2016
ANNUAL
REPORT
GENESIS LAND DEVELOPMENT CORP.
MESSAGE FROM THE CHAIR
2016 was a transformational year for Genesis as the board adopted a new shareholder focused strategy designed to generating
strong cash flow from our extensive land inventory, estimated to be over 10,000 single family and townhouse units and over 300
acres of mixed use commercial lands located in the Calgary, Alberta area.
The financial strength of Genesis improved significantly in 2016, as we reduced debt by over $20.5 million, paid the largest
dividend in our history, increased cash on hand and used $1.42 million to repurchase common shares.
The Alberta economy continued in 2016 to be impacted by the sharp drop and subsequent partial recovery in oil and natural gas
prices over the last several years. However, prices for lower and mid-market homes have been relatively stable and have been
less impacted by the Alberta economy than higher valued homes. As the Calgary area has a relatively low level of serviced lot
inventory available to builders, we were able to obtain increases in lot prices in 2016 and expect this trend to continue as the
level of new serviced lots remains low.
Our future continues to be bright and we are well-positioned for longer-term growth and success with a significant portfolio of
entitled and unentitled land in the Calgary, Alberta area and the ability to generate strong cash flow available for distribution to
shareholders.
On behalf of the Board, I would like to extend my gratitude to our valued employees and business partners for their contribution
to our success. And of course, thank you to our shareholders for your support and your trust.
Stephen J. Griggs
Chair of the Board
MANAGEMENT’S
DISCUSSION &
ANALYSIS 2016
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2016
The Management’s Discussion and Analysis ("MD&A") of the financial condition and results of operations of Genesis Land Development Corp.
(“Genesis”, “the Corporation”, “we”, “us”, or “our”) should be read in conjunction with consolidated financial statements and the notes
thereto for year ended December 31, 2016 and 2015, prepared in accordance with International Financial Reporting Standards (“IFRS”).
The consolidated financial statements and comparative information have been reviewed by the Corporation’s audit committee, consisting of
three independent directors, and approved by the board of directors of the Corporation. Additional information, including the Corporation’s
annual information form (“AIF”) and the Corporation’s MD&A for the year ended December 31, 2016 are available on SEDAR at
www.sedar.com.
All amounts are in thousands of Canadian dollars, except per share amounts or unless otherwise noted. This MD&A is dated as
of March 21, 2017.
STRATEGY AND 2017 BUSINESS FOCUS
Strategy
Genesis Land Development Corp. (“Genesis” or the “Corporation”) is a land developer and residential home builder operating in
the Calgary Metropolitan Area (“CMA”), holding a significant portfolio of well-located, entitled and unentitled residential, commercial
and mixed-use lands as well as serviced lots in the CMA.
As a land developer, Genesis plans, rezones, subdivides, services and sells residential communities and commercial and industrial
lands to third parties, and sells lots and completed homes through its home building business. The land portfolio is planned,
developed, serviced and sold with the objective of maximizing the risk adjusted net present value of the land and to maximize the
cash flow available for distribution to shareholders. Genesis has no immediate plan or need to acquire additional land at this time
and all excess cash on hand is expected to be used to issue dividends to shareholders, buy back common shares, or a combination
of both.
At December 31, 2016, Genesis land inventory is estimated to include over 10,000 single family and townhouse units and over
300 acres of mixed use commercial lands.
The home building business, operated through a wholly-owned subsidiary, Genesis Builders Group Inc. (“GBG”), designs,
constructs and sells single-family homes and townhouses primarily on lands developed by Genesis. The objective of the home
building business is to deliver a significant return and cash flow from the capital invested in it and to sell incremental Genesis single
family lots and townhouse land parcels. The home building division is expected to build and sell approximately 170 homes per
year on these lands with third party builders expected to purchase 50-100 lots per year.
Refer to the New Strategy section of this MD&A for additional information.
Genesis is focused on minimizing overhead costs, which significantly reduce the return on long terms assets. Long term
commitments are avoided where possible to preserve flexibility.
2017 Business Plan
The business plan for 2017 includes:
Maximizing the return of capital to shareholders through dividends and/or buying back shares
Obtaining additional land servicing and zoning entitlements which are expected to materially increase the value and
marketability of these lands
Developing detailed plans for the development and ultimate disposition of all core lands to maximize the net present
value of each project
Adding one or more third party builders acquiring lots in Genesis communities, in addition to the seven third-party builders
working with Genesis at the end of 2016
Increasing the number of units sold by GBG, including constructing several townhouse complexes, at reasonable
construction margins while optimizing the amount of required capital
Servicing a phase of the “Saddlestone” community in Calgary (expected to yield 102 residential lots) and an additional
phase in Airdrie (expected to yield 73 residential lots)
Selling the remaining non-core land
2
OVERVIEW OF MARKET AND 2016 OPERATING RESULTS
Alberta Real Estate Market Likely Hits Bottom
The Alberta economy continues to be impacted by the sharp drop and subsequent partial recovery in oil and natural gas prices
over the last several years and is generally expected to continue to be weak and possibly flat in the year ahead. The Alberta
economy is very dependent on the oil and gas industry and the price of oil and gas paid in Alberta. The economic impact of the
decline in oil and gas prices has included weaker consumer confidence, leading to lower levels of new home purchases and
significantly lower revenues for governments, constricting their ability to fund the infrastructure required to develop new
communities. At the same time, interest rates remain at record lows resulting in low mortgage rates which improve the affordability
of a new home for many buyers.
The sale of new homes has declined in Calgary since 2014, and prices for lower and mid-market homes are slightly lower, although
relatively stable and less impacted by the Alberta economy than higher valued homes. However, the CMA has a relatively low level
of serviced lot inventory available to builders, and Genesis was able to obtain increases in lot prices in 2016 and expects this trend
to continue as the level of new serviced lots remains low. In addition, Genesis has made design, finishing and supplier contractual
changes to reduce the construction cost of its homes while maintaining quality.
There has been a shift over the last several years in the buying of new CMA homes, and the vast majority of homes are now sold
at or close to completion on a quick possession basis, rather than being contracted for before construction commence. Given the
capital strength of the Corporation, Genesis is well positioned to sell homes on a quick possession basis and has developed a
sales program tailored to current market conditions.
2016 – A Transformation Year
New Strategy
2016 was a year of transformation for Genesis. Prior to 2016, the business focused on building homes primarily on Genesis land,
with most free cash flow being reinvested in the business to fund land servicing and new projects, and to acquire additional land.
In early 2016, the board of directors approved a new strategy focusing Genesis on:
Generating strong cash flow from the current inventory of land in the CMA (with development extending over 15 years)
– Genesis has land inventory with an estimate of over 10,000 single family and townhouse units (developed or estimated
to be developed) and over 300 acres of mixed use commercial lands (developed or estimated)
Returning excess cash flow to shareholders through special dividends and/or share buy backs
Selling land with the objective of maximizing the current net present value of the land, which may include developing a
parcel for later sale, holding land off the market or selling it before full development has occurred
After careful examination, the home building business was restructured to reflect current market opportunities and to
improve efficiency, reduce the capital invested in work in progress to reduce the risk of the business, and expand the
product mix to include additional small townhouse projects - all with the goal of generating a strong return on invested
capital
Minimizing capital expenditures by servicing land only when it has been sold or is highly likely to be sold within 12-24
months
Reorganizing the leadership team to improve and speed up decision-making and create higher levels of accountability
throughout the organization
Minimizing overhead and other costs
Selling non-core land as reasonable prices can be realized.
3
Significant 2016 Cash Flows from Operating Activities and a Large Dividend for Shareholders
Genesis generated significant positive cash flow in 2016 in comparison to prior years. This was the result of a new empowered
executive team, reductions in operating costs and capital commitments, creative land and home selling efforts and a focus on
strengthening cash flow and the balance sheet.
In 2016, Genesis had cash inflows from operating activities of $42,952 ($0.98 per share), up $61,277 compared to 2015 cash
outflows from operating activities of $18,325 (($0.41) per share), which is a change of $1.39 per share.
Home building work in progress was reduced by $11,368 to $19,400 at December 31, 2016 from $30,768 at
December 31, 2015, including by reducing the investment in home building inventory as a part of the drive for efficiency
and effectiveness of the Corporation. Home building work in progress is monitored carefully and varies based on
anticipated demand, the seasonal building cycle and the type of construction being undertaken (townhouse or single-
family projects)
Large cash outflows for land servicing in 2015 resulted in the 534 lots in inventory at December 31, 2015 and also
included a significant portion of the costs for the 82 lots added during 2016.
Higher cash inflows from residential lot and development land sales due to a larger number of residential lot sales
in 2016 as well as the sale of three development land parcel sales during 2016 compared to two development land
parcel sales in 2015.
Genesis acquired 349 acres in southeast Calgary in early 2015 and YE 2015 cash outflows included $10,000 paid
in January 2015 for this land. The balance of the purchase price of this land was financed by a vendor take back
mortgage (the “VTB”). An $8,000 payment on the VTB loan was made in each of January 2016 and 2017.
2016 cash inflows from operating activities of $42,952 were mainly used to:
Reduce debt by over $20,500 - In 2016, Genesis reduced its loans and credit facilities by $20,524 from $63,819 at
December 31, 2015 to $43,295 at December 31, 2016. The loans and credit facilities at December 31, 2016 included
$8,531 of debt related to a limited partnership and $28,506 related to the VTB on the Calgary southeast lands (2015 -
$8,125 and $34,321 respectively). The remainder of Genesis loans and credit facilities of $6,258 comprised a lot
purchase line for GBG and a land servicing loan at December 31, 2016 (2015 - $19,946).
$10,936 to pay the largest dividend in the Corporation’s history as a public company to shareholders ($0.25 per share)
Increase cash on hand by $2,919 to $14,318 as at December 31, 2016 in comparison to $11,399 at December 31,
2015. In January 2017, $8,000 was used to make the second installment payment of the VTB
$1,420 to repurchase common shares through the normal course issuer bid
Changes in leadership structure
Bruce Rudichuk, President and Chief Executive Officer and Mark Scott, Executive Vice President and Chief Financial Officer’s
employment with the Corporation ended on February 17, 2016.
Stephen Griggs, Chair of the Board, replaced Mr. Rudichuk as interim CEO. Rauf Muhammad, CPA (Colorado) served as interim
CFO, until the appointment of Kirsten Richter, CPA, CA, as the interim Chief Financial Officer effective April 18, 2016.
Genesis made a number of staffing and organizational changes in early 2016 with the objective of creating clear lines of
responsibility for the three main business functions of Genesis (land development, land sales and project financing, and home
building) and consolidating in the CFO role, responsibility for all support functions (such as technology, human resources and office
management). This new structure has allowed the CEO to focus on developing and implementing the new strategy, monitoring
and analyzing results, delegating day to day operational responsibility and ensuring that Genesis has strong cash flow available
for distribution to shareholders. In addition, the new structure is expected to reduce overall leadership costs while incentivizing key
executives to deliver the results expected by the Board on behalf of shareholders.
4
In May 2016, three new Vice-President roles were created, each reporting to the CEO, and the following internal appointments
were made to these new roles:
Arnie Stefaniuk was appointed Vice-President, Land Development, with responsibility for the planning and development
of Genesis’ extensive land portfolio and managing Genesis’ staff and external consultants
Brian Whitwell was appointed Vice-President, Land and Financing, focusing on the sale of developed and non-core
lands, the addition of new builder groups and the financing of land servicing and home building construction
Parveshindera Sidhu was appointed Vice-President, Homebuilding and President, Genesis Builders Group Inc., with
operating responsibility for Genesis’ home building business and its staff
In 2016, the CFO, Kirsten Richter, was also given the responsibility for technology, human resources and office management.
In 2016, the executive compensation plan was simplified to eliminate the share option plan, create accountability for delivering
measurable results for shareholders and create additional accountability for achieving or exceeding specific operational targets.
Significant cost reductions in 2016
In early 2016, Genesis reviewed its operating and capital budgets to reduce operating costs and servicing investments and to
respond to the expected level of land and lot sales over the next several years. This resulted in 2016 operating costs being reduced
by 14% in comparison to 2015 (including 13.9% in Q4 2016 vs Q4 2015), the postponement of previously planned land servicing
costs on a large development land parcel until a buyer is found, and the reduction of home building work in progress by $11,400.
In addition, Genesis reduced its staffing and consolidated a number of roles, ending 2016 with 55 employees in comparison to 80
employees at the end of 2015.
General, administrative and sales expenses for 2016 were $16,312 (including one time severance and other costs) compared to
$18,926 for 2015, down $2,614 or 14%. Q4 2016 general, administrative and sales expenses were $4,606, compared to $5,349 in
Q4 2015, down $743 or 13.9%. Genesis continues to seek cost reductions and operating efficiencies.
Genesis carefully plans any proposed land servicing to match expected sales over the following 12-24 months, and recognizing
the seasonality of servicing activities in Alberta. In 2016, Genesis had lower cash outflows of $13,921 for land servicing and
development compared to $ 36,092 in 2015.
Focused on obtaining entitlements or improving existing entitlements
In 2016, Genesis renewed its efforts to obtain zoning and servicing entitlements for its large portfolio of raw land, including in south
east Calgary and Rocky View County, and to improve the current zoning of its Sage Hill Crossing and Airdrie developments. Zoning
changes generally take a number of years and are not certain until the required municipal and other regulatory approvals have
been obtained. Overall, Genesis made significant progress on all of its rezoning projects in 2016, which has continued into 2017.
Balanced approach to selling land and lots to third parties rather than only internally
In 2016, Genesis focused on selling residential lots, developed townhouse sites and other lands to third parties, rather than
retaining land for future use primarily by Genesis in its GBG building business. 2016 revenues included the sale of three land
parcels to third parties for $21,237 compared to two land parcel sales for $3,600 during 2015, and 58 lots sold to third parties in
2016 compared to 69 lots in 2015 (with 50 lots being sold to a third party builder in late 2015 for use in 2016). In 2016, GBG sold
146 homes on lots provided by Genesis, in comparison to 115 in 2015. GBG continues to play an important part in the sale of
Genesis lots.
Solid 2016 results for Genesis Builders Group
GBG had 166 new home sales in 2016 with revenues of $83,249 compared to 209 new home sales with revenues of $102,846 in
2015. Of the 166 new home sales, 146 were built on residential lots supplied by Genesis, generating residential lot revenues
included in the land division of $25,495 (2015 – 115 and $18,935 respectively). There were 142 new home orders in 2016
compared to 135 in 2015. There were 30 new home orders in Q4 2016 compared to 36 in Q4 2015.
5
Monetization of non-core lands
Genesis accumulated lands over a number of years which it now considers non-core, all of which have been listed or made
available for sale. Progress was made in selling non-core land in 2016 with $1,650 realized in 2016. In March 2017, Genesis
announced the sale of 1,476 acres of unentitled, undeveloped non-core lands owned by Genesis near the Hamlet of Delacour,
Alberta for $9,000, which is expected to close in May 2017.
This 2017 sale will substantially complete the plan to dispose of the non-core lands owned by Genesis, with the bulk of non-core
assets by dollar value having been sold or contracted for sale. Genesis will continue to market the remaining non-core lands, with
the objective of selling the balance over the next few years.
Net earnings down – impacted by non-cash write downs
Net earnings were $5,906 for the year ending December 31, 2016 compared to $11,014 for the year ending December 31, 2015.
There was a net loss of $1,216 for Q4 2016 compared to net earnings of $5,365 in Q4 2015 in part due to non-cash write offs of
certain lands owned by Genesis as a result of revised estimates of costs to complete the development, including a significant
increase in the estimate of municipal levies. Net earnings for the three months and year ended December 31, 2016 were impacted
by $5,372 and $8,665 write-downs on parcels of development land located in Alberta (2015 – $1,129 and $12,390 respectively).
