Calloway Real Estate Investment Trust

Calloway Real Estate Investment Trust

December 06, 2007 10:27 ET

Calloway REIT Announces Agreements to Acquire $680 Million Property Portfolio

TORONTO, ONTARIO--(Marketwire - Dec. 6, 2007) -


Calloway REIT (TSX:CWT.UN) announced today that it has executed conditional agreements with Wal-Mart Canada Corp. and SmartCentres to acquire 10 new, large-scale, unenclosed shopping centres, totaling approximately 3 million square feet on completion, for total consideration of approximately $680 million. As a result of this transaction, there will be over 100 Wal-Mart's in Calloway's portfolio. The transaction will also result in an increase in Calloway's owned leaseable area to over 30 million square feet on full build out. Initial investment will be approximately $405 million, with a further $275 million payable over the next four years as additional space is built and occupied in the centres.

Simon Nyilassy, Calloway's President and CEO, said, "Reaching the century-mark with Wal-Mart as an anchor is exciting for us. The transaction also includes two newly built Supercentres, which will bring our total to 15." Nyilassy added, " Wal-Mart stores and Wal-Mart Supercentres draw value minded consumers from within their communities and quite often beyond. Wal-Mart brings customers to our centres like no other."

"Once again" he said, "we have the opportunity to add first class properties to our portfolio of dominant large format shopping centers. We are a young organization with young assets, built to last."

The properties to be acquired will further strengthen Calloway's presence in Canada's major urban centres, with approximately 75% of the area on completion located in the Toronto (Golden Horseshoe), Montreal, Ottawa and Vancouver markets. Details of the properties are set out in Schedule A.

The 10 centres will generate net rents of approximately $26 million per annum on initial closing and over $44 million per annum on completion, representing a 16.5 % increase over Calloway's current annual net rents. Alongside Wal-Mart, other national retailers operating in the centres include Canadian Tire, Home Depot, Sobeys, Home Outfitters, Reitmans and Best Buy.

"These properties are dominant and in the early stages of their maturity", says Nyilassy. "Not all shopping centres are created equal. When we look up in five to ten years, these are the centres that will be thriving - that is what we look for."

With this acquisition, Calloway's assets will have grown to $4.4 billion by early 2008. Calloway's portfolio will then be comprised of 125 operating properties and 15 properties for the development of future shopping centres. This portfolio of predominately newly built shopping centres, located in every province of Canada, is leased to financially strong retailers with an overall weighted average lease term of 9.9 years. The average term to maturity of Calloway's mortgage debt is over 8.5 years, most of which are locked in at interest rates of 6% and lower. This property and financial profile ensures predictability of cash flow and stability for Calloway unitholders.

Calloway expects the transaction to be financed with a combination of mortgage debt secured against the properties acquired, the issuance to Mr. Mitchell Goldhar or his affiliated companies of up to 1.6 million in units of a subsidiary limited partnership, exchangeable into Calloway REIT units on a one for one basis, representing approximately $32 million of the purchase price, and other third party financing. Based on current capital market conditions, Calloway does not anticipate the issuance of any additional equity or convertible debt in connection with the transaction. As part of the transaction, previously authorized rights to acquire 1.6 million exchangeable units held by companies affiliated with Mr. Goldhar will be cancelled.

Mr. Mitchell Goldhar, owner of SmartCentres and co-owner with Wal-Mart of the 10 properties, as well as owner of an aggregate approximately 21.5 million Calloway REIT and exchangeable units, has announced his intention to subscribe for up to 1.6 million additional exchangeable units. These units will be issued as consideration for current income producing assets. As a result, Mr. Mitchell Goldhar will increase his equity interest in Calloway from approximately 23.4% to 24.7%. In addition, on completion and occupancy of additional leased area in the centres, Mr. Mitchell Goldhar will have the right to receive up to approximately 2 million additional, non-voting units in a subsidiary limited partnership.

The 10 properties include one in which Calloway will acquire a leasehold interest. The term of the ground lease will be 49 years with an option to acquire the freehold interest at the end of the lease term. The transaction is expected to close in January, 2008 and is subject to Calloway completing satisfactory financing arrangements and obtaining regulatory approvals.

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.

To view the Schedule A, Property Details, please click on the link below:

Contact Information

  • Calloway REIT
    Simon Nyilassy
    President and Chief Executive Officer
    (905) 326-6400 ext. 7649
    (905) 326-0783 (FAX)
    Calloway REIT
    Bart Munn
    Chief Financial Officer
    (905) 326-6400 ext. 7631
    (905) 326-0783 (FAX)
    700 Applewood Crescent
    Vaughan, Ontario L4K 5X3