* Targets C$600 mln in acquisitions next year
* Expects U.S. retailers to spur rise in Canada rents
* Q3 FFO C$0.36/unit vs estimated C$0.35/unit (Recasts, updates throughout)
By Ka Yan Ng
TORONTO, Oct 28 (Reuters) - RioCan Real Estate Investment Trust (REI_u.TO) said on Thursday it has earmarked C$600 million ($588 million) for acquisitions in the coming year and expects rising competition for Canadian retail space will be "good for a landlord" and translate into higher rents.
RioCan is estimating about C$150 million in acquisitions next year in Canada and C$450 million in the United States. That come on top of expectations it will complete around C$1 billion in acquisitions and investments in 2010 -- twice what it had forecast earlier in the year.
The REIT has so far enjoyed relatively little competition for properties in the United States and is routinely approached by sellers -- even passing on some deals.
"People in the United States have started to sit up and take notice of what we have been creating over the last year," said Ed Sonshine, president and chief executive of RioCan, Canada's biggest and oldest real estate investment trust.
The market south of the border has presented the REIT with its greatest buying opportunities in the past year, and RioCan has built on its U.S. joint venture with Cedar Shopping Centers (CDR.N) in areas such as Massachusetts, Pennsylvania, and Connecticut.
It also recently entered the Texas market and says a third U.S. geographic region is possible, but it is in no hurry.
Analyst Mandy Samols said it may be harder for RioCan to pick up more properties going forward because of rising competition and as capitalization rates, a measure of return on investment, fall, which means the asset price would be higher.
"I don't think they'll do the same level of acquisitions next year but it's not unreasonable. It just depends how competitive it gets and how quickly cap rates compress. Because cap rates have come down, they're not going to be as accretive as they were last year," said Samols, an analyst at Raymond James.
In Canada, RioCan said it expects competition for retail space will be "good for a landlord" and pump up rents as more U.S. companies expand in Canada.
New entrants include clothing store Marshalls (TJX.N), and Dick's Sporting Goods (DKS.N) plans to bring its Golf Galaxy chain. Dressbarn DBRN.O brands Maurices and Justice are also looking for locations across the country.
Sonshine said Canadian retailers are "extremely strong" but often there is not a lot of competition and that is "bad because they can play name that tune when it comes to rent."
"(The U.S. retailers) are going to provide a strong second player in many sectors where we've only had one player. If that doesn't lead to higher rent growth in what I consider the best retail portfolio in Canada, then I would be shocked," he said.
Earlier on Thursday, RioCan reported quarterly funds from operations (FFO) that beat market estimates by a penny, helped by acquisitions it made in the quarter.
For the second quarter, FFO, a key measure of profitability for real estate companies, was C$89.3 million ($87.5 million ), or 36 Canadian cents a unit. That compares with C$71.6 million, or 30 Canadian cents a unit, a year earlier.
RioCan said reasons for the increase included an 18 percent rise in net operating income, thanks to acquisitions, as well as increase in lease cancellation fees of C$4.5 million.
RioCan said it completed six acquisitions in Canada and 10 in the United States in the July-September quarter.
The REIT said it maintained an occupancy rate of 97.1 percent in the quarter.
RioCan units rose close to 2 percent to C$22.92 on the Toronto Stock Exchange on Thursday afternoon.
$1=$1.02 Canadian Additional reporting by Isheeta Sanghi in Bangalore; editing by Rob Wilson