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RioCan cash flow rises 15%

RioCan Real Estate Investment Trust's (REI.U-T) growth prospects might be enough to support an increase in its monthly distribution next year, Canada's largest landlord of retail space said on Thursday.

The company held out the possibility of an increased payout after reporting a 15 percent increase in quarterly funds from operations, the benchmark measure of profitability for real estate investment trusts.

The REIT has steadily expanded its portfolio in Canada, while looking for new opportunities for growth in the United States for more than a year.

While the efforts are bearing fruit, its distribution has held steady at 11.5 cents since October 2008.

"I can say with assurance that not only will our distribution continue as it is, but that by 2012, I expect our growth to be such that our board will be in a position to at least consider an increase in the monthly distribution," RioCan Chief Executive Ed Sonshine said on an investor conference call.

His optimistic outlook stems from low interest rates, increasing retailer demand and acquisition opportunities. The company's organic growth is solid, he said, while redevelopment programs are accelerating and looking especially promising.

While RioCan aims to expand its footprint in the United States, it is also in talks with several U.S. retailers that have made known their own expansion plans into Canada.

RioCan is in extensive leasing talks with Target Corp (TGT-N), a U.S. retailer that in January revealed an ambitious and long-anticipated Canadian expansion plan.

Target will acquire the leases on up to 220 Zellers discount stores from Hudson's Bay Co, North America's oldest company. RioCan counts Zellers among its top five tenants.

RioCan was said nothing about specific locations where it will remain as landlord of the converted Target stores, but it expects to play a major role in Target's plan.

"I'm pretty confident that the same way as we're Zellers largest landlord we will be Target's largest landlord," said Sonshine. He expects locations to be finalized over the next 10 days, with announcements possible in the first week of June.

The shopping mall landlord reaffirmed this year's acquisition budget of $600 million to be used for properties in Canada and the United States. That builds on nearly $1 billion in expansion last year that added more than 5.7 million square feet to its portfolio.

UNITS SLIP

Funds from operations in the first quarter rose to $90 million, or 35 cents a unit, up from $78 million, or 32 cents, a year earlier.

Analysts, on average, had forecast FFO per unit of 37 cents, according to Thomson Reuters I/B/E/S.

The REIT said its occupancy rose slightly to 97.4 percent in the quarter, steady from year-end 2010, and up from 97 percent one year ago.

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