The Tradies Group stands to make millions of dollars from a $15.9 million investment in a Northbourne apartment block development on which it is alleged it had the original builder sacked.
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Financial reports tabled at the Royal Commission into Union Governance and Corruption show that at the end of June last year the Canberra Tradesmen's Union Club had 13,740,000 $1 units in the Marque Northbourne Limited Trust. The Woden Tradesmen's Union Club had 2,129,500 $1 units in MNLT.
The trust, which held units to the combined value of $15,869,000 as at June 30, 2014, is a joint venture partner in the IQ Apartments development.
IQ Apartments is a 230-apartment, seven commercial unit development on Northbourne Avenue.
The other joint venture partners are PrimeSpace (for the Northbourne Trust) and Worth Street Commercial.
The Tradies trust will retain 56 of the 230 apartments in the development, at an adjusted price of 90 per cent of the purchase. The clubs are owned by members of the Construction, Forestry, Mining and Energy Union, not the union branch itself.
Apartments are now on the market for immediate occupancy, with a starting price of just over $400,000 each.
This would give 56 apartments a potential value of about $22.4 million.
Assuming the units clear $20 million, the clubs' 90 per cent would come to $18 million dollars. This would represent a profit of between $2 million and $3 million.
ACT CFMEU secretary, Dean Hall, who said this profit estimate was in the ball park, is also a director of The Tradies clubs.
He defended the investment, saying it showed that even during a downturn, it was possible to make a profit on a building project executed by a builder and subcontractors with valid enterprise agreements in place and commitments to safety, quality and fair remuneration.
The recent Royal Commission into Trade Union Governance and Corruption hearing in Canberra was told that The Tradies' combined initial investment, which is understood to have been made in the second half of 2012, was $5 million.
It had grown to $15,523,000 by the end of June, 2013.
Canberra builder, Dennis Milin, told the Royal Commission in July his company had been the original builder on the project. He said Milin Builders had been sacked because the CMFEU did not like them.
Mr Hall confirmed he, and other CFMEU officials, had met with Mr Milin in 2012 when they learned The Tradies had an interest in IQ Apartments, and that Milin was the builder.
"Our concern was that a large amount of members' money was being invested. We felt it best to start as we meant to go on," he said.
"We did not want unionists to find they were underwriting a job where decent wages and conditions were not enforced and where there was not the highest commitment to safety. If that happened we would have got our butts kicked.
"We wanted a commitment to these things, and to quality, from the builder. If members were investing in this, we wanted them to have a job they could be proud of."
Mr Milin told the Royal Commission that as 2012 progressed he became more and more concerned that using The Tradies' preferred contractors was having an impact on the bottom line. "I did not want it to get out of hand," he said.
Mr Hall said neither The Tradies or the CFMEU sacked Milin Builders.
"PrimeSpace made the decision on who would be the builder," he said. "My understanding is that Construction Control (who took over from Milin) invested in IQ themselves in order to get it across the line. "That was something Mr Milin was either unable or unwilling to do."
Mr Milin told the commission he had been told by PrimeSpace's Anthony McDonald on Sunday, July 29, 2012 that his company was off the job unless "you kick in $5 million".
That didn't happen, and Construction Control, which had a valid CFMEU EBA, got the job.
