Calloway Real Estate Investment Trust
TSX : CWT.UN

Calloway Real Estate Investment Trust

February 24, 2011 18:44 ET

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

TORONTO, ONTARIO--(Marketwire - Feb. 24, 2011) - Calloway Real Estate Investment Trust (TSX:CWT.UN) is pleased to report its results for the fourth quarter and year ended December 31, 2010.

Highlights of the Quarter:

  • Issued $100 million in unsecured debentures bearing interest at 5% per annum
  • Invested $13.4 million to complete the development and lease up of 65,114 square feet of leasable area
  • Maintained portfolio occupancy rate above 99%
  • Net income increased by $7.1 million to $14.6 million and funds from operations (non-GAAP measure) increased by $7.8 million to $48.0 million compared to the same period in 2009 as a result of portfolio growth
  • Monthly distributions are confirmed for the period of March to May.

Highlights of the Year:

  • Maintained portfolio occupancy above 99% level
  • Acquired two income properties for $130.1 million and a development property for $25.9 million
  • Completed developments and earnouts of 508,436 square feet of leasable area for $151.3 million providing an unleveraged yield of 7.4%
  • Opened 15 Wal-Mart Supercentres during the year
  • Issued $306 million in new Trust Units
  • Issued $260 million in unsecured and convertible debentures
  • Redeemed $150 million 10.25% Series C senior unsecured debentures, $46 million 4.51% Series A senior unsecured debentures, and the balance of the 6.00% convertible debentures.
  • Net income increased by $19.9 million to $43.2 million(1) compared to 2009 due to an increase in rentals from income properties and a lower write off of tenant improvements and intangible assets offset by an increase in interest expense
  • Funds from operations (non-GAAP measure) increased by $13.7 million to $175.7 million(1) compared to 2009 due to an increase in rentals from income properties offset by an increase in interest expense
  • Fair value of investment properties increased by $1.1 billion over its historical book value
(1) Excludes the effect of the $31.6 million expense booked as a result of the redemption of the 10.25% Series C senior unsecured debentures.

Simon Nyilassy, President & CEO, said, "During 2010, Calloway has successfully improved occupancy to pre-recession levels, recapitalized its balance sheet and grown the portfolio by approximately 900,000 square feet through acquisition, development and earnouts. Calloway sees continued growth opportunities in 2011 through increased tenant expansions, including the impact of American retailers entering the Canadian market place."

Quarterly Results

The income-producing portfolio generated revenue of $126.0 million in the fourth quarter, a $9.8 million increase over the same period in the prior year. Net operating income (non-GAAP measure) for the fourth quarter of $82.8 million increased $7.8 million or 10.4% over the same period in the previous year. This growth is attributed mostly to developments and acquisitions during 2010. Net income and cash flow as measured by Funds from Operations (FFO – a non-GAAP measure) increased by $7.1 million and $7.8 million respectively. The increase is mainly due to the growth of the portfolio and reduced interest expense as a result of the repayment of the 10.25% Series C unsecured debentures. FFO per unit for the fourth quarter (fully diluted) was $0.42 compared to $0.40 in the previous year. The Trust's quarterly distribution of $0.39 per unit represents a payout ratio (to FFO) of 92.8% compared to 96.0% in the same period in 2009. This distribution is confirmed for the period of March to May.

Annual Results

As at December 31, 2010, Calloway's $4.3 billion real estate portfolio included 24.2 million square feet of built gross leasable area and 4.6 million square feet of future developable area in 119 operating and 11 development properties.

Developments completed during the year comprised approximately 508,436 square feet of leasable area at a cost of $151.3 million.

Calloway has been successful at recapitalizing its balance sheet. During the year, the Trust issued unsecured debentures ($200 million), convertible debentures ($60 million), and equity ($306 million) for a total of $566 million. In addition, the Trust obtained $79.9 million in new term mortgages with an average term of 7.7 years and weighted average interest rate of 5.6%.

