More construction woes as Arrow International goes under

Builder works on a construction site.

New Zealand construction firm Arrow International has gone into voluntary administration.

“This is not the outcome we wanted or expected, but in light of a recent adjudicator’s decision, we had no choice but to take this course of action,” said Arrow in a statement.

Just two weeks ago Arrow International had said the company was not suffering cash flow problems, despite a $4.2 million Building Disputes Tribunal case going against it in favour of Christchurch-based subcontractor March Construction.

“We were greatly surprised by the adjudication in favour of another contractor in a disputed Auckland project and the financial obligation attached to the decision left Arrow with insufficient cash flow to meets its day-to-day operating costs," said the statement.

Now, Arrow’s construction sites have been temporarily closed.

Arrow International had built some notable hotel projects including The Hermitage Hotel, JUCY Snooze in Christchurch, Te Waonui Forest Retreat, and the recently opened Rydges Wellington Airport Hotel. The projects they’re currently working on include a hotel in Vivian St, Wellington for the Chow brothers’ company, Stonewood Group.

According to co-owner Michael Chow, the hotel is 70 percent complete and work could restart in as quickly as one or two days.

"We have the capital and staffing requirements to step in immediately and complete our hotel projects and we will be meeting subcontractors today and tomorrow to reassure them of that," said Michael Chow.

He also said that he and his brother John may get involved with other Arrow developments.

"My brother John has already contacted the VA about our interest in all Arrow projects."

Arrow’s collapse follows some notable slip-ups in the construction sector during the second half of 2018, where major construction companies Ebert Construction and Corbel Construction both went into receivership. In the case of Ebert, unused cranes are still standing at abandoned work sites. Fletcher Building - one of New Zealand’s largest listed companies - has also taken major losses after a series of construction mistakes.

Peter Silcock, chief executive of Civil Contractors New Zealand said that the large quantity of construction work in New Zealand makes it difficult for construction companies, and now with fewer companies in the industry, the problem is likely to get worse.

“Part of the issue is clients repeatedly going for the lowest price but wanting a gold-plated outcome. That’s fuelling incessant litigation when the budget won’t stretch to cover costs,” said Silcock.

“Once again this is about attribution of risk. Arrow is one of New Zealand’s top vertical construction companies and it’s a real shame to see a well-respected player exit the market. We need to see a more equitable distribution of risk and a more collaborative approach."

New Zealand has a very strong hotel development pipeline, with its current room inventory expected to grow 50 percent by 2022 according to Horwath HTL. As of September 2018, there were 2,319 rooms currently under construction across the country. The demand to build these rooms could strain the construction industry even further.