News Column

Calloway Real Estate Investment Trust Releases Second Quarter Results and Announces Distribution Increase

August 7, 2014

TORONTO, ONTARIO--(Marketwired - Aug. 7, 2014) - Calloway Real Estate Investment Trust (TSX:CWT.UN) is pleased to report positive results for the second quarter ended June 30, 2014.

Highlights for the quarter:

-- Funds from operations ("FFO")(2) increased by 9.0% to $66.3 million and 7.0% to $0.488 on a per Unit basis compared to the same quarter of 2013 -- Maintained portfolio occupancy rate at the 99% level for the 18th sequential quarter -- Same properties NOI increased by 1.2% over the same quarter of 2013 -- Invested $11.0 million to complete the development and lease up of 42,719 square feet of leasable area at an average yield of 7.7% -- Issued on a private placement basis $50.0 million principal amount of 3.985% Series I senior unsecured debentures due May 2023 and used the net proceeds to partially redeem $50.0 million par value of 5.37% Series B senior unsecured debentures due October 2016 -- Increased the unencumbered asset pool to $1,691.6 million



Subsequent to quarter end:

-- Annual distribution increased to $1.60 per Unit effective October 2014 -- Issued $150.0 million of 3.73% Series M senior unsecured debentures maturing in July 2022 to finance the acquisition of income properties described below, repayment of maturing mortgages and for general trust purposes -- Entered into purchase and sale agreements with its partner, Investors Real Property Fund, to acquire two income properties totalling approximately 601,000 square feet with an additional 112,000 square feet available for future development for approximately $124.5 million from SmartCentres and Walmart Canada Realty Inc. through a 50:50 co-ownership -- Entered into an agreement to sell seven investment properties to Retrocom Real Estate Investment Trust totalling 640,023 square feet for approximate gross proceeds of $111.1 million, which consists of the assumption of mortgages totalling approximately $37.0 million, loans receivable of up to 40% of the gross proceeds and the balance in cash



Huw Thomas, President & CEO of Calloway Real Estate Investment Trust (the "Trust"), said, "I am pleased with our positive second quarter results. Our portfolio of 123 mostly Walmart-anchored retail centres continues to deliver reliable performance and steady growth. We have grown our portfolio by building out new space for existing and new tenants at an average investment yield of 7.7%. So far this year, we have renewed or are in final stages of renewal on 73% of 2014 lease expiries. With respect to our emerging portfolio of growth initiatives, the Toronto Premium Outlets continues to exceed our expectations in terms of performance, and we continue to look for further sites to add to the portfolio in addition to our Montreal Premium Outlets location, which will open in the fall of 2014. For the most significant longer term opportunity, construction has begun on the first tower in the VMC and we are now turning our attention to the next possible development on the site. With our growing confidence in the business performance, we are pleased to provide our unitholders with the first distribution increase in a number of years and look forward to further potential increases in future years as our business continues to develop."

The following table summarizes the Trust's portfolio information:

June 30, 2014 December 31, 2013 Change ---------------------------------------------------------------------------- Fair value of real estate portfolio (in millions of dollars) (1) 6,739.7 6,696.8 42.9 Weighted average stabilized capitalization rate 6.00% 6.01% (0.01)% ---------------------------------------------------------------------------- Built gross leasable area 27.5 million square feet Future estimated development area 3.0 million square feet Lands under Mezzanine Financing 0.8 million square feet Number of retail properties 123 Number of office properties 1 Number of development properties 8 Developments completed during the quarter are as follows: ---------------------------------------------------------------------------- Leasable area 42,719 square feet Cost $11.0 million Yield 7.7% ----------------------------------------------------------------------------



During the quarter, the Trust received repayments totalling $12.0 million on mortgages receivable with existing commitments of $116.7 million.

The Trust also obtained three new mortgages totalling $55.5 million with an average term of 8.8 years and a weighted average interest rate of 4.11%. The Trust also repaid three term mortgages totalling $33.4 million.

