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

Calloway Real Estate Investment Trust

March 01, 2007 19:42 ET

Calloway Real Estate Investment Trust: Fourth Quarter and Year End Results

TORONTO, ONTARIO--(CCNMatthews – March 1, 2007) –

Attention Business/Financial Editors:

Calloway Real Estate Investment Trust (TSX:CWT.UN) is pleased to report its results for the quarter and year ended December 31, 2006.

Highlights of the Quarter

- Portfolio occupancy maintained at 99% level.

- Committed to $57.1 million in mezzanine financing of which advanced $8.0 million was funded.

- Completed the acquisition of 100% freehold and leasehold interests in 14 retail properties in the seventh major transaction with SmartCentres, comprising 1.3 million square feet of leaseable area and 1.5 million square feet of future development, for $383.4 million.

- Internalized property management for $14.4 million.

- Issued $250 million of unsecured senior debentures at 5.37% due October 12, 2016.

- Issued 7,680,000 trust units for $29.30 per unit for gross proceeds of $225 million and net proceeds of $216 million.

- Expanded existing centres by an additional 136,545 square feet of leaseable area at a cost of $31.4 million.

As at December 31, 2006, Calloway's portfolio consists of 18.4 million square feet of built gross leaseable area and an ownership interest in 122 properties. The portfolio has a book value of $3.0 billion.

Simon Nyilassy, President and CEO, said, "2006 was another outstanding year for us as our operating portfolio grew by 3.8 million square feet, representing a 26% increase over 2005. The growth is primarily a result of our strong relationship with SmartCentres, Canada's leading developer of large format, unenclosed shopping centres. We expect this relationship will continue to contribute to Calloway's success and growth in future years.

We have assembled an outstanding portfolio of newly constructed, well-anchored shopping centres that provides the bedrock for our future. We will continue to grow our portfolio and to capitalize on the strength of our internal development pipeline, which increased by over 39% during the year for 2006, to 5.3 million square feet, equivalent of 21 new full-size shopping centres. Upon completion of this pipeline, Calloway's portfolio would increase from 18.4 million square feet to 23.7 million square feet."

During December 2006, Calloway completed the acquisition of 100% freehold and leasehold interests in 3 retail properties, partial interests in 5 retail properties and interests in 6 development lands, comprising 1.3 million square feet of built leaseable area and 1.5 million square feet of future development potential, for $383.4 million. The purchase price was satisfied by the assumption of existing debt of $173.4 million, the issuance of 789,444 Class B Series 2 LP Units and 34,130 Class D Series 2 LP Units for $24.1 million and the balance in cash.

Effective December 31, 2006, Calloway internalized property management for the majority of its portfolio, at a cost of $14.4 million payable to SmartCentres, the previous manager.

Calloway completed the issuance of $250 million of ten-year unsecured senior debentures at 5.37%, due on October 12, 2016. During the quarter, Calloway also completed the issuance of 7,680,000 trust units for $29.30 per unit for gross proceeds of $225 million. The net proceeds to Calloway, after deducting the underwriters' fee, were $216 million. The proceeds of these offerings were used by Calloway to pay down outstanding credit facilities, to finance subsequent acquisitions and development activities and for general trust purposes.

During the quarter, with respect to currently owned centres, the Trust expanded its portfolio by 136,545 square feet of leaseable area at an investment of $31.4 million, of which 76,200 square feet at a cost of $14.5 million was internally developed by Calloway and 60,345 square feet at a cost of $16.9 million was developed under existing agreements with SmartCentres. The Trust issued 271,088 REIT units and 69,044 Class "B" units to Mr. Mitchell Goldhar for $5.3 million, in addition to cash, to finance these acquisitions.

In addition, the Trust committed a total of $57.1 million mezzanine financing to SmartCentres and advanced $8.0 million. The mortgage has an eight year term at a 7.25% interest rate and includes an option entitling the Trust to acquire a 50% interest in the property upon substantial completion, at an agreed upon formula.

Acquisitions and expansion and development activities during the quarter contributed to a 9.6% increase in revenues of $82.3 million over the previous quarter of $75.1 million, and a 23.2% increase in revenues over the same period in 2005 of $66.7 million. A non recurring expenditure of $14.4 million relating to the acquisition and internalization of the property management business that has been expensed contributed to a net loss of $7.1 million. Net income from continuing operations before this one-time expense was $7.3 million, a decrease of $0.1 million over the third quarter because of additional interest expenses from the issuance of the unsecured debentures.

Adjusted funds from operations ("AFFO"), which is a non-GAAP measure commonly used by REITs as an estimate of cash flow, totaled $32.9 million for the fourth quarter, an increase of 5.8% over third quarter 2006 and an increase of 29.3% over fourth quarter 2005. On a diluted basis, AFFO per unit of $0.39 for the quarter increased 0.8% over third quarter 2006 and 0.4% over fourth quarter 2005, remaining relatively flat due to the short term dilution from both the debt and equity issuances. AFFO for 2006 increased to $1.56 per unit from $1.44 per unit in 2005, an increase of 8.3%. The Trust distributed $1.47 per unit in 2006 compared to $1.37 per unit in 2005. This equates to a payout ratio of 94.2% in 2006 compared to 95.0% in the prior year.

Occupancy rates continued their upward trend, with end of period rate of 99.3% compared with 99.0% at third quarter and 99.2% at December 31, 2005.

During the year, Calloway's real estate assets grew from $2.4 billion in 2005 to $3.3 billion, an increase of 35.7% and equity increased from $1.1 billion to $1.5 billion, a growth of 41.1%. Rental revenues increased 52.9% from $196.7 million to 300.7 million. Net income for 2006 (which was also adversely affected by the one-time expense of $14.4 million relating to the internalization of property management) was $20.8 million, a decrease from $26.8 million in 2005. Before the one-time expense, net income was $35.2 million, representing a 31.5% growth.

Calloway will hold a conference call on Monday, March 5, 2007 at 1:00 pm eastern time. Participating on the call will be members of Calloway's senior management.

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 Chief Executive Officer
    (905) 326-6400