WRAPUP 1-Brookfield, Calloway wary on growth prospects

Thu May 6, 2010 5:06pm EDT

* Brookfield Properties: markets have "turned the corner"

* Calloway REIT: "caution is still a watchword"

By Ka Yan Ng

TORONTO, May 6 (Reuters) - Two big Canadian real estate companies -- Brookfield Properties BPO.TO and Calloway Real Estate Investment Trust (CWT_u.TO)-- said they have emerged from recession with higher occupancy rates and rising rental income, but their chief executives showed only muted optimism on Thursday about near-term prospects.

Brookfield Properties CEO Ric Clark told investors that his company's markets have generally turned the corner with New York, Washington and Toronto, among those showing momentum. Brookfield is one of the biggest office landlords in Manhattan.

Clark said he was optimistic about Brookfield's recent joint venture in London, where it is building the 100 Bishopsgate complex with Great Portland (GPOR.L). He said it is a logical investment because of cross-continent possibilities with some of Brookfield's existing tenants, which are largely from the financial services, energy and government sectors. [ID:nLEE6EV001]

But the company said it faces uncertainty about Bank of America-Merrill Lynch's space needs in New York following their merger, while the long-term impact of the recent merger announcement of United and Continental airlines is unclear.

"Things are definitely improving, we're excited about it, but there are some negative signs out there too, so it's kind of a wait-and-see," Clark said.

Prospects in Calgary are also murky as office space that was developed during the oil boom comes on line, although Brookfield has some long-term contracts in place.

"I would say that considering everything we've been through, no one wants to sound too optimistic so people want to remain somewhat cautious," said Mark Rothschild, real estate analyst at Genuity Capital Markets. "However, the fundamentals are pretty good for most real estate companies, in Canada in particular."

Calloway REIT said potential acquisition opportunities remained sparse, and growth may need to come from its development pipeline. [ID:nN06104107]

"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."

Brookfield Properties BPO.N said on Thursday its first-quarter funds from operations rose 30 percent, helped by higher operating income from both commercial and residential property. It said it leased 2.3 million square feet of space, up from 1.8 million square feet a year earlier. Its managed portfolio occupancy rate finished the quarter at 94.8 percent. [ID:nSGE6450H5]

Calloway reported first quarter results late on Wednesday that were slightly ahead of expectations. It also said its occupancy rate increased to 99 percent and it retained more than 90 percent of tenants whose leases expired this year. [ID:nWNAB6853]

Other REITs that posted quarterly results on Thursday included Crombie REIT, which came in below market estimates because of higher expenses, and Dundee REIT, which topped forecasts on acquisitions. [ID:nSGE6450KE] [ID:nSGE6450NE]

($1=$1.05 Canadian) (Reporting by Ka Yan Ng; editing by Peter Galloway)

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