Walton Big Lake Development L.P. Reports Fourth Quarter and Fiscal Year End 2018 Fiscal Results
CALGARY, Alberta–(BUSINESS WIRE)–Walton Big Lake Development L.P. (the “Partnership”), and its
general partner, Walton Big Lake Development Corporation (the “General
Partner”), announced today the Partnership’s financial results for
the fourth quarter of 2018 and fiscal year ended December 31, 2018.
Launched in 2010, the Partnership owns a residential project in
northwest Edmonton, Alberta. The project is being developed in three
phases over a fifteen-year time frame and marketed under the name “Hawks
Ridge at Big Lake”, (the “Project”).
Project Debt Update
The Partnership had received forbearance on the previously reported
defaults until February 1, 2019 for the Phase 2 Facility and March 15,
2019 for the Second Mortgage Loan. There have been no further extensions
to these forbearance periods. While the Partnership has not been
provided with any further notices of default, and is negotiating loan
maturity and forbearance extensions with its lenders, the expiry of the
forbearance periods means the loans are currently due and payable.
The expired forbearance extension terms of the Second Mortgage Loan and
Phase 2 Facility were conditional on the Partnership funding interest
costs and fees payable to the Second Mortgage Loan lender and Phase 2
Facility lender on a monthly basis due immediately. The Partnership has
been reliant on Walton Global Investments Ltd. (“WGIL”) funding
monthly interest payments, which WGIL has continued to do even after the
expiry of the forbearance period up to and including the most recent
interest payments on May 1, 2019 but there is no guarantee that this
financing will continue. The Partnership continues to work with its
lenders on strategies that result in repayment of debt including but not
limited to continuing development of the Project.
2018 Highlights
During the year ended December 31, 2018, the key activities undertaken
by the Partnership were as follows:
-
Completed the commissioning of the sanitary lift station to the City
of Edmonton (including issuance of Construction Completion
Certificate) thus removing the liability and ongoing obligation to
operate the lift station including monthly utility costs; -
Completed Phase 2B engineering drawing and zoning revisions to
accommodate current market and builder needs (increase in
semi-detached and duplex housing and rear lane access products, and
decrease front attached garage product) resulting in 18 additional
lots in Phase 2B; -
Received over $885,000 in Arterial Roadway Assessment (“ARA”)
recoveries for construction of 215th street, which was used
to repay project debt; -
Received reports from homebuilders indicating only 15 third-party
sales in 2018; and -
Amended the Phase 3 concept plan in accordance with the updated slope
failure report from June 2018.
Overall market conditions for new residential home construction have not
recovered from the recession period over the past several years with new
single permits in NW Edmonton still being below 50% of the 2014 peak.
Continued uncertainty in energy prices including the large discount
applied to Canadian oil producers versus global oil prices has adversely
impacted overall market conditions for suburban single-family
residential housing in Edmonton. Lingering pipeline and rail capacity
concerns continue to severely impact capital investment in Alberta’s
largest industry. The historical pace of sales and current sales
activity is well behind the original targeted sales pace for the
Project. Given management believes there will be continued muted demand
for new housing in Edmonton, management anticipates pricing discounts on
current and future lots may be necessary in order to capture market
share and increase existing sales velocity or, if the existing project
debt can be restructured and additional construction financing obtained,
obtain new builder commitments on future inventory.
Management will continue to provide regular updates on market conditions
and project performance based on the key economic indicators for
Edmonton.
Fourth Quarter and Year End Financial Results
During the year ended December 31, 2018, the Partnership generated
revenue of $564,377 (December 31, 2017 – $847,579) and recorded cost of
sales of $964,789 (December 31, 2017 – $772,741), thereby arriving at a
negative gross margin of $400,412. The revenue and cost of sales
recognized in 2018 and 2017 was in respect to the sale of two and three
Phase 2A single family lots, respectively, to a home builder. Pursuant
to the terms of the purchase and sales agreements for the lots, final
payment from the purchaser is typically due 365 days after receipt of
the second deposit, but varies based on negotiated terms including
market conditions, pricing and absorption factors.
The Partnership generated a net and comprehensive loss for the year
ended December 31, 2018 of $11,065,054 (December 31, 2017 – loss of
$3,680,295). This loss was driven largely by other expenses of
$2,534,085 and a non-cash impairment recognized on land development
inventory of $8,130,557 (December 31, 2017 – $2,000,000). Other expenses
primarily consists of interest expenses of $1,177,465 (December 31, 2017
– $848,127), management fees of $509,012 (December 31, 2017 – $545,159),
financing expenses of $354,072 (December 31, 2017 – $196,804), marketing
expenses of $281,481 (December 31, 2017 – 139,751) and professional fees
of $233,181 (December 31, 2017 – $181,420). The non-cash impairment
recorded on Phases 2A, 2B and 3 of the Project is largely driven by the
change in financing assumptions between what was expected at December
31, 2017 and at December 31, 2018. The non-cash impairment recognized
has been included in the Cost of Sales line item in the financial
statements and all cash received from the sale of land during the year
was used to directly pay off debt.
Late Filing of Fiscal Year-End Financial Statements
The Partnership advises that the filing of its financial statements for
the fiscal year-ended December 31, 2018, the related management’s
discussion and analysis and its officer certifications for the fiscal
year-ended December 31, 2018 (collectively, the “Annual Filings”)
was not completed by the deadline of April 30, 2019. As a result, the
Alberta Securities Commission issued a cease trade order (“CTO”)
against the Partnership on May 6, 2019. Now that the annual Filings have
been completed, the Partnership will seek to have the CTO revoked.
Additional Information
The Walton Group of Companies (“Walton”) is a multinational real
estate investment, planning, and development group concentrating on the
research, acquisition, administration, planning and development of
strategically located land in major North American growth corridors.
Its communities are comprehensively designed in collaboration with local
residents for the benefit of community stakeholders. Its goal is to
build communities that will stand the test of time: hometowns for
present and future generations.
For more information about Walton Big Lake Development L.P., please
visit www.sedar.com.
For more information about Walton, visit www.Walton.com.
For information about Hawks Ridge at Big Lake visit www.hawksridge.ca.
This news release, required by Canadian laws, does not constitute an
offer of securities, and is not for distribution or dissemination
outside Canada. This news release contains forward looking information,
and actual future results may differ from what is disclosed in this news
release. The risks, uncertainties and other factors that could influence
results are described in the prospectus and other documents filed with
Canadian securities regulatory authorities and available online at www.sedar.com.
Except as otherwise noted, all amounts are in Canadian dollars, and
are based on audited financial statements for the year ended December
31, 2018 and related notes, prepared in accordance with International
Financial Reporting Standards.
Contacts
For media inquiries, please contact:
Camila Roncancio
Office
1.866.925.8668
Email: info@walton.com