Calloway Real Estate Investment Trust
TSX : CWT.UN

Calloway Real Estate Investment Trust

November 06, 2013 17:03 ET

Calloway Real Estate Investment Trust Releases Third Quarter Results

TORONTO, ONTARIO--(Marketwired - Nov. 6, 2013) - Calloway Real Estate Investment Trust (TSX:CWT.UN) is pleased to report positive results for the third quarter ended September 30, 2013.

Highlights for the quarter:

  • Completed the first phase of the Toronto Premium Outlets® in Halton Hills, Ontario, which had an extremely successful grand opening on August 1, 2013
  • Maintained portfolio occupancy rate at the 99% level for the 15th sequential quarter
  • Acquired four income properties totalling 696,867 square feet for a total of $184.0 million from SmartCentres and Walmart Canada Realty Inc. and formed a 50:50 joint venture with a third party for the purchase of the largest of these properties
  • Issued $150.0 million in Series J senior unsecured debentures bearing interest at 3.385% per annum maturing in December 2017 to finance the acquisition of the four income properties described above
  • Invested $31.3 million to complete the development and lease up of 98,387 square feet of leasable area at an average yield of 7.4%
  • Funds from operations ("FFO")(1) increased by 10.8% to $62.5 million and 5.2% to $0.467 on a per unit basis compared to the same quarter of 2012
  • Monthly distributions are confirmed for the period of November 2013 to January 2014 at $0.129 per unit
  • Increased the unencumbered asset pool to approximately $1,371.7 million

Subsequent to quarter end:

  • Commenced construction of the Montreal Premium Outlets® in Mirabel, Quebec in October 2013
  • Issued $100.0 million in Series K senior unsecured debentures bearing interest at a variable rate based on the three-month Canadian dealer offered rate plus 1.38% per annum maturing in October 2015

Huw Thomas, President & CEO of Calloway Real Estate Investment Trust (the "Trust"), said, "I am pleased with our very positive third quarter results. Our portfolio of 121 mostly Walmart-anchored retail centres continues to deliver reliable performance and steady growth. We have grown our portfolio in a balanced way with a combination of building out new space for existing and new tenants at an average investment yield of 7.4% and acquiring four income properties from SmartCentres and Walmart Canada Realty Inc. The addition of the four Walmart-anchored properties acquired during the quarter continues our commitment to add accretive acquisitions occupied by national tenants in high quality locations. The extremely successful opening of the first Canadian Premium Outlets® location, with record traffic count for a Premium Outlet® opening, reflects our commitment to look for various avenues of growth for Calloway and we continue to look for further sites to add to the portfolio in addition to our Montreal Premium Outlets® location.

The following table summarizes the Trust's portfolio information:

September 30, 2013 December 31, 2012 Change
Fair value of real estate portfolio (in millions of dollars) (2) 6,691.7 6,209.8 481.9
Weighted average stabilized capitalization rate 5.99 % 6.02 % -0.03 %
Built gross leasable area 27.4 million square feet
Future developable area 3.3 million square feet
Number of retail properties 121
Number of other operating properties 2
Number of development properties 10
Developments completed during the quarter are as follows:
Leasable area 98,387 square feet
Cost $ 31.3 million
Yield 7.4 %

During the quarter, the Trust acquired four income properties totalling 696,867 square feet for a total of $184.0 million from SmartCentres and Walmart Canada Realty Inc. and formed a 50:50 joint venture with a third party for the purchase of the largest of these properties. The purchase price was satisfied by the issuance of 397,000 Class B Series 6 LP III Units with a value of $10.2 million to SmartCentres and the balance paid in cash and other working capital adjustments.

The Trust maintained its debt to gross book value at 51.2% at September 30, 2013, which is below the Trust's target range. The debt to total assets ratio was 43.2% (December 31, 2012 - 41.3%), net interest coverage ratio (excluding capitalized interest) was 2.8X (December 31, 2012 - 2.6X) and interest coverage ratio was 2.5X (December 31, 2012 - 2.3X). In addition, properties with an aggregate appraised value of $1,371.7 million are unencumbered or debt-free. This will provide flexibility to the Trust to address its committed obligations and to grow its portfolio.

