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					Income Fund Report

Calloway Real Estate Investment Trust                                                                                                                                      Report Date:    November 1, 2006
                                                                                                                                                                         Press Release:      October 27, 2006
RATING                                                                                                                                                                 Previous Report:   September 22, 2005
Current                           2005                               2004                                  2003                                                                                416-593-5577
STA-3 (high)                      STA-3 (high)                       STA-3 (middle)                        NR                                                                         incomefunds@dbrs.com

STABILITY RATING SUMMARY                                             Legend:                          SUPERIOR                           MODERATE                        WEAK

    Operating                                                                                                                                     Size & Market              Sponsorship &
  Characteristics                        Asset Quality                     Financial Profile                        Diversification                  Position                 Governance        Growth



STABILITY RATING UPDATE
Calloway Real Estate Investment Trust’s (Calloway, or the                                                                           have strengthened its presence in major urban markets
Trust) rating confirmation reflects its strong underlying                                                                           including Toronto, Montréal, Vancouver and Calgary
property fundamentals and continued success in executing its                                                                        providing exposure to more robust and diversified local
growth strategy, which is expected to result in stable                                                                              economies. Over 75% of newly acquired space in 2006 has
distributions over the foreseeable future. Looking forward, the                                                                     been in major urban markets. (2) Calloway has both internal
recently increased cash distribution per unit of $1.50 (from                                                                        development capabilities and earn-out potential with
$1.45) annually should result in a payout ratio of between 95%                                                                      SmartCentres (formerly First Pro), which should sustain its
and 98% as recent acquisitions will contribute to growth in                                                                         strong growth profile (now 6.2 million square feet after the
cash flows. Dominion Bond Rating Service (DBRS) notes that                                                                          recent SmartCentres acquisition). (3) The Trust has strong
Calloway’s real estate assets are expected to grow by more                                                                          operating fundamentals with a newer portfolio (average age of
than 30% in 2006 through approximately $700 million in                                                                              five years) anchored by Wal-Mart, and a high occupancy of
acquisitions and expansions, adding 3.7 million square feet of                                                                      99%. As well, long average lease terms of about 10.8 years
leased space. For the first half of 2006, Calloway had acquired                                                                     remain well above that of most comparable REITs. Lease
11 income properties for $230.7 million at capitalization rates                                                                     maturities are low at 3.3% on average annually over the next
averaging 7.1%. It recently announced further acquisitions of                                                                       five years. Calloway also has mostly fixed-rate debt with
$440 million from SmartCentres, including nine income                                                                               average term to maturity of nine years, which closely matches
properties (eight are Wal-Mart anchored and fully leased with                                                                       lease maturities and limits interest rate risk. (4) DBRS expects
12-year average lease terms) for $382 million at an average                                                                         Calloway to maintain EBITDA interest coverage at about 2.1
capitalization rate of 6.1%. As Calloway begins to increase its                                                                     times, which is acceptable given its cash flow stability.
focus on internal development, its payout ratio (96.3%) is                                                                          Although the Trust is more diversified now, Calloway
expected to decline modestly to retain sufficient capital for                                                                       continues to have a significant presence in smaller, secondary
investment. Although developments are generally more risky,                                                                         Canadian markets, which rely on Wal-Mart to attract customers
they generate higher returns than acquisitions and are largely                                                                      and tenants (Wal-Mart accounts for 29% of rental income).
pre-leased. The rating confirmation also reflects the following:                                                                    Although Wal-Mart is currently a strong tenant, this
(1) Calloway is one of the largest REITs in Canada, with a                                                                          concentration tends to limit the internal growth in rental
geographically diversified portfolio of newer, large-format,                                                                        income, given Wal-Mart’s strong negotiating position.
unenclosed retail properties. Acquisitions over the past year
RATING CONSIDERATIONS
Strengths                                                                                                                     Challenges
• Large portfolio of unenclosed Wal-Mart–anchored malls                                                                       • Exposure to secondary markets, with reliance on Wal-Mart
• Long average lease terms and well spread maturities                                                                         • High portion of anchor tenants, which impacts rental rev. growth
• Newer assets with high occupancy, minimal capital needs                                                                     • Concentration by asset type – retail
• Development capability, which provides continued growth                                                                     • Relatively limited track record
FINANCIAL INFORMATION
                                                           Pro forma       6 mos. to     6 mos. to     12 mos. to                                          9 mos. to
                                                            June 30,        June 30,      June 30,       June 30,       For the year ended December 31      Dec. 31,
                                                            2006 (1)           2006          2005            2006          2005         2004        2003      2002
Declared distributions per unit (CAD)                            1.50           0.72          0.65           1.44           1.37         1.22       1.15       0.19
Cash available for distribution per unit (CAD)                                  0.77          0.70           1.52           1.46         1.35       1.15       0.80
Net income before extras. per unit (CAD)                                        0.15          0.13           0.28           0.25         0.51       1.10       0.71
Total debt/total capital (2)                                   58.8%          52.8%         60.4%          52.8%         57.6%         59.3%      52.6%      52.3%
Cash flow-to-debt (2)                                            0.07           0.08          0.07           0.07           0.05         0.06       0.07       0.02
EBITDA interest coverage                                         2.10           2.33          2.26           2.28           2.24         2.39       2.99       2.66
Cash flow return on total capital                                              7.5%          8.4%           9.4%          7.6%         10.3%       8.0%
Declared distributions/cash avail. for distribution            98.0%          95.5%         94.2%          96.3%         96.2%         94.0%     102.6%      86.9%
Market capitalization (CAD millions)                                         1,971.8         816.2        1,971.8       1,649.3         623.7      155.3       58.6
(1) Pro forma to reflect the recent $440 million acquisition from SmartCentres and $250 million issue of senior unsecured debt.
(2) Includes convertible debentures treated as 75% debt equivalent and 25% equity equivalent.


