Calloway Real Estate Investment Trust
TSX : CWR.UN
TSX : CWT.DB

Calloway Real Estate Investment Trust

May 30, 2007 07:00 ET

Calloway Announces New Acquisitions, Development Joint Venture With SmartCentres

TORONTO, ONTARIO--(CCNMatthews – May 30, 2007) –

Calloway Real Estate Investment Trust (TSX:CWT.UN) announced today that it has entered into conditional agreements with SmartCentres with respect to the acquisition of interests in 6 properties. Calloway's ownership of retail space will increase by approximately 1.1 million square feet, at an estimated cost of $252 million, on full build out of these properties.

Following completion of the transaction, Calloway's owned pipeline of future developments will increase to 6.3 million square feet and it will own options to acquire a further 2.2 million square feet. As a result, Calloway's existing portfolio of retail space will increase by over 44%, to 27.8 million square feet from the current 19.3 million square feet, upon full build out and after exercising all purchase options.

Located in the Greater Toronto Area (5) and British Columbia (1), the 6 new centres will reflect the trademarks of Calloway quality. Wal-Mart will anchor in five of the six centres and four of the centres will have multiple anchors, including Wal-Mart. Two of the properties, in Aurora and Oshawa, will each comprise over half a million square feet of leased area on completion and will be home to new Wal-Mart Supercentres. Development of these centres has already commenced and pre-leasing interest is strong at approximately 850,000 square feet, or 82%.

Also included is a planned 370,000 square foot shopping centre in British Columbia, which will be Calloway's first-ever joint development with SmartCentres (Calloway's 50% interest will be 185,000 square feet).

The 6 properties, described in more detail below, comprise 2 operating shopping centres, in which Calloway will own approximately 137,000 square feet of leased area and 7,000 square feet of expansion potential, and 4 developments with almost 1 million square feet of potential leaseable area. Aggregate investments will be approximately $252 million, with an initial payment of $84 million and the balance payable as the properties are developed. The properties are expected to be substantially completed over the next 1 to 3 years.

Mr. Simon Nyilassy, President and CEO of Calloway said "these transactions take Calloway to a new level. In the past, Calloway has acquired lands and acquired completed shopping centres from SmartCentres, but this will be the first time we will partner together from the start of a development. This represents a new direction to continue our accretive growth." He adds, "in addition, the acquisition of 5 excellent properties in the GTA expands our dominant presence in this key Canadian market. On completion of these developments, we will have over 8.3 million square feet of leaseable area in the greater Toronto market in 39 centres (including purchase options)."



Details of the properties to be acquired are as follows:

Operating Properties
--------------------

Location Leaseable Area (at share) Anchor Tenants Lease (L) or
-------- -------------- -------------- ------------
Purchase (P)
------------
Occupied Future Total
-------- ------ -----
Richmond Hill, 131,043 4,985 136,028 Wal-Mart, 50% (L)
Ontario Dominion
Toronto, Ontario 6,294 2,200 8,494 Wal-Mart(1) 100% (L)
----------------------------
Total 137,337 7,185 144,522
----------------------------
----------------------------

Development Properties
----------------------

Location Leaseable Area (at share) Anchor Tenants Lease (L) or
-------- -------------- -------------- ------------
Purchase (P)
------------
Occupied Future Total
-------- ------ -----
Aurora, Ontario - 259,382 259,382 Wal-Mart, Rona 50% (L)
Oshawa Ontario - 260,235 260,235 Wal-Mart, 50% (L)
Lowe's
Salmon Arm, BC - 185,279 185,279 Wal-Mart, 50% (P)
Home Depot(1)
Aurora (south), - 257,890 257,890 TBD 50% (P)(2)
Ontario
----------------------------
Total - 962,786 962,786
----------------------------

----------------------------
----------------------------
OVERALL TOTAL 137,337 969,971 1,107,308
----------------------------
----------------------------
(1) Shadow Anchor
(2) Calloway will have an option to purchase a 50% interest in the
property upon substantial completion, pursuant to a loan agreement
with SmartCentres


The initial investment comprises $43 million for the operating properties, at an estimated yield of approximately 6.1%, $27 million for the undeveloped land and a $13.5 million mezzanine loan. The transaction will be financed in part by the assumption of debt in the amount of approximately $22 million (net of a mark-to-market adjustment) with the balance paid from Calloway's committed operating lines. Mr. Nyilassy also commented, "in addition to the strategic importance of this transaction to Calloway, the financial results are expected to be immediately accretive."

The 1 million square feet in future developments will be completed by SmartCentres under development agreements. Calloway estimates that it will invest an additional $167 million in these properties at an estimated average yield of over 6.6%. SmartCentres will have the option to provide up to $50 million in financing for these developments, by subscribing for REIT units or exchangeable LP units at prices per unit, ranging from $29.55 to $33.00. Interests in 4 properties, for initial consideration of $62 million, will be by way of prepaid leases, where Calloway will have the unfettered right to acquire the free-hold interest at the end of the term.

In addition, Calloway has now executed a letter of intent with respect to the 2 previously announced acquisitions from SmartCentres in the United States, which will represent Calloway's first investments internationally.

Calloway has also agreed, as part of a separate transaction, to increase funding available on three existing mezzanine loan transactions with SmartCentres by approximately $20 million, at a yield of 7.25%, to finance current and future development costs.

This press release contains "forward looking statements" subject to various significant risks and uncertainties which may cause actual results, performances and achievements of Calloway to be materially different from any future results, performances or achievements, expressed or implied by such forward looking statements. Such risk factors include, but are not limited to, risks associated with real property ownership, availability of cash flow, restrictions on redemption, general uninsured losses, future property acquisition, environmental matters, tax related matters, debt financing, Unitholder liability, potential conflicts of interest, potential dilution, and reliance on key personnel. Calloway cannot assure investors that actual results will be consistent with these forward looking statements and Calloway assumes no obligation to update or revise them to reflect new events or circumstances.

The Toronto Stock Exchange neither approves nor disapproves of the contents of this Press Release.

Contact Information

  • Calloway Real Estate Investment Trust
    Simon Nyilassy
    President and Chief Executive Officer
    (905) 326-6400