6
CORPORATE HIGHLIGHTS
Key financial results and operating data for the Corporation are as follows:
Three months ended
December 31,(1)
Year ended
December 31,(2)
2016
2015
2016
2015
Key Financial Data
Total revenues
Direct cost of sales
(Write-down) recovery of real estate held for development and sale
Gross margin
(Loss) earnings before income taxes
Net earnings attributable to equity shareholders
Net earnings per share – basic and diluted
Cash flows from (used in) operating activities
Cash flows from (used in) operating activities per share – basic
and diluted
Special cash dividend per common share, declared and paid
Key Operating Data
Residential lots sold to third parties (units)
Residential lots sold through home building business segment
(units)
Average revenue per lot sold
Homes sold (units)
Average revenue per home sold
New home orders (units)
Development land sold (acres)
28,145
(18,831)
(5,372)
3,942
(1,408)
(1,216)
(0.03)
6,229
0.14
0.25
12
53
169
56
437
30
-
Homes (with lots) subject to firm sale contracts (units)
Key Balance Sheet Data
Cash and cash equivalents
Total assets
Loans and credit facilities
Total liabilities
Shareholders’ equity
Total equity
Loans and credit facilities (“Debt”) to total assets
(1) Three months ended December 31, 2016 and 2015 (“Q4 2016” and “Q4 2015”)
(2) Year ended December 31, 2016 and 2015 (“YE 2016” and “YE 2015”)
36,575
(26,215)
(1,129)
9,231
5,674
5,365
0.13
115,957
(80,674)
(8,665)
26,618
7,464
5,906
0.13
119,088
(84,189)
(12,390)
22,509
4,043
11,014
0.25
(7,193)
42,952
(18,325)
(0.16)
0.12
50
41
168
51
460
36
114
0.98
0.25
58
146
181
166
501
142
1,674
(0.41)
0.12
69
115
172
209
489
135
118
As at December 31,
2016
December 31,
2014
39
2015
63
As at December 31,
2016
14,318
288,995
43,295
77,330
205,751
211,665
15%
2015
11,399
331,045
63,819
106,054
212,125
224,991
19%
7
Land Development
Key Financial Data
Residential lot sales(1)
Development land sales
Direct cost of sales
Gross margin
Gross margin (%)(2)
Three months ended December 31,
Year ended December 31,
2016
2015
% change
2016
2015
% change
10,961
-
15,304
3,500
(6,280)
(13,148)
4,681
42.7%
5,656
30.1%
(28.4%)
(100.0%)
(52.2%)
(17.2%)
36,966
21,237
31,577
3,600
(36,753)
(20,704)
21,450
36.9%
14,473
41.1%
17.1%
489.9%
77.5%
48.2%
Write-down of real estate held for
development and sale
(5,372)
(1,129)
375.8%
(8,665)
(12,390)
(30.1%)
Equity income from joint venture
(22)
2,669
(100.8%)
86
4,238
(98.0%)
Other expenses(3)
Loss (earnings) before taxes
Key Operating Data
Residential lots sold to third
parties
Residential lots sold through
home building business segment
Total residential lots sold
Average revenue per lot sold
Average revenue per acres sold
Development land sold (acres)
(2,831)
(3,544)
(2,955)
(4.2%)
4,241
(183.6%)
(9,743)
3,128
(10,744)
(9.3%)
(4,423)
(170.7%)
12
53
65
169
-
-
50
41
91
168
31
114
(76.0%)
29.3%
(28.6%)
0.6%
N/R(4)
N/R(4)
58
146
204
181
13
1,674
69
(15.9%)
115
184
172
30
118
27.0%
10.9%
5.2%
(56.7%)
N/R(4)%
(1) Includes residential lot sales to third parties and to GBG and other revenue
(2) Gross margin amount divided by the sum of residential lot sales and development land sales
(3) Other expenses includes general and administrative, selling and marketing and net finance expense
(4) Not reflective due to percentage increase
8
Gross margin by source of revenue
Three months ended
December 31,
Residential lot sales(1)
Direct cost of sales
Gross margin
Gross margin (%)
Development land sales(2)
Direct cost of sales
Gross margin
2016
10,961
(6,280)
4,681
42.7%
-
-
-
Residential lot and development land gross margin
4,681
(1) Includes other revenue
(2) Includes rebate of $100 on early closing of the 14 acre development land parcel in 2016
2015
15,304
(9,671)
5,633
36.8%
3,500
(3,477)
23
5,656
Year ended
December 31,
2016
36,966
2015
31,577
(20,135)
(16,746)
16,831
45.5%
21,237
(16,618)
4,619
21,450
14,831
47.0%
3,600
(3,958)
(358)
14,473
The change in gross margin percentages for single-family lots relates to the mix of sales by community as the gross margin
percentage on residential lots typically varies by community and lot type, based on the nature of the development work to be
undertaken before the lots are ready for sale and how long the Corporation has owned the land.
Volumes and Revenues
Revenues were higher during YE 2016 compared to YE 2015 due to higher volumes of residential lot sales through the home
building business segment, partially offset by lower volumes of residential lot sale made to third parties. In addition, a 14 acre multi-
family site in Airdrie was sold in the first quarter of 2016 for $10,150, a 1,653 acre non-core land parcel in British Columbia was
sold in the second quarter of 2016 for $1,650 and a 7 acre development land parcel in Calgary was sold in the third quarter of 2016
for $9,437.
Revenues were lower in Q4 2016 compared to Q4 2015 due to lower volumes of residential lot sales made to third parties and to
no development land sales made during Q4 2016. This was partially offset by higher residential lot sales made through GBG.
Residential lots are sold to GBG at market prices.
The 14 acre sale transaction for $10,150 involved one of the Genesis limited partnerships in which Genesis owned a 10% undivided
interest in the land and therefore received 10% of the net proceeds. The details of the amounts attributed to each of Genesis and
the limited partnership are explained in note 4 in the consolidated financial statements for the year ended December 31, 2016 and
2015. The transaction closed in June 2016.
Equity income from joint venture
The community developed by the “Kinwood” joint venture is complete. Activity and operations will be nominal in future years as
the joint venture is wound down and the future development cost liability is settled. The joint venture continues to incur general
and administrative expenses during this period. Homes built on joint venture lots by the home building business segment resulted
in Genesis recognizing deferred gains and deferred margins. The home building business segment recorded 1 home sale on a lot
purchased from the joint venture in Q4 2016 compared to 10 homes in Q4 2015 and sold 8 homes in YE 2016 compared to 66
homes in YE 2015.
9
Write-down of real estate held for development and sale
The Alberta economy has been impacted by the sharp drop and subsequent partial recovery in oil and natural gas prices over the
last several years and is generally expected to continue to be weak and possibly flat for some time. Third-party appraisals and
cost-to-complete estimates were conducted during 2016. As a result, the Corporation recorded write-downs on parcels of land
located in and around Calgary during the year ended December 31, 2016: a write-down of $4,000 on land under development
owned by Genesis to reflect the estimated returns realizable from completion of the development and sale of this land, a write-
down of $1,990 to reflect the market value of a non-core undeveloped land parcel owned by Genesis and a write-down of $2,675
to reflect the market value of a non-core undeveloped land parcel belonging to a limited partnership.
Other expenses
Other expenses were lower for Q4 2016 and YE 2016 compared to the same periods in 2015. The restructuring at the end of the
first quarter of 2016 resulted in significant reductions in corporate administration, compensation, net finance and selling and
marketing expenses during the remainder of 2016. These decreases were partially offset by sales commissions incurred on the
sale of the three development land parcels.
Factors Affecting Results of Operations
A number of factors affect the results of operations, particularly in land development, including:
The development and sale of residential lots and development land occurs over a substantial period of time which creates
volatility in the revenues, earnings and cash flows from operating activities
Land and lot prices and gross margins vary by community based on the nature of the development work to be undertaken
before the land and lots are ready for sale, and the length of time the Corporation has owned the land
The sale of developed lots to GBG are structured to defer the related revenues and earnings from those lots until the
sale of the home and lot to the end purchaser
Seasonality has historically resulted in higher lot and home building revenues in the summer and fall months when home
building sales closings peak.
10
Home Building
The homebuilding segment of Genesis is represented through its wholly owned subsidiary, GBG.
Three months ended December 31,
Year ended December 31,
2016
2015
% change
2016
2015
% change
Key Financial Data
Revenues(1)
24,456
24,068
Direct cost of sales
(19,823)
(19,361)
Gross margin
Gross margin (%)
Other expenses(2)
Earnings before taxes
Key Operating Data
Homes sold (single-family units)
Homes sold (townhouse units)
Total homes sold (units)
Average revenue per single-
family home sold
Average revenue per townhouse
sold
Average revenue per home sold
(single-family and townhouse)
New home orders (units)
Homes (with lots) subject to firm
sales contracts (units)
4,633
18.9%
(2,497)
2,136
4,707
19.6%
(3,271)
1,436
56
-
56
437
-
437
30
39
12
51
479
396
460
36
1.6%
2.4%
(1.6%)
(23.7%)
48.7%
43.6%
N/R(3)
9.8%
(8.8%)
N/R(3)
(5.0%)
(16.7%)
83,249
(69,416)
13,833
16.6%
(9,497)
4,336
102,846
(84,326)
18,520
18.0%
(11,960)
6,560
166
-
166
501
-
501
142
39
186
23
209
501
394
489
135
63
(19.1%)
(17.7%)
(25.3%)
(20.6%)
(33.9%)
(10.8%)
N/R(3)
(20.6%)
0.0%
N/R(3)
2.5%
5.2%
(38.1%)
(1) Revenues include residential home sales and other revenue
(2) Other expenses includes general and administrative, selling and marketing and net finance expense
(3) Not reflective due to percentage increase
Volumes and revenues
Revenues for YE 2016 were lower than in YE 2015 mainly due to lower volumes. All 166 homes sold during 2016 were single-
family homes with an average price of $501 per home compared to 186 single-family and 23 townhouses in YE 2015 with average
prices of $501 and $394 respectively.
Revenues for Q4 2016 were slightly higher than in Q4 2015 due to the volume of sales and the product mix. All 56 homes sold in
Q4 2016 were single-family detached and semi-detached homes with an average price of $437 per home compared to 39 single-
family and 12 townhouses in Q4 2015 with average prices of $479 and $396 respectively.
Revenues for YE 2016 were lower than in YE 2015 mainly due to lower volumes. All 166 homes sold during 2016 were single-
family homes with an average price of $501 per home compared to 186 single-family and 23 townhouses in YE 2015 with average
prices of $501 and $394 respectively.
New home orders for Q4 2016 decreased to 30 compared to 36 in Q4 2015. New home orders for YE 2016 increased to 142
compared to 135 in YE 2015.
11
GBG builds homes either after receiving a firm sale contract or on a quick possession basis. Quick possession homes are built in
advance of receiving a firm sale contract to meet the market demand from those buyers seeking quick possession. GBG has seen
an increase in quick possession closings with 25 closings in Q4 2016 compared to 21 in Q4 2015 and 81 closings in 2016 compared
to 50 in 2015. GBG has also seen a decline in pre-construction sales closings with 31 closings in Q4 2016 compared to 30 in Q4
2015 and 85 closings in 2016 compared to 159 in 2015. The year over year closing book of firm sales contracts also reflects this
shift with 39 homes and lots with firm sales contracts at December 31, 2016 compared to 63 at December 31, 2015.
Townhouse sites listed for sale
Genesis has listed four townhouse sites for sale as GBG townhouse projects planned on these sites are not expected to proceed.
As a result $876 of pre-construction work in progress relating to these townhouse projects was expensed to cost of sales in 2016.
Other expenses
Other expenses for the home building division decreased by 23.7% for Q4 2016 compared to Q4 2015 and by 20.6% for 2016
compared to 2015. These decreases were achieved due to the restructuring in March 2016, as well as other ongoing cost reduction
initiatives, resulting in savings in corporate administrative expenses, compensation and benefits and advertising expenses.
Finance Expense
Interest incurred
Finance expense relating to VTB(1)
Financing fees amortized
Interest and financing fees capitalized
(1) VTB related to Calgary southeast lands acquisition
Three months ended December 31,
Year ended December 31,
2016
2015
% change
215
547
76
(98)
740
255
658
87
(102)
898
(15.7%)
(16.9%)
(12.6%)
(3.9%)
(17.6%)
2016
1,014
2,185
300
(500)
2,999
2015
1,248
2,633
606
(623)
3,864
% change
(18.8%)
(17.0%)
(50.5%)
(19.7%)
(22.4%)
The imputed rate on the VTB, which has a 0% face rate, is 8%. Interest expense on the VTB in 2016 is less than in 2015 following
payment of the first installment of $8,000 in January 2016. Interest incurred during 2016 is less than in 2015 due to lower loan
balances in 2016. The Corporation paid the second installment of $8,000 on the VTB in January 2017.
The weighted average interest rate of loan agreements with various financial institutions was 5.77% (YE 2015 - 4.75%) based on
December 31, 2016 balances.
The weighted average interest rate of loan agreements was 3.81% (YE 2015 - 3.82%), based on YE 2016 balances after excluding
$8,531 of debt relating to a limited partnership. This loan is guaranteed by Genesis and secured by lands held by the limited
partnership.
12
SEGMENTED BALANCE SHEET
December 31, 2016
December 31,
2015
Land Development
Genesis
LPs
Intra-
segment
eliminations
Home
Building
Inter-
segment
Eliminations
Consolidated Consolidated
189,913
36,881
(4,194)
19,597
(197)
242,000
288,291
20,938
13,189
34,543
-
40
50
-
-
(22,483)
121
1,089
4,122
258,583
36,971
(26,677)
24,929
20,066
-
10,674
27,631
64,658
36,145
-
-
(27,543)
(27,543)
863
1,187
6,642
8,692
193,925
826
866
16,237
-
-
(4,614)
(4,811)
-
-
(4,622)
(4,622)
(189)
21,059
14,318
11,618
17,234
11,399
14,121
288,995
331,045
43,295
21,253
12,782
77,330
211,665
63,819
18,926
23,309
106,054
224,991
Assets
Real estate held for
development and sale
Amounts receivable
Cash and cash equivalents
Other assets
Total assets
Liabilities
Provision for future
development costs
Other liabilities(1), (2)
Total liabilities
Net assets
Loans and credit facilities
33,918
8,514
(1) Segmented liabilities under the Genesis land segment include $287 due to the home building segment (December 31, 2015 - $9,095 due from the home building segment to the land
development segment)
(2) Other liabilities under the LPs segment is comprised of $27,543 (December 31, 2015 - $26,704) of accounts payable and accrued liabilities due to Genesis.
LIQUIDITY AND CAPITAL RESOURCES
Genesis significantly reduced its debt during 2016 and as at December 31, 2016, had an undrawn $10,000 operating line of credit,
39 homes (with lots) subject to firm sale contracts at the end of Q4 2016, and a portfolio of entitled land.
Genesis commenced a normal course issuer bid (“NCIB”) in 2015 and renewed it in 2016. During the year ended December 31,
2016, 551,796 common shares (1.25% of common shares outstanding at the beginning of the year) were purchased and cancelled
under the NCIB for a total cost of $1,420 (average $2.60 per share).
VTB
Other loans and credit facilities
Loan relating to a limited partnership
Total loans and credit facilities
Total liabilities to equity (1)
Loans and credit facilities (“Debt”) to total assets
(1) Calculated as total liabilities divided by total equity
December 31,
2016
2015
% change
28,506
6,258
34,764
8,531
43,295
37%
15%
34,321
(16.9%)
21,373
(70.7%)
55,694
(37.6%)
8,125
5.0%
63,819
(32.2%)
47%
19%
Genesis regularly reviews its credit facilities and manages its requirements in accordance with project development plans and
operating requirements. Genesis and its subsidiaries were in compliance with all covenants at all period ends. Refer to the credit
and liquidity risk section of this MD&A for factors that could affect Genesis’ liquidity and capital resources.
13
Real Estate Held for Development and Sale
Real estate held for development and sale
Provision for write-downs
December 31
2016
2015
% change
308,824
(66,824)
242,000
351,397
(12.1%)
(63,106)
5.9%
288,291
(16.1%)
Real estate held for development and sale decreased by $46,291 at YE 2016 compared to YE 2015. This reduction in land inventory
was due to the sale of three development land parcels with a net carrying value of $16,623, the $8,665 write-down on certain land
parcels as discussed in the Factors Affecting Results of Operations section and the sale of residential lots through the home
building division and to third party builders and the sale of residential homes. This decrease was partially offset by land development
and home building activities. Refer to note 4 in the consolidated financial statements for the year ended December 31, 2016 and
2015 which details gross book value, provision for write-downs and net book value of real estate held for development and sale.