THE TRUST Calloway is a major owner of retail properties in Canada including 115 shopping centres with a net interest in 18.3 million
square feet of leasable area across Canada. The properties mainly comprise large-format, unenclosed shopping centres, anchored by
Wal-Mart and other major tenants. Calloway is 24.5% owned by Mitchell Goldhar, owner of SmartCentres (formerly First Pro).
Notes: All figures are in Canadian dollars unless otherwise noted.
Real Estate                                                                                                                                                DOMINION BOND RATING SERVICE
Information comes from sources believed to be reliable, but we cannot guarantee that it, or opinions in this Report, are complete or accurate. This Report is not to be construed as an offering of any
securities, and it may not be reproduced without our consent. DBRS ratings are not a recommendation to buy, sell, or hold Fund units
                                                                                                       Calloway REIT – Page 2




OPERATING CHARACTERISTICS                           SUPERIOR
Strengths                                                      Challenges
• Calloway’s portfolio has grown significantly to include      • A significant number of the retail properties are located
    115 income-producing properties on a pro forma basis          in smaller, secondary Canadian markets (about 43% by
    to reflect the recent SmartCentres acquisition. Its           leasable area are located outside of major economic
    portfolio is diversified across Canada and is among the       centres including provincial capitals) that rely heavily
    largest REITs in Canada with a net interest in                on Wal-Mart to attract customers and other tenants.
    18.3 million square feet of leasable area. The portfolio      These markets have relatively less diversified local
    mainly comprises large, unenclosed, new-format                economies, and the properties are potentially more
    shopping centres having relatively low operating costs.       exposed to an increased supply of retail space
• Cash flow stability is expected to be supported by long         compared with locations in more densely populated
    average lease terms of 10.8 years, which compares             major economic centres. However, one mitigating
    favourably with that of other REITs. Lease maturities,        factor is that in some smaller markets the existence of a
    averaging 3.3% over the next five years, are among the        Wal-Mart as an anchor tenant acts as a barrier to entry
    lowest maturities of REITs in Canada.                         for other significant retail developments.
• Most properties (97 of 115 on a pro forma basis) are         • The high proportion of anchor tenants (specifically
    anchored by either Wal-Mart or another major national         Wal-Mart in 89 of 115 properties), which have strong
    tenant. Wal-Mart accounts for about 29% of gross              negotiating power in determining rents, somewhat
    rental revenue and provides stable cash flow under            limits internal growth in cash flow from existing
    long-term leases averaging 15 years.                          properties. Existing Wal-Mart leases are structured with
• The retail portfolio has high occupancy of 99%, which           flat rents throughout the term of the lease. Additionally,
    should support stable cash flows. As well, over 90% of        while Wal-Mart is obligated to pay rent, terms for the
    the portfolio has been developed in the past five years,      Wal-Mart leases are quite favourable to the tenant.
    which minimizes capital requirements over the medium       • Calloway is focused solely on retail properties, which
    term.                                                         are exposed to consumer spending cycles, especially
• Calloway now has in-house development capability                tenants that sell non-necessities.
    transferred from SmartCentres (formerly First Pro)         • The Trust has a relatively short track record and is
    along with a new senior management team. Calloway             under new management. It has been transformed over
    also strengthened its management capabilities by              the past year into a retail-focused trust owning newer
    internalizing the property management function by             properties. It will take some time to determine how the
    acquiring this from SmartCentres. New developments            properties perform, given the significant competition in
    and earn-out potential at existing properties with            local markets from other retail properties.
    SmartCentres represent significant opportunities for
    further growth at about 6.2 million square feet on a pro
    forma basis. As well, acquisitions from SmartCentres
    provide a potential pipeline of growth in the future.



