UPDATE 3-Two REITs complete IPOs after halving deals

* Colony sells 12.5 mln shares, raises $250 mln

* Apollo sells 10 mln shares, raises $200 mln

* Halving of deals clouds upcoming REIT IPOs -- analyst

(Updates with pricing)

By Phil Wahba

NEW YORK, Sept 23 (Reuters) - Two mortgage real estate investment trusts completed their initial public offerings at half the size they had originally targeted due to limited demand, casting a shadow over similar upcoming IPOs.

Colony Financial Inc (CLNY.N) said on Wednesday it sold 12.5 million shares and raised $250 million, while Apollo Commercial Real Estate Finance Inc (ARI.N) sold 10 million shares and raised $200 million, one of its underwriters said.

Both companies were created to buy distressed mortgage assets.

The deals were originally scheduled to price on Tuesday, but were postponed by a day. Early on Wednesday, both slashed their deal estimates by half.

They may have faced weak demand because of the recent glut of similar mortgage REIT IPOs. Two more plan to come to market in the next week.

"People are assuming the market is unlimited, but institutions don't want to be overweighted in the sector," said Nicholas Schorsch, chief executive of American Realty Capital, a real estate advisory firm. "The market doesn't have the capacity to absorb this many deals."

The two other mortgage REITs set to price in the next few days are Foursquare Capital Corp FSQR.N, due on Thursday, and Ladder Capital Realty Finance Inc LCG.N, due next week.

Schorsch said both could face the same investor reticence encountered by Colony Financial and Apollo Commercial.

A number of mortgage REIT IPOs have recently come to market, including Starwood Property Investment Trust Inc (STWD.N) and PennyMac Mortgage Investment Trust (PMT.N).

Last week, a REIT by Crexus Investment Corp CXS.N shrank its IPO by 60 percent on the day of its pricing.

Because their shares are down slightly since the IPOs, there is little pressure on institutional investors to get in early on such deals, Schorsch said.

There is little fear of missing out on a "first-day pop," he added. (Additional reporting by Christopher Kaufman; editing by Lisa Von Ahn and Andre Grenon)