Genesis expects to spend approximately $25,000 on land development activities during 2017.
The following tables present Genesis’ real estate held for development and sale, and estimated equivalent of single-family lots,
townhouse/multi-family units and commercial acreages as at December 31, 2016.
Land development segment
Net carrying
value
Acres(1)
Lots
Net carrying
value
Acres(1)
Net carrying
value
Acres(1)
Lots
Land under development
Land held for future
development
Total
Residential
Airdrie(2)
Calgary NW(3)
Calgary NE(4)
Calgary SE(5)
Mixed use(6)
Other assets(7) – non-core
32,185
28,748
14,259
-
75,192
43,704
-
Total land development segment
118,896
Home building business
segment(8)
Total land and home building
segments
Limited Partnerships(9)
Real estate held for development
and sale
See accompanying footnotes on page 15.
169
34
17
-
220
64
-
284
196
80
122
-
398
-
14
412
8,592
-
3,259
44,334
56,185
4,220
10,612
71,017
90
-
19
349
458
312
1,810
2,580
40,777
28,748
17,518
44,334
131,377
47,924
10,612
189,913
259
34
36
349
678
376
1,810
2,864
19,400
-
209,313
32,687
242,000
2,864
2,373
5,237
196
80
122
-
398
-
14
412
14
426
-
426
14
Developed Lots
Estimated Equivalent if/when Developed
Acres(1)
Single-family
(units)
Single-family (lots)
Townhouse/multi-
family (units)
Commercial
(acres)
Total
Single- and
townhouse/multi-
family (units)
Residential
Airdrie(2)
Calgary NW(3)
Calgary NE(4)
Calgary SE(5)
Mixed use(6)
Other assets(7) – non-core
Total land development segment
Home building business segment
Total land and home building
segments
Limited Partnerships(9)
Real estate held for development
and sale
259
34
36
349
678
376
1,810
2,864
-
2,864
2,373
5,237
196
80
122
-
398
-
14
412
14
426
-
426
1,517
31
217
1,984
3,749
-
1,269
5,018
-
5,018
2,495
7,513
162
1,869
117
-
2,148
2,650
-
4,798
-
4,798
800
5,598
10
1
-
-
11
336
-
347
-
347
441
788
1,875
1,980
456
1,984
6,295
2,650
1,283
10,228
14
10,242
3,295
13,537
(1) Acres comprises townhouse/multi-family, commercial acres and land not yet subdivided into single-family and other lots
(2) Airdrie comprises the communities of Bayside, Bayview and Canals
(3) Calgary NW comprises the community of Sage Meadows
(4) Calgary NE comprises the community of Saddlestone
(5) Calgary SE comprises southeast lands acquired in 2015
(6) Mixed use comprises North Conrich and Sage Hill Crossing
(7) Other assets are non-core and actively being marketed for disposal. These assets represent 5.6% (YE 2015 - 6.6%) of Genesis’ land portfolio with a carrying value of $10,612 (YE
2015 - $14,113). A 1,476 acre parcel has been contracted for sale in March 2017 for $9,000, and is expected to be completed in May 2017.
(8) Housing projects under development comprise $2,688 in lots and $16,712 of work-in-progress.
(9) Comprises land held for future development and land under development. Net of intra-segment eliminations of $4,194.
The following tables present the continuity of the each segment’s residential lot supply for the period ended December 31, 2016:
Land Development
Project
Airdrie
Bayside and Bayview
Canals
Calgary NW
Sage Meadows
Calgary NE
Saddlestone
Brooks (non-core)
Total
Lots at
Jan. 1, 2016
Additions made
during 2016
Sold to third-
party builders
Sold to
Home Building
Lots at
December 31,
2016
300
10
310
90
120
14
534
-
-
-
-
82
-
82
(47)
(1)
(48)
(10)
-
-
(58)
(65)
(1)
(66)
-
(80)
-
(146)
188
8
196
80
122
14
412
15
Home Building
Project
Airdrie
Bayside and Bayview
Canals
Calgary NW
Evansridge
Kinwood
Calgary NE
Saddlestone
Total
Amounts Receivable
Amounts receivable
Lots at January 1,
2016
Lots purchased in
2016
Homes sold in 2016
Lots at December 31,
2016
Price range of homes
sold
3
-
3
22
9
31
-
34
65
1
66
-
-
-
80
146
(65)
(1)
(66)
(12)
(8)
(20)
(80)
(166)
3
-
3
10
1
11
-
14
$317-$607
$611-$611
$317-$611
$486-$648
$458-$607
$458-$648
$360-$736
$317-$736
December 31,
2016
21,059
2015
17,234
% change
22.2%
Genesis generally retains title to lots and homes that are contracted for sale until full payment is received in order to mitigate credit
exposure to third parties. Individual balances due from customers at YE 2016, which comprise greater than 10% of total amounts
receivable, totaled $19,040 from five customers (2015 - $15,777 from three customers). The increase of $3,825 in amounts
receivable is mainly due to the timing of residential lot sales and closings, the timing of which affects the Corporation’s amounts
receivable. As of December 31, 2016 the Corporation had 110 lots or $17,528 receivable compared to 83 lots or $13,512 receivable
as at December 31, 2015, a change of $4,016.
Cash Flows from Operating Activities
Cash flows from (used in) operating activities
Cash flows from (used in) operating activities per
share – basic and diluted
Three months ended
December 31,
2016
2015
Year ended
December 31,
2016
2015
6,229
0.14
(7,193)
42,952
(18,325)
(0.16)
0.98
(0.41)
The $61,277 change in cash flows between YE 2016 (cash inflow of $42,952) and YE 2015 (cash outflow of $18,325) is explained
by the following:
Lower cash outflows for home building activity
Lower cash outflows for land servicing
Higher cash inflows from residential lot and development land sales
Lower cash outflows for land acquisition
Lower cash outflows for income tax installments
Lower cash outflows for other operating costs
Lower cash inflows from sale of residential homes
Lower other cash receipts
Total change in cash flows
28,167
22,171
12,087
10,000
5,125
3,840
(17,925)
(2,188)
61,277
16
Lower cash outflows for home building activity was partially due to reducing the investment in home building inventory from $30,768
at December 31, 2015 to $19,400 at December 31, 2016. This inventory reduction is partly the result of the drive for efficiency and
effectiveness of the Corporation. Large cash outflows for land servicing in 2015 contributed to the 534 lots at December 31, 2015
set out in the land development table on page 15 of this MD&A and also included a significant portion of the costs for the 82 lots
added during 2016.
Higher cash inflows from residential lot and development land sales was due to a larger number of residential lot sales as well as
the sale of three development land parcel sales during 2016 compared to two development land parcel sales in 2015.
YE 2015 cash outflows included $10,000 paid in January 2015 for the acquisition of 349 acres in southeast Calgary listed in the
table on page 14 of this MD&A and which was classified as an operating activity. The balance of the purchase price of this land
was financed by the VTB listed in the Liquidity and Capital Resources table of this MD&A. An $8,000 payment on the VTB loan
was made in YE 2016 was classified as a financing activity.
Lower cash inflows from the sale of residential homes are consistent with the lower volumes of sales during 2016.
LIABILITIES AND SHAREHOLDERS’ EQUITY
The following table presents Genesis’ liabilities and equity at the end of YE 2016 and YE 2015:
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Provision for future development costs
Income taxes payable
Total liabilities
Non-controlling interest
Shareholders’ equity
December 31,
December 31,
2016
43,295
2,587
10,195
21,253
-
77,330
5,914
205,751
288,995
% of Total
15%
1%
4%
7%
-
27%
2%
71%
100%
2015
63,819
3,820
19,219
18,926
270
106,054
12,866
212,125
331,045
% of Total
19%
1%
6%
6%
-
32%
4%
64%
100%
Loans and Credit Facilities
The change in the loans and credit facilities of Genesis and a limited partnership were as follows:
For the year ended December 31,
Balance, beginning of period – excluding VTB
Balance, beginning of period VTB – for land acquisition
Advances for land development and home building
Repayments from the proceeds of land and home sales
Interest and financing fees incurred
Interest and financing fees paid
Balance, end of period
2016
29,498
34,321
42,462
(65,800)
3,314
(500)
43,295
2015
23,892
34,321
45,524
(42,719)
4,276
(1,475)
63,819
17
The Corporation’s loans and credit facilities, net of deferred financing fees, consisted of the following segmented amounts:
For the year ended December 31,
Land development
Limited partnerships
Home building
2016
33,918
8,514
863
43,295
2015
50,603
8,062
5,154
63,819
The following is a summary of drawn and outstanding loan and credit facility balances as at Q4 2016 and as at the end of the
previous four quarters:
Vendor-take-back mortgage
Land development loans
Land loan relating to a limited partnership
Home building loans
Demand operating line
Unamortized deferred financing fees
Balance, end of period
Total liabilities to equity follows:
Total liabilities
Total equity
Total liabilities to equity(1)
(1) Calculated as total liabilities divided by total equity
Q4 2016
28,506
Q3 2016
27,959
Q2 2016
27,413
Q1 2016
26,867
5,566
8,531
903
-
43,506
(211)
43,295
1,004
8,531
1,344
-
38,838
(280)
38,558
1,410
8,325
2,148
1,580
40,876
(293)
40,583
9,807
8,125
3,670
-
48,469
(361)
48,108
December 31
2016
77,330
211,665
37%
Q4 2015
34,321
16,609
8,125
5,194
-
64,249
(430)
63,819
2015
106,054
224,991
47%
Genesis has four land project loan facilities with the ability to fund up to $33,270 of development and servicing costs as at December
31, 2016. Interest on these facilities ranges from prime + 0.75% to prime + 1.25% per annum and draws on these facilities can be
made as land development activities progress. $5,566 was drawn against these facilities as at YE 2016 (YE 2015 - $16,609).
In addition, Genesis has a demand operating line of credit of up to $10,000 for general corporate purposes at an interest rate of
prime + 1% per annum. The outstanding balance on this facility was $Nil as at YE 2016 (YE 2015 - Nil).
GBG has a demand operating line of $6,500 at an interest rate of prime + 1.5% per annum. The amount drawn on this facility as
at YE 2016 was Nil (YE 2015 - $1,427). In addition, a lot purchase loan at an interest rate of prime + 1.5% per annum is also
available to GBG with $903 drawn as at YE 2016 (YE 2015 - $3,767).
Genesis assumed a VTB on the purchase of the southeast lands in January 2015. The VTB has an outstanding balance of $32,000
with an unamortized discount of $3,494 as at YE 2016 (YE 2015 - $40,000 and $5,679 respectively) and the outstanding balance
payable in four equal installments of $8,000 in January of each of 2017 through 2020. Genesis paid $8,000 on the VTB in January
2017 leaving an outstanding balance of $24,000 excluding the unamortized discount.
Genesis guarantees an $8,531 loan (YE 2015 - $8,125) relating to a limited partnership bearing interest at the greater of 7.25% or
prime + 3% per annum. The loan is secured by lands held by the limited partnership.
18
Genesis has various covenants in place with its lenders with respect to its credit facilities. Such covenants include credit usage
restrictions; cancellation, prepayment, confidentiality and cross default clauses; sales coverage requirements; conditions precedent
for funding; and other general understandings such as, but not limited to, maintaining contracted lot prices, restrictions on
encumbrances, liens and charges, material changes to project plans, and material changes in the Corporation’s ownership
structure. In addition, GBG has a secured revolving operating line repayable on demand to be used for home construction and the
acquisition of serviced lots. This line has a financial covenant requiring that GBG maintain a net worth of at least $11,500 at all
times. Net worth is defined by the lender as “Retained Earnings plus Shareholders Loans plus Due to Related Parties (excluding
lot payables to related parties) minus Due from Related Parties”. Genesis and its subsidiaries were in compliance with all covenants
at YE 2016 and at YE 2015. Loans and credit facilities are used primarily to finance the costs of developing land, building houses
and for land purchases, in certain circumstances.
Genesis has sufficient liquidity from its cash flows from operating activities, supplemented by credit facilities, to meet the above
liabilities as they become due. Genesis regularly reviews its credit facilities and manages requirements in accordance with project
development plans and operating requirements.
Provision for Future Development Costs
When Genesis sells lots and homes, it often remains responsible to pay for future development costs known as “costs-to-complete”.
For GBG, costs-to-complete estimates are the costs likely to be incurred on seasonal and other work (such as paving and
landscaping) and estimated warranty charges over the one year warranty period.
For the land development segment, the provision for future development costs represents the estimated remaining construction
costs related to and/or allocated to sold land. This includes all direct construction costs and indirect costs expected to be incurred
during the remainder of the construction period, net of expected recoveries, allocable to the portions of the development that have
already been sold. The provision is reviewed periodically and when the estimate is known to be different from the actual costs
incurred or expected to be incurred, an adjustment is made to the provision for future development costs and a corresponding
adjustment is made to land under development and/or cost of sales.
Provision for future development costs at December 31, 2016 were $20,064 for the land segment ($17,064 – 2015) and $1,189
($1,862 – 2015) for the home building business segment. This increase in cost was due to normal sales activity in land and in
home building. The increase was partially offset by completion of previously recognized cost-to-complete liabilities on residential
lots and on residential homes.
Income Tax Payable
The changes in income tax (recoverable) payable are as follows:
Balance, beginning of period
Provision for current income tax
Net payments
Balance, end of period
The decrease in income tax payable is due to net payments made during 2016.
For the year ended December 31,
2016
270
4,397
(4,709)
(42)
2015
4,433
5,671
(9,834)
270
19
Shareholders’ Equity
As at March 21, 2017, the Corporation had 43,735,390 common shares issued and outstanding. The Corporation terminated its
stock option plan on March 22, 2016 and all 550,000 outstanding options to acquire common shares of Genesis were cancelled
effective June 30, 2016.
The common shares of the Corporation are listed for trading on the Toronto Stock Exchange under the symbol “GDC”.
In September 2015, Genesis initiated a normal course issuer bid (“NCIB”) to purchase and cancel up to 2,246,310 common shares
which was 5% of Genesis's issued and outstanding Common Shares as at September 3, 2015. On September 7, 2016, the
Corporation announced the renewal of its NCIB. The renewed NCIB commenced on September 12, 2016 and terminates on the
earlier of (i) September 11, 2017; and (ii) the date on which the maximum number of common shares are purchased pursuant to
the bid. The Corporation may purchase for cancellation up to 2,194,320 common shares under the renewed NCIB.
Number of shares purchased and cancelled
Total cost
Average price per share purchased
Beginning of period
Shares cancelled as a % of common shares
outstanding at beginning of period
Three months ended
December 31,
Year ended
December 31,
2016
36,178
92
2.54
2015
2016
2015
379,498
551,796
628,598
1,118
2.95
1,420
2.60
1,887
3.00
Sept 30, 2016
Sept 30, 2015
Jan 1, 2016
Jan 1, 2015
0.08%
0.85%
1.25%
1.40%
The Corporation repurchased for cancellation an additional 10,416 common shares for $30 between January 1, 2017 and March
21, 2017. As of the date of this MD&A, there are 2,128,108 common shares remaining for purchase under the NCIB.
Contractual Obligations and Debt Repayment
Contractual obligations excluding accounts payable, accrued liabilities, income taxes payable, customer deposits and provision for
future development costs, at the end of YE 2016 were as follows:
Current
January 2018 to December 2018
January 2019 to December 2019
January 2020 and thereafter
Current
(1) Excludes deferred financing fees
Loans and
Credit
Facilities(1)
22,990
7,383
6,822
6,311
43,506
Naming
Rights
Lease
Obligations
700
500
500
1,000
2,700
671
49
11
-
731
Total
24,361
7,932
7,333
7,311
46,937
In 2012, Genesis entered into a memorandum of understanding with the Northeast Community Society contribute $5,000 over 10
years for 15-year naming rights to the “Genesis Centre for Community Wellness”, a recreation complex in northeast Calgary ($500
each year, terminating in 2021). The first five installments totaling $2,500 had been paid as at December 31, 2016. Genesis paid
the sixth installment of $500 in February 2017.
