“That didn’t take long!”

Following our article on 30 July on retentions, the very next day the media reported that Ebert Construction had gone into receivership.

Now, it has been reported that the receivers for Ebert are taking legal action to test the law (Construction Contracts Amendment Act 2015) as they attempt recovery for subcontractors. It is understood that receivers PwC have set aside $9.3m for this purpose, although much of the $36.1 million owed to unsecured creditors will go unpaid, according to the first receivers’ report.

The receivers’ first report on the Ebert Construction Limited (in receivership) has identified some interesting points and learnings:

1. The current law as drafted does not provide enough clarity

Firstly, as Ebert is the first significant insolvency requiring application of the new retentions regime, the receivers will request directions from the Court to confirm entitlements, methods for distribution and who funds the cost of these activities.

The potential here is for the court to request the government to redraft the law to clarify further.

The report also states ‘the pathway and funding for addressing these issues with the application of the legislation, we are unable to confirm the timeframe for resolution of this matter. In the interim the funds continue to be set aside.’

2. Time is against the subcontractors

The timeframe to resolve this matter could be a reasonably long duration, which would not be the most favourable result for the subcontractors that have retentions funds withheld, however necessary in the current circumstances.

This situation will provide the test case which we hope will speed up this process in future.

3. Is there a shortfall?

The report further states Ebert had been placing funds in a separate bank account in respect to retentions held on subcontracts signed after 31 March 2017, with an adjustment made on a monthly basis once subcontractor’s claims for the period had been finalised and invoices issued.

A total of $3.68m was withheld, with the last adjustment taking place in June 2018 for applicable retentions held up to the end of May 2018.

At the time of the receivership, invoices for June claims had been processed, but the adjusting transfer had not yet been made. Accordingly the balance of the separate account does not represent all retentions held for subcontracts.

This suggests there may be a shortfall, with the potential value not identified in the report. This will be an area of interest to look out for on any forthcoming reports.

4. Did diversification wound Ebert?

A further point of interest is around the sectors Ebert was operating in. The receivers state: `Ebert had two principal areas of operation, being construction of processing facilities (predominantly in the diary sector) and more general commercial (including multi-unit residential) construction. Based on the information provided to us, it appears that the company had been largely successful with the processing side of the business over many years but had mixed performance in its other commercial and residential projects.’

This seems to concur with industry insight, which has suggested the move by Ebert to more residential high-rise type projects with a higher

risk profile may have contributed to the pathway that has led to receivership.

The ability of contractors to undertake multi-unit residential apartment projects is an area of concern in the industry, as higher density requirements translates to more apartment projects being undertaken.

5. Did Ebert have the right resources and skills in place to build apartments?

Multi-unit residential apartment-type construction includes complexities not always evident in other commercial projects, such as:

• Normally smaller inner city sites with limited access and complicated traffic management restraints
• Smaller building footprints resulting in limited work fronts with a more linear workflow
• Given the increased size of the number apartments per development, an estimating omission or construction defect on one unit can multiply by the quantity of the apartments.
• High concentration of subcontractors in short periods of time with resourcing and personnel management essential tight timeframes requested to meet sunset date requirements for purchasers.

It is essential that contractors have the requisite resources and skills in place for this type of work, including highly experienced personnel who have previous apartment experience, to navigate through the challenges of this type of work.
There have been many experiences in the market lately where apartment projects have experienced issues as a result of:

• Inexperienced personnel
• Subcontractor supply demand pressures leading to delays
• Construction programmes with unrealistic durations for current market conditions
• Insufficient site management to ensure works are completed in a timely manner to the level of quality required.
• Façade complexity and procurement issues
• Cost escalation associated with the project durations as not all subcontractors can be let at the commencement of the project.

6. Do your contractor due diligence thoroughly

With the construction industry under supply constraints regarding labour, materials and subcontractor availability managing the risks above is increasingly difficult.

Our advice to our valued clients and the market in general is ensure you have completed sufficient due diligence during your contractor selection, including the site personnel who will deliver the works.

Given the projection by MBIE in the latest pipeline report that 60% of residential consents will be multi-level developments by 2023, the construction sector will have to quickly respond to the challenges on how to successfully deliver high rise projects, to avoid further company failures.

Left to right – Brett Zeiler Principal , Justin Maritz Associate Director

We’re thrilled to announce that we’ve appointed a new Associate Director and a new Principal as part of two internal promotions.

Justin Maritz will step up from Principal to the role of Associate Director which sees specialist quantity surveyor Brett Zeiler step into the Principal role.

White Associates Director Graham White says the appointments are testament to the calibre of skills and leadership within the company.

“Being able to appoint from within speaks volumes for the first-class team we’ve built at White Associates over the last 13 years.”

“Controlling cost has never been more important than it is today. Justin and Brett are two of the leading cost consultants in the field and what these appointments do is really strengthen the leadership we offer our clients and the wider team at White Associates,”

Justin has more than 19 years’ experience within construction and quantity surveying in South Africa, the United Kingdom and New Zealand. He’s been with White Associates since 2013 and has proven pre-contract and post contract expertise having worked on a plethora of high profile projects across various sectors including correctional facilities, education, industrial, retail and residential developments.

