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

Calloway Real Estate Investment Trust

August 02, 2006 16:42 ET

Calloway Announces Substantial Progress on 2006 Growth

TORONTO, ONTARIO--(CCNMatthews – Aug. 2, 2006) –

Attention Business Editors:

Calloway Real Estate Investment Trust (TSX:CWT.UN) announced today that it has invested, or committed to invest, approximately $444 million of new investments, of which $344 million closed during the six months ending June 30, 2006 and an additional $99 million during the month of July. One remaining property valued at $1 million is committed to close in early August 2006.

Mr. Simon Nyilassy, President and CEO of Calloway, said, "The pace of our acquisition, expansion and development activity during the first half of the year reinforces Calloway's position as one of the fastest growing REITs in Canada. I now anticipate that Calloway's asset base will increase by approximately $675 million compared to the start of the year, representing growth of more than 27%."

Of the new investments that Calloway has invested, or committed to invest, Mr. Nyilassy added, "Not only are we managing to exceed our growth expectations, but we have achieved this by placing over 75% of our acquisitions in the major metropolitan markets of Toronto (6 properties), Montreal, Ottawa-Hull, and Calgary. Our existing properties also provide future growth opportunities - this year we have expanded or developed 35 of these properties.

These transactions will add approximately 2.4 million square feet of leased and future expansion space. Leased space includes some of Canada's largest and most successful retailers, such as Wal-Mart (4), Canadian Tire (2), The Brick , Home Depot, Rona, Sobeys, Zellers, Winners, Future Shop, and Staples."

Closed Acquisitions

During the second quarter, Calloway closed on $186.4 million of its previously announced acquisitions. The acquired properties are located in the Greater Toronto Area (4), Ontario, British Columbia and 50% interests in Quebec and Newfoundland, and comprise of 908,777 square feet of gross leaseable area.

For the six months ended, investments in newly acquired properties total $253.1 million in thirteen (13) properties, of which eleven (11) properties are income producing and two (2) are land purchases. These properties are comprised of approximately 1,171,000 square feet of existing leaseable area, 315,000 square feet of future development and 42,000 square feet of expansion.

The eleven shopping centres were acquired for a total of $230.7 million, generating $16.0 million annually in net revenues and providing a 7.1% yield.

The acquisitions were financed with the issuance of 815,348 limited partnership units, convertible into Trust units on a one-for-one basis, for proceeds of approximately $19.3 million, the assumption of $62.4 million in debt, and the balance in cash.

Expansions and New Developments

During the second quarter, the REIT completed 72,655 square feet of expansions and new developments within its existing portfolio. The total investment from these activities was approximately $17.0 million.

For the six months ending, Calloway has completed 418,696 square feet of expansions and new developments, generating annual net revenue of $6.2 million and a yield of 8.3%. Of this retail space, the REIT developed 250,778 square feet and Smart Centres developed the balance. The total investment was approximately $74.0 million and was in part financed by the issuance of 745,618 REIT units and 185,589 limited partnership units totaling $15.9 million.

Loans

Calloway committed to a four-year, 7.25% mezzanine financing of $7.2 million to SmartCentres on a Quebec property. During the quarter, $6.8 million was advanced. The commitment provides Calloway with options to acquire 50% of the property and SmartCentres with options to put its 50% interest. The option price is fixed at 7% for a portion of the property and the balance is based on the appropriate term Gov't of Canada bonds plus a spread. If Calloway acquired its 50% interest in the property an additional 125,000 feet of leaseable area would be added to the portfolio.

For the six months ended, financing commitments to SmartCentres total $40.6 million for three mezzanine loans on properties located in Ontario (2) and Quebec. Advances of $16.4 million have been made under these commitments with an estimated yield of 7.2%. Calloway has the right to acquire a 50% interest in each of these centres with a total leaseable area of approximately 214,000 square feet upon completion.

Under Contract/Negotiation

Calloway has under contract $264 million in acquisitions and expansions/developments that are expected to close prior to year-end. As at June 30, 2006, Calloway had also waived conditions on agreements to acquire 50% interests in two shopping centres located in the Greater Toronto Area and a 100% interest in a development property in Ontario. The 50% interests of these two shopping centres closed during July 2006 and will yield 6.3% to the REIT. Calloway has also entered into an agreement with SmartCentres to purchase the remaining 50% interests, conditional in the vendor's favor for a period of six months. The development property is expected to close in August 2006.

Calloway is also currently in negotiations to commit a further $68 million in mezzanine loans on two (2) properties located in Toronto and Quebec. The financing commitments are anticipated to close prior to year-end.

Mr. Nyilassy also said, "In aggregate, we are achieving yields on the completed acquisitions and expansions of 7.1% & 8.3%, respectively. While yields on new acquisitions continue to decline, we anticipate that we will be able to maintain an average aggregate return of approximately 7% for all of our 2006 acquisitions. In addition to our acquisition activities, we still have 3.8 million square feet of additional expansion capabilities remaining on our existing sites, an equivalent to 15 new full-size shopping centres. Approximately 547,000 square feet of this has been pre-leased, much of which will be completed by the end of the year, resulting in further accretive returns to our unitholders, well in excess of 8%."



In aggregate, Calloway's 2006 investing activities to date may be
summarized as follows (in millions of dollars):

June 30, Under
Q2 2006 Contract(1) Total
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Acquisitions $186 $253 $177(2) $430
Expansions/Developments $ 17 $ 74 $ 87 $161
Loans (net) $ 6 $ 17 $ 68 $ 85
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Total $209 $344 $332 $676
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2006

Appointment of Vice President, Acquisitions

In July, a VP of Acquisitions was added to Calloway's management team. Mr. Daniel J. Kumer has been appointed to the position of Vice President, Acquisitions of the Trust. Prior to joining Calloway, Mr. Kumer was Vice President, Acquisitions of a Toronto-based retail real estate investment and services company listed on the Toronto Stock Exchange, and then Director, Land Development of a Toronto-based privately-held shopping centre development company.

Mr. Kumer holds a BA degree from The University of Western Ontario, an MBA degree from the Schulich School of Business at York University, and an LL.B. degree from Osgoode Hall Law School of York University. Mr. Kumer is located in Calloway's Toronto offices.

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.

Contact Information

  • Calloway Real Estate Investment Trust
    Simon Nyilassy
    President and CEO
    (905) 326-6400 ext. 7649

    or

    Calloway Real Estate Investment Trust
    Bart Munn
    Chief Financial Officer
    (905) 326-6400 ext. 7631