In 2008, Genesis entered into an agreement with the City of Airdrie to contribute $2,000 over 10 years for 40-year naming rights
to “Genesis Place”, a recreation complex in the city of Airdrie ($200 each year, terminating in 2017). The first nine installments
totaling $1,800 were paid as at December 31, 2016.
20
Subsequent to December 31, 2016, the Corporation amended the term of its head office lease agreement to extend the term by
38 months to September 30, 2020. The total basic rent over the extension period is $364, equivalent to $115 per year (a 73%
reduction from the current 2016 basic rent cost of $426). Genesis also has other minor operating leases, a number of which were
terminated during 2016 as part of Genesis’ cost reduction program.
As a normal part of business, Genesis has entered into arrangements and incurred obligations that will impact future operations
and liquidity, some of which are reflected as short-term liabilities and commitments in note 14 of the consolidated financial
statements for the year ended December 31, 2016 and 2015.
Current Contractual Obligations
Loans and credit facilities, excluding deferred financing fees
Accounts payable and accrued liabilities
Total short-term liabilities
Commitments(1)
(1) Commitments comprise naming rights and lease obligations.
December 31,
2016
22,990
10,195
33,185
1,371
34,556
2015
13,184
19,219
32,403
1,708
34,111
At YE 2016, Genesis had obligations due within the next 12 months of $34,556, of which $22,990 related to loans and credit
facilities. Repayment is either (i) linked directly to the collection of lot receivables and sales proceeds; or (ii) due at maturity.
Management is confident that Genesis has the ability to continue to renew or to repay its financial obligations as they come due.
OFF BALANCE SHEET ARRANGEMENTS
Letters of Credit
Genesis has an ongoing requirement to provide irrevocable letters of credit to municipalities as part of the sub-division plan
registration process. At YE 2016, these letters of credit totalled approximately $4,429 (YE 2015 - $6,309).
Lease Agreements
Genesis has certain lease agreements that are entered into in the normal course of operations. All leases are treated as operating
leases and lease payments are included in general and administrative expenses. No asset value or liability has been assigned to
these leases in the balance sheet as at YE 2016 and YE 2015. In the event the lease for the office building is terminated early,
Genesis is liable to pay to Morguard for the loss of its income for the unexpired portion of the lease, in addition to damages and
other expenses incurred by Morguard, if any. In 2016, Genesis terminated a number of vehicle and other leases as a part of its
cost reduction program.
21
SELECTED ANNUAL INFORMATION
Total revenues
Gross margin
Net earnings attributable to equity shareholders
Net earnings per share – basic and diluted
Total assets
Loans and credit facilities
Special cash dividends per share, declared and paid
2016
2015
2014
115,957
119,088
134,245
26,618
5,906
0.13
22,509
11,014
0.25
39,001
17,395
0.39
288,995
331,045
309,742
43,295
63,819
23,892
0.25
0.12
0.12
Refer to the Factors Affecting Results of Operations section of this MD&A commencing on page 10 for the factors that affected
Genesis’ results.
Total revenues comprise residential lot sales, development land sales, residential home sales and other revenues. Residential lot
sales volumes were 204, 184 and 271 units in 2016, 2015 and 2014 respectively reflecting the market conditions. In addition,
development land sales were $21,237, $3,600 and $14,000 for 2016, 2015 and 2014 respectively. Development land sales are
lumpy in nature and comprise sales of non-core lands, commercial lands and other lands that Genesis does not intend to build on.
Residential home closings were 166, 209 and 220 in 2016, 2015 and 2014 respectively. Both 2015 and 2014 included closings of
townhouse units (2015 - 23, 2014 - 13) while there were no townhouse closings in 2016. This partially explains the lower home
closings during 2016.
Gross margins in 2016 and 2015 were impacted by a write-down of real estate held for development and sale, while in 2014 gross
margins were positively impacted by a recovery of write-downs previously made. Net earnings and net earnings per share were
affected as a result of the above.
Total assets decreased in 2016 compared to 2015 and 2014 mainly due to a reduction in real estate held for development and
sale, as a result of sales of residential lots, development lands and residential homes and a decision to reduce the home building
work in progress. In addition, 2016 included a write-down of $8,665 relating to various lands.
Total loans and credit facilities increased in 2015 compared to 2014 mainly due to the purchase of the southeast lands secured by
a $40,000 VTB. Total loans and credit facilities subsequently decreased in 2016 compared to 2015 mainly due to the repayment
of loans and credit facilities, including $8,000 for the VTB.
SUMMARY OF QUARTERLY RESULTS
Revenues
Net earnings(1)
EPS(2)
Q4
2016
28,145
(1,216)
(0.03)
Q3
2016
Q2
2016
Q1
2016
Q4
2015
Q3
2015
Q2
2015
Q1
2015
29,240
26,148
32,424
36,575
34,918
31,822
15,773
2,184
0.05
2,828
0.06
2,110
0.05
5,365
0.13
4,256
0.09
1,333
0.03
60
0.00
(1) Net earnings attributable to equity shareholders
(2) Net earnings per share - basic and diluted
In general, net earnings are mainly affected by the volume of residential lot and home sales, development land parcel sales, and
write-downs or recoveries, if any. Seasonality affects the land development and home building industry in Canada, particularly
winter weather conditions. Refer to the Factors Affecting Results of Operations section of this MD&A which discusses the factors
that affect Genesis’ results and seasonality further.
During Q4 2016, Genesis sold 12 residential lots to third parties and 56 homes (all single-family) compared to 24 residential lots
to third parties, a 7 acre development land parcel for $9,437 and 28 homes (all single-family) during the third quarter of 2016 (“Q3
2016”). This resulted in revenues that were slightly lower than Q3 2016. Genesis also had a write-down of $5,372 in Q4 2016
compared to a write down of $3,293 in Q3 2016, a difference of $2,079 which affected the net earnings in Q4 2016.
22
During Q3 2016, Genesis sold 24 residential lots to third parties, a 7 acre development land parcel for $9,437 and 28 homes (all
single-family). The development land parcel sale and higher residential lot sales resulted in higher revenues in the third quarter of
2016 compared to the second quarter of 2016 (“Q2 2016”), but this was partially offset by the lower residential home revenues.
Genesis also had a write-down $3,293 related to of a single parcel of undeveloped non-core land located in Alberta.
During Q2 2016, Genesis sold 22 residential lots to third parties, a 1,653 acre non-core development land parcel for $1,650 and
40 homes (all single-family). The sale of a development land parcel in the first quarter of 2016 resulted in higher revenues in the
first quarter of 2016 (“Q1 2016”) compared to Q2 2016, but this was partially offset by the higher volume of residential lot sales in
Q2 2016. During Q2 2016, Genesis also incurred $992 of cost of sales expense relating to townhouse projects that were not going
to proceed. These were the main factors resulting in lower net earnings and EPS during Q2 2016 compared to Q1 2016.
During Q1 2016, Genesis sold no residential lots to third parties, sold a development land parcel for $10,150 and 42 homes (all
single-family). During the fourth quarter of 2015, the joint venture in which Genesis is a 50% partner, sold a multi-family land parcel
for which Genesis realized a deferred gain of $1,184. Genesis also realized deferred gains from the sale of 10 single family lots
and its share of net income from the joint venture in the fourth quarter of 2015. There was no corresponding multi-family land sale
in Q1 2016, and Genesis realized deferred gain from five single-family lots during Q1 2016. These factors results in lower net
earnings and EPS during Q1 2016 compared to the fourth quarter of 2015.
During Q4 2015, Genesis sold 50 residential lots to third parties, 51 homes (39 single-family and 12 townhouses) and a non-core
development land parcel.
During Q3 2015, Genesis sold 13 residential lots and 67 homes (56 single-family and 11 townhouses).
During Q2 2015, net earnings were affected by a write-down of real estate held for development and sales.
During Q1 2015, revenues and net earnings were low due to lower residential lot and residential home sales.
RELATED PARTY TRANSACTIONS
Transactions occurred in the year ended December 31, 2016 with the following related parties:
1. Underwood Capital Partners Inc. (“Underwood”) - controlled by an officer and director, Stephen J. Griggs
2. Smoothwater Capital Corporation (“Smoothwater”) – a significant shareholder of Genesis and Stephen J. Griggs serves
as CEO
Paid to Underwood for the services of
Stephen J. Griggs as interim CEO
Reimbursement of travel and other costs
incurred by Smoothwater
CONSOLIDATED ENTITIES
Three months ended
December 31,
2016
2015
Year ended
December 31,
2016
2015
80
-
80
-
-
-
368
11
379
-
-
-
The Corporation is a general partner in four limited group structures and a 50% co-owner in a joint venture. Refer to note 19 of the
consolidated financial statements for the year ended December 31, 2016 and 2015 for summarized financial information concerning
the limited partnership arrangements. Refer to note 16 of the consolidated financial statements for the year ended December 31,
2016 and 2015 for summarized financial information concerning the joint venture. Genesis Limited Partnership #6 and Genesis
Limited Partnership #7 paid a final distribution of $6,978 to their unit holders during the year ended December 31, 2016 and are in
the process of being wound up.
23
SUBSEQUENT EVENTS
Since December 31, 2016, the Corporation has:
Paid the second installment of $8,000 on the VTB in January 2017. The balance on the VTB after this payment, excluding
the unamortized portion, is $24,000
Amended the term of its head office lease agreement by extending the term by 38 months to September 30, 2020. The
total basic rent over the extension period is $364, a reduction of 73% from the 2016 annual basic rent amount.
Entered into an agreement to sell 1,476 acres of non-core land for $9,000 payable at closing, which is expected to close
in May 2017.
SUMMARY OF ACCOUNTING CHANGES
The Corporation adopted no new IFRSs and interpretations during 2016.
RECENT ACCOUNTING PRONOUNCEMENTS
The Corporation has reviewed new and revised accounting pronouncements that have been issued but are not yet effective and
determined that the following may have an impact on the Corporation:
IFRS 15, “Revenue from contracts with customers”
On May 28, 2014 the IASB issued IFRS 15, “Revenue from contracts with customers”. IFRS 15 will replace existing standards and
interpretations on revenue recognition. The standard is effective for annual periods beginning on or after January 1, 2018, with
early adoption permitted. The standard outlines a single comprehensive model for entities for revenue recognition arising from
contracts with customers. The Corporation has not yet considered the impact of IFRS 15 on its financial statements. The
Corporation will assess the impact, if any, and report on this in its 2017 financial statements.
IFRS 9, “Financial instruments”
On November 12, 2009, the IASB issued IFRS 9, “Financial instruments” (“IFRS 9”), which will replace IAS 39 “Financial
Instruments: Recognition and Measurement” (“IAS 39”). The standard is effective for annual periods beginning on or after January
1, 2018, with early adoption permitted. IFRS 9 applies to classification and measurement of financial assets as defined in IAS 39.
It uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple
classification options in IAS 39. The Corporation has not yet considered the impact of IFRS 9 on its financial statements.
Corporation will assess the impact, if any, and report on this in its 2017 financial statements.
IFRS 16, “Leases”
On January 13, 2016, the IASB published a new standard, IFRS 16, “Leases”. The new standard brings most leases on-balance
sheet for lessees under a single model, eliminating the distinction between operating and finance leases. The standard is effective
for annual periods beginning on or after January 1, 2019, with early application permitted but only if the entity is also applying IFRS
15, “Revenue from contracts with customers”. Under the new standard, a lessee recognizes a right-of-use asset and a lease
liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly. The liability accrues
interest. The Corporation has not yet considered the impact of IFRS 16 on its financial statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of consolidated financial statements requires management to make judgments and estimates that affect the
reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date for
the land development and the home building business segments. On an ongoing basis, management evaluates its judgments and
estimates in relation to revenues, expenses, assets and liabilities. Management uses historical experience, third party appraisals
and reports and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments
and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions. There were no
material changes made to the critical accounting estimates for YE 2016 and YE 2015. Refer to note 2(q) in the consolidated
financial statements for the years ended December 31, 2016 and 2015 for additional information on judgments and estimates.
24
Provision for Future Development Costs
Changes in the estimated future development costs of land previously sold directly impact the amount recorded for the future
development liability, cost of sales, gross margin and, in some cases, the value of real estate under development and held for sale.
This liability is subject to uncertainty due to the longer time frames involved, specifically in land development.
Impairment of Real Estate Held for Development and Sale
The Corporation estimates the net realizable value (“NRV”) of real estate held for development and sale at least annually for
impairment or whenever events or changes in circumstances indicate the carrying value may exceed NRV. The estimate is based
on valuations conducted by independent real estate appraisers, other professional reports and estimates and taking into account
recent market transactions of similar and adjacent lands and housing projects in the same geographic area.
Valuation of amounts receivables
Amounts receivable are reviewed on a regular basis to estimate recoverability of balances. Any overdue amounts and any known
issues about the financial condition of debtors are taken into account when estimating recoverability.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
The Interim Chief Executive Officer (“CEO”) and Interim Chief Financial Officer (“CFO”) are responsible for establishing and
maintaining disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as those terms are
defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. The Interim CEO and
Interim CFO have designed, or caused to be designed under their direct supervision, Genesis’ DC&P to provide reasonable
assurance that:
(i)
(ii)
material information relating to the Corporation, including its consolidated subsidiaries, is made known to them by others
within those entities, particularly during the period in which the annual filings are being prepared; and
information required to be disclosed in the annual filings, interim filings or other reports filed or submitted under securities
legislation is recorded, processed, summarized and reported on a timely basis.
The Interim CEO and Interim CFO have also designed, or caused to be designed under their direct supervision, Genesis’ ICFR to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with IFRS. The ICFR have been designed using the control framework established in Internal Control –
Integrated Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
The Interim CEO and Interim CFO have evaluated the design and operating effectiveness of Genesis' DC&P and ICFR and
concluded that Genesis' DC&P and ICFR were effective as at December 31, 2016. While Genesis’ CEO and CFO believe that the
Corporation’s internal controls and procedures provide a reasonable level of assurance that such controls and procedures are
reliable, an internal control system cannot prevent all errors and fraud. It is management’s belief that any control system, no matter
how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met.
There were no changes in the Corporation’s ICFR during the three months and year ended December 31, 2016 that have materially
affected, or are reasonably likely to materially affect the Corporation’s ICFR.
RISKS AND UNCERTAINTIES
In the normal course of business, Genesis is exposed to certain risks and uncertainties inherent in the real estate development
and home building industries. Real estate development and home building are cyclical businesses. As a result, Genesis profitability
could be adversely affected by external factors beyond the control of management. Risks and uncertainties faced by Genesis
include industry risk, competition, supply and demand, geographic risk, development and construction costs, credit and liquidity
risks, finance risk, interest risk, management risk, mortgage rates and financing risk, general uninsured losses, cyber-security and
business continuity risk, environmental risk and government regulations.
25
Development and Construction Cost Risk
Genesis may be impacted by higher prices of labor, consulting fees, construction services and materials. Costs of development
and building have fluctuated over the past several years and are typically passed on to the end customer through higher pricing.
Any significant increase that Genesis cannot pass on to the end customer may have a negative material impact on profits.
Credit and Liquidity Risk
Credit risk arises from the possibility that third party builders that acquire lots from Genesis may experience financial difficulty and
be unable to fulfill their lot payout commitments. Liquidity risk is the risk that Genesis will not be able to meet its financial obligations
as they fall due. If Genesis is unable to generate sufficient sales, renew existing credit facilities or secure additional financing, the
Corporation’s ability to meet its obligations as they become due may be impacted. Based on the Corporation’s operating history,
relationship with lenders and committed sales contracts, management believes that Genesis has the ability to continue to renew
or repay its financial obligations as they come due.
Finance Risk
Genesis uses debt and other forms of financing in its business to execute the corporate strategy. Genesis uses project specific
credit facilities to fund land development costs and a construction operating line for home construction purposes. Should Genesis
be unable to retain or obtain such credit facilities, its ability to achieve its goals could be impacted. In order to reduce finance risk,
Genesis endeavors to match the term of financing with the expected revenues of the underlying land asset.
Management regularly reviews the Corporation’s credit facilities and manages the requirements in accordance with project
development plans and operating requirements.
