CALGARY, Alberta--(BUSINESS WIRE)--Walton Ontario Land L.P. 1 (the “Partnership”) and its general partner, Walton Ontario Land 1 Corporation (the “General Partner”) announced today the Partnership’s results for the three and nine months ended September 30, 2017. Launched in January 2010, the Partnership’s objective is to maximize returns to limited partners through the management of, concept planning on, and eventual sale of properties. The Partnership currently has an interest in a single parcel of land, comprised of 300 acres located in the southwest quadrant of the City of Ottawa (the “Ottawa Property”).
A Notice of Decision was issued by the Ontario Ministry of Municipal Affairs on August 10, 2017 stating a decision was made to approve the Official Plan Amendment 180 (“OPA 180”) that does not include an expansion of the municipal boundary of the City of Ottawa to include the Ottawa Property. Although Management of the Partnership continue to believe that the Ottawa Property has excellent attributes to accommodate a future employment and mixed use development opportunity and is well suited for an urban boundary expansion as previously expressed in multiple submissions to the City of Ottawa, an appeal to the OPA was not filed.
Pursuant to the appeal filed in 2015 by the Partnership with the Ontario Municipal Board (“OMB”), the City of Ottawa has offered to recognize the Partnership as a participating stakeholder in a planning study being initiated in 2017 which will identify trends in housing (including housing supply), employment, and identify opportunities to create complete communities. It is anticipated that the recommendations of this study will be presented to the appropriate standing committee in June 2018.
Management continues their efforts to market the Ottawa Property for an investment by or sale to local and regional homebuilding and development companies.
As a result of the ongoing appeal and related planning processes associated with the Official Plan, the time frame for the Partnership to hold its interest in the Ottawa Property as an investment has exceeded the original anticipated two to four year time horizon.
Companies’ Creditor Arrangement Act (“CCAA”) Status Update
On April 28, 2017, Walton Ontario Land 1 Corporation, (the ‘General Partner’), the General Partner of the Partnership, Walton International Group Inc. (“WIGI”), and certain affiliates, (the “CCAA Entities”), including the general partner of Walton Development and Management Development L.P (“WDM”) voluntarily filed and obtained creditor protection under the CCAA pursuant to an order (the “Initial Order”) granted by the Court of Queen’s Bench of Alberta (the “Court”).
The Initial Order authorized the CCAA Entities to begin a court-supervised restructuring and provides for a broad stay of proceedings against the CCAA Entities in order to provide the opportunity to formulate and present a plan of arrangement under the CCAA to WIGI’s creditors for approval. As the General Partner of the Partnership is a CCAA Entity, the Partnership has been included in the stay of proceedings. Under the terms of the Initial Order, Ernst & Young Inc. will serve as the Court-appointed monitor (the “Monitor”) of the CCAA Entities.
On May 9, 2017, the Partnership obtained a Court Order (the “Order”) for the implementation of a sale and investment solicitation process (the “SISP”) to be conducted within the CCAA proceedings under the supervision of the Monitor, which was to be used to solicit interest from one or more potential purchasers and/or investors in the Partnership’s business and/or Ottawa Property or to identify potential alternative financing. The SISP set forth the manner which potential purchasers/investors submitted bids, including the applicable deadlines for the submission bids. The SISP launched on June 6, 2017 and initial bids were received on July 25, 2017. The Partnership received one non-binding letter of intent (“LOI”) for the acquisition of the Ottawa Property. The LOI was compared to third party appraisals and recent comparable sales transaction in the same geographical area. The Partnership and the Monitor agreed that the LOI was materially lower than fair market value of those lands and therefore the party submitting the bid was not deemed to be a qualified bidder for the purposes of proceeding to Phase 2 of the SISP.
On August 15, 2017, the Court granted an Order (the “August 15 Order”) extending the period of the stay of proceedings as against the CCAA Entities, including the Partnership, from August 15, 2017 up to and including November 30, 2017 (the “Stay Period”). The August 15, 2017 Order further approved the termination of the SISP with respect to the Partnership. The termination of the SISP has allowed the Partnership, with the assistance of the Monitor, to explore other approaches to monetize the value of the Ottawa Property. The Partnership intends to seek a further extension of the CCAA to March 31, 2018 in order to allow the Partnership to complete a sale of the Ottawa Property or a restructuring of the Partnership
If the Partnership is unable to complete a sale of the Ottawa Property or restructuring of the Partnership, and the current stay of proceedings expires or is lifted, substantially all obligations of the Partnership, including amounts due to WIGI, will then be due and payable immediately, or subject to acceleration, creating an immediate liquidity issue and creditors would be permitted to exercise their pre-existing rights against the Partnership.
