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BOSTON-Locally based Heritage Property Investment Trust saw a 9% increase in funds from operations in second quarter compared with the parallel quarter a year ago. Same-store operating income rose 4.8%.

“Leasing was strong,” said Robert Prendergast, SVP and COO, during a conference call, “and our first-half gains show we’ve recovered from the high proportion of bankruptcies among major retailers in early 2004. Over the past 12 months, we’ve seen steady, sustained improvement in both leasing activity and rental rates,” he added.

Heritage added four properties during the quarter. “While we will continue to pursue attractive acquisitions as a means of growing our portfolio, we remain committed to our capital recycling program,” said Thomas Prendergast, president, chairman and CEO. “We expect to dispose of several non-core assets during the second half of the year.

“Our pipeline is solid,” he said, “but I continue to be amazed at the acquisition environment, which is getting more competitive.” The current cap rates and rising costs have prevented Heritage from bidding on some otherwise desirable properties, Prendergast noted. “We are continuing to explore capital-raising joint-venture opportunities involving an initial contribution of certain of our existing core assets and the funding of future shopping center acquisitions.”

Prendergast said the JV opportunities were in the US and abroad, but would not disclose the identities of the potential partners or locations. “Such a joint venture will help us to increase our sources of capital and our ability to pursue high-quality acquisitions.” He anticipates a net investment of between $125 million and $150 million in acquisitions this year, not necessarily related to the planned JVs.

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