Litigation Risk
All industries are subject to legal claims, with or without merit. The Corporation may be involved from time to time in various legal
proceedings which may include the potential liability from its operating activities and, as a public company, possibly from violations
of securities laws or breach of fiduciary duty by its directors or officers. Defense and settlement costs can be substantial, even with
respect to legal claims that have no merit. Due to the inherent uncertainty associated with litigation, the resolution of any particular
legal proceeding could have a material effect on the financial position and results of operations of the Corporation.
Cybersecurity and Business Continuity Risk
Genesis’ operations, performance and reputation depend on how its assets, including networks, IT systems, offices and sensitive
information, are protected from cyberattacks. Genesis’ operations and business continuity depend on how well it protects, tests,
maintains and replace its networks, IT systems and associated equipment. The protection and effective organization of Genesis’
systems, applications and information repositories are central to the security and continuous operation of the business.
Cyberattacks and threats (such as hacking, computer viruses, denial of service attacks, industrial espionage, unauthorized access
to confidential information, or other breaches of network or IT security) continue to evolve and Genesis’ IT defenses need to be
regularly monitored and adapted. Genesis may also be exposed to cyber threats as a result of actions that may be taken by its
customers, suppliers, employees or independent third parties, whether malicious or not, including as a result of the use of social
media, cloud-based solutions and IT consumerization (i.e. the combining of personal and business use of technology devices and
applications.) Vulnerabilities could harm Genesis’ brand and reputation as well as its business relationships, and could adversely
affect its operations and financial results, given that they may lead to: network operating failures and service disruptions, which
could directly impact Genesis’ ability to maintain its day-to-day business operations and meet its commitments; the theft, loss or
unauthorized release of confidential information, including customer or employee information, that could result in financial loss and
exposure to claims for damages by customers and employees; physical damage to network assets impacting service continuity as
well as corruption or destruction of data; litigation, fines and liability for failure to comply with privacy and information security laws;
regulatory investigations and increased audit and regulatory scrutiny that could divert resources from regular operations; loss of
customers or impairment of our ability to attract new ones; or lost revenues due to service disruptions and the incurrence of
remediation costs.
26
Genesis has the following in place to reduce and/or manage cybersecurity and business continuity risk: enterprise grade firewalls
with the ability to detect port scanning, denial of service attacks and content filtering and application control to permit or deny traffic
on the network; signature-based antivirus which runs scans to detect suspicious files and continuously receives updates to counter
new threat; email security and anti-spam filtering to scan all incoming and outgoing emails before email delivery is completed; and
regular internal and external backups of database and networks files which could be used to restore data in the event of loss of
information due to corruption, deletion or encryption due to viruses or malware or system failures.
The Corporation maintains various types of insurance to cover certain potential risks and regularly evaluates the adequacy of this
coverage.
There may be additional risks that management may need to consider as circumstances require. For a more detailed discussion
on the Corporation’s risk factors, refer to Genesis’ AIF for the year ended December 31, 2016 available on SEDAR at
www.sedar.com.
TRADING AND SHARE STATISTICS
The Corporation’s trading and share statistics for 2016 and 2015 are provided below.
Average daily trading volume
Share price ($/share)
High
Low
Close
Market capitalization at December 31
Shares outstanding
OTHER
2016
12,188
3.17
2.01
2.99
2015
47,810
3.90
2.58
2.73
130,800
43,745,806
120,932
44,297,602
Additional information relating to the Corporation can be found on SEDAR at www.sedar.com.
ADVISORIES
Forward-Looking Statements
This MD&A contains certain statements which constitute forward-looking statements or information ("forward-looking statements") within the
meaning of applicable securities legislation, including Canadian Securities Administrators’ National Instrument 51-102 ‘Continuous Disclosure
Obligations’, concerning the business, operations and financial performance and condition of Genesis. Generally, these forward-looking
statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or
state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”.
Forward-looking statements are based on material factors or assumptions made by us with respect to, among other things, opportunities that
may or may not be pursued by us; changes in the real estate industry; fluctuations in the Canadian and Alberta economy; changes in the number
of lots sold and homes delivered per year; and changes in laws or regulations or the interpretation or application of those laws and regulation.
Forward-looking statements in this MD&A include, but are not limited to, statements with respect to the nature of development lands held and
the anticipated inventory and development potential of such lands, anticipated general economic and business conditions, the anticipated impact
on Genesis' development and home building activities, Genesis’ ongoing review of its business, including cost reductions, expected closings of
land sales and listing of townhouse sites including the sale of 1,476 acres of non-core land, the activity levels and operations of the joint venture,
the ability to close the book of homes (with lots) subject to firm sale contracts, the Alberta real estate cycle, the wind-up of Genesis Limited
Partnership #6 and Genesis Limited Partnership #7, Genesis’ business plan for 2017, the Corporation’s cost reductions and operating efficiencies,
progress of rezoning projects, the continuing role of GBG in the sale of Genesis lots, the marketing of non-core lands, the closing of a sale of
land near Delacour, Alberta, the expected level of new serviced lot inventory available to builders and the ability of GBG to sell homes on a quick
possession basis and the ability to continue to renew or repay financial obligations and to meet liabilities as they become due. Although Genesis
believes that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements are based upon
reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements because they involve
27
assumptions, known and unknown risks, uncertainties and other factors many of which are beyond the Corporation's control, which may cause
the actual results, performance or achievements of Genesis to differ materially from anticipated future results, performance or achievement
expressed or implied by such forward-looking statements. Accordingly, Genesis cannot give any assurance that its expectations will in fact occur
and cautions that actual results may differ materially from those in the forward-looking statements.
Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to:
the impact of contractual arrangements and incurred obligations on future operations and liquidity; local real estate conditions, including the
development of properties in close proximity to Genesis’ properties; the uncertainties of real estate development and acquisition activity;
fluctuations in interest rates; ability to access and raise capital on favourable terms; not realizing on the anticipated benefits from transactions or
not realizing on such anticipated benefits within the expected time frame; labour matters, governmental regulations, stock market volatility and
other risks and factors described from time to time in the documents filed by Genesis with the securities regulators in Canada available at
www.sedar.com, including this MD&A under the heading "Risks and Uncertainties" and the AIF under the heading “Risk Factors”. Furthermore,
the forward-looking statements contained in this MD&A are made as of the date of this MD&A and, except as required by applicable law, Genesis
does not undertake any obligation to publicly update or to revise any of the forward-looking statements, whether as a result of new information,
future events or otherwise.
28
CONSOLIDATED
FINANCIAL
STATEMENTS
DECEMBER 31, 2016 AND 2015
GENESIS LAND DEVELOPMENT CORP.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016 and 2015
TABLE OF CONTENTS
Management’s Report ..................................................................................................................................................................... 31
Independent Auditors’ Report .......................................................................................................................................................... 32
Consolidated Balance Sheets ......................................................................................................................................................... 33
Consolidated Statements Of Comprehensive Income .................................................................................................................... 34
Consolidated Statements Of Changes In Equity ............................................................................................................................. 35
Consolidated Statements Of Cash Flows ........................................................................................................................................ 36
Notes to the Consolidated Financial Statements............................................................................................................................. 37
30
MANAGEMENT’S REPORT
To the Shareholders of Genesis Land Development Corp.:
The consolidated financial statements and all information in the Management’s Discussion and Analysis (“MD&A”) are the
responsibility of management. The consolidated financial statements have been prepared by management in accordance with the
accounting policies in the notes to the consolidated financial statements. In the opinion of management, the consolidated financial
statements have been prepared within acceptable limits of materiality, and are in accordance with International Financial Reporting
Standards (“IFRS”) appropriate in the circumstances. The financial information in the MD&A has been reviewed by management to
ensure consistency with the consolidated financial statements.
Management maintains appropriate systems of internal control. Policies and procedures are designed to give reasonable assurance
that transactions are properly authorized, assets are safeguarded and financial records properly maintained to provide reliable
information for the preparation of consolidated financial statements.
The consolidated financial statements have been further examined by the Board of Directors and by its Audit Committee, which
meets regularly with the auditors and management to review the activities of each. The Audit Committee is composed of three
independent directors, and reports to the Board of Directors.
MNP LLP, an independent firm of Chartered Professional Accountants, was engaged to audit the consolidated financial statements
in accordance with Canadian generally accepted auditing standards and IFRS to provide an independent auditors’ opinion.
/s/ Stephen J. Griggs,
Interim Chief Executive Officer
/s/ Kirsten Richter
Interim Chief Financial Officer
March 21, 2017
31
Independent Auditors’ Report
To the Shareholders of Genesis Land Development Corp.
We have audited the accompanying consolidated financial statements of Genesis Land Development Corp. which
comprise the consolidated balance sheets as at December 31, 2016 and 2015, the consolidated statements of
comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary
of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management determines
is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of Genesis Land Development Corp. as at December 31, 2016 and 2015, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial
Reporting Standards.
Calgary, Alberta
March 21, 2017
Chartered Professional Accountants
GENESIS LAND DEVELOPMENT CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
Assets
Real estate held for development and sale
Investment in joint venture
Amounts receivable
Other operating assets
Deferred tax assets
Income tax recoverable
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Income taxes payable
Provision for future development costs
Total liabilities
Commitments and contingencies
Equity
Share capital
Contributed surplus
Retained earnings
Shareholders’ equity
Non-controlling interest
Total equity
Notes
December 31, 2016 December 31, 2015
4
16
5
6
7
8
2(p)
14
9,10
10
19
242,000
288,291
-
21,059
5,019
6,557
42
14,318
288,995
43,295
2,587
10,195
-
21,253
77,330
54,888
-
150,863
205,751
5,914
211,665
2,854
17,234
7,574
3,693
-
11,399
331,045
63,819
3,820
19,219
270
18,926
106,054
55,591
5,577
150,957
212,125
12,866
224,991
Total liabilities and equity
288,995
331,045
See accompanying notes to the consolidated financial statements
Consolidated entities (note 19)
Subsequent events (note 20)
ON BEHALF OF THE BOARD:
/s/ Stephen J. Griggs
Director and Chair of the Board
/s/ Steven Glover
Director and Chair of the Audit Committee
33
GENESIS LAND DEVELOPMENT CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2016 and 2015
(In thousands of Canadian dollars except per share amounts)
Year ended December 31,
Notes
2016
2015
Revenues
Sales revenue
Other revenue
Direct cost of sales
Write-down of real estate held for development and sale
Gross margin
Income from joint venture
General and administrative
Selling and marketing
Earnings from operations
Finance income
Finance expense
Earnings before income taxes
Income tax expense
Net earnings being comprehensive earnings
Attributable to non-controlling interest
Attributable to equity shareholders
Net earnings per share – basic and diluted
See accompanying notes to the consolidated financial statements
Consolidated entities (note 19)
Subsequent events (note 20)
4
16
11
12
13
7
19
9
115,179
778
115,957
(80,674)
(8,665)
(89,339)
26,618
86
(11,930)
(4,382)
(16,226)
10,392
71
(2,999)
7,464
(1,532)
5,932
26
5,906
0.13
118,769
319
119,088
(84,189)
(12,390)
(96,579)
22,509
4,238
(13,521)
(5,405)
(14,688)
7,821
86
(3,864)
4,043
(3,336)
707
(10,307)
11,014
0.25
34
GENESIS LAND DEVELOPMENT CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2016 and 2015
(In thousands of Canadian dollars except number of shares)
Equity attributable to Corporation’s shareholders
Common shares – Issued
At December 31, 2014
44,931,200
Number of
Shares
Share-based payments
Cancellation of shares
Repurchase and
cancellation of shares (1)
Dividends (3)
Net earnings (loss) (2)
Amount
56,393
-
-
-
(5,000)
(628,598)
(802)
-
-
-
-
Contributed
Surplus
5,349
228
-
-
-
-
Total
Shareholders’
Equity
Non-
Controlling
Interest
Total Equity
208,101
23,173
231,274
Retained
Earnings
146,359
-
-
228
-
(1,085)
(1,887)
(5,331)
11,014
(5,331)
11,014
(10,307)
-
-
-
-
228
-
(1,887)
(5,331)
707
At December 31, 2015
44,297,602
55,591
5,577
150,957
212,125
12,866
224,991
At December 31, 2015
44,297,602
55,591
5,577
150,957
212,125
12,866
224,991
Share-based payments
-
-
Repurchase and
cancellation of shares (1)
Distributions (4)
Transferred to retained
earnings (5)
Dividends (3)
Net earnings (2)
(551,796)
(703)
-
-
-
-
-
-
-
-
At December 31, 2016
43,745,806
54,888
-
76
(717)
(1,420)
-
-
76
(1,420)
-
(5,653)
5,653
-
-
(10,936)
(10,936)
5,906
5,906
(6,978)
(6,978)
-
-
26
-
(10,936)
5,932
150,863
205,751
5,914
211,665
76
-
-
-
-
-
See accompanying notes to the consolidated financial statements
(1) Repurchased and cancelled under normal course issuer bid (“NCIB”). Refer to note 9c
(2) Net earnings (loss) being comprehensive earnings (loss)
(3) Special cash dividends of $0.25 and $0.12 per share were paid in 2016 and 2015 respectively.
(4) Distribution to unit holders of Genesis Limited Partnership #6 and Genesis Limited Partnership #7. Refer to note 4
(5) Transferred to retained earnings on cancellation of all outstanding stock options. Refer to note 10
35
GENESIS LAND DEVELOPMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2016 and 2015
(In thousands of Canadian dollars)
Operating activities
Receipts from residential lot and development land sales
Receipts from residential home sales
Other receipts
Paid for land development
Paid for land acquisition
Paid for residential home construction
Paid to suppliers and employees
Interest received
Income taxes paid
Cash flows from (used in) operating activities
Investing activities
Acquisition of equipment
Distribution received from joint venture
Disposal of equipment
Cash flows from investing activities
Financing activities
Advances from loans and credit facilities
Repayments of loans and credit facilities
Payment on vendor-take-back mortgage
Interest and fees paid on loans and credit facilities
Cash settlement of options
Dividends paid
Repurchase and cancellation of shares under NCIB
Distribution to unit holders of limited partnerships
Cash flows (used in) financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See accompanying notes to the consolidated financial statements
Notes
Year ended December 31,
2016
2015
27,795
83,100
2,910
(13,921)
-
(37,425)
(14,869)
71
(4,709)
42,952
(61)
3,200
-
3,139
42,462
(57,800)
(8,000)
(500)
-
(10,936)
(1,420)
(6,978)
(43,172)
2,919
11,399
14,318
16
8
9
15,708
101,025
5,083
(36,092)
(10,000)
(65,592)
(18,709)
86
(9,834)
(18,325)
(1,187)
3,800
10
2,623
45,524
(42,719)
-
(1,475)
(59)
(5,331)
(1,887)
-
(5,947)
(21,649)
33,048
11,399
36
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
1.
DESCRIPTION OF BUSINESS
Genesis Land Development Corp. (the “Corporation” or “Genesis”) was incorporated as Genesis Capital Corp. under the Business
Corporation Act (Alberta) on December 2, 1997.
The Corporation is engaged in the acquisition, development, and sale of land, residential lots and homes primarily in the greater
Calgary area. The Corporation reports its activities as two business segments: land development and home building.
The Corporation is listed for trading on the Toronto Stock Exchange under the symbol “GDC”. Genesis’ head office and registered
office are located at 7315 - 8th Street N.E., Calgary, Alberta T2E 8A2.
The consolidated financial statements of Genesis were approved for issuance by the Board of Directors on March 21, 2017.
2.
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Corporation are set out below. These policies have been consistently applied to each of the
years presented, unless otherwise indicated.
a)
Statement of compliance
The consolidated financial statements of the Corporation are prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
b) Basis of presentation
The consolidated financial statements have been prepared under the historical cost convention except for the financial assets
classified as fair value through profit or loss that have been measured at fair value. The consolidated financial statements are
presented in Canadian dollars, which is the Corporation’s functional currency, and all values are rounded to the nearest
thousand, except per share values and where otherwise indicated.
c)
Basis of consolidation
The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries, as well as
the consolidated revenues, expenses, assets, liabilities and cash flows of limited partnership entities that the Corporation
controls. When the Corporation has less than 50% equity ownership in these limited partnership entities, the Corporation may
still have control over these entities’ activities, projects, financial and operating policies due to contractual arrangements.