With more than 10 years of experience in construction, cost consultancy and quantity surveying himself, Brett joined White Associates in January last year and has quickly established a stellar reputation for providing expert advice that helps clients to mitigate risk and ensure the success of projects.

“As White Associates continues to grow, being able to call upon Justin and Brett’s wealth of expertise and leadership is going to be a huge asset as we move forward,” explains Graham.

With the number of New Zealanders battling with homelessness at an all-time high, the Auckland City Mission is in the process of redeveloping its central city premises to better serve our most vulnerable people.

The Mission is undertaking a landmark project to create what will be an iconic, multi-purpose facility that provides essential wrap-around health services, detox facilities and homeless residential accommodation for 80 people. This supportive housing model aspires to facilitate a successful transition into independent accommodation and supports the City Mission’s vision for sustained social change.

White Associates Director Konrad Trankels says that everyone in the White Associates team admires the approach being taken.

“The Auckland City Mission provides so many critical services to the wider Auckland community,” he says. “With the number of people streaming through the Auckland City Mission’s doors at 140 Hobson Street stretching the charity to its limits, it is really special to be part of what is a once-in-a-lifetime project.”

Auckland City Mission Chief Executive Chris Farrelly says that a great deal of thought, care and consultation is going into creating the new facility.

“It is going to provide high quality spaces within a homely and nurturing environment for generations to come. At the same time, the intelligent and sustainable design we have gone for has a distinctly New Zealand flavour and is going to really complement the CBD surroundings while reflecting the Mission’s values,” he explains.

 

“We have gone to great lengths to create a design which will meet our needs in years to come, recognises our city’s Maori and Pacific peoples, and integrates with our surroundings and local community.”

In conjunction with the project architects Stevens Lawson Architects, the Mission has been working in consultation with Ngāti Whātua to encompass Maori design principles to create a place of belonging and identity. There will be an overarching theme of ‘helping people to find their way home’ which marries with the Mission’s overriding purpose. This will be expressed through the building’s gabled roof which will evoke the image of a large house – a home for Auckland’s homeless people.

Given the Mission’s proximity to the historic St Matthew-In-The-City church and its relationship to the heritage Prince of Wales Hotel building, the facility has been carefully designed to fit its surroundings and support the community. The creation of community spaces, a medical centre, a pharmacy, a café, a group of small retail spaces on Federal Street and a rooftop meeting/conference room have all been designed to integrate with the fabric of the city.

Construction is due to begin in the new year and is being overseen by project management group Xigo. Project completion expected in 2020 – which will also mark the Mission’s 100 year anniversary.

We look forward to bringing you updates on this remarkable development over the next few years.

A stunning new 25-level development in the heart of Auckland’s CBD, Victoria Residences, developed by Conrad Properties Group, represents the future of distinguished, high-density, metropolitan living.

Located directly across the road from the iconic Skytower, Victoria Residences offer unparalleled design, convenience and location. The building consists of 161 residences and also offers a high-level of amenity, with an indoor swimming pool and gym for residents, and 9 retail units on the ground level.

Construction for the project is already underway, and 92% of residences are already under contract despite only being on the market for 6 months.

White Associates’ have worked closely with BNZ and Conrad Properties on Victoria Residences, conducting due diligence on the project, and ensuring BNZ was comfortable to fund it. Now that construction has begun, White Associates is responsible for monitoring the project key deliverables.

Darin Bayer on Victoria Residences:

It is fantastic to be involved with this high-profile, well-thought out project right from the start. This is the fourth project we’ve worked on with Conrad Properties, and it’s a privilege to be involved with such high-quality, well-designed developments.

We provide value to our clients and to the bank, by providing rigour, expertise and a fresh perspective to projects.

For a highly experienced developer like Conrad Properties, the ability to call on White Associates for a rigorous peer review on Feasibility Reports, Sale and Purchase Agreements, Lease Agreements and budgets, means there’s a high-level of confidence instilled in the project that our clients really appreciate.

Expert eyes know where to look

With our combined experience, we know where to look and we know the cost implications and issues that might arise at settlement time. With these large construction contracts there’s a lot less room for ambiguity.

Our specialist bank funding team has a practical knowledge base, ranging from engineering through to the building trades, and our new team structure means we have the capacity and resources to ensure the right levels of expertise are applied to the project.

For every construction project, time is the critical element. Many projects will secure bank funding in principle, but until there’s a QS report from a reputable consultancy, the money stays with the lender. That’s a pretty compelling reason for any major project owner to engage with a proactive and highly experienced bank funding QS!

The strong demand for apartments within Victoria Residences highlights the opportunities at hand for astute developers like Conrad Properties, who are quick to bring a quality product to market, while satisfying funders and setting their projects up for success from the outset.