Third Quarter Financial Results
During the three and nine months ended September 30, 2017, and September 30, 2016, the Partnership did not recognize any revenue relating to land sales and incurred no cost of sales. The Partnership is not expected to generate significant revenues, except when the Ottawa Property is sold.
During the three months ended September 30, 2017, the Partnership realized a net loss of $230,970 compared to a net loss of $198,590 for the three months ended September 30, 2016. Total expenses have increased by $31,892, primarily the result an increase of $43,859 in professional fees relating to the Partnership engaging third party corporate secretary services that had previously been provided by WIGI for no additional charge and legal and other expenses associated with the CCAA filing. This has been offset by a decrease in director fees in the three months ended September 30, 2017 of $13,075 due to the Partnership having only one independent director during the third quarter of 2017, compared to having two independent directors in the third quarter of 2016.
During the nine months ended September 30, 2017, the Partnership realized a net loss of $675,782 compared to a net loss of $606,300 for the nine months ended September 30, 2016. Total expenses have increased by $68,209, primarily the result of an increase of $85,799 in professional fees relating to the Partnership engaging third party corporate secretary services that had previously been provided by WIGI for no additional charge and legal and other expenses associated with the CCAA filing, and an increase of $9,560 for bad debt expense relating to amounts due from WIGI for lease income. The bad debt expense has been recorded as WIGI filed and received protection under CCAA on April 28, 2017. These amounts have been stayed and the Partnership will need to file a claim as an unsecured creditor. If WIGI is successful in its restructuring, and as new information becomes available indicating that the Partnership will recover the amounts owing, the allowance will be reversed up to the amount of the impairment. There is no assurance that WIGI’s restructuring plan will be successful or sufficient for the Partnership to recover the full amount of the receivable, if at all. This has been offset by a decrease in director fees in the nine months ended September 30, 2017 of $26,151 due to the entity having only one independent director during the second and third quarter of 2017, compared to having two independent directors in the second and third quarter of 2016.
As at September 30, 2017, the refundable expense reserve is $319,815 and is being used to pay management fees and operating expenses. Management believes that the refundable expense reserve is sufficient to cover the entity’s expected operating costs and concept planning costs up to and including the extended stay period of November 30, 2017; however, the refundable expense reserve is not sufficient to cover the Partnership’s on-going operating expenditures for the next twelve months. The Partnership will require alternative financing or capital to continue as a going concern. The refundable expense reserve is being used to pay the management fees payable to WIGI incurred subsequent to April 28, 2017 and operating expenses, including the court appointed Monitor fees. As at April 28, 2017, outstanding payables of $1,273,253, including $1,252,858 due to WIGI have been stayed. If the Partnership is unable to complete a sale of the Ottawa Property or a restructuring of the Partnership, and the stay of proceedings against the Partnership expires or is lifted and WIGI was to demand repayment of the fees outstanding, the Partnership would be unable to pay the full amount owing to WIGI, as the cash balances at September 30, 2017 were $319,815 and are not sufficient to cover the management fees of $1,279,717 outstanding at September 30, 2017, and the Partnership would not have sufficient funds to continue operations. There is no assurance that these initiatives will be successful. These conditions lend significant doubt as to the ability of the Partnership to meet its obligations as they come due and, accordingly, the appropriateness of the use of the accounting principles applicable to a going concern.
Additional Information
The Partnership is managed by WIGI which is a member 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.
Walton has been in business for over 35 years and takes a long-term approach to land planning and development. Walton’s industry-leading expertise in real estate investment, land planning and development uniquely positions Walton to responsibly transition land into sustainable communities where people live, work and play.
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 Ontario Land L.P. 1, please visit www.sedar.com. For more information about Walton, visit www.Walton.com.
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 unaudited financial statements for the three and nine months ended September 30, 2017 and related notes, prepared in accordance with International Financial Reporting Standards.