ASSET QUALITY                                      SUPERIOR
•   Calloway’s large, unenclosed retail centres are newly      •   Maintenance capital spending is minimal, given the
    built, with an average age of about five years.                newly built properties, and largely recoverable from
    Approximately 85% of the square footage has been               tenants through lease terms.
    completed since 2000. Many properties were built with      •   Limited capital expenditure requirements ensure that
    the flexibility for expansion for new and existing             most cash flow is available for distribution to
    tenants.                                                       unitholders.
Calloway REIT – Page 3



FINANCIAL PROFILE                                                                        MODERATE
                                                                             6 mos. to      6 mos. to    12 mos. to                                          9 mos. to
                                                                              June 30,       June 30,       June 30,    For the year ended December 31        Dec. 31,
(CAD thousands)                                                                   2006           2005           2006         2005         2004        2003       2002
Net income (before extras.)                                                     8,054          3,358         13,238        8,542        11,723      7,608       1,127
Depreciation and amortization                                                  48,622         21,848         93,560       66,786        24,622      1,172         213
Discontinued operations                                                             0            780           (780)            0            0          0           0
Other non-cash items                                                            1,415            120            862          (433)         152          0           0
Cash Flow from Operations                                                      58,091         26,106       106,880        74,895        36,497      8,780       1,340
Leasing costs and maintenance capex                                              (877)        (1,104)        (1,652)      (1,879)       (1,127)      (834)        (62)
Cash Available for Distributions                                               57,214         25,002       105,228        73,016        35,370      7,946       1,278
Gross cash distributions                                                     (53,071)       (23,234)       (91,126)      (61,289)      (29,231)    (8,156)     (1,110)
Cash Available after Distributions                                              4,143          1,768         14,102       11,727         6,139       (210)        168
Changes in working capital                                                   (11,715)         (1,414)      (13,012)       (2,711)       (1,313)     1,875         944
Free Cash Flow                                                                 (7,572)           354          1,090        9,016         4,826      1,665       1,112
(Acquisitions)/dispositions                                                 (174,640)      (200,536)      (728,521)     (754,417) (650,807)       (14,332)    (71,052)
Capital expenditures                                                             (246)             0         (1,666)      (1,420)            0          0           0
Properties under development                                                   (7,783)        (6,197)      (29,115)      (27,529)       (2,580)         0           0
Other investments                                                            (17,540)         (2,051)      (19,479)       (3,990)      (38,575)      (972)     (1,600)
Cash Flow before Financing                                                  (207,781)      (208,430)     (777,691)      (778,340) (687,136)       (13,639)   (71,539)
Equity financing (net)                                                       220,565          60,334       534,498       374,267      294,509      21,033      49,462
Debt financing (net)                                                         (43,969)       158,648        287,989       490,606      404,385      (6,837)     22,929
Other financing                                                                  (566)          (966)        (4,087)      (4,487)       (4,604)      (397)       (628)
Net Change in Cash                                                           (31,751)          9,586         40,709       82,046         7,154        160         223
                                                             Pro forma
                                                              June 30,
Key Financial Ratios                                          2006 (1)
Total debt/total capital (2)                                    55.8%           52.8%         60.4%          52.8%          57.6%      59.3%       52.6%       52.3%
Total debt/gross book value assets                              55.6%           49.4%         57.6%          49.4%          54.9%      58.1%       51.1%       51.6%
Cash flow/total debt (2)                                          0.07           0.08          0.07           0.07           0.05       0.06        0.07        0.02
EBITDA interest coverage                                          2.10           2.33          2.26           2.28           2.24       2.39        2.99        2.66
EBIT interest coverage                                                           1.14          1.16           1.10           1.10       1.44        2.72        2.40
(1) Pro forma to reflect the recent $440 million acquisition from SmartCentres and $250 million issue of senior unsecured debt.
(2) Includes convertible debentures treated as 75% debt equivalent and 25% equity equivalent.


