Metricon, Probuild, Condev: ‘Crisis’ grips construction industry as big names fail

Metricon’s possible collapse is just the latest in the industry with a handful of companies going bankrupt, battered by a “perfect storm” of problems putting billions of dollars at risk.

Australia’s construction industry is now in ‘crisis mode’ with warnings the country’s biggest builder, Metricon, is on the brink of collapse.

If Metricon fails, it will join a long string of recent collapses in the construction industry, including big companies such as Probuild and Condev.

A ‘perfect storm’ of factors – from supply chain issues to instability caused by Covid – is crushing the industry leading major construction projects worth billions of dollars to come to a screeching halt and blow up some home construction projects up to $100,000.

On Wednesday, it was reported that Metricon was in emergency talks with customers after falling into financial disputes just days after the sudden death of co-founder Mario Biasin.

Metricon employs around 2,500 people, primarily in eastern Australia, where it has a pipeline of around 4,000 homes under construction.

Company bosses are due to meet key clients, including the Victorian government, on Thursday. Metricon is so big that the Daniel Andrews-led government considers it too big to fail because of the thousands of direct and indirect jobs that depend on the company.

Company memos seen by the sun herald have detailed cash flow concerns. “This is the critical moment,” one document reportedly said.

Interim CEO Peter Langfelder denied the company had solvency issues and said the business remained viable.

“There is simply no basis to these rumours. Metricon is a solid and viable company with no solvency issues,” he said.

The construction industry in “crisis”

But the construction industry is in such bad shape that it wouldn’t be surprising if another big name faltered.

Speaking to news.com.au last week, Equifax managing director of commercial and property services Scott Mason said there was now a hidden crisis in the industry.

“Rising costs, disrupted supply chains and periodic lockdowns have created a profitless boom, with many construction companies embarking on projects that are no longer financially viable thanks to steep increases in the price of building materials” , did he declare.

“While the collapses of big names like Probuild and Condev have grabbed the headlines recently, which doesn’t often make the headlines, it’s the impacts of these events on small businesses that make up the bulk of businesses in building in Australia.”

A building insider told news.com.au that over the past 12 months, ongoing bankruptcies by Australian builders have already pushed construction costs for single-storey homes up by $40,000 to $50,000, and for a double floor, $60,000 and $100,000.

“Builders aren’t there to rip off customers, the fact is if they don’t get more money they might not be there to finish a house,” he said.

Several major construction companies have gone bankrupt over the past year.

Notable builders who went bankrupt

Probuild

In February, Probuild collapsed after its South African parent company WBHO withdrew all financial support.

WBHO said it had bailed out the Australian arm of the business with up to $183 million over the past four years, which had “severely drained” its resources.

He blamed pandemic restrictions and lockdowns for costly project delays.

“The Australian Government’s hardline approach of managing Covid-19 through a combination of border restrictions, instant lockdowns and mandatory work-from-home regulations for many sectors, has had a huge impact on property markets as well than on other industries such as the leisure industry,” WBHO said in a statement.

At the time, Probuild was developing 13 major projects in Victoria, three in New South Wales, one in Queensland and one in Western Australia with at least $5 billion.

These included the ribbon’s highly publicized $1 billion development in Sydney’s Darling Harbor area, which will feature a 25-storey W Hotel and a new IMAX cinema.

The project was close to completion when the site was shut down due to Probuild failing.

Probuild was also building the historic 433 Queen St project in Brisbane and the $2 billion West Side Place project in Melbourne.

Condev

A month after Probuild collapsed, Gold Coast builder Condev went bankrupt.

Co-founders Steve and Tracy Marais were unable to secure a $25 million bailout from developers to deal with rising construction costs and Covid delays.

The couple held back tears as they announced the collapse.

Notable projects in the $1 billion development pipeline reported by Condev include Cannes Beachfront in Surfers Paradise, Brookes Residences in Varsity Lakes, Natura and Brake Street, both in Burleigh, and Jindi Apartments in Palm Beach.

Ms Marais said other companies in the industry would soon suffer the same fate as Condev.

“I don’t think potentially, I think for sure,” she said.

Hotondo Homes Hobart

In January, the Tasmanian builder who owned Hotondo Homes Hobart collapsed, leaving families hoping to move into new homes out of pocket and fearing homelessness.

Up to 80 contractors and 40 clients were in limbo with unfinished homes.

Tasmanian Constructions, owner of the Hotondo Homes franchise in Hobart, has notified the Australian Securities and Investments Commission (ASIC) that it is closing with liabilities estimated at over $1 million, not including amounts paid by customers.

A report by liquidator Revive Financial showed some deals owed between $75,000 and $100,000 for work completed for Hotondo Hobart.

Other Hotondo Homes franchisees were unaffected by the collapse in Tasmania.

Following

In April, Sydney-based builder Next, which specializes in aged care, student accommodation and hotel and hospitality projects, blamed flooding, labor and material shortages and project delays of Covid-19 as the reason for its liquidation, reported The Australian.

Dozens of traders and other unsecured creditors owed $5 million, while employees were left with no more $400,000 rights, although liquidators said it was reasonable to expect they would see their money.

Next had worked on a $35million student housing project in Kensington, Sydney’s southeast, which is now in limbo, as well as a 100-bed aged care facility near Penrith.

Private

In December, Queensland homebuilder Privium went bankrupt. But it emerged that in addition to general industry woes, Privium had also made an ill-advised $3 million cryptocurrency punt.

Liquidators FTI Consulting concluded that Privium was likely in business while insolvent since late August 2021.

At the time of the collapse, Privium chief executive and founder Rob Harder said he was “deeply sorry”.

Privium had acquired Bartercard dollars and converted them into a cryptocurrency called Qoin.

Gold Coast-based Qoin is part of the same company as Bartercard.

“Based on our investigations into the nature of Qoin, it is evident that it is a highly illiquid asset whose sale is limited to a few hundred dollars per day,” the FTI report said.

“Therefore, unleashing this asset is extremely difficult, if not impossible.”

The directors went on to say that it was “possible that a breach of certain directors’ obligations may have resulted from this transaction.”

It’s not just crypto investing that has raised eyebrows.

In 2021, four payments were made by Privium to a Christian charity called Love Your World totaling over $530,000.

Speaking to the ABC in March, Master Builders Gold Coast regional manager Adam Profke said the industry was nervous due to supply chain and cost issues.

“It’s the perfect storm.

“A 30% increase in construction costs over the past 12 months would be a fairly conservative figure.”