 in PAYE deductions owed to IRD.
“We estimate the 14 staff made redundant have unsecured claims for notice pay of approximately $57,362, also, subject to further validation calculations,” the liquidators wrote.
Unsecured trade creditors are listed as being owed $8.6m by Build Partners, which the liquidators said had 14 vehicles which a financier has demanded they get access to.
“Heartland Bank is seeking to assert its right to take custody of the vehicles and arrange the sale,” the liquidators said.
Several containers used for storage and office printers were also leased.
“Prior to the administration, the group had been experiencing numerous challenges which resulted in the directors determining that the group was or would likely become insolvent and leading to the appointment of the administrators,” the report said.
Dozens of creditors are listed.
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Labour Supply Company, Hercules Cranes and Rigging, Complete First Aid Supplies, United Rentals, Canam Joinery, Genesis, Hills Commercial Floors, Laser Electrical, North Harbour Ford, Hardware Direct, Evergreen Modular, DC Cranes, Auckland First Construction and many others appear in the report.
A second company in liquidation, Richardson Road, has secured creditors owed a massive $50.6m via a loan to a company 1769 Funding Ltd. That is not a New Zealand-registered company.
“1769 Funding Ltd, as the main funder on the Richardson Road Project, is owed $50.4 million, based on claim value as at May 2 2024 in the administration, interest continues to accrue on the debt. Work is to be undertaken to verify the balance owed in accordance with the 1769 Funding Ltd terms and conditions. At this stage, the return to be achieved on the debt is unknown,” the liquidators wrote.
Richardson Road was established to develop three six-storey apartment buildings with 108 two-bedroom units on Richardson Rd, Ōwairaka, constructed from off-site manufactured timber volumetric modules constructed by Evergreen Modular,” the liquidators wrote.
The third company, Evergreen Modular, is listed as owing unsecured creditors $8.8m, secured creditors $1.5m and preferential creditors $241,000. Total assets are listed at $3.2m.
Evergreen Modular previously appeared in a video about construction award beacons, hailed as an innovative business. The Herald published an article when the first of three modular apartment blocks, designed and made in a south Auckland factory but based on a Swedish system, were up at an Ōwairaka site.
Mikkelsen, chief executive of Property Partners Group, said last year a company that the business owns built a six-level block with the first 36 units and would soon build the next two. The units were made in a Wiri factory, then trucked to the site and craned into place, one on top of the other.
A video clip showed the construction of the first block where the first stage of the $90m project has risen on land that Property Partners bought from Kāinga Ora, with the rider that some affordable housing be built there.
The Ministry of Business, Innovation and Employment (MBIE) featured the Mt Albert project under its construction sector accord.
MBIE said market demand existed for suppliers who could deliver quality housing at pace and scale. MBIE features around 10 companies a year, showing what businesses are doing, Mikkelsen said.
What went wrong
Liquidators said challenges specified by directors included:
- Mispricing key contracts, meaning there were significant shortfalls identified in projects that were well advanced and could not be remedied with profits from other contracts because these were insufficient to cover the debts;
- Cost escalations that cut possible profit margin on contracts;
- Undercapitalisation, requiring cash advances from other group entities to keep the modular factory going in periods of low volume or inactivity;
- Underestimating the capital required to increase production to profitable levels;
- Inconsistent payment timing resulting in cashflow difficulties;
- Lumpy pipeline for modular units meaning capacity and margin return have not been as forecast with periods of downtime and inactivity impacting cashflow and margins;
- Cost and margin pressure across the property and construction industry, making worse existing financial pressures felt by the group.
Jones and Mikkelsen initially thought voluntary administration was better than liquidation, likely to see a better return to creditors.
But that did not work and creditors voted at a meeting for liquidation, resulting in Grant Thornton’s appointment.
Build Partners was contracted to deliver four social housing projects:
- Corner Great North Road/Cadman Avenue, Waterview – 40 units and a community room;
- Hindmarsh Street, Johnsonville – 29 units and a community room;
- Fowlds Ave, Sandringham – 15 units;
- Hendon Ave/Hargest Terrace corner, Ōwairaka – nine units.
Kāinga Ora has now taken over all those jobs, saying subcontractors would be paid.
Mikkelsen previously said the business had built nearly 700 new state apartments over the years it was trading.
“When you’ve got 100 subcontractors calling you every day ... we are not a rogue contractor but a trusted partner with the Government that came unstuck because of the current situation,” Mikkelsen said in April.
Associated business Property Partners remains in voluntary administration although the Grant Thornton accountants last week vacated their role running that business.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