Summary                                                                                                             Outlook
• Calloway has continued to finance its acquisition growth                                                          • Looking ahead, Calloway’s cash flows from its current
  prudently through a combination of equity and debt                                                                   portfolio are expected to remain reasonably stable,
  financing, resulting in a debt-to-gross book value of                                                                supported by high occupancy levels and well spread out
  49.4% at the end of Q2 2006. On a pro forma basis to                                                                 lease maturities. The improved scale and diversification
  reflect the recent $440 million acquisition from                                                                     by property and geographically should also enhance
  SmartCentres and $250 million issue of senior                                                                        cash flow stability looking forward.
  unsecured debentures, debt-to-gross book value is                                                                 • Cash flows overall will continue to grow from
  expected to increase to 55.6%, which remains below its                                                               acquisitions completed in 2006 and those in 2005.
  limit of 65% (60% excluding convertible debentures).                                                                 DBRS expects cash flows to be sufficient to cover cash
• DBRS expects leverage over time to be targeted toward                                                                distributions and modest levels of leasing costs as lease
  the 55% to 60% range as developments and acquisition                                                                 maturities remain minimal. Maintenance capex is also
  activity continue.                                                                                                   expected to remain low for the next several years.
• These acquisitions have resulted in cash flows more than                                                          • Cash distributions of $1.50 per unit are expected to
  doubling year over year to $58 million for the first six                                                             result in a payout ratio of between 95% and 98% for
  months of 2006, largely reflecting the $1.16 billion                                                                 2006 and 2007, although much depends on the pace of
  acquisitions from SmartCentres in July 2005 of                                                                       acquisitions, which add incremental cash flows.
  Wal-Mart–anchored new-format retail centres.                                                                      • Calloway is expected to increase investments in
• Acquisitions and new developments announced so far in                                                                development-related activity, with the potential for
  2006 have totalled just under $700 million, increasing                                                               6.2 million square feet of additional leasable area,
  the value of assets by approximately 30% to $3.4 billion.                                                            which would represent an increase of about 34% from
• Approximately $260 million of acquisitions have been at                                                              its pro forma portfolio. This will include earn-outs to be
  capitalization rates of between 7% and 10%, which are                                                                managed and completed by SmartCentres over the next
  accretive to cash flow.                                                                                              three to five years and that will be acquired by
• The most recent $440 million acquisition from                                                                        Calloway at predetermined capitalization rates of
  SmartCentres includes $382 million for nine income                                                                   between 6.5% and 9.1%.
  properties at an average capitalization rate of 6.1%,                                                             • Calloway’s costs to complete these developments are
  which is modestly accretive; $44 million for                                                                         estimated at $984 million. Calloway will require
  development potential; and $14 million to internalize the                                                            external debt and equity financing to complete these
  property management of 112 properties.                                                                               projects, which requires that financial market
• Calloway has continued to generate sufficient cash flow                                                              conditions remain favourable. Calloway’s much larger
  from operations to cover leasing costs, maintenance                                                                  scale over the past year has improved access to capital.
  capex and cash distributions. Maintenance capex has
  been minimal to date, given that most properties are
  relatively new.
                                                                                                              Calloway REIT – Page 4




DEBT MATURITIES AND BANK LINES
(As at June 30, 2006)  2006                 2007        2008      2009        2010     Thereafter    Total
(CAD millions)         13.9                 27.3        27.5      63.3       315.6       986.1      1,433.8
% of total debt        1.0%                 1.9%        1.9%      4.4%       22.0%      68.8%       100.0%

•   Calloway’s debt maturities are modest over the next             •    Calloway recently increased its operating facilities to
    few years until 2010, when $200 million of unsecured                 $190 million through a new unsecured $150 million
    debentures matures.                                                  acquisition facility and an existing $40 million
•   Excluding the unsecured debentures, the weighted-                    operating facility secured by specific properties.
    average term of its debt is relatively long at nine years,      •    Since the end of Q2 2006, Calloway has raised an
    which along with long average lease terms supports                   additional $250 million (5.37%, ten-year) senior
    cash flow stability over the next several years.                     unsecured debentures and will assume $235 million in
•   Favourable financing for real estate has resulted in                 mortgage debt related to the recent SmartCentres
    average interest rates of 6.06% for its mortgage debt,               acquisition.
    while exposure to rising interest rates is limited with
    only 1.3% floating rate debt.

DIVERSIFICATION                                      MODERATE
•   Calloway is Moderate in terms of diversification,               •    Calloway is well diversified by geography, with a
    reflecting its tenant concentration risk, with Wal-Mart              presence in the ten provinces across Canada. Over the
    comprising 29% of rental revenue, which is higher than               past year, it increased its exposure to Ontario from 29%
    in other REITs.                                                      to 45% of leasable area, which is more reflective of the
•   Calloway has substantially improved its property                     share of economic activity within Canada.
    diversification over the past year by both increasing the       •    The Trust is 100% concentrated in retail, which
    number of properties significantly to 115 on a pro                   exposes it to continually changing retail trends and a
    forma basis from 60 last year, while also improving the              competitive landscape, including new supply, which
    mix of properties in dense urban locations.                          can cause tenant disruption.
•   The remaining tenants are well diversified, with no
    single tenant comprising more than 4% of gross rental
    revenues.

