Hundreds of creditors are owed $12 million following the appointment of liquidators to Brisbane-based apartment builder CMF Projects, with real estate analysts warning more SMEs could be caught up in future troubles that are looming in the property sector.
CMF Projects Pty Ltd entered liquidation in May, and Fairfax reports creditors raised concerns at a meeting on May 26 about why the company had continued to trade right up until liquidators took control of the business.
In a note to sub-contractors on the company’s website in May, liquidator David Clout informed sub-contractors they would have to pick up their equipment from two sites associated with the company.
“We are liaising with the site controllers who, with us, wish to ensure your belongings are returned as quickly as possible,” he said at the time.
The company had completed a number of multi-level residential apartment builds across Brisbane.
Its collapse has drawn the attention of the state government, with Queensland Minister for Housing and Works Mick de Brenni claiming in May that the previous Liberal National Party government in the state had cost family businesses through deregulation of the building sector.
“I’m sick of family run small businesses being forced to bear the brunt of these situations,” de Brenni said.
The Palaszczuk government is working on reforms to the state’s construction sector, claiming changes to financial reporting regulations to the state’s building regulator leave suppliers vulnerable to not knowing the state of building companies’ financial positions until they run into trouble.
According to Fairfax, CMF’s list of creditors includes 225 names, including other property developers and big names like Telstra, Officeworks and Bunnings.
Liquidator David Clout was unable to provide further comment to SmartCompany about the process of recouping money for creditors at this stage.
However, his appointment to CMF comes at a time when property analysts warn the problematic apartment market could have a cascading effect on state economies and small business owners if things cool much further in Brisbane and Melbourne.
In its most recent quarterly housing review, CoreLogic says the unit and apartment sectors are likely to hurt first, and hardest, in a market that is expected to see softening of prices, particularly in Perth and Darwin.
“There is an expectation of further value rises, however, there are clearly some potential risks in the market, with most of this risk coming from the unit market,” CoreLogic analysts report.
Managing director at Market Economics Stephen Koukoulas tells SmartCompany there’s already a “time risk” building apartments due to approval processes, and with negative stories and developments starting to emerge about the apartment sector in cities like Melbourne and Brisbane, it’s likely SME suppliers will be left “high and dry”.
“There’s both a positive and negative spiral to this. You get huge benefits [from apartment building], so the whole economy is going to be lifted and you get a jobs benefit lift from that too,” Koukoulas says.
However, the prospect of more tough times for apartment builders across the country will have a broader macroeconomic impact, says Koukoulas.
“But there are going to eventually be people left high and dry, and you get that downward spiral occurring. You get this cascading down the chain,” he says.
While some have clearly “made a fortune” from the apartment boom, sub-contractors and suppliers who might be caught up in the slowdown are largely powerless to the prevent the possibility they might lose jobs or payments, Koukolas believes.
“That’s their bad luck, really… just bad luck,” he says.
SmartCompany contacted CMF Projects but did not receive a response from the company prior to publication.