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Walton Westphalia Development Corporation Reports Fiscal Year End and Fourth Quarter 2019 Fiscal Results

2020/04/15

CALGARY, Alberta–(BUSINESS WIRE)–Walton Westphalia Development Corporation (the “Corporation”) announced today its results for the fiscal year ended December 31, 2019, and for the fourth 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.

Novel Coronavirus (“COVID-19”)

First quarter 2020 global events have significantly impacted the global economy and have the potential to downgrade the Corporation’s near-term expectations with respect to the demand for its assets. The spread of the COVID-19, in combination with the Organization of the Petroleum Exporting Countries (“OPEC”) inability to maintain global oil prices during early March 2020, has significantly undermined commodity prices, customer cash flows and investor confidence. Management is actively working with its customers and suppliers to limit the disruption to the Corporation’s business, however, at this time it is not possible to estimate the impact that COVID-19 and significantly lower oil prices could have on the Company’s business, as the impact will depend on future developments, which are highly uncertain and cannot be currently predicted.

2019 Highlights

During the year ended December 31, 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”). The sale of Phase 1A closed on January 29, 2020. The Corporation also continued discussions with a regional retail developer interested in the Phase 1 retail. The Corporation expects to have an LOI for a joint venture in Q2 2020, with the goal of having an agreement within the same quarter end. In Q2 2020, the Corporation signed a PSA for the bulk sale of Phases 2 and 3. The key activities undertaken by the Corporation were as follows:

Construction Activities

  • Completed the construction of the Westphalia Green central park;
  • Completed 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.

Financing Activities

  • On August 21, 2019, the Corporation received the first $3.5 million USD advance of the loan agreement (“Loan Agreement”) entered into with MCFI Global Fund Westphalia LLC (“MCFI”). The second and third advance of $1 million USD and $2 million USD were received on November 21, 2019, and March 31, 2020, respectively.

Sales Activities

  • Closed on the sale of Phase 1A on January 29th, 2020, for $14.15 million USD. These proceeds were used towards discharging the New Senior Loan in full in Q1 2020.

The single-family market in the Washington, D.C. metropolitan statistical area (“MSA”), and specifically in the Prince George’s County submarket, over the year continued 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 December 31, 2019, NVR, Inc. had closed on all 144 lots, Haverford Homes had closed on all 103 lots, and Mid-Atlantic Builders had closed on 81 lots. NVR reported 144 home sales (contracts with future homeowners), Haverford reported 95 home sales, and Mid-Atlantic reported 86 home sales. There have been 286 occupancies; 144 for NVR, 87 for Haverford, and 72 for Mid-Atlantic.

Management continues to focus on strategies to maximize the returns of the project, which include, but are not limited to:

  • 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 has executed a purchase and sale agreement for the bulk sale of Phases 2 and 3 which has a closing date of on or before June 2, 2020.

Fourth Quarter and Year End Financial Results

The Corporation recognized revenue of $801,228 on Phase 1 single family lot sales in the fourth quarter of 2019 and the Corporation recorded cost of sales of $801,228. During the year ended December 31, 2019, the Corporation recognized revenue on contracts of $7,485,088 from single-family lot sales in Phase 1. The cost of sales relating to the lot sales was $7,729,603, which includes selling and commission costs of $244,515. The revenue and cost of sales recognized for the year ended December 31, 2019 was in respect to the sale of 66 Phase 1 single-family lots to home builders, respectively.

For the year ended December 31, 2019, the Corporation generated a comprehensive loss of $1,613,792. When compared to the year ended December 31, 2018, loss of $14,239,963, there is a variance of $12,626,171 between the respective period ends. The variance is largely due to an impairment of $13,132,297 recognized during the year ended December 31, 2018. The breakdown of the comprehensive loss generated is detailed in the Management Discussion & Analysis.

Appointment of Chief Financial Officer

The Corporation is pleased to announce that Ms. Rebecca Bruce has been appointed Chief Financial Officer and Corporate Secretary of the Corporation effective April 9, 2020. Ms. Bruce is also the Senior Vice President Finance and Accounting of Walton Global Investments Ltd. (“WGI”), having served WGI in this capacity, and previously as Corporate Controller, since 2009. Before joining the Walton Group of Companies (“Walton”), Ms. Bruce was a Manager in the Assurance and Advisory Business Services practice of Ernst & Young, LLP, one of the world’s largest accounting firms.

The Corporation also announces Mr. Neil Narfason has resigned as Chief Financial Officer and Corporate Secretary of the Corporation, in connection with his return to Ernst & Young, LLP to lead its national restructuring practice. The board of directors thanks Mr. Narfason for all his contributions.

Additional Information

The Corporation is managed by WGI and the development of the project is managed by Walton Development & Management (USA), Inc., both of which are members of Walton.

Walton is a privately owned, leading global real estate investment, land asset management and administration group that has focused on strategically located land in major growth corridors for more than 40 years. Walton manages and administers US$3.8 billion of real estate assets in North America, on behalf of its investors and business partners. Walton has more than 106,000 acres of land under ownership, management and administration in the United States and Canada. Key entities in Walton include Walton Global Holdings, Walton International Group and Walton Development and Management. For more information visit Walton.com.