SIZE & MARKET POSITION                               SUPERIOR
•   Calloway is Superior in size and scale, reflecting that it      •    Calloway has more than doubled its leasable area to
    has more than doubled its market capitalization to just              18.3 million square feet on a pro forma basis from
    under $2.0 billion at the end of Q2 2006, from                       8.8 million year over year. This should improve
    $816 million last year, from acquisitions and strong                 economies of scale in managing properties and in
    unit-price performance.                                              enhancing relationships with large national tenants.
•   Calloway is now Canada’s third largest REIT on this
    measure. This should provide improved access to
    equity; and debt markets to continue to grow.

SPONSORSHIP & GOVERNANCE                               MODERATE
•   Calloway’s board of trustees is composed of nine                •    Calloway has recently strengthened its internal
    trustees, five of whom are independent. At ownership                 management capabilities by acquiring the property
    levels at the end of Q2 2006 (24.3%), Mitchell Goldhar               management function from SmartCentres for
    is entitled to appoint three trustees (including himself).           $14 million. Calloway will no longer pay property
•   Calloway benefits from having a major owner/sponsor                  management fees to SmartCentres, and will increase its
    in terms of its close relationship with SmartCentres.                staff to manage the properties internally.
Calloway REIT – Page 5



GROWTH                                                           MODERATE
                                                           6 mos. to     6 mos. to    12 mos. to                                         9 mos. to
                                                            June 30,      June 30,      June 30,    For the year ended December 31        Dec. 31,
                                                               2006          2005          2006          2005         2004        2003      2002
Trust units outstanding (thousands)                          80,646        38,087        80,646       69,475        33,263      11,298      5,952
Weighted-average trust units (basic) (thousands)             74,303        35,540        68,784       49,402        26,191       6,934      1,592
Net income before extras. per unit (CAD)                        0.15          0.13          0.28          0.25         0.51       1.10       0.71
Cash flow from operations per unit (CAD)                        0.78          0.73          1.55          1.52         1.39       1.27       0.84
Cash available for distribution per unit (CAD)                  0.77          0.70          1.52          1.46         1.35       1.15       0.80
Declared distributions per unit (CAD)                           0.72          0.65          1.44          1.37         1.22       1.15       0.19
Declared distributions/cash avail. for distributions          95.5%         94.2%         96.3%        96.2%         94.0%    102.6%       86.9%
Declared distributions/cash flow from operations              93.7%         90.2%         93.9%        92.8%         91.1%      92.9%      82.8%

•   Calloway has grown rapidly since its inception through                                  as new developments and earn-outs from its
    accretive acquisition resulting in continued growth in                                  development pipeline coming on line are expected to
    cash flow from operations on a per unit basis. Calloway                                 generate further growth in cash flows to support the
    has been able to increase cash distributions each year                                  cash distribution. As well, Calloway’s relatively new
    while maintaining a payout ratio of below 100% based                                    assets require less maintenance capital, and leasing
    on cash available for distribution.                                                     costs are lower than many other REITs at this stage.
•   Calloway recently increased its cash distribution to                              •     Looking forward, internal growth in cash available for
    $1.50 per unit annually (from $1.45), which is expected                                 distribution is somewhat limited by the stable operating
    to result in a payout ratio of between 95% and 98% on                                   characteristics of the existing portfolio, including
    a pro forma basis in 2007, reflecting recent                                            limited lease maturities, high occupancy levels and
    acquisitions. This remains manageable looking forward                                   modest rent steps in existing leases with Wal-Mart.

THE PORTFOLIO
(As at June 30, 2006)                              Retail         Industrial      Total*
Leasable area (thousands of sq. ft.)               15,921            113          16,034
% of leasable area                                 99.3%            0.7%          100.0%
Number of properties                                105               1             106
Occupancy                                          98.9%           100.0%         98.9%
* Total excludes 3.8 million square feet of development potential at new and existing properties.


