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Press release from Marketwire

Calloway REIT Releases Third Quarter Results

Wednesday, November 03, 2010

Calloway REIT Releases Third Quarter Results19:30 EDT Wednesday, November 03, 2010TORONTO, ONTARIO--(Marketwire - Nov. 3, 2010) - Calloway Real Estate Investment Trust ("Calloway") (TSX:CWT.UN) is pleased to report its results for the third quarter ended September 30, 2010.Highlights of the Quarter:Issued $266 million in new Trust Units Acquired two income properties for $129.9 million Invested $40.7 million to complete the development and lease up of 153,879 square feet Portfolio occupancy rate increased to 99.2% Negotiated renewals of 279,500 square feet with an average rent increase of 8.4% Net income increased by $3.7 million ($0.03 per unit) to $10.5 million ($0.10 per unit)(1) compared to the same period in 2009 Funds from operations (non-GAAP measure) increased by $4.1 million to $43.4 million(1) compared to the same period in 2009. (1) Excludes the effect of the $31.6 million expense booked as a result of the redemption of the Series C senior unsecured debentures. Subsequent to the Quarter:Issued $100 million in unsecured debentures bearing interest at 5% per annum which closed on October 1, 2010 Redeemed $150 million 10.25% Series C senior unsecured debentures which closed on October 25, 2010 Simon Nyilassy, President and CEO said "The quarter has seen Calloway acquire two shopping centres comprising 731,433 square feet of existing space with additional density for a further 415,238 square feet. These acquisitions allowed Calloway to have a presence in two new markets. During the quarter and subsequently, Calloway raised $366 million in debt and in equity capital. With our strengthened financial position the Trust will be seeking accretive acquisitions."As at September 30, 2010, Calloway's $4.3 billion real estate portfolio included 24.2 million square feet of built gross leasable area and 5.1 million square feet of future developable area in 119 operating and 10 development properties.The Trust has been actively raising capital. In July 2010, the Trust issued 74,100 units at a weighted average price of $21.82 for total proceeds of $1.6 million under the Equity Distribution Agreement which allows the Trust to sell up to 5 million units by the way of At The Market distribution. In August 2010, the Trust issued 6,900,000 units (including a 900,000 unit over-allotment which was exercised by the underwriters) at $21.60 for total proceeds of $149 million. In September 2010, the Trust issued 4,738,000 units (including a 618,000 unit over-allotment which was exercised by the underwriters) at $24.30 for total proceeds of $115 million. Subsequent to the quarter end, the Trust issued $100 million in unsecured debentures bearing interest at 5% per annum. The funds from the equity and debt issues in late September and early October were used towards the redemption of the $150 million 10.25% Series C senior unsecured debentures on October 25, 2010.Calloway's debt to gross book value (non-GAAP measure) totals 51.5% (55.0% including convertible debentures) at September 30, 2010; which is below the Trust's target range of 55.0%-60.0% (60.0% to 65.0% including convertible debentures).During the quarter, the Trust acquired 731,433 square feet of retail space in two retail properties for $129.9 million, which was satisfied by the issuance of Class B LP III Units with a value of $11.1 million and the balance in cash.Developments completed during the quarter comprised approximately 153,879 feet of leasable area at a cost of $40.7 million and a 7.6% yield. Calloway has the capacity to acquire $578.9 million of real estate with existing cash, operating facilities, and proceeds from the new equity issuance.Net income for the quarter was $0.10(1) per unit compared to $0.07 in the same quarter 2009. The increase was primarily the result of higher net operating income of $5.5 million in the current quarter offset by higher interest expense of $1.9 million relating to debt issued over the last twelve months.Calloway's occupancy level at quarter end was 99.2% recognizing the strength of the portfolio. No significant tenant failures occurred and 279,500 square feet of expiring leases were renewed with an average 8.4% increase in rent. The high occupancy level, as well as Calloway's acquisition and development program, generated rental revenue of $117.8 million in the quarter, a $7.9 million increase over the prior year. Net operating income (non-GAAP measure) of $79.7 million increased $5.5 million or 7.4% over the previous year. Net income increased $3.7 million(1) over the previous year. Cash flow as measured by Funds from Operations (FFO – a non-GAAP measure) totalled $43.4 million(1) in the quarter, an increase of $4.1 million or 10.5% from 2009. The year-over-year results were positively impacted mainly by completed acquisitions and developments generating additional rental income of $7.9 million offset by increased interest expense of $1.9 million. FFO per unit (fully diluted) was $0.406(1) compared to $0.403 in the previous year. The Trust's quarterly distribution of $0.387 per unit represents a payout ratio (to FFO) of 95.3%(1) compared to 96.0% in 2009.(1) Excludes the effect of the $31.6 million expense booked as a result of the redemption of the Series C senior unsecured debentures. Significant progress has been made on the resolution of the remaining matters required to ensure Calloway complies with the new regime for exemption from the taxation of trusts. In particular, negotiations are in an advanced stage to restructure the $144 million of mezzanine loans to SmartCentres, which would be a non-qualifying activity under the new rules. Calloway has historically advanced mezzanine loans to developers as a means of securing rights to developments when substantially completed. Based on current discussions, the Trust expects that one loan for approximately $4 million will be repaid and, the Trust would acquire the remaining development properties in exchange for the outstanding mezzanine loan balance and the assumption of third party mortgages of $23 million, totalling approximately $167 million. The current estimated value of these properties based on existing land uses is approximately $128 million. As a result, the Vendor would provide a guarantee of the $35.2 million difference. This guarantee would reduce over time as development milestones relating to zoning, pre-leasing and certain land sales are achieved. Achievement of all of the milestones would result in a full release of the guarantee. The Trust would develop these properties over the next 2 to 7 years, at a yield expected to be in the range of 7.1% to 7.4%.The non-GAAP measures identified in this Press Release do not have any standardized meaning prescribed by Canadian generally accepted accounting principles ("GAAP") and are therefore unlikely to be comparable to similar measures presented by other issuers. These non-GAAP measures are more fully defined and discussed in the management discussion and analysis of Calloway for the three-months ended September 30, 2010, available on SEDAR website at reports of the financial results of the Trust for the year are outlined in the audited financial statements and the related management discussion and analysis of Calloway, available on the SEDAR website at In addition, supplemental information is available on Calloway's website at will hold a conference call on Thursday November 4, 2010 at 10:00 a.m. (ET). Participating in the call will be members of Calloway's senior management.Investors are invited to access the call by dialing 1-800-814-4860. 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 4, 2010 beginning at 12:00 p.m. (ET) through to 11:59 p.m. (ET) on Thursday, November 11, 2010. To access the recording, please call 1-877-289-8525 and use the reservation number 4368278#. About Calloway 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.FOR FURTHER INFORMATION PLEASE CONTACT: Simon NyilassyCalloway Real Estate Investment TrustPresident and Chief Executive Officer(905) 326-6400 ext. 7649ORBart MunnCalloway Real Estate Investment TrustChief Financial Officer(905) 326-6400 ext. 7631www.callowayreit.comThe TSX neither approves nor disapproves of the contents of this Press Release.