SOURCE: Calloway Real Estate Investment Trust

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November 05, 2014 18:34 ET

Calloway Real Estate Investment Trust Releases Third Quarter Results

TORONTO, ON--(Marketwired - November 05, 2014) - Calloway Real Estate Investment Trust (TSX: CWT.UN) is pleased to report positive results for the third quarter ended September 30, 2014.

Highlights for the quarter:

  • Funds from operations ("FFO") increased by 6.3% to $66.4 million and 4.3% to $0.487 on a per Unit basis compared to the same quarter of 2013
  • Maintained portfolio occupancy rate at the 99.0% level
  • Acquired two income properties totalling 300,942 square feet for $63.1 million at Calloway's share from SmartCentres and Walmart Canada Realty Inc., which is held as a co-ownership with an existing third party partner
  • Invested $18.8 million to complete the development and lease up of 63,048 square feet of leasable area at an average yield of 7.3%
  • Issued $150.0 million of 3.73% Series M senior unsecured debentures due on July 22, 2022, to finance the acquisitions described above, repayment of maturing debt and for general trust purposes
  • Obtained a new $350.0 million unsecured revolving operating facility, which includes an accordion feature of $150.0 million
  • Monthly distributions are confirmed for the period of November 2014 to January 2015 at $0.1334 per unit, an increase of 3.4% over the prior year
  • Increased the unencumbered asset pool to $2.3 billion

Subsequent to quarter end:

  • On October 21, 2014, the Trust announced the appointment of Peter Sweeney as our new Chief Financial Officer. We have subsequently confirmed that Peter will be starting on November 17, 2014. Peter is a very experienced financial professional with a strong real estate and capital markets background, and will be a great addition to Calloway's management team
  • On October 30, 2014, the Trust completed the sale of seven investment properties to Retrocom Real Estate Investment Trust, totalling 640,023 square feet for gross proceeds of $111.1 million, which consists of the assumption of mortgages totalling approximately $38.2 million, loans receivable of approximately $40.3 million and the balance in cash

Huw Thomas, President & CEO of Calloway Real Estate Investment Trust (the "Trust"), said, "I am pleased with our positive third quarter results. Our portfolio of 125 mostly Walmart-anchored retail centres continues to deliver reliable performance and steady growth. We have grown our portfolio by building out new space for existing and new tenants at an average investment yield of 7.3%. So far this year, we have renewed or are in final stages of renewal on 75% of 2014 lease expiries at a 7.0% increase in base rent. With respect to our emerging portfolio of growth initiatives, the extremely successful opening of the second Premium Outlets in Montreal and the Toronto Premium Outlets which continues to exceed our expectations in terms of performance, reflects our commitment to look for various avenues of growth and we continue to look for further sites to add to the portfolio. For the most significant longer term opportunity, construction has begun on the first tower in the VMC and we are now turning our attention to the next possible development on the site."

The following table summarizes the Trust's portfolio information:

  September 30, 2014 December 31, 2013 Change
Fair value of real estate portfolio (in millions of dollars) (1) 6,852.0 6,696.8 155.2
Weighted average stabilized capitalization rate 6.00% 6.01% (0.01)%
Built gross leasable area 27.8 million square feet
Future estimated development area 2.9 million square feet
Lands under Mezzanine Financing 0.8 million square feet
Number of retail properties 125
Number of office properties 1
Number of development properties 8

Developments completed during the quarter are as follows:

Leasable area 63,048 square feet
Cost $18.8 million
Yield 7.3%

During the quarter, the Trust completed the acquisition of two income properties from SmartCentres and Walmart Canada Realty Inc. totalling 300,942 square feet for $63.1 million, which is held as a 50:50 co-ownership with an existing third party partner. The purchase price was satisfied by the issuance of 354,000 Class B Series 7 LP III Units with a value of $9,285 to SmartCentres, and the balance in cash, adjusted for other working capital adjustments.

During the quarter, the Trust repaid four term mortgages totalling $64.6 million.

The Trust issued $150.0 million of 3.73% Series M senior unsecured debentures due on July 22, 2022, with semi-annual payments due on January 22 and July 22 each year. The proceeds were used to finance the acquisition of properties described above, repayment of maturing debt and for general trust purposes.

The Trust's debt to gross book value was 51.3% at September 30, 2014 (December 31, 2013 -- 51.5%), which is below the Trust's target range, and the debt to aggregate assets ratio was 43.5% (December 31, 2013 -- 43.8%). The decrease in the debt to gross book value and debt to aggregate assets ratios is primarily due to the increase in total assets mainly from developments, earnouts and acquisitions.

The interest coverage ratio improved to 2.7X at September 30, 2014 from 2.5X at September 30, 2013 primarily due to the increase in net operating income and decrease in interest expense from refinancing of existing debt and raising additional debt at lower interest rates.

In addition, properties with an aggregate appraised value of approximately $2.3 billion are now unencumbered or debt-free. This will provide significant flexibility to the Trust to address its committed obligations and to grow its portfolio in future years. Finally, maturing mortgages for the balance of 2014 and into 2015 continue to present significant potential FFO benefits when refinanced due to the substantial rate differential.

The following table summarizes the Trust's key financial highlights for the quarters ended September 30(1):

(in millions of dollars, except per Unit information)  Three Months
30, 2014
 Three Months
30, 2013
Net income excluding fair value adjustments and loss on sale of investment properties (1)  64.5  61.2  3.3
Rental revenue (1)  147.8  140.3  7.5
Net operating income (1)  99.1  94.5  4.6
Cash flow as measured by FFO  66.4  62.5  3.9
Per Unit Information         
FFO per Unit (fully diluted)  $0.487  $0.467  $0.020
AFFO per Unit (fully diluted)  $0.461  $0.448  $0.013
Quarterly distribution  $0.387  $0.387  --
Payout ratio (to AFFO)  83.9%  86.4%  (2.5)%

FFO for the quarter was $66.4 million compared to $62.5 million in the same period of 2013. The increase of $3.9 million is primarily due to an increase in net operating income ($4.6 million) partially offset by a decrease in interest income of $0.5 million. On a per Unit basis, FFO increased by 4.3% over the same period of 2013.

The high occupancy level of 99.0%, as well as the Trust's acquisition and development program, generated rental revenue of $147.8 million during the period. NOI of $99.1 million increased by 4.8% over the same period of 2013. On a same properties basis, NOI increased by 0.1% over the same period last year primarily due to rent increases in renewing tenants and step-ups in existing leases offset by higher than expected bad debt expense and operating cost recovery shortfalls.

The non-IFRS measures used in this Press Release, including AFFO, FFO, NOI, debt to aggregate assets, 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, 2014, available on SEDAR website at

(1) Includes the Trust's share of investments in associates.

Full reports of the financial results of the Trust for the year ended December 31, 2013 are outlined in the audited financial statements and the related management discussion and analysis of the Trust, available on the SEDAR website at In addition, supplemental information is available on the Trust's website at

The Trust will hold a conference call on Thursday November 6, 2014 at 9:00 a.m. (ET). Participating on the call will be members of Calloway's senior management.

Investors are invited to access the call by dialing 1-866-530-1553. 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 6, 2014 beginning at 12:00 p.m. (ET) through to 12:00 p.m. (ET) on Wednesday November 12, 2014. To access the recording, please call 1-888-203-1112 and enter the Conference ID 1508596#.

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, 2013 and under the heading "Risk Factors" in its Annual Information Form for the year ended December 31, 2013. 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

  • For more information, please contact:

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

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