•   At the end of Q2 2006, Calloway’s portfolio had grown                             •     Many of the properties acquired in the past year are
    by over 80% year over year, as measured by leasable                                     larger than previous acquisitions, with approximately
    area, to become one of the largest retail REITs in                                      30 of these properties ranging in size from 300,000 to
    Canada at 16 million square feet.                                                       over 500,000 square feet.
•   The 106 retail properties included 81 Wal-Mart–                                   •     On a pro forma basis, Calloway as 6.2 million square
    anchored, unenclosed, large-format retail shopping                                      feet of development potential, including expansions at
    centres (Wal-Mart owns its property and acts as shadow                                  current properties, which represent a 34% potential
    anchor for 22 of the 81).                                                               increase in leasable area from 18.3 million square feet.
•   Calloway recently announced the acquisition of nine                               •     The retail assets are mostly newer properties, with 85%
    income-producing properties (eight are Wal-Mart                                         being developed within the past five years. Most reflect
    anchored) from SmartCentres, adding another                                             newer unenclosed retail formats, which have lower
    1.6 million square feet (0.6 million of expansion                                       costs and have expansion potential for Wal-Mart and
    potential) and seven development properties with a                                      additional tenants.
    potential for 1.8 million square feet.
PORTFOLIO OCCUPANCY
               June 30,                                As at December 31
                  2006                    2005           2004       2003              2002
Leased area      98.9%                   99.2%          97.8%      97.9%             96.4%

•   Calloway has maintained consistently high occupancy,                              •     DBRS does not anticipate any material change to
    averaging more than 98% over its relatively short                                       occupancy levels, given the modest lease maturities
    history as a REIT.                                                                      over the next several years.
•   This reflects its mostly newly developed properties,
    which are well-located, new-format centres anchored
    by Wal-Mart or other major national tenants.
                                                                                                                                     Calloway REIT – Page 6



LEASE MATURITIES
                                                                                                                           2011 &         Total
(As at June 30, 2006)                          2006             2007           2008         2009       2010      2011       after         area
Leasable area (thousands of sq. ft.)          187.7            289.5          362.3        386.0      630.5     963.7     13,213.7      16,033.5
% of gross leasable area                       1.2%             1.8%           2.3%         2.4%       3.9%      6.0%      82.4%         100.0%

•     Lease maturities are minimal over the next five years,                               •   The low lease maturities are expected to contribute to
      ranging from 1% to 6% with an average of just over 4%                                    stable cash flows from existing rents, with only modest
      over the next ten years, which compares favourably                                       growth from built-in rent steps.
      with that of other large retail portfolios.
•     The average lease term of 10.8 years is above average
      for REITs covered by DBRS.

TENANT PROFILE
(As at June 30, 2006)                       % of gross
Tenants                                  rental revenue
Wal-Mart Canada                                   28.6%
Reitmans                                           3.7%
HBC/Zellers/Home Outfitters                        3.6%
Best Buy/Future Shop                               3.6%
Mark's Work Wearhouse                              3.5%
Winners/HomeSense                                  3.2%
Sobeys/IGA                                         3.0%
Staples/Business Depot                             2.6%
Cara restaurants                                   1.8%
Rona                                               1.5%
Total                                             55.0%

•     The Trust has significant tenant concentration with                                  •   The average lease term across its portfolio is long, at
      Wal-Mart Canada representing just under 30% of gross                                     10.8 years, with Wal-Mart leases averaging 15 years.
      rental revenue (Wal-Mart Canada’s parent, Wal-Mart                                       This should provide for significant stability in cash
      Stores, Inc. is rated at AA by DBRS). Otherwise, the                                     flows.
      portfolio is reasonably well diversified, with the next                              •   Lease terms for Wal-Mart are favourable to the tenant,
      largest tenant comprising less than 4% of gross rent.                                    although Wal-Mart is obligated to pay rent (with few
•     Calloway’s properties also benefit from often having                                     exceptions).
      one of Loblaws, Sobeys, Rona, Home Depot, Canadian
      Tire or Sam’s Clubs as additional anchors.

PORTFOLIO BY GEOGRAPHY
                                                   Owned             % of
(As at June 30, 2006)              % gross    leasable area      leaseable
                             rental revenue   (000s sq. ft.)           area    Occupancy
Ontario                              49.0%          7,267           45.3%          98.6%
Québec                               15.2%          2,602           16.2%          98.8%
British Columbia                     11.9%          2,006           12.5%          98.6%
Alberta                               6.9%          1,184             7.4%         99.6%
Manitoba                              5.3%            809             5.0%         98.7%
Newfoundland & Labrador               3.9%            775             4.8%       100.0%
Saskatchewan                          3.5%            593             3.7%       100.0%
Nova Scotia                           2.0%            343             2.1%       100.0%
New Brunswick                         1.5%            266             1.7%       100.0%
P.E.I.                                0.9%            189             1.2%         97.9%
Total                               100.0%         16,034          100.0%          98.9%


•     Calloway’s portfolio is well diversified by geography,                               •   Calloway’s portfolio has a significant number of
      with assets owned across Canada.                                                         properties located in smaller, secondary markets in
•     Its presence in Ontario has increased to over 45% of                                     Canada. Approximately 2.5 million square feet of
      total leasable area, although this reflects the                                          property is located in markets with populations below
      concentration of population and economic activity of                                     100,000, while just over 6 million square feet is in
      this region.                                                                             major urban markets with over 1 million people.
Calloway REIT – Page 7



