Westphalia Dev. Corp. Reports Third Quarter 2020 Fiscal Results
Press Release, 2020/11/20
Calgary – Nov. 20, 2020: Westphalia Dev. Corp. (the “Corporation”) announced today its results for the third quarter of 2020. 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.
Novel Coronavirus (“COVID-19”)
Since early 2020, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries, including Canada and the United States, businesses have been forced to cease or limit operations for long or indefinite periods. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of nonessential services have triggered significant disruptions to businesses worldwide, resulting in an economic shutdown. The short and long-term impact to the real estate market is unknown at this time and therefore the impact to the Corporation’s land and development costs is unknown as of the date of these unaudited condensed interim consolidated financial statements.
The Corporation continues to actively seek purchasers and developers for the lands associated with Phases 2 and 3 as well as other more immediate opportunities associated with the Phase 1 retail land. The Corporation intends to try to renegotiate or refinance its senior debt with its related party, WWMN, LLC. The key activities undertaken by the Corporation were as follows:
• Continued construction on the Woodyard Road Interchange project.
• Began construction on the Presidential Parkway East project.
• Obtained the rough grading permit for the construction of Presidential Parkway West from the existing Phase 1 development to Machinist Place.
• Solicited bids for the construction of Presidential Parkway West. Sales Activities
• On August 28, 2020, the Corporation successfully finalized the sale of six lots to Mid-Atlantic Builders, completing the sale of all lots in Phase 1. The Corporation continues to work diligently on increasing the residential density allowed.
• The Corporation has received numerous letters of intent for differing uses on various parcels throughout the Property. The Corporation continues to evaluate these potential deals and intends to negotiate purchase and sale agreements in at least two instances.
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 robust. As of August 28, 2020, the Project had closed on the sale of 346 lots to three homebuilders: NVR, Inc. (144 lots), Mid-Atlantic Builders (99 lots) and Haverford Homes (103 lots). NVR has reported 144 home sales (contracts with future homeowners), Haverford reported 103 home sales, and Mid-Atlantic reported 99 home sales. There have been 329 occupancies; 144 for NVR, 103 for Haverford, and 82 for Mid-Atlantic.
Management continues to focus on strategies to maximize the returns of the Project, which include, but are not limited to the following:
• While neighborhood serving retail is our primary focus and will be part of any scenario going forward, the Corporation continues to receive offers for varying uses across the entirety of the master plan. We continue to evaluate offers for multiple land uses, including residential, retail, commercial and employment centers.
• The Corporation continues to work closely with the local community, County leadership, and internal staff to re-plan additional development within the Westphalia Town Center. The Corporation also continues to work with the various consultants to implement a shift in the Project’s scope after having received input from those detailed above by reducing the significant retail and office space that had been previously planned and increasing the amount of residential units throughout the Project.
Third Quarter Financial Results
During the three and nine months ended September 30, 2020 and September 30, 2019, the Corporation recognized revenue on contracts of $855,038 (September 30, 2019 - $1,371,722) and $18,868,800 (September 30, 2019 - $6,683,860), respectively. The cost of sales relating to the lot sales for the two periods was $950,584 (September 30, 2019 - $1,396,514) and $21,211,950 (September 30, 2019 - $6,782,078), respectively, including selling and commissions costs. Cost of sales for the three and nine months ended September 30, 2020 also included impairments on land development inventory of $352,860 and $2,469,865, respectively.
Revenue and cost of sales recognized for the three and nine months ended September 30, 2020, was in respect to the sale of 6 Phase 1 single family lots to homebuilders, and 18 Phase 1 single family lots and the Phase 1A bulk land sale to Galaxy, respectively. Revenue and cost of sales recognized for the three and nine months ended September 30, 2019, was in respect to the sale of Phase 1 single family lots to homebuilders.
For the nine months ended September 30, 2020, the Corporation generated a total comprehensive loss of $4,052,296 compared to a total comprehensive loss of $1,136,704 for the nine months ended September 30, 2019. The year-over-year variance includes an impairment of $2,469,865 that was recorded on Phase 1 of the Property as the expected realizable value was lower than the carrying value. Additional information on the variance is discussed in detail in Management’s Discussion & Analysis.