Calloway Real Estate Investment Trust
TSX : CWR.UN
TSX : CWT.DB

Calloway Real Estate Investment Trust

August 11, 2006 16:47 ET

Calloway Reports Second Quarter Results

TORONTO, ONTARIO--(CCNMatthews – Aug. 11, 2006) –

Attention Business/Financial Editors:

Calloway Real Estate Investment Trust (TSX:CWT.UN) is pleased to report its results for the quarter ending June 30, 2006.

Highlights of the Quarter

- Expanded existing centres by an additional 72,655 square feet of leaseable area, at a cost to Calloway of $16.9 million.

- Issued 8,500,000 Trust Units for $26.60 per unit for gross proceeds of $226.1 million and net proceed of $216.6 million.

- Acquired $186 million in real estate assets providing a going-in yield of 7.1%.

- Committed to $7.2 million in mezzanine financing and advanced $6.8 million.

- Completed the sale of one industrial property for gross proceeds of $11.7 million and a gain on sale of $4.7 million.

As at June 30, 2006, Calloway's $2.6 billion real estate portfolio consists of 16.0 million square feet of gross leaseable area in 106 properties and 3.8 million square feet of future gross leaseable area. During the quarter the acquisition of one retail property and a partial interest in seven additional centres for $186.0 million resulted in an additional 1.1 million sq. ft. of rentable area. These assets provide a going in yield of 7.1% prior to debt financing. Calloway also completed the development of 72,655 sq. ft. of retail space at a cost of $16.9 million, yielding 8.6%.

During the quarter Calloway issued 9,265,650 Trust units and 905,826 LP Units. Calloway completed the issuance of 8,500,000 Trust units for $26.60 per unit for gross proceeds of $226.1 million in a bought deal. The net proceeds to Calloway after deducting the underwriters fees were $216.6 million dollars, which has been used to finance acquisitions during the quarter. The additional 765,650 Trust units and 905,826 LP Units were part consideration for second quarter acquisitions.

As result of the additional equity, Calloway's debt to gross book value is a conservative 49% at quarter end. Calloway targets a debt to gross book value of 57.5% and has the capacity to purchase an additional $645.5 million.

For the quarter ended June 30, 2006, revenues totaled $73.8 million, essentially equal to the prior quarter. Increased base rental income in the quarter was offset by decreased cost recoveries, the result of lower operating expenses. Lower operating expenses reflect seasonal fluctuations for snow removal and other services. Net operating income increased $3.2 million or 14.9% over the prior quarter. The increase is due to acquisitions made in 2005 and 2006 as well as earnouts from SmartCentres. High occupancy levels continue to exist in the portfolio with vacant space of only 1%. Quarterly cash flow as measured by adjusted funds from operations "AFFO" totaled $30.4 million, a 9% increase over first quarter reflecting the accretion from acquisitions and developments. "AFFO" per unit (dilutive) was $0.385 compared to $0.396 in first quarter. The expected decline was a result of the 8.5 million units issued during the quarter for cash. With proceeds now invested the dilution will not impact future quarters. The REIT distributed $0.3625 per unit, unchanged from the prior quarter. Our pay out ratio was 94.1% of "AFFO", compared to 91.5% in first quarter.

Calloway successfully completed the sale of an industrial building located in Calgary, AB for proceeds of $11.7 million, realizing a gain on sale of $4.7 million. This transaction completes the Trust's sales program.

Subsequent to the quarter end the Trust completed the purchase of a 50% interest in two income properties located in Toronto and Mississauga, ON, for a purchase price of $99.1 million. Mortgages totaling $35.7 million were assumed and the balance paid in cash. The Trust entered into an agreement, subject to conditions, to acquire the remaining 50% from SmartCentres.

Simon Nyilassy, President and CEO, said, "the issuance of $226 million in equity in the quarter was slightly dilutive in the second quarter, but has positioned the Trust to be able to capitalize on future acquisition opportunities. During this quarter, Calloway acquired over $200 million in real estate assets with an additional $100.0 million acquired in July. The Trust can purchase a further $545 million without raising additional equity."

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

Calloway will hold a conference call on Monday, August 14, 2006 at 10:00 am eastern time. Participating on the call will be members of Calloway's senior management.

Calloway Real Estate Investment Trust is an unincorporated open-end real estate investment trust focused on the ownership and development of high quality retail properties. Calloway's purpose is to deliver to its unitholders stable and reliable cash distributions, which continuously increase over time. Calloway is Canada's largest owner of large format unenclosed retail properties with total assets of approximately $2.8 billion. It has ownership interests in a portfolio of 105 retail properties and 1 industrial property across Canada containing an aggregate of approximately 16.0 million square feet and 3.8 million square feet of future gross leasable area.

Contact Information

  • Calloway Real Estate Investment Trust
    Simon Nyilassy
    President and CEO
    (905) 326-6400 ext. 7649

    or

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