Building firm’s $2m collapse

The former office of Clan Construction Ltd in Hillside Rd, Dunedin. PHOTO: GERARD O’BRIEN
The former office of Clan Construction Ltd in Hillside Rd, Dunedin. PHOTO: GERARD O’BRIEN
A Dunedin construction company has collapsed, owing more than $2 million and leaving eight projects in limbo.

It comes as rising interest rates and falling house prices put pressure on the building sector.

Clan Construction Ltd went into liquidation on March 7, and liquidators Trevor and Emma Laing have been appointed.

Material price increases and supply issues, Covid-19, a lack of profit on contracts, and franchise fee commitments were all listed as reasons for the company’s failure, according to the first liquidators’ report released last week.

It states an estimated $1.29 million is owed in secured debt, while an estimated $893,833.26 is owed to 40 unsecured creditors and a further $50,000 is owed in preferential employee entitlements.

The company has two directors, former Otago rugby player Brett McCormack, who also holds 40% of the company’s shares, and businesswoman Michelle Macmillan, who holds 60% of the shares.

Ms Macmillan was also a former shareholder of the former All Blacks coach Laurie Mains-owned Clan Construction Commercial.

That company was placed into liquidation in 2017.

Clan Construction Ltd was incorporated in January 2005 and undertook mainly residential new builds, initially under a franchise arrangement with GJ Gardner Homes but more recently, independently.

There were eight building contracts at various stages that were left uncompleted due to the liquidation.

“The liquidators have been liaising with the various parties involved with unfinished contracts with a view to putting arrangements in place that will allow these contracts to be completed," the report states.

The collapse of the company follows fellow Dunedin construction company Nashcon Ltd going into liquidation in early February.

Master Builders chief executive David Kelly said the building and construction industries were facing challenges that were being felt across the sector.

The cost of borrowing was high, and as a result, house prices were falling.

“We understand that it is a highly stressful and emotional time for everyone involved, including impacted homeowners.

"We have been working with our membership to help them prepare for changing circumstances.

“Unlike with the Global Financial Crisis, where there was a sudden drop in work, this change has been more gradual, which has given people time to prepare.

"It is still unfortunate that some businesses are unable to weather the changing environment."

For the past five decades, the building and construction sector had traversed an endless boom and bust cycle which was unproductive and unsustainable, he said.

Following the GFC, house building declined by 50% and the residential construction sector lost 25% of its workforce, he said.

That had directly contributed to the housing deficit New Zealand had today, he said.