February 18, 2010 / 8:10 PM / 8 years ago

UPDATE 1-Boardwalk REIT mulls options for its cash

* FFO per unit of C$0.58 vs year-ago C$0.61

* Street view was C$0.59 per unit

* Leaves distribution, outlook unchanged

* Units little changed in Toronto (Recasts, updated throughout)

By Ka Yan Ng

TORONTO, Feb 18 (Reuters) - Boardwalk Real Estate Investment Trust (BEI_u.TO) said on Thursday it would look at several options to put its hoard of cash to use, while saying it was not prudent to apply a special dividend at this time.

The Calgary, Alberta-based real estate investment trust, which posted lower quarterly results late on Wednesday, said it was happy with its cash position and stood ready to use it, but has yet to make a decision.

“The truth of the matter is we’re in a very strong position. We want to be able to react if something does happen quickly. If not, to be honest, we’ll sit and be steady,” Rob Geremia, president of Boardwalk, said on a conference call.

“We’ve learned over the last 12 months (that) being steady, liquid and patient is a very good thing.”

The REIT said it has nearly C$400 million ($385 million) in liquidity through cash and a revolving credit facility. Cash generally has a low return on it, which dilutes results on a per unit basis. Boardwalk said it has not yet thoroughly examined alternatives for its capital.

But it did rule out for now a special distribution. Geremia said the board routinely considers the REIT’s payout and at this point decided it a special payment was not prudent.

Instead, it decided the next three payouts will remain at 15 Canadian cents per unit per month.

The REIT sounded an optimistic tone with its key Alberta market where it mainly operates. Executives said it has seen an increase in occupancy in oil-rich province through the winter months, and hopes that momentum will carry into the spring.

It listed several high-profile energy projects in Alberta, which could create jobs and therefore may prompt a bump in the need for rental housing.

“We contend that operating fundamentals in the Alberta apartment market will turn around much sooner than other types of real estate as Alberta leads the country in terms of both economic and population growth,” Macquarie analyst Michael Smith said in a research note. He also raised his price target to C$44.00 from C$42.00, with an “outperform” rating.

“Concurrently, new supply of competing forms of housing is set to diminish in 2010, thus setting the stage for rental rate increases in the back half of the year,” he said.

RESULTS SLIGHTLY SHY OF EXPECTATIONS

The trust posted a 5.2 percent drop in funds from operations, partly as a result of the dilutive effect of holding higher levels of cash.

Funds from operations (FFO), a key measure of performance for real estate companies, slipped to C$30.8 million, or 58 Canadian cents a unit, the REIT said.

That compared with C$32.5 million, or 61 Canadian cents a unit, a year ago. It was just shy of the expected FFO per unit of 59 Canadian cents, according to Thomson Reuters I/B/E/S.

The REIT left its 2010 FFO per unit expectations in the range of C$2.45-C$2.60.

The average monthly rent in the trust’s portfolio for the quarter was C$981 per suite, compared with C$978 a year earlier. Average occupancy rose to 96.6 percent, up from 95.3 percent a year ago. Rental revenues in the quarter were flat at C$107.1 million.

Units of Boardwalk were unchanged at C$37.75 on the Toronto Stock Exchange at late afternoon.

$1=$1.05 Canadian Reporting by Ka Yan Ng; editing by Rob Wilson

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