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Strongbuild’s prefab facility fails to find a successor

Adam Strong strongbuild

There might have been 70 parties kicking around to buy the Strongbuild prefab lightweight construction facility at Bella Vista in Sydney after it went into voluntary administration late last year. But after a strong marketing campaign and plenty of initial interest, none in the end put up their hand to buy the facility as a going concern.

Neither did they bid a good price to pick up the expensive equipment that’s said to have contributed to the financial difficulties in the first place at an auction held in mid March.

Voluntary administrator Brian Silvia of BRI Ferrier said,

“There were so many people that you would not regard as tyre kickers.”

“We had 70 odd prospective purchaser – a Who’s Who of building companies,” he said.

They included CSR, John Holland, Mirvac and ADCO Constructions. Lendlease was not in the running and neither was XLam whose owner Hyne Timber is currently reviewing whether to keep its manufacturing at Nelson on New Zealand’s South Island open.

Strong interest from a keen potential purchaser who had been prepared to pay a “substantial” price for the Bella Vista factory in north west Sydney came to nothing.

The interested party, which remains undisclosed, went through an expressions of interest process but failed to proceed, Mr Silvia said.

He said creditors of the Strongbuild operation on the South Coast of NSW have agreed to a deed of company arrangement, with projects expected to be completed and a likely continuation of the business.

Sticking points

A sticking point for potential buyers at Bella Vista was the eroding confidence in the property market and the banks’ reluctance to lend funds in the wake of the banking royal commission.

Another problem was the lease arrangement for the premises, owned by Mulpha.

“Some of the people looking to get into the business in the existing premise thought it was too expensive,” Mr Silvia said. Mulpha maintained the premises were underleased.

In addition there was the difficulty of disassembling the complex plant and the cost of moving to new premises, considered prohibitive.

This was despite prospects of reasonable levels of work coming through the business.

The plant and equipment were then auctioned separately but results there were also disappointing.

“We went through an expressions of interest program; we tried to sell the business as a going concern and when that failed we tried to sell the major items of equipment through an expressions of interest campaign, because we knew that if we had to resort to going to auction the result may not be pretty.”

The reason for an expected poor showing at auction, Mr Silvia said, is that in an auction room a prospective buyer needs to secure all the different parts of the machinery to make the operation viable “and you may not get all the parts”.

Yet another sticking point was the need to reach a viable agreement with the Strong family, which retained much of the intellectual knowledge.

Replacement cost of all the equipment would be between $12 to $13 million though it’s understood the Strongs paid significantly less because of favourable exchange rates they managed to secure.

Biggest creditor was Bendigo Bank owed $3.5 million.  Other creditors including Westpac, St George and the Bank of Queensland.

At least part of this debt was in relation to the plant and equipment, which is typically leased for around five years and then transferred to the lessee.

In all lessors are owed $5.5 million, but may not be paid in full, Mr Silvia said.

Other creditors

Some of the contractors involved in projects already under way have gone through complex negotiations to secure payments in order to complete work, Mr Silvia said.

Mr Silvia thought that employee claims could be “ultimately” met, but there was “a way to go to bring that to reality.” In this category there were about $300-$400,000 owing in each of three different companies.

Unsecured creditors were owed $15-20 million and the Strongs are understood to have lost around $20 million.

The end message, said Mr Silvia, was that the Strongs “had been pioneers and the question was to what extent prospective buyers needed to continue to be pioneers.”

Mr Silvia retains strong faith in the prefabrication lightweight construction industry, especially when it can be used to build for unused floor space rights above mid to taller buildings.

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Comments

4 Responses to “Strongbuild’s prefab facility fails to find a successor”

  • It is a complete shame. What Strongbuild were doing wasn’t new. It is a tried and tested method that is used in other parts of the world. I respect Strongbuild for what they tried to do and it disappointing they were not given a proper chance to really give it a go. It is typical of the short sightedness of government, investors and authorities in Australia. This building method is not only a perfect solution for new sustainable and efficient construction for Australia, it also had the potential for creating an export market of Australia designed and manufactured housing that can be flat packed and exported as they do in Germany. The amount of money that was invested seems very small considering the potential return over the next 5-10 years. How many houses need to be built to get back the investment, 200, 300 let’s say 500 or even 1000. In 2018 there were over 118,000 single detached houses built in Australia. Only a very small percentage would have been required to get a return on the investment. SEKISUI HOUSE from Japan arrived in Australia in 2009. They invested a lot of time and money to enter the Australian market their goal was never a short term goal.
    The Strongbuild product is good product with a massive potential to streamline the housing construction market. To make it more efficient, cost effective and even safer. The greatest missed opportunity was to create a new export market. I hope someone with a bit of guts gives them another go.

  • Adrian says:

    I’m working right next door at the moment and always felt happy looking across at these guys, that they were doing well and trying something different. Alas, we know how that usually ends Down Under.

  • Emine Mehmet says:

    Such a shame. We need pioneers in the industry.

    • Tina Perinotto says:

      yes really did not enjoy writing this. but we’ve had so many queries on our search function with people trying to find what happened.

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