Late in the cycle, richly valued real estate becomes much less liquid than most expect.
Walton Group is one of Canada’s largest real estate investment companies, owning 100K+ acres of property in Alberta, Ontario and the US through a complex web of some 600 corporations, limited partnerships and other entities. This week it filed for creditor protection. See: Fate of Walton Group’s real estate, provides test of ailing Alberta market:
International real estate investment and development firm, Walton Group filed for creditor protection earlier this week under the Companies’ Creditors Arrangement Act, owing hundreds of millions of dollars to thousands of retail investors, as well as to major Canadian banks and construction lenders. The court-supervised restructuring applies only to the company’s Canadian subsidiaries, which represent about 15 per cent of Walton’s entire assets.
In Edmonton, where Walton is among the city’s largest owners of land that is close to being ready for development, the company’s court filing came as a surprise.
“Nobody expected to hear that Walton would be going into CCAA,” said Andy Horvath, a partner in the Edmonton office of Cushman & Wakefield. “It’s a big deal because the name is well-recognized.”
According to securities filings in January, 2016, the company had raised more than $3-billion in recent years for active land sites by selling ownership stakes in properties to thousands of retail investors in Canada and internationally. Then over the last year, new investor flows dried up, as U.S. developers lost interest in Walton’s US properties and home-building in Alberta nose-dived with oil prices since late 2014.
Classic: a liquidity crunch becomes a solvency problem.
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