Property and Construction Insolvency – A practical perspective

The FerrierSilvia’s Principal Brian Silvia has been the leading insolvency practitioner in this space for over 30 years. He has been involved in the largest successful construction company reconstruction in Australia as a consultancy, recovering the Bank’s secured debt in full.

Construction insolvency frequently is a dynamic process, which if it stalls, results in a total loss of value for the majority of stakeholders. Traditionally, the investigative assessment process of a project involved cessation of work whilst undertaken. In most instances this led to clients terminating construction contracts, where the cost of completion increased 30 to 40 percent on a resumption of work. In today’s environment, these increased costs can be more significant because of loss of warranty issues and project documentation.

Brian Silvia 30 years ago developed techniques which enable project completion, notwithstanding a lack of normal funding to continue. Personally, he and members of his former firm invested in a joint venture project in Parramatta with a public company developer and builder who failed, going into Receivership and Liquidation. Not one day’s work was lost on the project that went on to be successfully completed and a profitable long-term investment. Similar techniques were subsequently successfully utilised in aspects of the provisional liquidation of KB Hutchison Group, the original builder of World Square Sydney.

Assessment of failed construction projects is made more complicated with the advent of supplier retention of title concepts and project vandalism should a site not be secure. The ability of an Insolvency Practitioner (“IP”) to successfully contribute to an Administration or Consultancy retainer hangs on the practitioner’s knowledge across all aspects of property and construction. The easiest retainer is of course a static project, where the IP will have little to contribute in terms of added value. A mortgagee may be better served by simply entering possession.

The more challenging assignments are:

  • Securing tenants for projects. Most IPs do not have the range of contacts to successfully secure tenants being recognisant of the market in which they may be operating.
  • Defect rectification where the challenge is to contain costs and ensure warranties are honoured in the future.
  • Specialist knowledge of the capability of one-off asset projects, for example, does the project have requisite operating approvals.

Our knowledge and know-how: 

  • Planning laws and processes;
  • Understanding valuation methodologies;
  • Impact of Bio Credits;
  • Lightweight timber construction projects;
  • Impact of mine subsidence on projects;
  • Ability to recover past income tax payments of unviable projects;
  • Ability to recover GST in respect of Bonds and Guarantees drawn down;
  • Different State legislative regimes as pertains to construction;
  • Understanding the impact of defective ACP panels used in the construction of projects and the ability to secure finance to undertake rectification, even though traditional banking lines will not be available;
  • Impact of EPA laws on IP’s personal liability to undertake environmental clean-ups, even when appointed by the Court;
  • Managed Investment Schemes and Responsible Entities – REITS;
  • Ability to source expert resources in undertaking assignments, and;
  • Industrial laws.

The requisite skills of a true Property and Construction IP specialist are far more exhaustive, including the need to be registered as an Auditor and Real Estate Agent in order to undertake certain types of assignments. FerrierSilvia has these resources available to undertake these types of assignments. The team at FerrierSilvia possesses expansive knowledge in Property and Construction far beyond the majority of its competitors. We are available to assist and advice clients or formal appointment at competitive rates throughout Australia and elsewhere. 

The Founding Principal Brian Silvia is a registered liquidator and a registered trustee in bankruptcy with over 50 years’ experience in insolvency internationally. He has experienced a wide range of industries, mainly in the property and construction, throughout Australia, New Zealand, Singapore, Hong Kong, Slovakia, UK, Czech Republic, Germany, France, Hungary and  Indonesia.

Contact details:
P: 02 8263 2300

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