Crippling costs put Auckland builder under, homes taken over by others

Inflation in the building sector is running at very high levels.

An Auckland residential construction company has called in liquidators, blaming crippling costs for making fixed-price house-building contracts untenable and leaving others to build the homes.

But whether creditors claiming $1.5 million from the insolvent business will see a cent is unknown.

M W Residential, trading as Stroud Homes Pukekohe, called in Whangārei’s Garry Whimp of Blacklock Rose to wind up the business.

James Stroud of Stroud Homes said contracts were struck to build nine homes: work was to start on three, some were finished except for final compliance and driveway and three were under construction and needed finishing.

“This is a very disappointing situation. Our customers are our number one priority and our head office and another franchise nearby are working with customers to ensure their homes are built. We have five other franchises across New Zealand in excellent financial health that are continuing to grow.”

The five others are Auckland north, Auckland south, Bay of Plenty, Christchurch and Queenstown Lakes District, Stroud said.

M W Residential formed in October 2020.

But Whimp’s initial report specified exactly what went wrong for director and shareholder Michael Ross Wilson. Eden Louise Farrell and MW & EW Trustees are also shareholders.

“The director has advised that the company could not continue to trade due to the increasing building costs which made fixed-price contracts untenable,” Whimp said.

In January, the Herald reported the rate of inflation in the house-building sector halved in the latest quarter but still hit a new annual high of 10.4 per cent.

CoreLogic NZ’s Cordell Construction Cost Index found 1.7 per cent inflation in the residential building sector in the final quarter of last year, down on the 3.4 per cent increase in the third quarter, or the three months to last September.

Last month, Westpac senior economist Satish Ranchhod said construction cost inflation was likely to remain strong for some time and in the past year, the cost of building a new home rose 14 per cent nationally, but in Auckland was up 17 per cent.

Those figures were from the Consumers Price Index and Ranchhod is yet to model how high inflation in Auckland could go.

M W Residential traded as a Stroud branch from Coles Cres, Papakura.

Several other businesses have registered security interests over the insolvent business: Sharp Corporation of NZ, Fletcher Distribution, Heartland Bank, Carpet Court Retailing, Bizcap NZ, Guest Group and Johang, trading as Sky Funds.

Inland Revenue is yet to provide information but Whimp said there are amounts due on GST, PAYE and other payroll deductions.

Unsecured creditors have big claims: “From my review of the company’s accounting records and other information I estimate that the amount due to unsecured creditors is approximately $1,596,000,” Whimp wrote.

On the plus side, the builder has assets: three Ford Rangers listed in the statement of affairs as being worth $42,000, $39,000 and $34,000 and a Holden Colorado at $19,000, all up worth about about $135,000.

Stock of $150,000 and debtors of $358,000 are also listed as assets available for preferential creditors. How much can be realised from those is yet to be investigated.

A list of creditors includes Accident Compensation Corporation, Auckland Council, Spark and the Hauraki District Council.

Carters Building Supplies, Carpet Court, Crest Showers, Kitchen Things Hamilton, NZ Brick & Stone, Realmax Flooring, Speedy Signs, Stroud Homes NZ Marketing Fund, Harding Builds, Gibbons Civil Engineering, Kitchen Inspirations and Erect Safe Solutions are also listed as creditors in the liquidation report.

Stroud runs a franchised model in New Zealand.

“If you are a building industry professional looking to take the next step into developing a profitable business, talk to us about our franchise opportunities throughout New Zealand,” the company website says.

“With ongoing training, excellent systems, a strong support network and a wide range of award-winning home designs in our portfolio, you’ll benefit from our industry-leading franchise network and profitable business model.”