Conditions for 2013 ‘likely to be soft’ – Mainzeal Living boss

Mainzeal Living was set up just 12 months ago and the new division of the collapsed firm was set up to deliver more affordable housing in Christchurch

Its general manager, Noel Horan, set out the direction for Mainzeal Living in a client magazine just before Christmas. In setting the scene for 2013 he predicted that the first half of 2013 “will be soft, with too much capacity in the non-residential sector chasing too few quality projects”.

“The danger signs are clearly flashing on the supply chain – having to continue to consolidate to survive.

“It is ironic that with Christchurch and Auckland residential markets picked to grow strongly next year (2013) and, with major projects in Auckland and Christchurch forecast to start in the second half, those businesses that survive will be looking to rebuild capacity very quickly.

“A classic boom cycle is on the cards ,with the risks of inflation and shortage of resources. The industry’s risk profile continues, due to not being able to develop a more sustainable business model to retain capacity through the downturn," Mr Horan writes.

More sustainable

“From a Mainzeal perspective, the arrival of Mainzeal Living gives us a more sustainable business model.

“Mainzeal’s point of difference in the residential market is that it brings extensive skills in large scale project management and planning, sustainability expertise, ISO certified management, safety and environmental systems and a 40-year history – all of which will provide new residential clients with a high degree of confidence.

“Mainzeal Living began this year looking for land within existing subdivisions. They purchased 100 sites for development from among the Sovereign Palms, Wigram Skies and Live in Lincoln, Longhurst, Faringdon and Rolleston subdivisions.

“The company initially came across restrictive covenants around minimum house sizes within the existing subdivisions. This has gradually changed due to the increase in demand for sites, which has caused the reduction in site sizes and a relaxation of the covenants.

“Mainzeal Living is building houses that are smaller than the average size house for Canterbury but high on features.

“Mainzeal Living’s houses target a 5-star Homestar rating. Homestar is a joint venture partnership between BRANZ and the New Zealand Green Building Council.

“Mainzeal Living expects to have 20 homes completed in the Christchurch region by the end of the year (end of 2013) and is aiming to complete another 80 to 100 homes in 2013.

"Mainzeal Living’s preference is for smaller homes on smaller sites although we are unsure of the Christchurch market’s willingness to move into this space yet,” Mr Horan says in the December 2012 newsletter.

Christchurch plans

In the same newsletter, Mainzeal manager southern region Paul Blackler thanks his 180-strong team, which was gearing up for the Christchurch rebuild.

“This growth has crystallised in the reactivation of our respected Mainworks Division which is tasked specifically to respond to the work stream typically consisting of short duration, fast track, smaller projects.

“Complementing the region’s existing activities which provide safe, quality, timely and cost effective construction outcomes, Mainworks enters 2013 with a steady pipeline of projects.

“Many of you will be aware that the building housing our southern region main office received an unfavourable detailed engineering evaluation in June, resulting in a very rapid departure into temporary offices located in Riccarton Rd and O’Brien’s Rd.

“Following the success of Mainzeal House Auckland, I am delighted that Mainzeal House Christchurch is now being designed and we expect to start construction in early 2013.

"The three-level LVL building will see the many facets of Mainzeal’s total business offering housed in one location. Completion is scheduled for mid-2014,” Mr Blackler’s update to clients before Christmas says.

One of the Christchurch projects that was under way and now stalled is an office rebuild for Trimble Navigation.

“The opportunity to work in a collaborative procurement model provides the design team with more definitive information on issues including innovation, buildability and project cost management," he writes.

"Early contractor input on issues such as material selection, construction detailing and construction sequencing not only improve the efficiency of the design and delivery process but also reduce overall project risk for all parties.”

Among the 40-odd stalled Mainzeal projects is Coastlands Aquatic Centre at Kapiti, Manakau Institute of Technology, demolition of Clarendon Towers in Christchurch, The Hub at Victoria University, a power link at Benmore Dam in Otago.

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8 Comments & Questions

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This newsletter shows everything that is wrong with Mainzeal and middle management in New Zealand:

"collaborative procurement model"
"not being able to develop a more sustainable business model to retain capacity"
"This growth has crystallised in the reactivation"
"improve the efficiency of the design and delivery process"

What the hell is he talking about? Is everyone else as impressed as I am at his ability to talk and say nothing at the same time?

You are a building company, build what people want and you might survive. Green building, sustainabilty, yawn. Just make a profit first and then I will be impressed.

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Christchurch was making a profit.

Running a construction bussiness at management level involves procurement and sustainability issues, not just sticking up a building.

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Richard, dead right mate.

What a load of absolute bollocks. If you want people to understand you; believe in you and have confidence in you, then talk their language.

An intelligent man speaks in plain language the masses understand.

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There are a lot of long words in there, Horan; we're naught but humble readers. What is it that you really mean in that article?

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Agree Totally

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Working in construction with margins currently at 2-3% and less when the big boys decide to buy jobs and then try and make it in the extras it is all doomed. Mainzeal paid out $25m on the 2 leaky buildings in Wgtn, thats $500m-$750m to turn over to claw those payouts back.
Commercial construction, huge turn over, huge risk and little profit.

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Mainzeal Living was set up 12 months ago to replace Mainzeal Property and Construction so they could avoid their responsibilities regarding leaky buildings. The whole thing stinks and there needs to ba law changes to deal with situations like this.

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You do not know what you are talking about. Mainzeal Living is strictly residential housing, spec built houses. So far they have built and sold 20 houses and made a profit after all expenses, including overheads of $1 million.
As far as leaky buildings go, remember, yes Mainzeal built them, but they did not design them. It was probably fool hardy to try and fix them, but then there is no one else left in business except them and the council. So either way we are going to pay for them.

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