CALGARY, Alberta--(BUSINESS WIRE)--Walton Westphalia Development Corporation (the “Corporation”) announced today its results for the second quarter of 2017. Launched in March 2012, the Corporation was formed to provide investors with the opportunity to participate in the acquisition and development of the 310-acre Westphalia Property (the “Property”) located in Prince George’s County, Maryland, United States of America.
Second Quarter Highlights
During the period ended June 30, 2017, the Corporation continued to take steps toward its construction and financing activities. The key activities undertaken by the Corporation were as follows:
- Continued with construction activities on the northern lots by removing over 150,000 cubic yards of material and completing the construction of the second storm water management pond on the Property;
- Continued scoping meetings and negotiations for the Westphalia Green (Phase 1 circular park amenity) to be constructed in 2017;
- Continued installation of the dry utility conduit and crossings within the alleys and internal streets in Phase 1 and the installation of the wet utilities in Phase 1 (estimated to be complete by Q3 2017); and
- Proceeded with the design of the Pennsylvania Avenue / Woodyard Road interchange (estimated to be complete by Q3 2017).
- Subsequent to June 30, 2017, the Corporation agreed to terms with Prince George’s County on a tax increment financing (“TIF”) bond issuance incentive term sheet;
- The Maryland Centre for Foreign Investment, LLC (“MCFI”) continues to market this project in many overseas markets with the goal of raising $58 million under the EB-5 Immigrant investor visa program (“EB-5 Program”). An amendment to the Loan agreement was signed to increase the interest rate to 7% from 5.25%;
- Closed on the sale of the sewer and water charges for 22 lots in Phase 1 totaling $122,186 USD (front foot benefits) in July 2017;
- Finalized a loan extension through November 15, 2017 with both the Senior Lender and the Mezzanine Lender that increased the Mezzanine Loan by $7 million and increased the interest rate from 15% to 17.5% per annum; and
- Subsequent to June 30, 2017, the Corporation signed a listing agreement with Jones Lange LaSalle to represent them in the search for a hotel development partner.
The single family market in the Washington, D.C. metropolitan statistical area (MSA), and specifically in the Prince George’s County submarket, continues to be strong. The Project is selling lots to three homebuilders, NVR, Inc., Mid-Atlantic Builders and Haverford Homes. As of June 30, 2017, NVR, Inc. had closed on 68 lots, Haverford Homes had closed on 46 lots, and Mid-Atlantic Builders had closed on 16 lots. As of June 30, 2017, NVR reported 78 home sales, Haverford reported 44 home sales and Mid-Atlantic reported 14 home sales. There have been 66 occupancies; 43 for NVR, 21 for Haverford, and two for Mid-Atlantic.
The Corporation has been meeting with the Prince George’s County staff weekly to discuss the TIF bond sale, terms, and process. The Corporation has revised its projection on the timing of passing the bond issuance ordinance to the middle of the fourth quarter of 2017.
Second Quarter Financial Results
During the three and six months ended June 30, 2017, the Corporation recognized revenue of $3,654,536 (June 30, 2016 - $1,787,476) and $5,905,491 (June 30, 2016 - $1,787,476), respectively, from the sale of 35 and 57 single family lot sales related to Phase 1 in the three and six months ended June 30, 2017, as compared to 18 lots for the same periods of 2016. The cost of sales relating to the lot sales was $3,346,232 (June 30, 2016 - $1,619,934) and $5,311,266 (June 30, 2016 - $1,619,934) respectively, resulting in a gross margin of $308,304 (June 30, 2016 - $167,542) and $594,225 (June 30, 2016 - $167,542).
Total expenses increased by $6,453 from $335,314 for the three months ended June 30, 2016 to $341,767 for the three months ended June 30, 2017. The increase in total expenses was largely due to increased office expenses of $17,621 relating to additional client communication on loan maturity extensions and refinancing in 2017 being partially offset by a reduction in director fees of $13,076 due to the entity having only one independent director during the second quarter of 2017.
Total other expenses increased by $3,128 from $601,917 for the six months ended June 30, 2016 to $605,045 for the six months ended June 30, 2017. Professional fees increased by $23,231 due to legal fees for corporate secretarial services that had previously been provided by WIGI for no additional charge and office expenses increased by $15,030 due to additional expenses relating to client communications on loan maturity extensions and refinancing. The increase was partially offset reduced marketing costs of $22,974 as higher client communication, media placement and signage expenses were incurred in 2016 as builders heavily marketed lots and lower director fees of $13,076 due to the entity having only one independent director during the second quarter of 2017.
The loss from total other items increased by $588,270 from a loss of $44,395 for the three months ended June 30, 2016 to a loss of $632,665 for the three months ended June 30, 2017 as the result of additional foreign exchange losses in 2017.
Total other items increased by $661,082 from a loss of $1,480,696 for the six months ended June 30, 2016 to an $819,641 loss for the six months ended June 30, 2017. The increase is primarily due to decrease in unrealized foreign exchange loss of $1,333,662 in 2016 to a foreign exchange loss of $819,641 of 2017 as a result of the translation of the Canadian dollar loan to the U.S. Subsidiary from the Corporation. The U.S. dollar weakened against the Canadian dollar for the period ending June 30, 2017 compared to the U.S. Dollar strengthening for the period ending June 30, 2016.
For the three months ended June 30, 2017 the Corporation recognized a cumulative translation loss of $436,821 as compared to a cumulative translation gain of $1,572 in the same period of 2016. For the six months ended June 30, 2017, the cumulative translation loss decreased by $529,440 to a loss of $572,432 in 2017 as compared to $1,101,872 in 2016. The cumulative translation losses resulted from translation of the U.S. entity’s accounts from a functional currency of U.S. dollars to Canadian dollars for reporting purposes. The U.S. dollar has weakened against the Canadian dollar in the six month period in 2017, primarily in the second quarter, compared to the U.S. dollar strengthened against the Canadian dollar in the six month period in 2016.
The Corporation is managed by WAM and the development of the project is managed by Walton Development & Management (USA), Inc., both of which are members of the Walton Group of Companies.
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.
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. Forward-looking information is based on the current expectations, estimates and projections of the Corporation at the time the statements are made. They involve a number of known and unknown risks and uncertainties which would cause actual results or events to differ materially from those presently anticipated. The risks, uncertainties and other factors that could cause the Corporation's actual results and performance in future periods to differ materially from the forward looking information contained in this news release include, among other things, the receipt of financing under the Loan including the amount and timing of the financing received, the amount of, timing and terms of any tax increment financing that may be received by the Corporation, the length of time it takes to develop and sell the Property, the ability of the Corporation to enter into joint ventures relating to, or to otherwise, vertically develop portions of the Property, the availability and terms of other construction financing required by the Corporation, the costs involved in the horizontal and/or vertical development of the Property, the prices at which the serviced lots and parcels from, or vertically developed structures on, the Property can be sold, the rate at which serviced lots and parcels from, or vertically developed structures on, the Property are purchased in the marketplace, general economic and market factors, including interest rates, a decline in the real estate market, changes in government policies and regulations or in tax laws, changes in municipal planning strategies and whether certain development approvals are obtained and changes in the Canadian/U.S. dollar exchange rate, in addition to those factors discussed or referenced 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 unaudited financial statements for the three months ended June 30, 2017 and related notes, prepared in accordance with International Financial Reporting Standards.