February 25, 2010 / 7:25 PM / 7 years ago

UPDATE 1-Calloway REIT sees modest rent increases in 2010

* Aims for 5-10 pct average rent increases this year

* Sees at least 7 Walmart supercenters added to portfolio (Adds details)

TORONTO, Feb 25 (Reuters) - Calloway REIT CWT_u.TO on Thursday said it expects tenants to accept modest rent increases this year, and said it would add at least seven Walmart supercenters to its portfolio this year.

Walmart (WMT.N) supercenters, a retail format that offers groceries and general merchandise under one roof, accounts for about a quarter of the revenues generated by the retail-space owner.

"We continue to anticipate this clearly succesful Walmart strategy will have longer-term beneficial effects for Calloway from a higher volume and frequency of consumer visits to our properties," said Chief Executive Simon Nyilassy on a conference call with analysts.

The company expects modest rent increases across its portfolio, Nyilassy said. It has negotiated just over 25 percent its renewals for the year so far, and the majority of the deals have resulted in average rent increases of about 5-10 percent.

"If 2009 might have been called the year of the balance sheet, I believe 2010 may end up being the year where we call flat the new up," said Nyilassy.

"In a potentially deflationary environment, tenants that reliably pay the same rent on time month in, month out are to be treasured. Same rents (is) a lot better than no rents at all."

The REIT owns 22 million square feet of space, and one of its main objectives is to have strong retailers anchoring its unenclosed shopping centers, which total more than 100 across Canada.

On Wednesday, Calloway posted a drop in funds from operations, a key measure used by real estate investment trusts, but the decline was in line with expectations as strong operating results were offset by higher costs. [ID:nN24219791]

The company said it will monitor the market for new investment opportunities beyond its existing development pipeline after its recent capital raising.

It also said it will work on maintaining its historically high occupancy levels.

($1=$1.06 Canadian)

Reporting by Ka Yan Ng; Editing by Frank McGurty

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