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Press release from Marketwire

Calloway Real Estate Investment Trust Releases Second Quarter Results

Thursday, August 08, 2013

Calloway Real Estate Investment Trust Releases Second Quarter Results

17:52 EDT Thursday, August 08, 2013

TORONTO, ONTARIO--(Marketwired - Aug. 8, 2013) - Calloway Real Estate Investment Trust (TSX:CWT.UN) is pleased to report very positive results for the second quarter ended June 30, 2013.

Highlights for the quarter:

  • Completed the first phase of the Toronto Premium Outlets® in Halton Hills, Ontario, which had its extremely successful grand opening on August 1, 2013
  • Maintained portfolio occupancy rate at the 99% level for the 14th sequential quarter
  • Acquired an income property for $45.6 million totalling 198,110 square feet located in Regina, Saskatchewan
  • Invested $92.4 million to complete the development and lease up of 256,059 square feet of leasable area including 138,000 square feet in the Toronto Premium Outlets® at an average yield of 7.2%
  • Issued $150.0 million in Series I senior unsecured debentures bearing interest at 3.985% per annum maturing in 2023
  • Repaid $75.0 million of 7.95% Series D senior unsecured debentures
  • Funds from operations ("FFO")(1) increased by 9.6% to $60.8 million and 3.6% to $0.456 on a per unit basis compared to the same quarter of 2012
  • Monthly distributions are confirmed for the period of August to October at $0.129 per unit

Subsequent to quarter end:

  • Entered into purchase and sale agreements to acquire four income properties totalling 818,651 square feet for a total of $231.5 million from SmartCentres and Walmart Canada Realty Inc. and formed a 50:50 joint venture with a third party for the purchase of the largest of these properties
  • Issued $150.0 million in Series J senior unsecured debentures bearing interest at 3.385% per annum maturing in December 2017 to finance the acquisition of the four income properties described above

Huw Thomas, President & CEO of Calloway Real Estate Investment Trust (the "Trust"), said, "I am pleased with our very positive second quarter results. Our portfolio of 117 mostly Walmart-anchored retail centres continues to deliver reliable performance and steady growth. We have grown our portfolio in a balanced way with a combination of building out new space for existing and new tenants at an average investment yield of 7.2% and acquiring one Calloway-quality centre from a third party at a 6.0% yield. The addition of four further Walmart-anchored properties acquired subsequent to the quarter end continues our commitment to add accretive acquisitions occupied by national tenants in high quality locations. The extremely successful opening of the first Canadian Premium Outlets® location, with record traffic count for a Premium Outlet® opening, reflects our commitment to look for various avenues of growth for Calloway and we continue to look for further sites to add to the portfolio in addition to our Montreal Premium Outlets® location, which will open next year."

The following table summarizes the Trust's portfolio information:

June 30,
2013
December 31,
2012
Improvement
Fair value of real estate portfolio (in millions of dollars) (2) 6,522.6 6,209.8 312.8
Weighted average stabilized capitalization rate 5.93 % 6.02 % -0.09
Built gross leasable area 26.6 million square feet
Future developable area 3.4 million square feet
Number of retail properties 117
Number of other operating properties 2
Number of development properties 10
Developments completed during the quarter are as follows:
Leasable area 256,059 square feet
Cost $92.4 million
Yield 7.2 %

During the quarter, the Trust obtained $129.5 million in new and assumed mortgages with an average term of 14.1 years and weighted average interest rate of 3.69%.

In addition, the Trust completed the acquisition of an income property in Regina, Saskatchewan totalling 198,110 square feet for $45.6 million.

The Trust maintained its debt to gross book value at 49.7% at June 30, 2013, which is below the Trust's target range. The debt to total assets ratio was 41.5% (December 31, 2012 - 41.3%), net interest coverage ratio (excluding capitalized interest) was 2.7X (December 31, 2012 - 2.6X) and interest coverage ratio was 2.4X (December 31, 2012 - 2.3X). In addition, properties with an aggregate appraised value of $1,031.0 million are unencumbered or debt-free. This will provide flexibility to the Trust to address its committed obligations and to grow its portfolio.

Subsequent to the quarter end, the Trust entered into purchase and sale agreements to acquire four income properties totalling 818,651 square feet from SmartCentres and Walmart Canada Realty Inc. and formed a 50:50 joint venture with a third party for the acquisition and management of the largest of these properties. The purchase price of the income properties will be approximately $231.5 million. The purchase price will be satisfied by the net proceeds from $150.0 million of unsecured debentures bearing interest at 3.385% per annum maturing in 2017, which were issued subsequent to the quarter end, issuance of Class B Series 6 LP III Units, proceeds from the assignment of the 50% interest in one of the properties to a third party and the balance paid in cash.

Excluding convertible debentures Including convertible debentures
Debt to gross book value 49.7 % 50.7 %
Target range 55.0%-60.0 % 60.0%-65.0 %

The following table summarizes the Trust's key financial highlights for the quarters ended June 30(2):

(in millions of dollars, except per Unit information) Three Months
Ended
June
30, 2013
Three Months
Ended
June 30, 2012
Improvement
Net income excluding income tax, fair value adjustments and loss on sale of investment properties 54.9 54.1 0.8
Rental revenue (2) 139.4 134.5 4.9
Net operating income (2) 91.8 89.0 2.8
Cash flow as measured by FFO (1) 60.8 55.5 5.3
Per Unit Information
FFO per Unit (fully diluted) (1) $ 0.456 $ 0.440 $ 0.016
AFFO per Unit (fully diluted) $ 0.428 $ 0.422 $ 0.006
Quarterly distribution $ 0.387 $ 0.387 -
Payout ratio (to AFFO) 90.4 % 91.7 % (1.3 )%

Net income for the quarter (excluding income tax expense) was $102.7 million compared to $159.7 million in the same quarter of 2012. Excluding the impact of fair value adjustments and loss on disposal of investment properties, net income increased by $0.8 million compared to the same quarter of 2012 mainly due to an increase in net operating income of $2.8 million and a decrease in general and administrative costs of $0.7 million, partially offset by an increase in interest expense of $2.5 million, which was due to the yield maintenance fee paid on the early redemption of the 7.95% Series D senior unsecured debentures.

The high occupancy level of 99.0%, as well as the Trust's acquisition and development program, generated rental revenue of $139.4 million during the quarter. NOI of $91.8 million increased by 3.1% over the same quarter of the previous year including a 0.6% increase on a same properties basis.

The non-IFRS measures used in this Press Release, including AFFO, FFO, NOI, 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 six months ended June 30, 2013, available on SEDAR website at www.sedar.com.

(1) Excludes income tax expense and adjustments relating to the yield maintenance fee paid and write-off of unamortized financing costs upon redemption of the 7.95% Series D senior unsecured debentures and direct costs of CEO transition.
(2) Includes the Trust's share of investments in associates.

Full reports of the financial results of the Trust for the year ended December 31, 2012 are outlined in the audited financial statements and the related management discussion and analysis of the Trust, available on the SEDAR website at www.sedar.com. In addition, supplemental information is available on the Trust's website at www.callowayreit.com. The Trust will hold a conference call on Friday August 9, 2013 at 10:00 a.m. (ET). Participating in the call will be members of the Trust'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 Friday August 9, 2013 beginning at 11:00 a.m. (ET) through to 11:59 p.m. (ET) on Friday August 16, 2013. To access the recording, please call 1-877-289-8525 and use the reservation number 4628904#.

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, 2012 and under the heading "Risk Factors" in its Annual Information Form for the year ended December 31, 2012. 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.

FOR FURTHER INFORMATION PLEASE CONTACT:

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


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

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