David Adjaye has been forced to turn to insolvency experts to rescue his firm from the brink of financial collapse, despite pumping in half a million pounds of his own money to keep it afloat.
Following a period in which it owed more than a million pounds to creditors, it emerged this week that Adjaye Associates has entered into a Company Voluntary Arrangement (CVA), a deal to stave off insolvency under which it will repay 43 pence in the pound to creditors including Her Majesty’s Revenue & Customs.
Adjaye, who formed Adjaye Associates in 2000 and was shortlisted for the Stirling Prize in 2006 for his Whitechapel Idea Store library, has rapidly developed a reputation as an international architect, opening offices in Berlin and New York and earlier this year winning a leading role to design the National Museum of African American History & Culture in Washington DC.
Despite its profile, there are now fears that that the firm’s financial problems will see it struggle to enter public competitions in future due to rules laid down in the Official Journal of the European Union.
RIBA head of practice Richard Brindley said it would be difficult for any practice with insolvency problems to win new work.
“Ojeu rules for all public contracts say that bidders can’t be in any form of insolvency. And many private sector clients like to follow similar processes.”
Lane Bednash, partner at insolvency practitioner Valentine & Co which is supervising the CVA, said the arrangement had proved necessary when Adjaye Associates opted to keep staff employed after projects in Birmingham, Abu Dhabi, Kuala Lumpur and India were stopped or delayed.
“[Adjaye] took a calculated risk on the basis those projects would continue, but unfortunately there were problems that the clients hadn’t foreseen,” he said.
Accounts from March 2008 — the most up-to-date available — show that the company made a loss of £59,000 and owed more than £1 million to creditors.
Bednash added that his firm’s aim was to help Adjaye Associates to recover, but warned: “If they don’t comply with the terms of the arrangement we are empowered to begin winding-up proceedings on behalf of the creditors.”
Speaking this week, Adjaye admitted the practice had made some staff redundant last year but insisted it was over the worst of its financial problems and would not be forced to close any part of the business, including the American arm Adjaye Associates Inc.
“The CVA is a reality but it’s nothing to be ashamed of,” he said. “It was difficult last year due to the financial crisis but we’re through it now.
“We have enough work on our books and we’re repaying our CVA very well so we’re in a good place.”
Adjaye Associates entered into the CVA at the end of February, with Adjaye himself the CVA’s main creditor, having put in an unsecured loan of £400,000 and a secured amount of £100,000.
HMRC was the second largest creditor under the deal, owed £150,000 by the practice.
NatWest bank is owed £500,000, a figure not covered by the CVA.
Nigel Coates, professor of architecture at the RCA said he was saddened by the news.
“It’s a real struggle for architects now. Generally speaking, the profession is so difficult that some including myself are turning away from it. David has incredible commissions so I sincerely hope he can carry them through.”
all i can offer is that, for as many people who will be glad to see him get some 'comeuppance', it's really sad to witness firms who were doing good work get to this stage. i'm parsing from the story that his woes were primarily due to a stubbornness to lay staff off in the face of evaporating commissions. could also be money he owes consultants on the same projects.
this saddens me, but I really do hope he comes out of this. £500,000 of your own money is a hell of alot to invest in a practice. But there is something noble to be said that didn't want to close the practice or reduce the staff.
the problem is that he may not be eligible to enter any number of competitions because of the financial circumstances he is in.
egeraat went bankrupt and jumped right back but i think he was sort of lucky. OMA too.
assume adjaye has good lawyers advising him, but now is not best time to be in dire straits cuz the rules are probably going to be tighter now, not less so...i guess he is test case for the new economy.
his work is good, he might be in trouble now but as soon as is physically possible he will be back where he was 2 years ago and just continue moving ahead,,, he seems dedicated too, i mean, half a million pounds are testimony for that
couldn't he just go out and create another company that would be eligible for EU competitions, partner up with a money person who doesn't design and may not even be an architect? i'm sure there are many ways to work around thi.
I'M SURE PRINCE CHARLES IS DRINKING IN CELEBRATION OF THIS NEWS. I WOULD GO AS FAR AS SUGGESTING HE MIGHT BE THE ONE PUSHING THE BUTTONS IN THE BACKGROUND. IT IS CRUEL WAY OF WANTING TO STAY IN THE PAST.
jump, this reveals my total lack of understanding of the world of global competitions, but why would one's financial standing make one ineligible? Does one have to post a bond or something when one enters an invited competition?
The decision to keep his staff on was charming, and will perhaps go down in legend, but now those same employees have traded at least several more years of steady work for a few months in a troubled time. He should have let them all go, maybe brought them to Sussex or some beach side resort town and put them up in an old hotel with a seafood restaurant. They could have participated in a recession long unpaid charrette, maybe sailing lessons, a few novels could have been written under such circumstances.
