One of Alberta’s biggest residential builders has obtained court-ordered protection from its creditors.
The Medican group of companies has until June 11 to restructure its affairs. The May 26 court order, which was issued pursuant to the Companies’ Creditors Arrangement Act, also authorizes it to continue operations and borrow $1.5 million to meet immediate cash-flow needs.
The order applies to more than three dozen companies under the Medican umbrella. These include Medican (Red Deer — Michener Hill) Developments Ltd., Axxess (Sylvan Lake) Developments Ltd., Medican (Sylvan Lake) Developments Ltd., Sylvan Lake Marina Developments Ltd. and Watercrest (Sylvan Lake) Developments Ltd.
Medican is working on the first phase of its four-storey Sierras of Michener Hill in Red Deer, with a 38-unit duplex community also planned. It’s completed the first phase of its Axxess Sylvan Lake condominium, and had planned to build another condominium in the same area under the name Watercrest.
A Medican condominium was also planned for the Sylvan Lake Marina, with another slated for other lands at Sylvan Lake.
In a sworn affidavit filed in connection with the court order, Medican founder Wes Reinheller blamed his companies’ troubles on “significant cost overruns,” a decline in the real estate market, high financing costs and poor management decisions after he and his wife, Janice, reduced their involvement in the business.
The companies’ combined financial statements indicate a net loss of $1.47 million for the fiscal year ended March 31, 2009, as compared with $2.77 million in earnings the previous year.
“The Medican Group’s funds are insufficient to continue its operations,” said Reinheller in his affidavit.
He said the restructuring process, which is being done under the supervision of a court-appointed monitor, will involve a review of the viability of each of Medican’s projects.
“The Medican Group’s core business is sound,” said Reinheller.
Founded in 1974 as a concrete company, Medican expanded into residential construction. By 2007, it was involved in more than 30 projects and had net equity estimated at more than $90 million.
Since 1974, Medican has constructed more than 10,000 homes in Western Canada. It develops its own projects and also builds for other developers on a contract basis, and employs 128.