As a result of these financing activities, Calloway has reduced its debt to gross book value (non-GAAP measure) to 51.3% excluding convertible debentures (54.9% including convertible debentures) at year- end which is below the Trust's target range of 55.0%-60.0% (60.0% to 65.0% including convertible debentures). This will provide the Trust with significant flexibility to finance its growth.

Net income for the year totalled $0.41(1) per unit compared to $0.24 per unit in 2009, primarily the result of increases in rentals from income properties as a result of the growth of the portfolio, and lower write down of capital offset by an increase in interest expense. Cash provided by operating activities decreased by $2.8 million to $140.0 million over the previous year due to a yield maintenance fee of $31 million on redemption of the Series "C" unsecured debentures, higher interest expense offset by increased rentals from income properties.

High occupancy levels, as well as Calloway's acquisition and development program, significantly improved the Trust's results in 2010, helped the income-producing portfolio to generate rental revenue of $481.0 million in the year, a $34.0 million increase over the prior year, net operating income (non-GAAP measure) of $317.9 million to increase $23.6 million and net income to increase $19.9 million(1) over the previous year. Rental revenues of $481.0 million, net operating income (non-GAAP measure) of $317.9 million and Funds from Operations (FFO – a non-GAAP measure) of $175.7 million(1), increased 7.6%, 8.0% and 8.4% respectively. FFO per unit (fully diluted) was $1.65(1) compared to $1.67 in the previous year. The Trust's annual distribution of $1.55 per unit represents a payout ratio (to FFO) of 93.8%(1) compared to 92.8% in 2009. The payout ratio (to FFO) is forecasted to improve to less than 90% by the end of 2011.

(1) Excludes the effect of the $31.6 million expense booked as a result of the redemption of the 10.25% Series C senior unsecured debentures.

Commencing in 2011, Canadian entities must report under International Financial Reporting Standards ("IFRS"). Calloway has adopted the fair value model for investment properties and as at January 1, 2011 investment properties will total $5.216 billion, an increase of $1.102 billion from the net book value of $4.114 billion recorded under Canadian GAAP at December 31, 2010.

In 2010, Calloway endeavored to restructure its operations to meet the REIT Exemption under the SIFT legislation introduced in 2006. The REIT Exemption permits distributions of the Trust to be taxed at the investor level. The Trust needed to comply by January 1, 2011.

Prior to January 1, 2011 and the completion of the Trust's restructuring, the Department of Finance announced proposed amendments that when passed will be effective January 1, 2011. These changes provided clarity and new changes in the application of the REIT Exemption. As a result, the Trust did not proceed with its restructuring.

Calloway does not meet the existing REIT Exemption but is expected to comply based on the proposed amendments, when passed and substantially enacted.

The non-GAAP measures identified in this Press Release do not have any standardized meaning prescribed by Canadian generally accepted accounting principles ("GAAP") and are therefore unlikely to be comparable to similar measures presented by other issuers. These non-GAAP measures are more fully defined and discussed in the management discussion and analysis of Calloway for the year ended December 31, 2010, available on SEDAR website at www.sedar.com.

Full reports of the financial results of the Trust for the year are outlined in the audited financial statements and the related management discussion and analysis of Calloway, available on the SEDAR website at www.sedar.com. In addition, supplemental information is available on Calloway's website at www.callowayreit.com.

Calloway will hold a conference call on Friday February 25, 2011 at 10:00 a.m. (ET). Participating in the call will be members of Calloway's senior management.

Investors are invited to access the call by dialing 1-800-814-4859. You will be required to identify yourself and the organization on whose behalf you are participating. A recording of this call will be made available Friday, February 25, 2011 beginning at 12:00 p.m. (ET) through to 11:59 p.m. (ET) on Friday, March 4, 2011. To access the recording, please call 1-877-289-8525 and use the reservation number 4399066#.

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 ext. 7649
    or
    Calloway Real Estate Investment Trust
    Bart Munn
    Chief Financial Officer
    (905) 326-6400 ext. 7631