CALGARY, Alberta--(BUSINESS WIRE)--Walton Edgemont Development Corporation (the “Corporation”) announced today its results for the first quarter of 2016. The Corporation was launched in 2011 to provide investors with the opportunity to participate in the acquisition and development of the approximately 201.5 acres comprising the “Edgemont” properties located in southwest Edmonton, Alberta.
Marketed under the name “Woodhaven Edgemont,” the community will be developed in four phases and upon completion, is anticipated to comprise 656 single-family lots, 2.0 acres of multi-family development, parks and natural areas. Phase 1 consists of 181 lots and approximately 2.0 acres of multi-family development. The timing for the release of Phase 2 lots to the homebuilder group will be based on general economic and market conditions and specific activity in the sector. Based on current market conditions management anticipates the delivery of Phase 2 serviced lots to builders to begin in 2016. Management will continue to monitor and assess the economic conditions in the Edmonton market to determine any significant changes that may impact the ultimate timing for delivery of Phase 2.
First Quarter Highlights
During the first quarter of 2016, the Corporation undertook the following initiatives:
- scheduled remaining work on 199th street to commence in Spring 2016, weather permitting, including landscaping and surface repairs in anticipation of Construction Completion Certificate inspections with the City of Edmonton;
- continued work on the final phase of the Edgemont Sanitary Pump Station with an operational commissioning of the facility achieved on May 9, 2016;
- successfully carried out competitive tenders and negotiations for major onsite work (earthworks, underground utilities, surface works) in Phase 2 to obtain current market pricing resulting in a reduction in estimated construction costs of $6,478,000 or 13.9% for Phase 2 compared to the previous budget;
- prepared a revised budget for Phase 1 and 2, based on the most recent construction prices received, and formally presented the financing package to the current lending institution requesting the full Phase 2 construction loan facility;
- actively engaged home builders, including those who participated in Phase 1 of the project as well as new home builders interested in the project, to obtain commitments for lot inventory in Phase 2;
- received recoveries from EPCOR Water in the amount of $602,583 for the water mains installed in conjunction with Phase 1 and offsite works;
- invoiced participating developers in accordance with the Edgemont Ownership Cost Share Agreement based on the current Sanitary Permanent Area Contribution calculation up to January 2016 for a total of $1,728,084;
- received recoveries from the City of Edmonton for Phase 1, Storm Permanent Area Contributions in the amount of $70,257; and
- secured remaining entitlements for Phase 3A of development by obtaining the subdivision approval on February 18, 2016 in addition to the rezoning which previously received unanimous approval from City Council on March 16, 2015.
With the slowdown of Edmonton’s economy as a result of global oil prices, overall market conditions for suburban single-family residential housing were adversely affected in the latter half of 2015. Notwithstanding the short term forecast for 2016, the fundamental economic indicators such as Gross Domestic Product (“GDP”), net migration, housing starts and oil prices are predicted to recover to positive levels in 2017. Management continues to actively negotiate with homebuilders and is optimistic that commitments for lot inventory in Phase 2 can be obtained to allow construction of Phase 2 to commence in 2016 for serviced lot delivery to builders in 2017 to align with the projected economic recovery. Management will continue to monitor key economic indicators such as the unemployment rate, Alberta GDP growth, interest rates and the resale and new home markets in the Edmonton market to determine any significant changes that may impact the ultimate timing for delivery of Phase 2 lots.
There are 171 third-party sales of single family homes in the community as of May 1, 2016. While management remains optimistic that there will be continued demand for new housing in Edmonton, the current sales activity is behind the targeted sales pace for the project and, subject to the timing and extent of the projected economic recovery for Edmonton, the forecast project duration for collection of the final revenue and receipt of recoveries owing to the Corporation is anticipated to extend to 2021, being two years beyond the overall 8 year hold period as previously forecasted in the Corporation’s interim management’s discussion and analysis for Q3 2015. The two year increase is not anticipated to impact the previously reported projected internal rate of return. The Corporation will continue to provide regular updates on market conditions and project performance during the key economic indicators for Edmonton. The Board and management continue to actively investigate strategies including pursuing vertical development opportunities to enhance the return on investment for investors.
First Quarter Financial Results
During the three months ended March 31, 2016 and the three months ended March 31, 2015, the Corporation did not recognize any revenue from lot sales and incurred no cost of sales related to lots sold. Total other expenses decreased by $4,301 from $221,525 for the three months ended March 31, 2015 to $217,224 for the three months ended March 31, 2016. The decrease in other expenses is mainly due to a reduction in professional fees of $5,870 as no legal costs have been incurred, a decrease in marketing expenses of $4,000 which is due to a reduced marketing program due to the deferral of Phase 2 and an increase in interest income of $6,215 relating to interest accrued on the restricted cash balance. These were offset by an increase in directors’ fees of $12,804 due to increased compensation paid to each independent board member. As well, a previous board member who was not independent has been replaced with an independent board member who will receive compensation to act in that capacity.
Walton Asset Management LP (“WAM”), which manages the Corporation, continues to undertake that management notwithstanding that its management fees are being accrued and will not be paid until the Corporation has sufficient capital for the payments of such amounts. In the first quarter of 2016, a total of $144,471 in management fees were accrued. The total amount outstanding and payable to WAM as at March 31, 2016 is $2,592,366.
As the principal amount of the debentures and interest debentures mature on December 31, 2016, management and the Board of Directors of the Corporation is currently reviewing available options including (i) extending the maturity date on both the debentures and interest debentures (which extension up until December 31, 2018 is permitted under the terms thereof), and/or (ii) converting all or any portion of the principal amount of, or interest under, the debentures and interest debentures into Class B shares of the Corporation.
Additional Information
The Corporation is managed by Walton Asset Management L.P. and the development of the project is managed by Walton Development and Management LP, 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.
Walton has been in business for over 30 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 Edgemont Development Corporation, 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 months ended March 31, 2016 and related notes, prepared in accordance with International Financial Reporting Standards.