Calloway Real Estate Investment Trust: Fourth quarter and year end results

    TORONTO, March 1 /CNW/ - Calloway Real Estate Investment Trust
(TSX:CWT.UN) is pleased to report its results for the quarter and year ended
December 31, 2006.

    Highlights of the Quarter

    -   Portfolio occupancy maintained at 99% level.
    -   Committed to $57.1 million in mezzanine financing of which advanced
        $8.0 million was funded.
    -   Completed the acquisition of 100% freehold and leasehold interests in
        14 retail properties in the seventh major transaction with
        SmartCentres, comprising 1.3 million square feet of leaseable area
        and 1.5 million square feet of future development, for
        $383.4 million.
    -   Internalized property management for $14.4 million.
    -   Issued $250 million of unsecured senior debentures at 5.37% due
        October 12, 2016.
    -   Issued 7,680,000 trust units for $29.30 per unit for gross proceeds
        of $225 million and net proceeds of $216 million.
    -   Expanded existing centres by an additional 136,545 square feet of
        leaseable area at a cost of $31.4 million.

    As at December 31, 2006, Calloway's portfolio consists of 18.4 million
square feet of built gross leaseable area and an ownership interest in
122 properties. The portfolio has a book value of $3.0 billion.
    Simon Nyilassy, President and CEO, said, "2006 was another outstanding
year for us as our operating portfolio grew by 3.8 million square feet,
representing a 26% increase over 2005. The growth is primarily a result of our
strong relationship with SmartCentres, Canada's leading developer of large
format, unenclosed shopping centres. We expect this relationship will continue
to contribute to Calloway's success and growth in future years.
    We have assembled an outstanding portfolio of newly constructed,
well-anchored shopping centres that provides the bedrock for our future. We
will continue to grow our portfolio and to capitalize on the strength of our
internal development pipeline, which increased by over 39% during the year for
2006, to 5.3 million square feet, equivalent of 21 new full-size shopping
centres. Upon completion of this pipeline, Calloway's portfolio would increase
from 18.4 million square feet to 23.7 million square feet."
    During December 2006, Calloway completed the acquisition of 100% freehold
and leasehold interests in 3 retail properties, partial interests in 5 retail
properties and interests in 6 development lands, comprising 1.3 million square
feet of built leaseable area and 1.5 million square feet of future development
potential, for $383.4 million. The purchase price was satisfied by the
assumption of existing debt of $173.4 million, the issuance of 789,444 Class B
Series 2 LP Units and 34,130 Class D Series 2 LP Units for $24.1 million and
the balance in cash.
    Effective December 31, 2006, Calloway internalized property management
for the majority of its portfolio, at a cost of $14.4 million payable to
SmartCentres, the previous manager.
    Calloway completed the issuance of $250 million of ten-year unsecured
senior debentures at 5.37%, due on October 12, 2016. During the quarter,
Calloway also completed the issuance of 7,680,000 trust units for $29.30 per
unit for gross proceeds of $225 million. The net proceeds to Calloway, after
deducting the underwriters' fee, were $216 million. The proceeds of these
offerings were used by Calloway to pay down outstanding credit facilities, to
finance subsequent acquisitions and development activities and for general
trust purposes.
    During the quarter, with respect to currently owned centres, the Trust
expanded its portfolio by 136,545 square feet of leaseable area at an
investment of $31.4 million, of which 76,200 square feet at a cost of
$14.5 million was internally developed by Calloway and 60,345 square feet at a
cost of $16.9 million was developed under existing agreements with
SmartCentres. The Trust issued 271,088 REIT units and 69,044 Class "B" units
to Mr. Mitchell Goldhar for $5.3 million, in addition to cash, to finance
these acquisitions.
    In addition, the Trust committed a total of $57.1 million mezzanine
financing to SmartCentres and advanced $8.0 million. The mortgage has an eight
year term at a 7.25% interest rate and includes an option entitling the Trust
to acquire a 50% interest in the property upon substantial completion, at an
agreed upon formula.
    Acquisitions and expansion and development activities during the quarter
contributed to a 9.6% increase in revenues of $82.3 million over the previous
quarter of $75.1 million, and a 23.2% increase in revenues over the same
period in 2005 of $66.7 million. A non recurring expenditure of $14.4 million
relating to the acquisition and internalization of the property management
business that has been expensed contributed to a net loss of $7.1 million. Net
income from continuing operations before this one-time expense was
$7.3 million, a decrease of $0.1 million over the third quarter because of
additional interest expenses from the issuance of the unsecured debentures.
    Adjusted funds from operations ("AFFO"), which is a non-GAAP measure
commonly used by REITs as an estimate of cash flow, totaled $32.9 million for
the fourth quarter, an increase of 5.8% over third quarter 2006 and an
increase of 29.3% over fourth quarter 2005. On a diluted basis, AFFO per unit
of $0.39 for the quarter increased 0.8% over third quarter 2006 and 0.4% over
fourth quarter 2005, remaining relatively flat due to the short term dilution
from both the debt and equity issuances. AFFO for 2006 increased to $1.56 per
unit from $1.44 per unit in 2005, an increase of 8.3%. The Trust distributed
$1.47 per unit in 2006 compared to $1.37 per unit in 2005. This equates to a
payout ratio of 94.2% in 2006 compared to 95.0% in the prior year.
    Occupancy rates continued their upward trend, with end of period rate of
99.3% compared with 99.0% at third quarter and 99.2% at December 31, 2005.
    During the year, Calloway's real estate assets grew from $2.4 billion in
2005 to $3.3 billion, an increase of 35.7% and equity increased from
$1.1 billion to $1.5 billion, a growth of 41.1%. Rental revenues increased
52.9% from $196.7 million to 300.7 million. Net income for 2006 (which was
also adversely affected by the one-time expense of $14.4 million relating to
the internalization of property management) was $20.8 million, a decrease from
$26.8 million in 2005. Before the one-time expense, net income was
$35.2 million, representing a 31.5% growth.
    Calloway will hold a conference call on Monday, March 5, 2007 at 1:00 pm
eastern time. Participating on the call will be members of Calloway's senior

    This press release contains "forward-looking statements" subject to
various significant risks and uncertainties which may cause actual results,
performances and 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
acquisition, 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

For further information:

For further information: Simon Nyilassy, President and Chief Executive
Officer, Calloway Real Estate Investment Trust, 700 Applewood Crescent, Suite
200, Vaughan, ON, L4K 5X3, Tel: (905) 326-6400

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