Calloway Real Estate Investment Trust

Calloway Real Estate Investment Trust

August 15, 2011 15:54 ET

Calloway REIT Announces Acquisition of Three New Walmart-Anchored Supercentres in Ontario

Issuance of $75 Million Series G Senior Unsecured Debenture Issue and Renewal and Increase in Operating Facilities

TORONTO, ONTARIO--(Marketwire - Aug. 15, 2011) -


Calloway REIT (TSX:CWT.UN) announced today that it has waived conditions (on two properties in Hamilton and Sudbury, Ontario), and is under conditional contract (on one property in Guelph, Ontario), to acquire (a total of) three new, large-scale, unenclosed shopping centres, totaling approximately 830,000 square feet on completion. The initial consideration is approximately $139 million with a further expected investment of $76 million over the next four years as additional space is built and occupied in the centres. "This is the 11th portfolio in the last 8 years, that Calloway has been successful in acquiring from the Walmart/SmartCentres joint venture (or from SmartCentres) and represents a caliber of retail that is consistent with the quality of the rest of our portfolio. SmartCentres are well located and value focused shopping centres designed to meet the needs of all Canadians," said Al Mawani, Calloway's President and CEO.

Each of the SmartCentres is anchored by a new Walmart Supercentre and is dominant in their respective market. Walmart is the largest retailer in the world with total sales greater than $405 billion in 2010. After closing, Walmart Canada will account for 41.4% of total square footage and 26.4% of gross revenue in the Calloway portfolio. The purchased centres are 100% occupied with national tenants accounting for 92.9% of in-place tenants. The average remaining lease term is 16.0 years, which compares favorably to our existing portfolio of 9.1 years.

The Hamilton SmartCentre is located on the main retail artery of Upper James in a densely populated and mature residential area. The centre has been redeveloped and currently has approximately 190,000 square feet operating, including a newly built Walmart Supercentre and other national tenants such as Shoppers Drug Mart, Tim Horton's and CIBC. Upon completion the centre will be approximately 280,000 square feet.

The Sudbury SmartCentre is located at the southern entry into the city just north of the Trans-Canada Highway interchange. It currently comprises over 210,000 square feet of newly built retail and is anchored by a Walmart Supercentre. Over 20,000 square feet of additional retail is planned for the centre, of which 94% has been pre-leased.

The Guelph SmartCentre is located in the north end of the city and currently comprises 190,000 square feet of retail anchored by a Walmart Supercentre and shadow-anchored by Home Depot. The property can accommodate a further 130,000 square feet of retail uses, of which over 85,000 square feet has been pre-leased and under various stages of development to national tenants such as Home Sense, Michaels, RBC, Penningtons and Reitmans.

The blended average cap rate of 6.5% for the acquisition of this portfolio including future build out of the undeveloped space is accretive to Calloway. The acquisition is expected to close in August 2011.

Calloway will finance the transaction with existing cash resources and the issuance of up to 193,000 units of a subsidiary limited partnership (the "LP Units") at $25.47 per unit to SmartCentres. As a portion of the consideration for the future build out of these centres, SmartCentres will be entitled to subscribe for up to 1,243,000 LP units at the then market price of Calloway. The LP Units are exchangeable into Calloway REIT units on a one-for-one basis. SmartCentres is owned by Mitchell Goldhar, owner of a 20.6% equity interest in Calloway. Pursuant to this transaction and the completion of future earn outs related to previous transactions that Mr. Goldhar has entered into with Calloway, Mr. Goldhar's interest could increase up to 28% if SmartCentres elects to receive its entitled portion of consideration in LP Units.

Financing Initiatives

Calloway also announced today that it has agreed to issue $75 million principal amount of Series G senior unsecured debentures on a bought deal basis. These debentures will carry a coupon rate of 4.70% and will mature on August 22, 2018. The issue is being offered by a syndicate of dealers co-led by CIBC and RBC Capital Markets.

Closing of the offering is expected on or about August 22, 2011. Calloway intends to use the net proceeds from the offering to complete the aforementioned acquisitions and for general trust purposes. Dominion Bond Rating Service has provided Calloway with a provisional credit rating of BBB with a stable trend relating to the debentures.

This offering is being made by way of a Prospectus Supplement to Calloway's existing $2 billion base shelf short form prospectus filed with Canadian securities regulatory authorities. The terms of the offering will be described in a prospectus supplement to be filed with Canadian securities regulators.

Calloway is also pleased to announce that it has renewed its operating line facility for $160 million with an additional $40 million option for a three-year term at Bankers Acceptance Rates plus 1.65% (2.85% at today's rate). Calloway has also closed a new one-year $35 million unsecured facility with the same interest rate.

Calloway is one of Canada's largest real estate investment trust with an enterprise value of $5.6 billion as at June 30, 2011. It owns and manages 24 million square feet in 113 value-oriented retail centres having the strongest national and regional retailers, as well as strong neighbourhood merchants. Walmart will continue to be the dominant anchor tenant in the portfolio, and we expect their presence will continue to attract other retailers and consumers. Calloway's vision is to provide a value-oriented shopping experience to Canadian consumers.

This press release contains "forward looking statements" subject to various significant risks and uncertainties which may cause actual results, performances or 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 acquisitions, 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
    Al Mawani
    President and Chief Executive Officer
    (905) 326-6400 ext. 7649
    (905) 326-0783 (FAX)

    Calloway Real Estate Investment Trust
    Bart Munn
    Chief Financial Officer
    (905) 326-6400 ext. 7631
    (905) 326-0783 (FAX)