But to continue the illusion of safety seems less fair than doling out the bitter medicine when it comes. Architects, even young idealistic types, should appreciate the FLEETING and often EPHEMERAL satisfactions of an UNDERLOVED and mostly UNNECESSARY profession.
from the article, it sounded more like a british regulation. maybe e.u., but they didn't say.
i'm not sure it would prevent him getting work outside the islands - maybe. but probably not.
also, the article doesn't say he's 'done' - it says he's under receivership supervision. so long as he's on the path to building back up, they won't call the debt due immediately. it probably does mean that he'd have to lay staff off if revenues don't come in as expected, given that they've probably cut everything else they can.
for comparison, we don't have a formal 'you can't do work for public agencies while in bankruptcy' law here, but every public project asks for financial references and your revenues from the past years. some ask for balance sheets. it's very upfront that financial solvency and strength is a big criteria in the decision making.
LB, i think more than regular competitions it means he will now have problems doing equivalent of RFP's or RFQ's. We have been involved in a few competitions this year that required evidence of qualifications in addition to proposal for design. and this included proving we had enough staff and funds to undertake the projects. i sort of assume the article was talking about the same sort of thing.
well anyway, i am hoping he pulls out, and mostly expect that he will, but will be interesting case-study. also very tellingly shows how fragile a position an architecture office is in because of the way our offices are structured in general.
I wish I had half a million to invest in my own firm...
maybe he can go and do a couple more episodes of Dreamspaces for the BBC, that was one of my favourite arch.programs and miss it still.
This is once again evidence that the profession of architecture is not a real profession. It's more a foundation run by volunteers and when the donations temporarily stop, everything goes south.
I'm with randomized... that show was only one season in 2003 and to this day I haven't seen anything that matches it's brilliance. I'd love to see that back on air
and how big was the bathroom at Mies flat to place your bed in it??
Expect that many US architectural firms are also financing their office overhead with personal guarantee loans from their local banker, and that those loans will be called in shortly.
Notice that Feds are now concerned about looming commercial real estate loan defaults, the financial blogs are filled with graphs illustrating CRE loans as the next devasting bubble blow-out with no solution in sight.
I know of a firm where principals were asked to kick in $50,000 per person to invest in the firm, so its not just Adjaye that's kicking in his own money.
Jul 31, 09 12:06 pm ·
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adjaye associates nearly insolvent?
from building design online this afternoon:
David Adjaye has been forced to turn to insolvency experts to rescue his firm from the brink of financial collapse, despite pumping in half a million pounds of his own money to keep it afloat.
Following a period in which it owed more than a million pounds to creditors, it emerged this week that Adjaye Associates has entered into a Company Voluntary Arrangement (CVA), a deal to stave off insolvency under which it will repay 43 pence in the pound to creditors including Her Majesty’s Revenue & Customs.
Adjaye, who formed Adjaye Associates in 2000 and was shortlisted for the Stirling Prize in 2006 for his Whitechapel Idea Store library, has rapidly developed a reputation as an international architect, opening offices in Berlin and New York and earlier this year winning a leading role to design the National Museum of African American History & Culture in Washington DC.
Despite its profile, there are now fears that that the firm’s financial problems will see it struggle to enter public competitions in future due to rules laid down in the Official Journal of the European Union.
RIBA head of practice Richard Brindley said it would be difficult for any practice with insolvency problems to win new work.
“Ojeu rules for all public contracts say that bidders can’t be in any form of insolvency. And many private sector clients like to follow similar processes.”
Lane Bednash, partner at insolvency practitioner Valentine & Co which is supervising the CVA, said the arrangement had proved necessary when Adjaye Associates opted to keep staff employed after projects in Birmingham, Abu Dhabi, Kuala Lumpur and India were stopped or delayed.
“[Adjaye] took a calculated risk on the basis those projects would continue, but unfortunately there were problems that the clients hadn’t foreseen,” he said.
Accounts from March 2008 — the most up-to-date available — show that the company made a loss of £59,000 and owed more than £1 million to creditors.
Bednash added that his firm’s aim was to help Adjaye Associates to recover, but warned: “If they don’t comply with the terms of the arrangement we are empowered to begin winding-up proceedings on behalf of the creditors.”
Speaking this week, Adjaye admitted the practice had made some staff redundant last year but insisted it was over the worst of its financial problems and would not be forced to close any part of the business, including the American arm Adjaye Associates Inc.
“The CVA is a reality but it’s nothing to be ashamed of,” he said. “It was difficult last year due to the financial crisis but we’re through it now.
“We have enough work on our books and we’re repaying our CVA very well so we’re in a good place.”
Adjaye Associates entered into the CVA at the end of February, with Adjaye himself the CVA’s main creditor, having put in an unsecured loan of £400,000 and a secured amount of £100,000.
HMRC was the second largest creditor under the deal, owed £150,000 by the practice.
NatWest bank is owed £500,000, a figure not covered by the CVA.
Nigel Coates, professor of architecture at the RCA said he was saddened by the news.
“It’s a real struggle for architects now. Generally speaking, the profession is so difficult that some including myself are turning away from it. David has incredible commissions so I sincerely hope he can carry them through.”
Read more: http://www.bdonline.co.uk/story.asp?storycode=3145530&origin=BDweeklydigest#ixzz0MBCIMLTs
all i can offer is that, for as many people who will be glad to see him get some 'comeuppance', it's really sad to witness firms who were doing good work get to this stage. i'm parsing from the story that his woes were primarily due to a stubbornness to lay staff off in the face of evaporating commissions. could also be money he owes consultants on the same projects.
note nigel coates' quote at the end...
