Star’s Brisbane project pulls Multiplex deeper into loss

The hit to one of Australia’s largest builders makes it one of many casualties of the ambitious – and disastrous – property project dreamed up by casino operator Star Entertainment, at which costs blew out from $2.6 billion to $3.6 billion, leaving owners saddled with $1.4 billion in debt.

The problems between client and contractor led to a slew of claims and counter claims played out in public, with Multiplex and the consortium taking their fight to Queensland’s Supreme Court in 2023. The two settled out of court later that year.

Even as it listed the hefty loss in its financials, Multiplex insisted it did so due to accounting standards based on the “diminished credit quality” of its client, that it still claimed the money and if it did get the funds they would contribute to future earnings.

“The Australian financial year result was due in most part to losses incurred at Queen’s Wharf in Brisbane, where we bore the brunt of impacts from COVID, hyperinflation, unprecedented wet weather, IR challenges and more than 1000 client-requested design changes, all on a very large, complex project that was won in more benign times,” a Multiplex spokesperson told The Australian Financial Review.

“Despite this, we displayed our resilience and are proud to have completed and handed over a city-changing project. The losses we incurred at Queen’s Wharf have been isolated and accounted for, and there are no outstanding costs associated with the project.”

In March, Star Entertainment staved off collapse by agreeing to sell its 50 per cent stake in the Queen’s Wharf complex to consortium partners Hong Kong’s Chow Tai Fook Enterprises and Far East Consortium, along with two towers in Broadbeach Island in Gold Coast and a $53 million cash payment.

In April, Star agreed to hand control of its gaming operations to US-based Bally’s Corporation in a $300 million deal.

The $192.6 million write-off accounted for just over half of the $354.2 million due from contracts and so-called other receivables that Multiplex booked for the year.

Multiplex, owned by Canada’s Brookfield Asset Management since 2008, is one of a small handful builders in Australia that can deliver large and complex buildings, such as Perth’s $853 million, 65,000-square-metre Edith Cowan University City campus building, due to open next year.

The capacity of Australia’s construction industry has been hit by rising corporate failures – ASIC figures last week put construction industry insolvency appointments for the financial year to April 13 at 2795, up 17 per cent from 2398 at end-April last year.

Costs are rising while work volumes are falling. Total project values for the country’s 50 largest builders declined 8 per cent last calendar year to $33.17 billion from $36.11 billion, a report by data provider BCI Central said. They were unlikely to recover until economic conditions in the two largest states, NSW and Victoria, improved, builders said.

The company, which said it was delivering 55 projects globally, including 7 with Brookfield and related parties, was expecting a pick-up in conditions.

“Looking forward, Multiplex is in the strong position of having a globally diversified workbook, a robust balance sheet, a healthy pipeline of future work, and continued support from Brookfield as both our parent company and development partner,” the spokesperson said.

But rising materials and borrowing costs also hit the company last year. Its gross profit – revenue less costs – sank by 90 per cent from $70.7 million to just $7.3 million.