May 6, 2010 / 4:16 PM / 7 years ago

Calloway REIT sounds cautious note on growth

* Says current acquisition landscape is bare

* Sees no significant acceleration in new business (Adds details)

TORONTO, May 6 (Reuters) - Calloway Real Estate Investment Trust CWT_u.TO said on Thursday it favors putting its cash into its development projects because acquisitions opportunities are nowhere to be seen.

At the same time, executives said they were cautious about the trust’s growth.

“We’re seeing very little in the way of potential acquisitions that we like. We’re seeing some renewed interest in expanding from our existing tenants, as well as some potential new tenants,” Simon Nyilassy, Calloway’s chief executive, said on a conference call.

“But I think caution is still a watchword for our tenants, which is why I don’t see significant acceleration in new business for the rest of the year.”

The REIT has about 5 million square feet of gross leasable area that it could develop. Nyilassy said the property development pipeline is an “ideal” use of cash in the absence of good acquisition opportunities.

The lack of prime properties has been an issue facing many Canadian REITs, which have raised piles of cash in the past year and are looking at ways to deploy it. [ID:nN2966623]

Calloway units were up 0.48 percent at C$21.15 on the Toronto Stock Exchange at midday on Thursday.

The trust, which is sometimes called the “Wal-Mart REIT” because a large chunk of its revenue comes from the discount retailer that anchors many of its mall properties across Canada, reported first quarter results late on Wednesday that were slightly ahead of expectations. [ID:nWNAB6853]

It also said its occupancy rate increased to 99 percent and it retained more than 90 percent of tenants whose leases expired this year.

On the conference call, Nyilassy said he expects occupancy and retention rates to remain at high levels for rest of year but struck a note of caution.

“Last quarter I suggested 2010 would be a year where flat is the new up. So it seems like we’re now on a modest incline but there’s enough challenges, I think, in the broader economy and with our trading partners to remain cautious, and so we do,” he said.

$1=$1.03 Canadian Reporting by Ka Yan Ng; editing by Rob Wilson

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