The Trust issued on a private placement basis $50.0 million principal amount of Series I senior unsecured debentures due May 2023. The Trust used the net proceeds from the private placement to partially redeem $50.0 million par value of its 5.37% Series B senior unsecured debentures due October 2016. During the quarter, for accounting purposes, the Trust recognized a yield maintenance fee of $4.3 million on redemption of the 5.37% Series B senior unsecured debentures and wrote off unamortized financing costs of $0.1 million.

The Trust's debt to gross book value was 50.8% at June 30, 2014 (December 31, 2013 - 51.6%), which is below the Trust's target range, and the debt to total assets ratio was 43.1% (December 31, 2013 - 43.8%). The decreases in the debt to gross book value and debt to total assets ratios are primarily due to repayments of term mortgages and development loans during the quarter, which resulted in a decrease in total indebtedness. The interest coverage ratio improved to 2.6X at June 30, 2014 from 2.4X at June 30, 2013 primarily due to an increase in net operating income and decrease in interest expense from the refinancing of existing and raising additional debt at lower interest rates. In addition, properties with an aggregate appraised value of $1,691.6 million are now unencumbered or debt-free. This will provide significant flexibility to the Trust to address its committed obligations and to grow its portfolio in future years. Finally, maturing mortgages for the balance of 2014 and into 2015 continue to present significant potential FFO benefits when refinanced due to the substantial rate differential.

Excluding Including convertible convertible debentures debentures ---------------------------------------------------------------------------- Debt to gross book value 50.8% 51.7% 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(1): Three Months Three Months (in millions of dollars, except per Ended June 30, Ended June 30, Unit information) 2014 2013 Change ---------------------------------------------------------------------------- Net income excluding fair value adjustments and loss on sale of investment properties (1) 60.1 54.9 5.2 Rental revenue (1) 150.0 139.4 10.6 Net operating income (1) 98.8 91.8 7.0 Cash flow as measured by FFO (2) 66.3 60.8 5.5 Per Unit Information FFO per Unit (fully diluted) (2) $0.488$0.456$0.032 AFFO per Unit (fully diluted) $0.459$0.428$0.031 Quarterly distribution $0.387$0.387 - Payout ratio (to AFFO) 84.3% 90.4% (6.1)%



FFO for the quarter was $66.3 million compared to $60.8 million in the same period of 2013. The increase of $5.5 million is primarily due to an increase in net operating income ($7.0 million) partially offset by an increase in interest expense net of yield maintenance on early redemption of unsecured debentures ($0.7 million), increase in general and administrative expenses of $0.6 million and decrease in interest income of $0.5 million. On a per Unit basis, FFO increased by 7.0% over the same period of 2013.

The high occupancy level of 99.0%, as well as the Trust's acquisition and development program, generated rental revenue of $150.0 million during the period. NOI of $98.8 million increased by 7.6% over the same period of 2013 including a 1.2% increase on a same properties basis.

Subsequent to the quarter end, the Trust announced an increase in distribution from the current annual distribution of $1.55 to $1.60 effective October 2014, which represents a 3.4% increase on an annualized 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, 2014, available on SEDAR website at www.sedar.com.

(1) Includes the Trust's share of investments in associates.

(2) June 30, 2014 excludes yield maintenance fees on redemption of unsecured debentures and related write-off of unamortized financing costs. June 30, 2013 excludes yield maintenance fees on redemption of unsecured debentures and related write-off of unamortized financing costs and CEO transition costs.

Full reports of the financial results of the Trust for the year ended December 31, 2013 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 8, 2014 at 9:00 a.m. (ET). Participating on the call will be members of Calloway's senior management.

Investors are invited to access the call by dialing 1-866-530-1553. 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 8, 2014 beginning at 12:00 p.m. (ET) through to 12:00 p.m. (ET) on Thursday August 14, 2014. To access the recording, please call 1-888-203-1112 and enter the Conference ID 5831072#.

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, 2013 and under the heading "Risk Factors" in its Annual Information Form for the year ended December 31, 2013. 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: Calloway Real Estate Investment TrustHuw Thomas President and Chief Executive Officer (905) 326-6400 ext. 7649 Calloway Real Estate Investment TrustMario Calabrese Interim Chief Financial Officer (905) 326-6400 ext. 7610 www.callowayreit.com Source: Calloway Real Estate Investment Trust


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