Excluding convertible debentures Including convertible debentures
Debt to gross book value 51.2 % 52.1 %
Target range 55.0%-60.0 % 60.0%-65.0 %

The following table summarizes the Trust's key financial highlights for the quarters ended September 30(2):

(in millions of dollars, except per Unit information) Three Months Ended September 30, 2013 Three Months Ended September 30, 2012
Improvement
Net income excluding income tax, fair value adjustments and loss on sale of investment properties
61.2

54.0

7.2
Rental revenue (2) 140.3 133.0 7.3
Net operating income (2) 94.5 89.9 4.6
Cash flow as measured by FFO (1) 62.5 56.4 6.1
Per Unit Information
FFO per Unit (fully diluted) (1) $ 0.467 $ 0.444 $ 0.023
AFFO per Unit (fully diluted) $ 0.448 $ 0.428 $ 0.020
Quarterly distribution $ 0.387 $ 0.387 -
Payout ratio (to AFFO) 86.4 % 90.4 % (4.0 )%

Net income for the quarter (excluding income tax expense) was $28.6 million compared to $199.8 million in the same quarter of 2012. Excluding the impact of fair value adjustments and loss on disposal of investment properties, net income increased by $7.2 million compared to the same quarter of 2012 mainly due to an increase in net operating income of $4.6 million and decrease in interest expense of $3.5 million partially offset by an increase in general and administrative costs of $0.4 million and decrease in interest income of $0.5 million.

The high occupancy level of 99.0%, as well as the Trust's acquisition and development program, generated rental revenue of $140.3 million during the quarter. NOI of $94.5 million increased by 5.1% over the same quarter of the previous year including a 1.1% increase on a same properties basis.

The non-IFRS measures used in this Press Release, including AFFO, FFO, NOI, debt to gross book value, payout ratio and interest coverage ratio do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS") and are therefore unlikely to be comparable to similar measures presented by other issuers. These non-IFRS measures are more fully defined and discussed in the management discussion and analysis of the Trust for the three and nine months ended September 30, 2013, available on SEDAR website at www.sedar.com.

(1) September 30, 2012 excludes income taxes and penalty paid on early redemption of term mortgages.
(2) Includes the Trust's share of investments in associates.

Full reports of the financial results of the Trust for the year ended December 31, 2012 are outlined in the audited financial statements and the related management discussion and analysis of the Trust, available on the SEDAR website at www.sedar.com. In addition, supplemental information is available on the Trust's website at www.callowayreit.com. The Trust will hold a conference call on Thursday November 7, 2013 at 10:00 a.m. (ET). Participating in the call will be members of the Trust's senior management.

Investors are invited to access the call by dialing 1-877-974-0445. 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 Thursday November 7, 2013 beginning at 11:00 a.m. (ET) through to 11:59 p.m. (ET) on Thursday November 14, 2013. To access the recording, please call 1-877-289-8525 and use the reservation number 4642284#.

Certain statements in this Press Release are "forward-looking statements" that reflect management's expectations regarding the Trust's future growth, results of operations, performance and business prospects and opportunities as outlined under the headings "Business Overview and Strategic Direction" and "Outlook". More specifically, certain statements contained in this Press Release, including statements related to the Trust's maintenance of productive capacity, estimated future development plans and costs, view of term mortgage renewals including rates and upfinancing amounts, timing of future payments of obligations, intentions to secure additional financing and potential financing sources, and vacancy and leasing assumptions, and statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may" and similar expressions and statements relating to matters that are not historical facts, constitute "forward-looking statements". These forward-looking statements are presented for the purpose of assisting the Trust's Unitholders and financial analysts in understanding the Trust's operating environment, and may not be appropriate for other purposes. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. However, such forward-looking statements involve significant risks and uncertainties, including those discussed under the heading "Risks and Uncertainties" and elsewhere in the Trust's Management's Discussion & Analysis for the year ended December 31, 2012 and under the heading "Risk Factors" in its Annual Information Form for the year ended December 31, 2012. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Although the forward-looking statements contained in this Press Release are based on what management believes to be reasonable assumptions, the Trust cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. These forward-looking statements are made as at the date of this Press Release and the Trust assumes no obligation to update or revise them to reflect new events or circumstances unless otherwise required by applicable securities legislation.

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

Contact Information

  • Calloway Real Estate Investment Trust
    Huw Thomas
    President and Chief Executive Officer
    (905) 326-6400 ext. 7649

    Calloway Real Estate Investment Trust
    Mario Calabrese
    Interim Chief Financial Officer
    (905) 326-6400 ext. 7610
    www.callowayreit.com