He'll bounce back.
i hope so.
this saddens me, but I really do hope he comes out of this. £500,000 of your own money is a hell of alot to invest in a practice. But there is something noble to be said that didn't want to close the practice or reduce the staff.
1 million pounds? peanuts.
the US gov't should bail him out.
right on...where's obama when you need him?
didn't Gehry and Nouvel go bankcrupt, even multiple times...
Lou Kahn died massively in debt.
this guy is going to be goood.
sad news in deed...but again, his reputation as a talented designer will not be tainted by going (or almost going) bankrupt in a market like this...
the problem is that he may not be eligible to enter any number of competitions because of the financial circumstances he is in.
egeraat went bankrupt and jumped right back but i think he was sort of lucky. OMA too.
assume adjaye has good lawyers advising him, but now is not best time to be in dire straits cuz the rules are probably going to be tighter now, not less so...i guess he is test case for the new economy.
his work is good, he might be in trouble now but as soon as is physically possible he will be back where he was 2 years ago and just continue moving ahead,,, he seems dedicated too, i mean, half a million pounds are testimony for that
couldn't he just go out and create another company that would be eligible for EU competitions, partner up with a money person who doesn't design and may not even be an architect? i'm sure there are many ways to work around thi.
I'M SURE PRINCE CHARLES IS DRINKING IN CELEBRATION OF THIS NEWS. I WOULD GO AS FAR AS SUGGESTING HE MIGHT BE THE ONE PUSHING THE BUTTONS IN THE BACKGROUND. IT IS CRUEL WAY OF WANTING TO STAY IN THE PAST.
jump, this reveals my total lack of understanding of the world of global competitions, but why would one's financial standing make one ineligible? Does one have to post a bond or something when one enters an invited competition?
The decision to keep his staff on was charming, and will perhaps go down in legend, but now those same employees have traded at least several more years of steady work for a few months in a troubled time. He should have let them all go, maybe brought them to Sussex or some beach side resort town and put them up in an old hotel with a seafood restaurant. They could have participated in a recession long unpaid charrette, maybe sailing lessons, a few novels could have been written under such circumstances.
But to continue the illusion of safety seems less fair than doling out the bitter medicine when it comes. Architects, even young idealistic types, should appreciate the FLEETING and often EPHEMERAL satisfactions of an UNDERLOVED and mostly UNNECESSARY profession.
lb -
from the article, it sounded more like a british regulation. maybe e.u., but they didn't say.
i'm not sure it would prevent him getting work outside the islands - maybe. but probably not.
also, the article doesn't say he's 'done' - it says he's under receivership supervision. so long as he's on the path to building back up, they won't call the debt due immediately. it probably does mean that he'd have to lay staff off if revenues don't come in as expected, given that they've probably cut everything else they can.
for comparison, we don't have a formal 'you can't do work for public agencies while in bankruptcy' law here, but every public project asks for financial references and your revenues from the past years. some ask for balance sheets. it's very upfront that financial solvency and strength is a big criteria in the decision making.
this reminds me a bit of MC Hammer who staffed 200 people to do nothing and then went or almost went bankrupt later, and no one helped him then...
LB, i think more than regular competitions it means he will now have problems doing equivalent of RFP's or RFQ's. We have been involved in a few competitions this year that required evidence of qualifications in addition to proposal for design. and this included proving we had enough staff and funds to undertake the projects. i sort of assume the article was talking about the same sort of thing.
well anyway, i am hoping he pulls out, and mostly expect that he will, but will be interesting case-study. also very tellingly shows how fragile a position an architecture office is in because of the way our offices are structured in general.
I wish I had half a million to invest in my own firm...
maybe he can go and do a couple more episodes of Dreamspaces for the BBC, that was one of my favourite arch.programs and miss it still.
randomized, £500,000 is something like US$820,000.
but yeah, it's no chump change.
With 40 people on the payroll, £500,000 might last a few months.
Overhead is a killer. Remember that Mies used his Berlin flat as his office in the 1930s and put his bed in the bathroom. THAT'S TRUE!
This is once again evidence that the profession of architecture is not a real profession. It's more a foundation run by volunteers and when the donations temporarily stop, everything goes south.
I'm with randomized... that show was only one season in 2003 and to this day I haven't seen anything that matches it's brilliance. I'd love to see that back on air
and how big was the bathroom at Mies flat to place your bed in it??
if it was a fold -a-way ned, probably not a problem.
harold,
to volunteers, i would add spoiled trust-funded owners that don't know how to run a business.
Expect that many US architectural firms are also financing their office overhead with personal guarantee loans from their local banker, and that those loans will be called in shortly.
Notice that Feds are now concerned about looming commercial real estate loan defaults, the financial blogs are filled with graphs illustrating CRE loans as the next devasting bubble blow-out with no solution in sight.
I know of a firm where principals were asked to kick in $50,000 per person to invest in the firm, so its not just Adjaye that's kicking in his own money.
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