Accordingly, the accounts of the limited partnerships have been consolidated in the Corporation’s financial statements.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Corporation obtains control, and
continues to be consolidated until the date when such control ceases. Control exists when the Corporation has the power,
directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefit from its activities. All intra-
group transactions, balances, dividends and unrealized gains and losses resulting from intra-group transactions are eliminated
on consolidation.
Non-controlling interests represent the portion of profit or loss and net assets not held by the Corporation and are presented
separately from shareholders’ equity in the consolidated statements of comprehensive income and within equity in the
consolidated balance sheets. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a
deficit balance.
37
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
d)
Interest in joint venture
The Corporation has an interest in a joint venture, Kinwood Communities Inc., (the “JV”) which is a jointly controlled entity. The
Corporation recognizes its interest in the JV using the equity method of accounting.
e) Revenue recognition
(i) Residential lot and development land sales
Land and lot sales to third parties are recognized when the risks and rewards of ownership have been transferred, the
agreed-to services pertaining to the property have been substantially performed, a minimum 15% non-refundable
deposit has been received, and the collection of the remaining unpaid balance is reasonably assured. Deposits received
upon signing of contracts for purchases of lots on which revenue recognition criteria have not been met are recorded
as customer deposits.
(ii) Residential home sales
Revenue is recognized when title to the completed home is conveyed to the purchaser, at which time all proceeds are
received or collection is reasonably assured.
Deposits received from customers upon signing of contracts for purchases of completed homes for which revenue
recognition criteria have not been met are recorded as customer deposits.
(iii)
Interest income
Interest income is recognized as it accrues using the effective interest rate method.
(iv) Other revenue
Rental income is recognized on a straight-line basis over the term of the rental agreement. Rental income is incidental
to ownership of real estate and does not result in classification of real estate as investment property. All real estate is
classified as inventory. Deposits forfeited are recognized as income.
f)
Real estate held for development and sale
Land under development, land held for future development and housing projects under construction are inventory and are
measured at the lower of cost and estimated net realizable value (“NRV”). NRV is the estimated selling price in the ordinary
course of the business at the balance sheet date, less costs to complete and estimated selling costs.
Cost includes land acquisition costs, other direct costs of development and construction, borrowing costs, property taxes and
legal costs. These costs are allocated to each phase of the project in proportion to saleable acreage.
38
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Borrowing costs
The acquisition or construction of real estate assets necessarily takes a substantial period of time to prepare for its intended
use or sale. Borrowing costs attributable to real estate held for development and sale are recorded as part of the respective
inventory carrying cost. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist
of interest and other costs incurred in connection with the borrowing of the funds.
The borrowing costs are determined first by reference to borrowings specific to the project, where relevant, and secondly by
applying a weighted average interest rate for the Corporation’s non-project specific borrowings, less any investment income
arising on temporary investing of funds, to qualifying inventory. Borrowing costs are recorded as inventory from the date of
commencement of development work until the date of completion. The recording of interest as inventory is suspended if the
project development is suspended for a prolonged period.
h)
Property and equipment
Property and equipment is stated at cost, net of any accumulated depreciation and accumulated impairment losses.
Depreciation is provided on all operating property and equipment based on the straight-line method over the estimated useful
lives of the property and equipment. The useful lives of the properties are as follows:
Vehicles and other equipment
Office equipment and furniture
Computer equipment
Computer software
Showhome furniture
Leasehold improvements
5 years
7 years
3 years
3 years
3 years
Lesser of 5 years or remaining term of the lease
i)
Income taxes
Income taxes comprise the following:
(i) Current income tax
Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities, net of
recoveries, using tax rates and laws that are enacted or substantively enacted as at the balance sheet date.
(ii) Deferred tax
Deferred tax is provided at the balance sheet date using the liability method on all temporary differences between the
tax basis of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are recognized to the extent that it is probable that taxable income will be available, against which
deductible temporary differences, carried forward tax credits or tax losses can be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset
is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at
the balance sheet date.
39
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
The Corporation’s consolidated financial statements include some entities that are limited partnerships (note 19) and are not
subject to income taxes. The income or loss for Canadian tax purposes is attributable to the taxable income of the partners in
accordance with the provisions of the Income Tax Act (Canada). The calculation of income tax expense reflects the exclusion
of taxable income allocated to partners that form part of the non-controlling interest.
j)
Cash and cash equivalents
Cash and cash equivalents consist of cash held with banks and short-term deposits of original maturity of three months or less.
k)
Leases
Operating lease payments are recognized as an operating expense in the consolidated statements of comprehensive income
on a straight-line basis over the lease term.
l)
Share-based payments
Prior to 2016, the Corporation provided equity-settled share-based payments in the form of a share option plan to its employees,
officers and directors. The share options issued are either regular options or performance options. The costs of share-based
payments are calculated by reference to the fair value of the options at the date on which they are granted. The fair values of
regular options are determined using the Black-Scholes Option-Pricing Model while the fair values of performance options are
determined using the Black-Scholes Option-Pricing Model incorporating the Monte Carlo simulation. The costs of the share-
based payments are recognized on a proportionate basis over the related vesting period of each tranche of the grant as an
expense with recognition of the corresponding increase in contributed surplus. Any consideration paid on the exercise of stock
options, together with any related contributed surplus, is credited to the share capital account.
Share-based payments may be settled in cash at the discretion of the Corporation and are accounted for as equity-settled
plans. When options are settled in cash, the cash paid reduces the contributed surplus to the extent of previously recognized
liability. Amounts paid in excess of previously recognized liability are expensed.
The dilutive effect of outstanding options is reflected in the computation of earnings per share.
m) Financial assets
All financial assets are initially recognized on the consolidated balance sheet at fair value and designated at inception into one
of the following classifications: at fair value through profit or loss (“FVTPL”); and loans and receivables. All financial assets are
recognized initially on the trade date at which the Corporation becomes a party to the contractual provisions of the instrument.
Transaction costs related to financial assets classified as FVTPL are expensed, and for all other financial assets they are
included in the initial carrying amount.
The financial assets classified as FVTPL are cash and cash equivalents, and deposits and restricted cash. Financial assets at
FVTPL include financial assets held for trading and financial assets designated upon initial recognition at fair value through
profit or loss. Financial assets at FVTPL are carried on the consolidated balance sheet at fair value with changes in fair value
recognized in the consolidated statements of comprehensive income.
Financial assets classified as loans and receivables are amounts receivable. Financial assets classified as loans and
receivables are subsequently measured at amortized cost using the effective interest rate method, less impairment. The
amortization and losses arising from impairment are recognized in the consolidated statements of comprehensive income.
Financial assets are no longer recognized when the contractual rights to the cash flows from the asset expire, or the Corporation
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the
risks and rewards of ownership of the financial assets are transferred. Any interest in transferred financial assets that is created
or retained is recognized as a separate asset or liability.
40
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets are assessed at each reporting date in order to determine whether objective evidence exists that the assets
are impaired as a result of one or more events that have had a negative effect on the estimated future cash flows of the asset.
If there is objective evidence that a financial asset has become impaired, the amount of the impairment loss is calculated as
the difference between its carrying amount and the present value of the estimated future cash flows from the asset, discounted
at its original effective interest rate. Impairment losses are recorded in earnings. If the amount of the impairment loss decreases
in a subsequent period and the decrease can be objectively related to an event occurring after the impairment was recognized,
the impairment loss is reversed up to the original carrying value of the asset. Any reversal is recognized in earnings.
n)
Financial liabilities
The financial liabilities classified as other financial liabilities are accounts payable and accrued liabilities, and loans and credit
facilities.
All financial liabilities are initially recognized on the consolidated balance sheet at fair value less directly attributable transaction
costs, and designated at inception as other financial liabilities.
Other financial liabilities are subsequently measured at amortized cost using the effective interest method. The effective interest
method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life
of the financial liability, or, where appropriate, a shorter period.
Financial liabilities are no longer recognized as a liability when the contractual obligations are discharged, cancelled or expire.
o)
Earnings per share
The amount of basic earnings per share is calculated by dividing the comprehensive earnings attributable to equity holders by
the weighted average number of shares outstanding during the period. The diluted earnings per share amount is calculated
giving effect to the potential dilution that would occur if stock options were exercised. The treasury stock method is used to
determine the dilutive effect of stock options.
p)
Provision for future development costs
The Corporation sells land, lots and homes for which it is responsible to pay for future development costs. For the home building
segment, the provision for future development costs represents the costs likely to be incurred on seasonal work and estimated
warranty charges over the one year warranty period. For the land development segment, the provision for future development
costs represents the estimated construction costs related to sold land. This includes all direct construction costs and indirect
costs expected to be incurred during the remainder of the construction period, net of expected recoveries. The provision is
reviewed periodically and when the estimate is known to be different from the actual costs incurred or expected to be incurred,
an adjustment is made to the provision for future development costs and a corresponding adjustment is made to land under
development and/or cost of sales.
q)
Significant accounting judgments and estimates
The preparation of consolidated financial statements requires management to make judgments and estimates that affect the
reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date.
On an ongoing basis, management evaluates its judgments and estimates in relation to revenues, expenses, assets and
liabilities. Management uses historical experience and various other factors it believes to be reasonable under the given
circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different
assumptions and conditions.
41
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
The following are the most significant accounting judgments and estimates made by the Corporation in applying accounting
policies:
Judgments
(i) Revenue Recognition
Revenue recognition for development lands requires judgment to determine when the risks and rewards of ownership
have been transferred. The Corporation reviews each contract and evaluates all the factors to determine the appropriate
transfer date.
(ii) Consolidation
The Corporation applies judgment in determining control over certain limited partnerships where the Corporation holds
less than 50% equity ownership. The judgment is based on a review of all contractual agreements to determine if the
Corporation has control over the activities, projects, financial and operating policies of the limited partnerships.
(iii)
Income Taxes
The Corporation applies judgment in determining the total provision for current and deferred taxes. There are many
transactions and calculations for which the ultimate tax determination and timing of payment is uncertain due to the
interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income.
Given the long-term nature and complexity of the business, differences arising between the actual results and the
assumptions made, or future changes to such assumptions, could necessitate future adjustments to the provision for
current and deferred taxes.
(iv) Net realizable value
NRV for land and housing projects held for development and sale is estimated with reference to market prices and
conditions existing at the balance sheet date. This is determined by the Corporation having considered suitable external
advice from independent real estate appraisers and in light of recent market transactions of similar and adjacent lands
and housing projects in the same geographic area.
(v) Legal contingencies
The Corporation applies judgment as it relates to the outcome of legal proceedings to determine whether a provision
and disclosure in the consolidated financial statements is required. Among the factors considered in making such
judgments are the nature of litigation, claim or assessment, the legal process and potential level of damages, the
progress of the case, the opinions or views of legal advisers and any decision of the Corporation’s management as to
how it will respond to the litigation, claim or assessment.
Estimates
(i)
Provision for future development costs
Changes in the estimated future development costs, provided by third party service providers, directly impact the
amount recorded for the future development liability, cost of sales, gross margin and, in some cases, the value of real
estate under development and held for sale. This liability is subject to uncertainty due to the long time frames involved,
specifically in land development.
(ii)
Impairment of real estate held for development and sale
The Corporation estimates the NRV of real estate held for development and sale at least annually for impairment or
whenever events or changes in circumstances indicate the carrying value may exceed NRV. The estimate is based on
valuation conducted by independent real estate appraisers, other third party advisors, and also based on housing
projects in the same geographic area.
42
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(iii) Valuation of amounts receivables
Amounts receivable are reviewed on a regular basis to estimate recoverability of balances. Any amounts becoming
overdue and any known issues about the financial condition of debtors are taken into account when estimating
recoverability.
3.
STANDARDS AND AMENDMENTS TO EXISTING STANDARDS DURING 2016
The Corporation adopted no new IFRSs and interpretations during 2016.
RECENT ACCOUNTING PRONOUNCEMENTS
The Corporation has reviewed new and revised accounting pronouncements that have been issued but are not yet effective and
determined that the following may have an impact on the Corporation:
IFRS 15, “Revenue from contracts with customers”
On May 28, 2014 the IASB issued IFRS 15, “Revenue from contracts with customers”. IFRS 15 will replace existing standards and
interpretations on revenue recognition. The standard is effective for annual periods beginning on or after January 1, 2018, with early
adoption permitted. The standard outlines a single comprehensive model for entities for revenue recognition arising from contracts
with customers. The Corporation has not yet considered the impact of IFRS 15 on its consolidated financial statements. The
Corporation will assess the impact, if any, and report on this in its 2017 financial statements.
IFRS 9, “Financial instruments”
On November 12, 2009, the IASB issued IFRS 9, “Financial instruments” (“IFRS 9”), which will replace IAS 39 “Financial Instruments:
Recognition and Measurement” (“IAS 39”). The standard is effective for annual periods beginning on or after January 1, 2018, with
early adoption permitted. IFRS 9 applies to classification and measurement of financial assets as defined in IAS 39. It uses a single
approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple classification
options in IAS 39. The Corporation has not yet considered the impact of IFRS 9 on its consolidated financial statements. The
Corporation will assess the impact, if any, and report on this in its 2017 financial statements.
IFRS 16, “Leases”
On January 13, 2016, the IASB published a new standard, IFRS 16, “Leases”. The new standard brings most leases on-balance
sheet for lessees under a single model, eliminating the distinction between operating and finance leases. The standard is effective
for annual periods beginning on or after January 1, 2019, with early application permitted but only if the entity is also applying IFRS
15, “Revenue from contracts with customers”. Under the new standard, a lessee recognizes a right-of-use asset and a lease liability.
The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly. The liability accrues interest. The
Corporation has not yet considered the impact of IFRS 16 on its consolidated financial statements.
43
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
4.
REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Land Under
Development
Land Held
for Future
Development
Home
Building
Limited
Partnership
s
Intra-
segment
Elimination
Total
Consolidated
Total
Gross book value
As at December 31, 2015
138,518
107,495
30,768
276,781
79,997
(5,381)
351,397
Transfers between categories
(22,923)
(2,632)
25,555
-
29,822
296
34,615
64,733
-
244
-
-
-
64,977
(22,521)
(6,466)
(71,538)
(100,525)
(8,212)
1,187
(107,550)
Development
Sold
As at December 31, 2016
122,896
98,693
19,400
240,989
72,029
(4,194)
308,824
Less provision for write-downs
As at December 31, 2015
Sold
Write-down of real estate held for
development and sale
-
-
30,633
(4,947)
4,000
1,990
As at December 31, 2016
4,000
27,676
-
-
-
-
30,633
(4,947)
32,473
-
5,990
2,675
31,676
35,148
-
-
-
-
63,106
(4,947)
8,665
66,824
Net book value
As at December 31, 2015
As at December 31, 2016
138,518
118,896
76,862
30,768
246,148
47,524
(5,381)
288,291
71,017
19,400
209,313
36,881
(4,194)
242,000
During the year ended December 31, 2016, interest of $500 (2015 - $623) was capitalized as a component of the Development costs
above.
During the year ended December 31, 2016, $876 of pre-construction work in progress, relating to certain townhouse projects in the
home building segment, that are not expected to proceed, was expensed to cost of sales in the home building segment. The
Corporation does not intend to build on these townhouse sites but rather has listed the relevant land parcels for sale to third parties.
Land under development: The Corporation closed the sale of a 7 acre development land parcel in September 2016 for $9,437.
Land held for future development: The Corporation closed the sale of a 1,653 acre non-core parcel of land in June 2016. The sale
was contracted for gross proceeds of $1,650.
Land under development: The Corporation closed the sale of a 14 acre development land parcel during the three months ended
March 31, 2016 for $10,150. The Corporation owned a direct 10% undivided interest. This parcel was the final land holding of Genesis
Limited Partnership #6 (“LP6”).
During the year ended December 31, 2016, the Corporation recorded the following write-downs on parcels of land located in and
around Calgary, Alberta: a write-down of $4,000 on land under development to reflect the estimated returns realizable from
completion of development and sale of this land, a write-down of $1,990 to reflect the market value of a non-core undeveloped land
parcel and a write-down of $2,675 to reflect the market value of a non-core undeveloped land parcel belonging to a limited partnership.
44
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
4.
REAL ESTATE HELD FOR DEVELOPMENT AND SALE (continued)
The following table summarizes the sale of the 7 acre development land parcel and the 1,653 acre non-core land parcel.
