Reid Built Homes, affiliates failed after revenues plunged and debt payments doubled
Alberta builder and related companies owe $200 million to about 700 creditors
Reid Built Homes was once a prosperous builder and developer that sold hundreds of new houses every year, but court records show the family-owned business and its affiliates failed after revenues plunged at a time they were dealing with “unsustainable” debt.
Reid Investments Inc., the parent company controlled by Emilie Reid, was forced into receivership by its lender, Royal Bank, which is seeking $64 million from the businesses, along with another $2 million from Emilie Reid.
The group of companies formed by Art Reid, Emilie’s late husband, in the early 1980s owe roughly 700 creditors — including banks, municipal governments, contractors, homeowners and employees — $200 million, receivership records show. The court-appointed receiver, Alvarez and Marsal, plans to begin the process of selling the Reid group’s assets next month.
Home sales and revenues had been falling at the home builder and developer since at least 2014, court records state. The Reid group of companies collected $102 million in revenues selling 213 homes last year, a more than 30 per cent drop in activity over 2015 levels.
The receiver said in court records the Reid group’s margins on home sales were also slipping, “which is consistent with sluggish market conditions” and falling home prices in Alberta at the time.
While its books were being slammed by weakened housing demand during a recession, the home builder’s interest payments more than doubled to $11.6 million, indicating “an unsustainable debt load and leverage,” the receiver said.
Two subsidiaries — Reid Capital and Reid Worldwide — were involved in a number of ventures and developments in 2016 and 2017 that accounted for a “large portion” of the debt the Reid group amassed in the past two years, the documents state.
Dave Abbey, who was the sales and marketing manager at Reid Built Homes in Calgary before the receivership, told Postmedia in October that two senior executives were “removed” amid revelations Reid Worldwide was overextended in debt.
Court records show banks, other lenders and municipal governments — considered secured creditors, which have priority in receiverships — are seeking $122.5 million, including $44.5 million owed by Reid Worldwide.
Debt levels are “one of the primary reasons for the financial difficulties and eventual insolvency of the Reid group,” the court records state.
While home sales improved at Reid-Built’s Calgary and Edmonton operations leading up to the receivership, the company still could not support its debt, the records show.
George Grosul, who led Reid-Built Homes in Calgary from 1997 to 2014, said he was surprised the company is now in receivership.
Grosul said he hired most of the staff now out of work in Calgary, and knew many of the contractors who are lining up to be paid for outstanding bills.
“Reid Built has always been a solid, solid company,” said Grosul, who at one point owned the Calgary division but sold it back to the Reid group for personal reasons.
“They’d be the last that I would ever guess that this would have happened to.”
Rod Martinez, general manager of St. Albert-based High Standard Landscape, said he started working with Reid Built in 2009 and for years believed it was a reliable client. His company now claims the home builder owes it $222,000.
“It felt like it was a good client that paid on time, and they always had work; sometimes they had more work than one contractor could handle,” Martinez said. “It was a good client, until it wasn’t.”
Reid Built has always been a solid, solid company. They’d be the last that I would ever guess that this would have happened to.