DEALING WITH A DISTRESSED PROJECT?

Make sure you’re not paying another developers’ bills

Is your builder asking for more money to finish? Best case scenario, the builder is up to date with payments & genuinely requires help to complete the project. Far worse is when your builder has been cash flowing other projects with your money.

While you may never know the true cause of the shortfall, the least disruptive (and least expensive) course of action is often to ‘help’ the builder.

But there is another problem: your builder will be working on multiple projects at various stages of completion (& likely, distress); how do you know that any extra payment you make isn’t immediately being shifted into the builders’ other projects?

Manage Distressed Projects To Completion
Without Paying Subcontractors & Suppliers Directly

IPEX is an online payment platform that places practical limits on how a builder can use project funds. Builders can access payment for their preliminaries, margin & direct costs, but the balance of each progress payment is set aside & off limits – these funds can only be used to pay subcontractors & suppliers linked to the project. 

Rather than relying solely on a ‘stat dec’, IPEX allows project managers to verify that those linked to previous claims have been paid as expected before certifying the most recent claim. 

Whilst ideally used as a preventative tool, IPEX can also be engaged mid-project to help developers/lenders to ensure that any further payments made into a distressed project are paid under controlled conditions.

Ring-fence all further payments to your project.

Stop payments from being used to cashflow other projects.

Validate ‘stat decs’ to confirm subcontractor payments.

Target specific subcontractors & suppliers for payment.

Act on ‘step in’ rights before your builder goes under.

Protect funds already paid to builder in the event of insolvency.

No change to builder processes & no impact on builder payment.

IPEX Adds Practical Controls to Existing Legal Protections

RING-FENCE ALL FUTURE PAYMENTS TO YOUR PROJECT

IPEX prevents your payments from being used to cashflow other project/s linked to your builder – only subcontractors & suppliers working on your project can be paid out of the project account.

Making any agreement to contribute additional funds conditional on the use of IPEX is the safest way forward. By agreeing, builders are confirming that their request is genuine (a payment through IPEX doesn’t help their position on any other project), whilst developers gain transparency & certainty over how funds are spent for the remainder of the project.

ISOLATE SPECIFIC SUBCONTRACTORS OR SUPPLIERS FOR PAYMENT

In addition to ‘ring-fencing’ funds to your project, IPEX can also further limit how funds can be distributed by the builder down to isolating a specific subcontractor or supplier that those funds are owed to; funds deposited into the IPEX account can only be paid to that entity. 

This is ideal for payment of supplier deposits or specific overdue invoices – the developer/lender can ensure funds reach the intended recipient without the risk/admin involved with having to step in & pay them directly.

Once all payments associated with the ‘variation’ request have been made, these controls can be removed.

PROTECT FUNDS ALREADY PAID TO THE BUILDER IN AN INSOLVENCY EVENT

Should a ‘payment default’ event occur before completion of an IPEX protected project, the impact to developers & lenders is minimised as:

  • Any payment made to the builder via IPEX has either been distributed to approved parties or remains in the account
  • The developer can replace the builder as trustee of the project funds, gaining full visibility of all previous transactions & the ability to make payments directly to subcontractors/ suppliers, minimising delays to practical completion

$1B+ in funds protected and counting

IPEX Project Applications

PREVENTION FROM DAY 1: 
PROTECT AGAINST FUTURE BUILDERS’ CASHFLOW ISSUES 

  • Guard against the potential impact of other, less-feasible developments linked to your builder
  • Additional protection when working with a builder for the first time or builder is ‘stepping up’ a level
  • Provide lender comfort should builder due diligence has raised minor red flags
  • Provide lender comfort on developer-builder projects

MID-PROJECT IMPLEMENTATION:
GUIDE ‘TROUBLED’ PROJECTS TO COMPLETION SAFELY

  • ‘Controlled’ payments to assist your builder with funding supplier deposits
  • ‘Ring-fence’ additional payments outside of the
    contract to ensure they’re spent on your project
  • Move forward with the builder despite substantiated instances of non/delayed payment of subcontractors or suppliers

Developer Protections under IPEX

  • All progress payments are ring-fenced to the project & can only be used to pay approved subcontractors & suppliers on your project 
  • All subcontractors & suppliers are subject to full KYC/AML checks & have account details independently verified before they are eligible for payment. BSB & Account Numbers are then cross-referenced with the payment file the builder submits – payment is blocked if details don’t match 
  • The developer can view (and if need be, approve of) any subcontractors & suppliers that are linked to the project account before they are eligible for payment
  • The developer can confirm which subcontractors & suppliers have been paid, when & how much* before approving additional claims, reducing risk of misappropriation & making ‘cost to complete’ reports far more reliable
  • In cases where risk is higher or greater control is deemed necessary, the developer can ‘isolate’ a specific subcontractor or supplier for targeted payment
  • Certain ‘key trades’ may be set to ‘open book’ to satisfy oversight requirements including the payment of supplier deposits or similar, whilst other contract/payment values can remain confidential (payments made under standard view are expressed as a percentage of contract value which is sufficient to ensure amounts paid are in line with work performed onsite) 
  • If required, the developer may elect to link the payment of builders’ entitlements to subcontractor/supplier payments – an active incentive for the builder to distribute funds quickly & in full

* Standard developer portal view shows payment as % of contract value. Open book developer portal view shows subcontract/payment values.

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