Sales revenue
Direct cost of sales
Gross margin
Sales commission and misc. expenses/recoveries
Net margin
The following table summarizes the 14 acre development land sale transaction.
Sales revenue, net of $100 rebate
Direct cost of sales
Deferred gain from the original sale of these lands to LP6
Gross margin
Sales commission and misc. expenses
Management fees
Net margin
Genesis’ 11.75% interest in LP 6
Land Under
Development
Land Held
for Future
Development
9,437
(5,936)
3,501
(186)
3,315
1,650
(1,533)
117
(76)
41
Total
11,087
(7,469)
3,618
(262)
3,356
Genesis
1,015
LP 6/7
Group
9,135
Total
10,150
(2,124)
(8,212)
(10,336)
1,187
78
(25)
669
722
2
724
-
923
(238)
(669)
16
(2)
14
1,187
1,001
(263)
-
738
-
738
Genesis Limited Partnership #6 and Genesis Limited Partnership #7 paid a total distribution of $6,978 to their unit holders during the
year ended December 31, 2016.
5.
AMOUNTS RECEIVABLE
Agreements receivable
Other receivables
2016
19,778
1,281
21,059
2015
16,312
922
17,234
Agreements receivable for lot sales are secured by the underlying real estate assets and have various terms of repayment.
Purchasers generally have between 6 and 24 months to pay the balance owing for the purchased lots. Certain agreements receivable
and mortgages receivable, if any, are interest bearing.
45
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
6.
OTHER OPERATING ASSETS
Deposits
Prepayments
Restricted cash
Property and equipment
2016
2,497
262
1,353
907
5,019
2015
3,485
309
2,127
1,653
7,574
Deposits include amounts paid to development authorities as security to guarantee the completion of construction projects under
development and deposits on future land acquisitions. The deposits are refundable upon completion of the related projects and earn
interest at rates approximating those earned on guaranteed investment certificates. The Corporation has also provided letters of
credit as security to guarantee the completion of certain construction projects (see note 14 for additional information). Restricted cash
is held in trust accounts.
7.
a)
INCOME TAXES
Income tax was recognized in the consolidated statements of comprehensive income as follows:
Current income tax
Deferred tax relating to origination and reversal of temporary differences
2016
4,397
(2,865)
1,532
2015
5,671
(2,335)
3,336
b)
Income tax expense differed from that which would be expected from applying the combined statutory Canadian federal and
provincial income tax rates of 27.00% (2015 – 26.01%) to earnings before income taxes. The difference resulted from the
following:
Earnings before income taxes
Statutory tax rate
Expected income tax expense
Utilization of previously recognized tax losses
Benefit of losses not recognized
Effect of tax rate change
Share-based payment transactions
Change in estimate of a deferred tax component
Others
Non-controlling interest
Non-taxable item
Tax expense for the year
2016
7,464
27.00%
2,015
-
63
-
20
(533)
78
(7)
(104)
1,532
2015
4,043
26.01%
1,052
(160)
-
(190)
75
-
(122)
2,681
-
3,336
46
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
7.
c)
INCOME TAXES (continued)
The deferred tax assets (liabilities) of the Corporation were as follows:
Deferred tax assets
Deferred tax liabilities
d)
The components of the deferred tax asset (liability) were as follows:
Real estate held for development and sale
Non-capital loss carry-forwards*
Reserves from land sales
Unamortized financing costs
Other temporary differences
*Non-capital losses carry-forward amounts expire between 2032 and 2036
2016
8,461
(1,904)
6,557
2016
5,562
212
(1,690)
2,419
54
6,557
2015
6,694
(3,001)
3,693
2015
4,589
182
(2,974)
1,923
(27)
3,693
47
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
8.
LOANS AND CREDIT FACILITIES
Secured by agreements receivable and real estate held for development and sale
(a) Land project loan, payable on collection of agreements receivable, bearing interest ranging
from prime +0.75% to prime +1.25% per annum, secured by real estate held for development
and sale with a carrying value of $35,711, due between September 18, 2017 and November 5,
2017.
Secured by real estate held for development and sale
(b) Vendor-take-back mortgage (“VTB”) of $32,000 at 0% per annum is measured at amortized
cost and whose fair value is based on discounted future cash flows, using an 8% discount rate.
The VTB was assumed on January 6, 2015 for $40,000 for the purchase of southeast Calgary
lands and is secured by these lands with a carrying value of $44,334. The VTB is to be paid in
five annual installments of $8,000 each, commencing January 6, 2016 and ending January 6,
2020. The second installment of $8,000 was paid in January 2017.
Unamortized portion of the discount on the VTB.
(c) Demand operating line of credit up to $10,000, bearing interest at prime +1.0% per annum,
secured by real estate held for development and sale with a carrying value of $13,058.
Secured by housing projects under development
(d) Demand operating line of credit up to $6,500, bearing interest at prime +1.5% per annum,
secured by a general security agreement over assets of the home building division.
(e) Lot purchase loan, payable on collection of closing proceeds, bearing interest at prime
+1.5% per annum, secured by home building projects with a carrying value of $1,473 due on
September 11, 2017.
Secured by land held for future development - Limited Partnership
(f) Land loan, bearing interest at the greater of 7.25% or prime +3% per annum, secured by land
held for future development and sale with a carrying value of $26,121 maturing July 1, 2017.
Deferred fees on loans and credit facilities
2016
2015
5,566
16,609
32,000
40,000
(3,494)
(5,679)
-
-
-
1,427
903
3,767
34,975
56,124
8,531
8,125
43,506
(211)
43,295
64,249
(430)
63,819
The weighted average interest rate of loan agreements with financial institutions was 5.77% (December 31, 2015 - 4.75%) based on
December 31, 2016 balances. The VTB at 0% per annum is measured at amortized cost and its fair value is based on discounted
future cash flows using an 8% discount rate, resulting in interest expense of $2,185 (2015 - $2,633) for the year ended December
31, 2016.
During the year ended December 31, 2016, the Corporation received advances of $42,462 for the year (2015 - $45,524) relating to
various existing loan facilities secured by agreements receivable and real estate held for development and sale, bearing interest
ranging from prime + 0.75% to prime + 1.25% per annum, with due dates ranging from March 31, 2017 to December 31, 2017.
48
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
8.
LOANS AND CREDIT FACILITIES (continued)
Based on the contractual terms, the Corporation’s loans and credit facilities are to be repaid within the following time periods
(excluding deferred financing fees):
January 1, 2017 to December 31, 2017
January 1, 2018 to December 31, 2018
January 1, 2019 to December 31, 2019
January 1, 2020 to December 31, 2020
22,990
7,383
6,822
6,311
43,506
The Corporation has various covenants in place with its lenders with respect to certain contracted credit facilities. Such covenants
include credit usage restrictions; cancellation, prepayment, confidentiality and cross default clauses; sales coverage requirements;
conditions precedent for funding; and other general understandings such as, but not limited to, maintaining contracted lot prices,
restrictions on encumbrances, liens and charges, material changes to project plans, and material changes in the Corporation’s
ownership structure. In addition, the home building business segment has a secured revolving operating line repayable on demand,
to be used for home construction and for the acquisition of serviced lots. As at December 31, 2016 and 2015, the Corporation and
its subsidiaries were in compliance with all loan covenants.
9.
SHARE CAPITAL
a) Authorized
Unlimited number of common shares without par value
Unlimited number of preferred shares without par value, none issued
b) Weighted average number of shares
The following table sets forth the weighted average number of common shares outstanding for the year ended December 31, 2016
and 2015:
Basic
Effect of dilutive securities – stock options
Diluted
Year ended December 31,
2016
2015
43,969,313
44,828,422
-
-
43,969,313
44,828,422
In calculating diluted earnings per share for the year ended December 31, 2016, the Corporation excluded all options as they were
cancelled effective June 30, 2016 and their exercise price was greater than the average market price during the six months ended
June 30, 2016. In calculating the diluted earnings for the year ended December 31, 2015, the Corporation excluded all 2,357,000
options as their exercise price was greater than the average market price of the Corporation’s shares during the period.
49
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
9.
c)
SHARE CAPITAL (continued)
Normal course issuer bid
On September 7, 2016, the Corporation announced the renewal of its NCIB. The renewed NCIB commenced on September 12, 2016
and terminates on the earlier of (i) September 11, 2017; and (ii) the date on which the maximum number of common shares are
purchased pursuant to the bid. The Corporation may purchase for cancellation up to 2,194,320 common shares under the renewed
NCIB.
The prior NCIB, which expired on September 9, 2016, allowed the Corporation to purchase for cancellation up to 2,246,310 common
shares. The Corporation purchased a total of 1,124,598 common shares at an average price of $2.81 per share under this NCIB.
The following table sets forth the number of common shares repurchased and cancelled during the year ended December 31, 2016
and 2015 under the NCIB.
Number of shares repurchased and cancelled
Reduction in share capital
Reduction in retained earnings
Reduction in shareholders’ equity
Year ended December 31,
2016
551,796
703
717
1,420
2015
628,598
802
1,085
1,887
The average purchase prices per share for the year ended December 31, 2016 was $2.60 (2015 - $3.00).
10.
STOCK OPTIONS
The Corporation terminated the stock option plan on March 22, 2016 and all outstanding options were subsequently cancelled. The
stock option plan was a plan for employees, officers, and directors of the Corporation to purchase common shares. Vesting provisions
and exercise prices were set at the time of issuance by the Board of Directors. Options vested over a number of years on various
anniversary dates from the date of the original grant. The options were issued at not less than the fair market value of the common
shares at the date of grant and were issued with terms not exceeding five years from the date of grant.
All outstanding stock options were cancelled effective June 30, 2016 and $5,653 of contributed surplus relating to share-based
payments was transferred to retained earnings.
Regular options
Details of outstanding regular options were as follows:
Outstanding – beginning of period
Options expired (1)
Options cancelled
Options settled in cash
Outstanding – end of period
Exercisable – end of period
(1) Holders no longer employees of Genesis
Year ended December 31,
2016
2015
Number of
Options
1,085,000
(918,328)
(166,672)
-
-
-
Weighted
Average
Exercise Price
$4.01
$3.89
$4.71
-
-
-
Number of
Options
1,419,000
(115,000)
(75,000)
(144,000)
1,085,000
848,327
Weighted
Average
Exercise Price
$3.86
$3.53
$3.40
$3.27
$4.01
$3.93
50
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
10.
STOCK OPTIONS (continued)
Performance options
Details of outstanding performance options were as follows:
Year ended December 31,
2016
2015
Number of
Options
1,272,000
(1,272,000)
-
-
Exercise Price
$3.35
$3.35
-
-
-
Number of
Options
1,272,000
-
1,272,000
193,900
Exercise Price
$3.35
-
$3.35
$3.35
3.00 years
Outstanding – beginning of period
Options expired (1)
Outstanding – end of period
Exercisable – end of period
Weighted average remaining contractual life
(1) Holders no longer employees of Genesis
11.
GENERAL AND ADMINISTRATIVE
The general and administrative expense of the Corporation consisted of the following:
Corporate administration
Compensation and benefits
Professional services
Compensation and benefits of the directors and key management personnel were as follows:
Salaries, wages and benefits
Share-based payments
12.
SELLING AND MARKETING
Selling and marketing expenses of the Corporation consisted of the following:
Advertising and marketing
Sales commissions
2016
2,780
8,131
1,019
11,930
2016
1,924
76
2,000
2016
2,020
2,362
4,382
2015
3,040
9,230
1,251
13,521
2015
2,110
287
2,397
2015
3,197
2,208
5,405
51
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
13.
FINANCE EXPENSE
The finance expense of the Corporation consisted of the following:
Interest incurred
Finance expense relating to VTB (note 8)
Financing fees amortized
Interest and financing fees capitalized (note 4)
2016
1,014
2,185
300
(500)
2,999
2015
1,248
2,633
606
(623)
3,864
14.
a)
b)
c)
COMMITMENTS AND CONTINGENCIES
The Corporation has entered into a memorandum of understanding with the Northeast Community Society in 2012, whereby
the Corporation will contribute $5,000 over 10 years for 15-year naming rights to “Genesis Centre for Community Wellness”, a
recreation complex in northeast Calgary ($500 each year, terminating in 2021). The first five installments totaling $2,500 were
paid up to and through to the end of December 2016. The Corporation paid the sixth installment of $500 in February 2017.
The Corporation has entered into an agreement with the City of Airdrie in 2008, whereby the Corporation will contribute $2,000
over 10 years for 40-year naming rights to “Genesis Place”, a recreation complex in the city of Airdrie ($200 each year,
terminating in 2017). The first nine installments totaling $1,800 were paid up to and through to the end of December 2016.
The Corporation has issued letters of credit pursuant to service agreements with municipalities to indemnify them in the event
that the Corporation does not perform its contractual obligations. As at December 31, 2016, the letters of credit amounted to
$4,429 (December 31, 2015 – $6,309).
d) On July 15, 2011, a joint venture (note 16) obtained a credit facility in the amount of $17,000. The Corporation and a joint
venture partner had each provided guarantees for 50% of this facility. The facility was cancelled during 2016.
e)
f)
g)
The Corporation has office and other operating leases with the following annual payments: not later than one year - $671; later
than one year but not later than five years - $60; and later than five years - Nil.
Two former employees have filed a claim against the Corporation on May 27, 2016 alleging wrongful dismissal and seeking
damages. The Corporation is vigorously defending these allegations.
Limited Partnership Land Pool (2007) has a credit facility in the amount of $8,531 included in loans and credit facilities balance
(note 8) in the consolidated financial statements. The Corporation has provided a guarantee for this facility.
15.
FINANCIAL INSTRUMENTS
a) Risks associated with financial instruments
(i) Credit risk
As at December 31, 2016, the Corporation carried Nil (2015 - Nil) as allowance for doubtful accounts.
The Corporation recognizes bad debt expense or recovery relating to amounts receivable on sold lots, net of the return of the real
estate held for development and sale. These lots are taken back into the Corporation’s lot inventory. The difference between an
impaired amount receivable and the related bad debt expense or recovery is the cost of a lot for which impairment has been assessed.
52
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
15.
FINANCIAL INSTRUMENTS (continued)
Recovery of bad debt expense is included in the Corporation’s general and administrative expenses. In order to mitigate credit risk,
the Corporation retains title to sold residential lots until full payment is received. Individual balances due from customers as at
December 31, 2016, which comprise greater than 10% of total amounts receivable, totaled $19,040 from five customers
(December 31, 2015 - $15,777 from three customers).
Aging of amounts receivable was as follows:
Not past due
Past due
(ii) Liquidity risk
2016
20,865
194
21,059
2015
17,234
-
17,234
The following were the contractual maturities of financial liabilities and other commitments as at December 31, 2016:
Financial liabilities
Accounts payable and accrued liabilities
Loans and credit facilities excl. deferred fees (note 8)
Commitments
Lease obligations (note 14)
Naming rights (note 14)
<1 Year
>1 Year
Total
10,195
22,990
33,185
671
700
1,371
34,556
-
20,516
20,516
60
2,000
2,060
22,576
10,195
43,506
53,701
731
2,700
3,431
57,132
At December 31, 2016, the Corporation had obligations due within the next 12 months of $34,556 (2015 - $34,111). Based on the
Corporation’ operating history, its relationship with its lenders and committed sales contracts, management believes that the
Corporation has the ability to continue to renew or repay its financial obligations as they come due.
(iii) Market risk
The Corporation is exposed to interest rate risk to the extent that certain agreements receivable and certain loans and credit facilities
are at a floating rate of interest. A 1% change in interest rates would result in a change in interest incurred of approximately $150
annually on floating rate loans.
53
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
15.
FINANCIAL INSTRUMENTS
b)
Fair value of financial instruments
The fair values of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities approximate their carrying
values as they are expected to be settled within twelve months. The fair value of deposits approximates their carrying value as the
terms of deposits are the comparable to the market terms for similar instruments.
The fair values of the Corporation’s loans and credit facilities and amounts receivable were estimated based on current market rates
for loans of the same risk and maturities.
Fair value measurements recognized in the consolidated balance sheets are categorized using a fair value hierarchy that reflects the
significance of inputs used in determining the fair values. The three fair value hierarchy levels are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices)
or indirectly (i.e. derived from prices); and,
Level 3: Inputs for the asset or liability that is not based on observable market data (unobservable inputs).
