CALGARY, Alberta--(BUSINESS WIRE)--Walton Westphalia Development Corporation (the “Corporation”) announced today its results for the third quarter of 2019. 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” or the “Project”) located in Prince George’s County, Maryland, United States of America.
During the nine months ended September 30, 2019, the Corporation continued to work with the purchaser of Phase 1A to progress the activities necessary to close on the Purchase and Sale Agreement (“PSA”) in December 2019. The Corporation also began discussions with retail developers interested in the Phase 1 retail after the Kimco agreement was terminated by management. The Corporation continues marketing the opportunities available in Phases 2 and 3 and has received interest from several developers and an offer for the bulk purchase of the land associated with these two phases. The key activities undertaken by the Corporation were as follows:
- Continued the construction of the Westphalia Green central park;
- Completed the installation of privately maintained lighting located within the alley areas;
- Continued with the design of the Pennsylvania Avenue / Woodyard Road interchange;
- Received design approval from the State Highway Administration (“SHA”) for the Woodyard Road interchange project;
- Continued to work on the administrative matters necessary to obtain the SHA permit for the Woodyard Road Interchange; and
- Awarded the contract for the construction of the Woodyard Road Interchange and construction is expected to commence in Q1 2020.
- On August 21, 2019, the Corporation received $3.5 million USD in the first advance of the loan agreement (“Loan Agreement”) entered into with MCFI Global Fund Westphalia LLC (“MCFI”). On November 21, 2019, the second advance of $1 million USD was received by the Corporation.
- With regards to Phase 1A, the Corporation and the purchaser continued to work through conditions precedent; however, the outside closing date is December 13, 2019 as agreed to by the 11th Amendment to the PSA. An amendment to the PSA was executed as well as a right of entry agreement to allow the purchaser early access to the property to conduct clearing and grading activities. The Corporation also prepared a boundary line adjustment to refine the boundary associated the parcel associated with Phase 1A. The purchaser continues to work with their engineers and the County to prepare and get their plans approved for construction. Additional reciprocal easements and miscellaneous agreements continue to be worked through between the purchaser and the Corporation.
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 has received commitments to sell 346 lots to three homebuilders, NVR, Inc. (144 lots), Mid-Atlantic Builders (99 lots) and Haverford Homes (103 lots). As of September 30, 2019 NVR, Inc. had closed on all 144 lots, Haverford Homes had closed on 96 lots, and Mid-Atlantic Builders had closed on 81 lots. NVR reported 144 home sales (contracts with future homeowners), Haverford reported 92 home sales, and Mid-Atlantic reported 82 home sales. There have been 286 occupancies; 144 for NVR, 83 for Haverford, and 59 for Mid-Atlantic.
Management continues to focus on strategies to maximize the returns of the project, which include, but are not limited to:
- The Development Feasibility period for Kimco ended on July 1, 2019. Kimco has transitioned all LOIs, including the grocer, to the Corporation and continues to forward other expressions of interest it has received from various retail entities;
- The Corporation received terms from a regional retail developer for a joint venture for the Phase 1 retail. The Corporation continues to negotiate various deal structure options which also include a sale of the associated land. The Corporation continues to explore other options for the retail developer as well;
- The Corporation continues to receive additional interest in the parcels associated with Phases 2 and 3. The Corporation has evaluated various letters of intent for the purchase of Phases 2 and 3 and has also received an offer for the bulk purchase of the land associated with these two phases.
Third Quarter Financial Results
During the three and nine months ended September 30, 2019 and September 30, 2018, the Corporation recognized revenue on contracts of $1,371,722 (September 30, 2018 - $3,197,192) and $6,683,860 (September 30, 2018 - $9,266,847), respectively, from single-family lot sales in Phase 1. The cost of sales relating to the lot sales for the two periods was $1,396,514 (September 30, 2018 - $3,297,254) and $6,782,078 (September 30, 2018 - $9,394,497), respectively, which includes selling and commission costs of $24,792 (September 30, 2018 – $41,274) and $98,218 (September 30, 2018 - $127,650), respectively. The revenue and cost of sales recognized for the three and nine months ended September 30, 2019 and 2018 was in respect to the sale of 11 (September 30, 2018 – 33) and 59 (September 30, 2018 – 92) Phase 1 single-family lots to home builders, respectively.
The Corporation generated a comprehensive loss for the three and nine month periods ended September 30, 2019, of $470,369 (September 30, 2018 – loss of $435,634) and $1,136,704 (September 30, 2018 – loss of $6,504,615) respectively. The losses were largely driven by other expenses as detailed in the Management Discussion & Analysis.
The Corporation is managed by Walton Global Investment Ltd 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, renegotiation of loans, refinancing or extension of the existing loans, 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 condensed interim consolidated financial statements for the nine months ended September 30, 2019 and related notes, prepared in accordance with International Financial Reporting Standards.