•   Acquisitions over the past year have increased the                                •     Looking forward, DBRS expects the Trust to continue
    Trust’s presence in major urban centres including the                                   to increase its presence in major markets across
    Greater Toronto Area, Montréal and Calgary.                                             Canada, and in particular in Ontario, Alberta and
                                                                                            Québec.
SMARTCENTRES RELATIONSHIP (FORMERLY FIRST PRO)
•   SmartCentres, owned by Mitchell Goldhar (Calloway’s                               •     Including the most recent acquisition, Calloway has
    largest unitholder at 24.5% at the end of Q2 2006), is a                                acquired interests in 97 properties, for about
    leading owner and developer of unenclosed, large-                                       $2.7 billion, from SmartCentres and the Wal-Mart First
    format shopping centres in Canada. It also established                                  Pro Partnership.
    the Wal-Mart First Pro Partnership in 1999.                                       •     While further acquisitions are not assured,
•   SmartCentres has developed over 160 shopping centres                                    SmartCentres offers another potential avenue for
    in Canada, including 117 Wal-Mart–anchored centres                                      growth for Calloway.
    out of the 182 newly built Wal-Marts in Canada over
    the past ten years. (There are 262 Wal-Marts in
    Canada.)
TRUST STRUCTURE
(As at June 30, 2006)
                                                                                                                       Mitchell Goldhar
                                                                  Public Unitholders                                   (SmartCentres)


                           75.5% (58.2 million REIT units & 2.7 million Class B LP units)

                                                                                                      24.3% equity (8.5 million REIT unit
                                                                                                           11.2 million Class B LP &
                            Unsecured Debentures                                                                Class B LP II units)
                                                                  Calloway REIT
                                                                      76 properties




                                                                      CWT Holdings
                                                                         Trust




                                                                                                    General Partners



                                                                     Calloway LP
                                                                      44 properties


                           Note: Calloway REIT and Calloway LP have joint ownership in 14 properties (of
                           106 properties in total). The ten development properties are within Calloway LP.


•   There are upstream guarantees provided by Calloway                                •     As a result, Mitchell Goldhar’s ownership interest
    LP and CWT Holdings to avoid structural                                                 could potentially increase to a maximum of 34.3% over
    subordination because the Trust is the issuer of the                                    time, assuming no further issuance of equity to the
    unsecured debt. However, the unsecured debt ranks                                       public.
    behind a substantial amount of property-specific
    secured debt.
•   Through SmartCentres, Mitchell Goldhar has the option
    of receiving consideration for future development
    commitments (i.e., earn-outs) totalling 12.3 million
    trust units or Class B LP units.
                                                                                                                                                    Calloway REIT – Page 8



                                                              Calloway Real Estate Investment Trust
Balance Sheet
(CAD thousands)                                                    June 30,       December 31                                              June 30,   December 31
Assets                                                                2006          2005       2004        Liabilities & Equity               2006     2005       2004
Cash and short-term investments                                     57,919        89,670      7,624        Bank debt                             0    5,000     17,000
Income properties                                                2,437,118     2,185,416    921,900        Mortgage debt                1,245,571 1,224,406   530,589
Properties under development                                       149,831       155,817     32,030        Unsecured debentures           200,000   200,000          0
Mortgages receivable                                                60,926        43,153     39,942        Convertible debentures            9,997   22,674     54,550
Accounts receivables                                                39,127        26,694      5,743        Acc. payable & other liab.       69,172   54,626     23,040
Other assets                                                        74,074        63,338      7,379        Unitholders' equity          1,294,255 1,057,382   389,439
Total Assets                                                     2,818,995     2,564,088 1,014,618         Total Liab. & Equity         2,818,995 2,564,088 1,014,618

