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28 February, 2022

Construction halted at W Sydney and Ritz-Carlton Melbourne following Probuild collapse

The future of two major hotels set to open in Australia this year has been thrown into question after construction giant Probuild entered into administration.

The Ritz-Carlton, Melbourne and W Sydney, which were set to open in September and November 2022 respectively, were both projects of the now-collapsed construction company.

A spokesperson for Marriott confirmed construction at both management sites has paused, but said the company was unable to comment further at this time.

Probuild’s parent company WBHO, which is based in South Africa, decided to stop providing financial assistance to the Australian arm of its business, WBHOA from 22 February, forcing WBHOA to enter into administration.

In a statement to investors, WBHO said the decision was the result of the Australian government’s “hard-line approach of managing Covid-19”.

“…a combination of border restrictions, snap lockdowns and mandatory work-from-home regulations for many sectors, has had a considerable impact on property markets as well as other industries such as the leisure industry,” the statement said.

“Border restrictions have resulted in hundreds of thousands of foreign students, tourists and investors unable to gain entry to the country. Population levels in the two major cities of Melbourne and Sydney have shown negative growth as a result.

“The impact of lockdown restrictions on the retail, hotel and leisure and commercial office sectors of building markets have created high levels of business uncertainty in Australia and have significantly reduced demand and delayed the award of new projects in these key sectors of the construction industry.”

Deloitte’s Sal Algeri, who has been appointed as administrator to Probuild, told Reuters he would assess the company’s financial position and begin working toward finding a new owner.

“This news comes as a devastating hit to the Australian construction industry,” CreditorWatch CEO Patrick Coghlan said.

“The demise of a business with the scale and reach of Probuild is bound to send shockwaves through the industry, as thousands of small businesses are impacted.

“Sadly, I fear this is the tip of the iceberg, and we could see many more going under, as an industry that was already under significant pressure is dealt another heavy blow.”

According to a statement from CreditorWatch, the” writing was on the wall” for Probuild, with the reporting agency listing the company under a D1 or D2 RiskScore Rating from October 2021, with its risk of default or insolvency significantly higher than the average Australian business.

This score was awarded based on a variety of factors, including the rapid increase in credit enquiries from August 2021 onwards. In the past five years, Probuild had 1,588 credit enquiries, of which 545 were lodged in the last 12 months alone.

“The fundamental reasons for failure are the same as they always are; albeit some, but certainly not all, blame can be attributed to COVID,” Ginette Muller, general manager of Advisory Services Australia said.

“The usual reasons are under capitalisation and underquoting with both labour and supplies. Add to those this time the supply chain going to hell in a handbasket.”

In November last year, Probuid completed the installation of the W brand signage on the Ribbon building, which is set to house W Sydney Hotel, a state-of-the-art IMAX Theatre, retail and entertainment spaces, and 10,000sqm of public domain.

The Ritz-Carlton, Melbourne is part of the West Side Place building on the Age newspaper’s former Spencer street site.

At 270 metres high, the hotel is set to be the tallest in the southern hemisphere.

It is not yet known how Probuild’s collapse will affect work on the hotels.

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administration deloitte marriott probuild Ritz-Carlton Melbourne W Sydney WBHO