An Auckland house builder granted $100,000-plus in government wage subsidies has gone under, leaving homes unfinished after suffering cost-overruns of more than $400,000.
Steven Khov and Kieran Jones of KhovJones are joint liquidators of the North Shore business and say they have secured all the building sites and are talking to clients whose homes are unfinished.
The Wairau Valley-headquartered Sika Homes was working in Glendowie, Torbay, Omaha and Glen Innes, Khov said: "There's a big variety in the state of the homes, everything from trusses up to one of them which has the cladding and roof on."
Sika Homes got pandemic relief wage subsidies of $70,296 for 10 employees then a further $51,550 for 11 employees, Work and Income's site shows.
"The liquidators have attended the four construction sites that the company was completing and locked these sites down," Khov and Jones wrote.
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"As part of this process, the liquidators have taken steps to secure assets of the company while an assessment of each build can be undertaken," the first report said.
Sika Homes said they were "experts in architectural new builds, renovations and reclads".
"We are award-winning Master Builders ... builders of luxury architectural homes and high-end renovations. We like to build a partnership between the client, architect and builder where quality always comes first."
But Khov and Jones said the reason for the failure of the company which led to their appointment was "due to excessive labour costs and other project cost overruns which eroded profit and margins over time resulting in an unsustainable business model".
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A Sika director told them that cost overruns totalling more than $400,000 across two specific projects had caused the company's cashflow to run out.
Accounts showed $394,000 owed to unsecured creditors and the estimated losses unknown at this stage. Carters Building Supplies, Placemakers Albany, Mitre 10's Grove Hardware, Inland Revenue, Prestige Loos, UDC Finance, Registered Master Builders, roofing, plumbing, electrical, bin and others are listed as Sika creditors.
"The company has not been able to recover sufficient profitability to sustain the servicing requirements of its overall liability position. Following the exit from level 4 lockdown due to Covid-19, the shareholders have assessed the financial position of the company and elected to place the company into liquidation," the liquidators said.
A meeting of current staff and contractors was called and all were terminated.
Sika's sole director is Orewa's Adam James O'Gram, who could not be reached for comment. He is a shareholder along with Terra Firma Enterprises, Rebecca Ann O'Gram, Lachlan Sherwood Sloan and Rochelle Maree Sloan.
"Steps are now been taken to engage with each build owner to determine the fate of their respective construction contracts," the liquidators said.
Khov said some homes had Master Build guarantees "but some don't", meaning those people with partly built places will have to find another builder.
"Homeowners have been proactive and we're giving them as much information as possible. Master Builders will appoint an assessor to the projects with guarantees and ascertain what needs to be done.
"Homeowners are disappointed but they're doing the best they can in trying to salvage the situation," Khov said. Homes ranged in value from hundreds of thousands of dollars to $1m-plus.
Suppliers are the main creditors and the liquidators can't say how much they will get back. ASB made a loan to the company which Khov said was "in the hundreds of thousands. This is typical of your residential builder when you've got a combination of staff, thin margins and Covid putting you under pressure in the construction sector.
"They had huge cost overruns before Covid. The business ultimately suffered the impacts of the lockdown - that probably forced the director or owner to reassess the business. Sometimes business owners are so focused on keeping the wheels turning, they never have time to think about the business in a bigger sense. Sitting down in lockdown has probably caused a lot of owners to reassess or rethink their business," Khov said last night.
Had liquidation not been called now, the builder might have carried on signing further contracts, taking deposits and possibly not starting some places, Khov said.
"As the hole gets bigger, these firms sign up new projects and use that money to continue. Then you have homeowners with nothing done but deposits paid."