The estimated fair value of financial assets and liabilities as at December 31, 2016, are presented in the following table:
Fair value through profit and loss
Cash and cash equivalents
Deposits
Restricted cash
Loans and receivables
Amounts receivable
Other financial liabilities
December 31, 2016
December 31, 2015
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
14,318
14,318
2,497
1,353
2,497
1,353
11,399
3,485
2,127
11,399
3,485
2,127
21,059
20,057
17,234
16,106
Accounts payable and accrued liabilities
Loans and credit facilities, excluding deferred loans
and credit facilities fees (note 8)
10,195
43,506
10,195
43,506
19,219
64,249
19,219
64,249
Cash and cash equivalents, deposits, and restricted cash are classified under Level 1 of the hierarchy.
The fair values of the Corporation’s amounts receivable and of loans and credit facilities were estimated based on current market
rates for loans of the same risk and maturities. These are classified as Level 2 of the hierarchy. Accounts payable and accrued
liabilities are classified under Level 2 of the hierarchy and their fair value approximates the carrying value due to the short term nature
of the financial instruments.
During the years ended December 31, 2016 and 2015, no transfers were made between the levels in the fair value hierarchy.
c) Capital management
The Corporation’s policy is to maintain a sufficient capital base in order to maintain investor, creditor and market confidence and to
sustain future development of the business. The Corporation is not subject to externally imposed capital requirements.
The Corporation manages its capital structure and makes adjustments to it in light of changes in regional economic conditions and
the risk characteristics of the underlying real estate industry within that region.
54
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
15.
FINANCIAL INSTRUMENTS (continued)
The Corporation considered its capital structure at the following dates to specifically include:
Loans and credit facilities (note 8)
Shareholders’ equity
16.
JOINT VENTURE
2016
43,295
205,751
249,046
2015
63,819
212,125
275,944
The Corporation formed the JV on April 30, 2010, for the purpose of acquiring, developing and selling certain real estate. The
Corporation is a 50% partner in the JV and the following tables summarize the financial information of the JV.
December 31,
Assets
Amounts receivable
Cash and cash equivalents
Total assets
Liabilities
Accounts payable and accrued liabilities
Provision for future development costs
Total liabilities
Net assets
Corporation’s share of net assets (50%)
Deferred gain
Carrying amount on the consolidated balance sheets
2016
237
1,204
1,441
442
1,787
2,229
(788)
(394)
(10)
(404)
2015
11,687
2,127
13,814
1,661
6,241
7,902
5,912
2,956
(102)
2,854
As at December 31, 2016, the carrying amount is grouped with accounts payable and accrued liabilities on the consolidated balance
sheets.
55
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
16.
JOINT VENTURE (continued)
Revenues
Cost of sales
General and administrative
Net finance (expense) income
(Loss) earnings being comprehensive (loss) earnings
Corporation’s share of (loss) earnings and comprehensive (loss) earnings (50%)
Deferred gain recognized
Deferred margin recognized on JV lots sold
Amount on consolidated statements of comprehensive income
Cash flows from operating activities
Cash flows (used in) financing activities
Net change in cash and cash equivalents
Year ended December 31,
2016
32
(314)
(282)
(14)
(4)
(300)
(150)
92
144
86
2015
12,172
(9,115)
3,057
(679)
99
2,477
1,239
1,855
1,144
4,238
Year ended December 31,
2016
5,477
(6,400)
(923)
2015
12,212
(10,085)
2,127
56
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
16.
JOINT VENTURE (continued)
At December 31, 2015
Share of net income in JV
Deferred gain recognized
Deferred margin from JV on lots sold
Distribution received
At December 31, 2016
At December 31, 2014
Share of net income in JV
Deferred gain recognized
Deferred margin from JV on lots sold
Distribution received
At December 31, 2015
Investment in JV
Income from JV
2,854
(150)
92
-
(3,200)
(404)
3,560
1,239
1,855
-
(3,800)
2,854
-
(150)
92
144
-
86
-
1,239
1,855
1,144
-
4,238
The Corporation’s transactions with the JV are limited to the purchase of home building lots. During the year ended December 31,
2016, the JV sold no lots (2015 - Nil) to Genesis Builders Group Inc., a wholly owned subsidiary of the Corporation. The Corporation's
accounts payable and accrued liabilities as at December 31, 2016 was Nil (December 31, 2015 - Nil), related to the purchase of
home building lots.
The Corporation deferred $13,167 of gain when it contributed its share of land to the JV in 2010. As at December 31, 2016, the
Corporation had realized $13,157 (2015 - $13,065) of that amount as a result of sales through its home building business segment
and directly to third parties.
57
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
17.
SEGMENTED INFORMATION
The income producing business units of the Corporation reported the following activities for the year ended December 31, 2016 and
2015:
Year ended December 31, 2016
Revenues
Genesis
49,704
LP
9,204
Land Development Segment
Intrasegment
Elimination
Total
Home
Building
Segment
(705)
58,203
83,249
Direct cost of sales
Write-down of real estate held
for
development and sale
Gross margin
(29,696)
(8,244)
1,187
(36,753)
(69,416)
(5,990)
(2,675)
-
(8,665)
-
14,018
(1,715)
482
12,785
13,833
Income from JV
86
-
-
86
-
G&A, selling & marketing and
net finance expense or income
Earnings (loss) before income
taxes and non-controlling
interest
Segmented assets
Segmented liabilities(1),(2)
Segmented net assets(1),(2)
(7,277)
(3,135)
669
(9,743)
(9,497)
6,827
(4,850)
1,151
3,128
258,583
64,658
193,925
36,971
36,145
826
(26,677)
268,877
(27,543)
73,260
866
195,617
4,336
24,929
8,692
16,237
Intersegment
Elimination
(25,495)
25,495
-
-
-
-
-
(4,811)
(4,622)
(189)
Year ended December 31, 2015
Revenues
Direct cost of sales
Write-down of real estate held
for development and sale
Gross margin
Income from JV
G&A, selling & marketing and
net finance expense or income
Earnings (loss) before income
taxes and non-controlling
interest
Segmented assets as at
December 31, 2015
Segmented liabilities as at
December 31, 2015(1),(2)
Segmented net assets as at
December 31, 2015(1),(2)
Land Development Segment
Genesis
35,719
(20,694)
LP
(542)
(10)
(4,365)
(8,025)
10,660
4,238
(8,577)
-
(8,662)
(2,082)
6,236
(10,659)
Intrasegment
Elimination
-
-
-
-
-
-
-
Total
35,177
(20,704)
(12,390)
2,083
4,238
Home
Building
Segment
102,846
(84,326)
Intersegment
Elimination
(18,935)
20,841
-
-
(12,390)
18,520
1,906
-
-
-
(10,744)
(11,960)
(4,423)
6,560
1,906
4,043
290,431
48,209
(31,801)
306,839
35,683
(11,477)
331,045
86,183
34,794
(26,704)
94,273
22,917
(11,136)
106,054
204,248
13,415
(5,097)
212,566
12,766
(341)
224,991
(1) Segmented liabilities under the Genesis land segment include $287 due to the home building segment (December 31, 2015 - $9,095 due from
the home building segment to the land development segment)
(2) Segmented liabilities under the LP segment is comprised of accounts payable and accrued liabilities and includes $27,543
(December 31, 2015 - $26,704) due to Genesis.
58
Total
115,957
(80,674)
(8,665)
26,618
86
(19,240)
7,464
288,995
77,330
211,665
Total
119,088
(84,189)
22,509
4,238
(22,704)
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
18.
RELATED PARTY TRANSACTIONS
Transactions occurred in the year ended December 31, 2016 with the following related parties:
a) A corporation controlled by an officer and director,
b) A corporation which is a significant shareholder of Genesis.
Genesis incurred costs of $379 from the two entities for the year ended December 31, 2016 (2015 - Nil). For the year ended December
31, 2016, $368 (2015 - Nil) related to fees for services and $11 (2015 - Nil) related to reimbursement of travel and other costs. Of
these amounts, Nil (2015 - Nil) is in accounts payable and accrued liabilities as at December 31, 2016.
19.
CONSOLIDATED ENTITIES
The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries, as well as the
consolidated revenues, expenses, assets, liabilities and cash flows of limited partnership entities that the Corporation controls. The
Corporation has less than 50% equity ownership in these limited partnership entities; however, the Corporation has control over
these entities’ activities, projects, financial and operating policies due to contractual arrangements. As such, the relationship between
the Corporation and the limited partnership entities indicates that they are controlled by the Corporation. Accordingly, the accounts
of the limited partnerships have been consolidated in the Corporation’s financial statements. The Corporation is the general partner
in four limited partnership group structures.
Limited Partnership Land Pool (2007) (“LPLP 2007”) has a loan amounting to $26,590 (2015 - $25,143) due to the Corporation. The
loan has been secured by a second mortgage on a property owned by LPLP 2007. The loan agreement has also been registered as
a caveat on the titles of two properties held by LPLP 2007.
59
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
19.
CONSOLIDATED ENTITIES (continued)
All entities are incorporated in Canada and are listed in the following table:
Name
Land Development
Genpol Inc.
Genpol LP
1504431 Alberta Ltd.
Genesis Sage Meadows Partnership
Genesis Land Development (Southeast) Corp.
Polar Hedge Enhanced Income Trust
No. 114 Corporate Ventures Ltd., Buena Vista Ranches Ltd.
Home Building
Single-Family and Townhouses
Genesis Builders Group Inc.
The Breeze Inc.
Generations Group of Companies Inc.
Laurels by Genesis Inc.
Newport at Canals Landing Inc.
Ashbury at Saddlestone Inc.
Hutton at Bayview Inc.
Joint Venture
Kinwood Communities Inc.
Limited Partnerships
LP 4/5 Group
Genesis Limited Partnership #4 (1)
Genesis Limited Partnership #5, GLP5 GP Inc., GLP5 NE Calgary Development Inc.
Genesis Northeast Calgary Ltd.
LP 6/7 Group
Genesis Limited Partnership #6
Genesis Limited Partnership #7, GP GLP7 Inc., GLP7 Subco Inc.
LP 8/9 Group
Genesis Limited Partnership #8 (1)
Genesis Limited Partnership #9, GP GLP9 Inc., GLP9 Subco Inc.
GP GLP8 Inc.
LPLP 2007 Group
Limited Partnership Land Pool (2007)
GP LPLP 2007 Inc.
GP RRSP 2007 Inc., LPLP 2007 Subco Inc., GP RRSP 2007 #2 Inc.
LPLP 2007 Subco #2 Inc., LP RRSP Limited Partnership #1
LP RRSP Limited Partnership #2
% equity interest as at
December 31, 2016
December 31, 2015
100%
100%
0.0002%
99.9998%
100%
100%
Dissolved
100%
100%
Dissolved
100%
100%
100%
100%
50%
0.001%
0%
100%
11.75%
0%
53.63%
0%
100%
0.023%
100%
0%
0%
0%
100%
100%
0.0002%
99.9998%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
50%
0.001%
0%
100%
11.75%
0%
53.63%
0%
100%
0.023%
100%
0%
0%
0%
(1)The allocation of profit or loss is 0% at December 31, 2016 and 2015 in accordance with the terms of the limited partnership agreement.
60
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
19.
CONSOLIDATED ENTITIES (continued)
The following tables summarize the information relating to the Corporation's subsidiaries that have material non-controlling interests
and may include inter-group balances that are eliminated on consolidation and become a component of the net non-controlling
interest:
BALANCE SHEETS
Assets
LP 4/5
LP6/7
LP 8/9
LPLP 2007
Total
December 31, 2016
Real estate held for development and sale
8,186
Amounts receivable
Other operating assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Due to related parties
Total liabilities
Net assets (liabilities)
Non-controlling interest (%)
-
-
-
8,186
-
-
-
427
427
7,759
100%
-
-
-
-
-
-
-
-
-
-
-
88.25%
2,574
26,121
36,881
-
-
1
-
50
39
-
50
40
2,575
26,210
36,971
-
-
-
526
526
2,049
100%
8,514
8,514
2
86
26,590
35,192
(8,982)
100%
2
86
27,543
36,145
826
Assets
Real estate held for development and sale
7,943
8,212
2,574
28,795
47,524
LP 4/5
LP6/7
LP 8/9
LPLP 2007
Total
December 31, 2015
Amounts receivable
Other operating assets
Cash and cash equivalents
Total assets
Liabilities
Loans and credit facilities
Customer deposits
Accounts payable and accrued liabilities
Due to related parties
Total liabilities
Net assets (liabilities)
Non-controlling interest (%)
-
-
-
7,943
-
-
-
159
159
7,784
100%
-
-
442
8,654
-
-
-
895
895
7,759
88.25%
-
-
1
2
197
43
2
197
486
2,575
29,037
48,209
-
-
-
507
507
2,068
100%
8,062
8,062
2
26
25,143
33,233
(4,196)
100%
2
26
26,704
34,794
13,415
61
GENESIS LAND DEVELOPMENT CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)
19.
CONSOLIDATED ENTITIES (continued)
SUMMARIZED INCOME STATEMENTS
Revenues
Net loss being comprehensive loss
LP 4/5
17
(23)
LP6/7
9,137
(21)
Non-controlling interest (%)
100%
88.25%
100%
100%
Year ended December 31, 2016
LP 8/9
LPLP 2007
-
(19)
-
(615)
100%
(4,787)
(4,850)
50
54
Total
9,204
Total
(542)
(9,434)
(10,659)
100%
Year ended December 31, 2015
LP 8/9
LPLP 2007
Revenues
Net earnings (loss) being comprehensive income
(loss)
LP 4/5
19
11
LP6/7
(615)
(621)
Non-controlling interest (%)
100%
88.25%
SUMMARIZED STATEMENT OF CASH FLOWS
Cash flows from (used in) operating activities
Cash flows used in financing activities
Net decrease in cash and cash equivalents
Cash flows from financing activities
Net increase in cash and cash equivalents
20.
SUBSEQUENT EVENTS
LP 4/5
-
-
-
LP6/7
7,296
(7,738)
(442)
Year ended December 31, 2016
LP 8/9
LPLP 2007
-
-
-
(4)
-
(4)
Year ended December 31, 2015
Total
7,292
(7,738)
(446)
LP 4/5
LP6/7
LP 8/9
LPLP 2007
Total
-
-
3
3
-
-
6
6
9
9
The Corporation paid the second installment of $8,000 on the VTB in January 2017. The balance on the VTB after this payment,
excluding the unamortized portion, is $24,000.
The Corporation amended the term of its head office lease agreement extending the term by 38 months to September 30, 2020. The
total basic rent over the extension period is $364.
The Corporation entered into a firm agreement to sell 1,476 acres of non-core land for $9,000. The sale is expected to close in May
2017.
62
OFFICERS
TRANSFER AGENT
STEPHEN J. GRIGGS
Interim Chief Executive Officer
KIRSTEN RICHTER
Interim Chief Financial Officer
PARVESHINDERA SIDHU
President, Genesis Builders Group Inc.
and Vice-President, Home Building
ARNIE STEFANIUK
Vice- President, Land Development
BRIAN WHITWELL
Vice-President, Land and Financings
DIRECTORS
STEPHEN J. GRIGGS
Chair of the Board
STEVEN GLOVER
Lead Director
YAZDI BHARUCHA
Director
MICHAEL BRODSKY
Director
MARK W. MITCHELL
Director
LOUDON OWEN
Director
IAIN STEWART
Director
Computershare Trust Company of Canada
600, 530 - 8th Avenue SW
Calgary, AB T2P 3S8
STOCK EXCHANGE
Toronto Stock Exchange
Stock Symbol – GDC
AUDITORS
MNP LLP
1500, 640 - 5th Avenue SW
Calgary, AB T2P 3G4
CORPORATE COUNSEL
Norton Rose Fulbright Canada LLP
Suite 3700, 400 - 3rd Avenue SW
Calgary, AB T2P 4H2
CORPORATE OFFICE
Genesis Land Development Corp.
7315 - 8th Street NE
Calgary, AB T2E 8A2
Main 403 265 8079
Email info@genesisland.com
www.genesisland.com