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Calloway Real Estate Investment Trust (OTC:CWYUF) has a portfolio of Wal-Mart (NYSE:WMT) anchored power centres of “exceptional quality”, but that’s not enough in today’s economic climate, according to Canaccord Adams analyst Shant Poladian.

Mr. Poladian reduced his 12-month target price on the REIT by C$2 to C$15.75 Monday, saying Calloway is facing major challenges because of a lack of access to equity and unsecured debt financing.

Mr. Poladian said:

We estimate Calloway’s liquidity sands at about C$170-million which is insufficient relative to its C$1.1-billion of unfunded development and mezzanine loan commitments. Also looming is a C$200-million senior unsecured debenture due in 2010.

He expects Calloway will face equity dilution, a slowdown in its development of properties and be forced to sell some core and non-core assets. “Calloway has not positioned itself to outperform its peers in a bear market,” says Mr. Poladian.

By comparison, the analyst says shopping store owner First Capital Realty Inc. (OTC:FCRGF) is far better positioned to withstand current economic conditions.

Describing First Capital as a “must own investment," Mr. Poladian said:

It has a strong balance sheet that includes C$182-million of cash and undrawn lines of credit plus a whopping C$1.6-billion (at book value) of unencumbered and real estate assets.

RBC Capital Markets analyst Neil Downey also reduced his target price on Calloway from C$23 to C$17.50 but was more positive in his remarks about the REIT.

“While it requires a lot of work, Calloway has a credible plan to manage liquidity/capital requirements,” said Mr. Downey, in a report.

Source: Calloway REIT Struggling While First Capital Realty Shines