                                                                  6 mos. to     6 mos. to     12 mos. to                                              9 mos. to
Balance Sheet &                                                    June 30,      June 30,       June 30,      For the year ended December 31           Dec. 31,
Liquidity Ratios*                                                     2006          2005           2006           2005           2004       2003         2002
Total debt/total capital                                             52.8%         60.4%          52.8%         57.6%          59.3%       52.6%        52.3%
Net debt/total capital                                               51.8%         59.9%          51.8%         56.1%          59.0%       52.5%        52.2%
Total debt/gross book value assets                                   49.4%         57.6%          49.4%         54.9%          58.1%       51.1%        51.6%
Secured debt/total debt                                              85.7%         96.4%          85.7%         85.0%          93.0%      100.0%       100.0%
Cash flow-to-debt                                                      0.08          0.07           0.07           0.05           0.06       0.07         0.02
Coverage Ratios
EBITDA interest coverage                                               2.33          2.26          2.28           2.24           2.39        2.99         2.66
EBIT interest coverage                                                 1.14          1.16          1.10           1.10           1.44        2.72         2.40
Profitability Ratios
Net rental margin                                                    66.6%         67.6%         67.4%          68.0%          66.1%       60.6%         61.2%
Cash flow return on average equity                                    9.9%         12.2%         12.1%          10.4%          14.7%       11.2%
Cash flow return on average capital                                   7.5%          8.4%          9.4%           7.6%          10.3%        8.0%
General and administrative/rental revenue                             1.8%          1.6%          2.7%           3.1%           2.1%        3.0%          5.0%
Operating Statistics
Number of properties                                                   106            60           106             96             55          23            12
Net interest in GLA (thousands of square feet)                      16,034         8,797        16,034         14,556          7,532       1,850         1,000
Portfolio occupancy                                                  98.9%         98.4%         98.9%          99.2%          97.8%       97.9%         96.4%

                                                                  6 mos. to     6 mos. to     12 mos. to                                              9 mos. to
Income Statement                                                   June 30,      June 30,       June 30,     'For the year ended December 31           Dec. 31,
(CAD thousands)                                                       2006          2005           2006          2005           2004         2003         2002
Rental revenue                                                    140,432         64,863       270,405       194,836          93,450     22,497          3,753
Operating expense                                                 (46,923)      (21,033)       (88,278)       (62,388)       (31,687)    (8,861)        (1,457)
Net rental income                                                   93,509        43,830       182,127       132,448          61,763     13,636          2,296
General and administrative                                          (2,532)       (1,070)        (7,406)       (5,944)        (1,919)       (685)         (188)
Interest and other income                                            4,147         2,145          6,464         4,462          2,355         247            38
EBITDA                                                              95,124        44,905       181,185       130,966          62,199     13,198          2,146
Less: Interest expense (gross)                                    (40,859)      (19,891)       (79,560)       (58,592)       (26,044)    (4,418)          (806)
Add: Capitalized interest (and market adjustment)                    2,433           192          5,195         2,954            190           0             0
Income before Non-Cash Items                                        56,698        25,206       106,820         75,328         36,345       8,780         1,340
Depreciation and amortization                                     (48,622)      (21,848)       (93,560)       (66,786)       (24,622)    (1,172)          (213)
Straight-line rent adjustment                                        3,339         1,190          6,100         3,951          1,692           0             0
Non-contolling interest                                                 22             0             22             0              0           0             0
Net Income before Extraordinary Items                               11,393         4,548         19,338        12,493         13,415       7,608         1,127
Extraordinary items                                                  4,709        13,338          5,630        14,259              0       1,353           134
Discontinued operations                                                  0           509           (509)            0              0           0             0
Reported Net Income                                                 16,102        18,395         24,459        26,752         13,415       8,961         1,261
Distributions declared                                            (54,421)      (23,543)      (100,362)       (69,484)       (33,241)     (8,156)       (1,110)
Net Remaining                                                     (38,319)        (5,148)      (75,903)       (42,732)       (19,826)        805           151

Earnings per Trust Unit (basic)
Weighted-average trust units (basic) (thousands)                     74,303       35,540         68,784         49,402         26,191       6,934        1,592
Cash available for distribution per unit                               0.77         0.70           1.52           1.46           1.35        1.15         0.80
Net income before extras. per unit                                     0.15         0.13           0.28           0.25           0.51        1.10         0.71
Reported net income per unit                                           0.22         0.52           0.36           0.54           0.51        1.29         0.79
Gross cash distributions per unit                                      0.71         0.65           1.32           1.24           1.12        1.18         0.70
Declared distributions per unit                                        0.72         0.65           1.44           1.37           1.22        1.15         0.19
Earnings per Trust Unit (diluted)
Weighted-average trust units (diluted) (thousands)                   75,310       35,659         71,652         51,827         28,535       6,944        1,592
Cash available for distribution per unit                               0.76         0.70           1.50           1.44           1.32        1.14         0.80
Gross cash distributions per unit                                      0.71         0.65           1.33           1.23           1.12        1.17         0.70
Payout Ratio
Declared distributions/cash avail. for distribution                  95.5%         94.2%         96.3%          96.2%          94.0%      102.6%         86.9%
Declared distributions/cash flow from operations                     93.7%         90.2%         93.9%          92.8%          91.1%       92.9%         82.8%

* Includes convertible debentures treated as 75% debt equivalent and 25% equity equivalent.

				
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