August 13, 2010 / 6:15 PM / 7 years ago

Boardwalk pays special div, not ready to up regular

* Announces special distribution of C$0.50 per unit

* Hopes rising of hike to regular distribution

OTTAWA, Aug 13 (Reuters) - Boardwalk Real Estate Investment Trust (BEI_u.TO) is not yet ready to raise its regular monthly payout to unitholders, as net operating income has not risen enough, but it announced a special distribution from proceeds of recently sold properties.

The trust, which reported a 5.7 percent per-unit drop in funds from operations in the second quarter, said on Friday that it was "a matter of time" before higher rents flowed through to its results.

"The good news is that market rents are an early indicator, and that's positive for the first time in many, many quarters. We believe the worst is behind us... It's just a matter of time for us to see it in the results and in our performance," said Sam Kolias, Boardwalk's chief executive officer.

"So when we see the results and the cash and increased FFO, then we can look at increasing our distribution on a permanent basis."

The Calgary, Alberta-based REIT confirmed a regular distribution for the next three months of 15 Canadian cents per unit when published second-quarter results late on Thursday.

But the board approved a special distribution of 50 Canadian cents, payable Sept. 15 to unitholders on record as of Aug. 31, to reflect sale of several non-core assets.

"Boardwalk is starting to return profits to shareholders in a more meaningful way as a direct result of improving fundamentals," Michael Smith of Macquarie Research said in a note. He was encouraged that average occupancy was at a high level.

"We believe that if the current trends continue it paves the way for a distribution increase."

Because of the loss of income generation from the sale of these properties, the REIT cut its full-year FFO outlook to C$2.40-C$2.55 per unit, from C$2.45-C$2.60 previously.

For the quarter, Boardwalk reported FFO of C$34.6 million ($33.3 million), or 66 Canadian cents a unit, down from C$36.8 million, or 70 Canadian cents a unit, for the same period last year.

Boardwalk units rose 0.2 percent to C$41.31 at midafternoon on the Toronto Stock Exchange. ($1=$1.04 Canadian) (Reporting by Ka Yan Ng; editing by Janet Guttsman)

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