Stock market bullies property company shares
NEW YORK (Reuters) - Shares of U.S. real estate investment trusts (REITs) were battered on Monday after some of the sector's sources of capital needed to be rescued and hedge funds looked to real estate stocks as the last of the financial stocks available to sell short.
The MSCI U.S. REIT Index .RMZ, a yardstick used to measure REIT share performance, was down 3 percent in early afternoon trading.
"The only financial shorts you can find right now are in REIT-land," said Shawn Campbell, principal of Campbell Asset Management.
Many real estate stocks are not listed on the short-sale prohibition list compiled by the U.S. Securities and Exchange Commission and the New York Stock Exchange.
Global real estate services providers CB Richard Ellis Group Inc (CBG.N) and Jones Lang LaSalle Inc (JLL.N) were slammed. CB Richard Ellis shares were off 12 percent, or $1.70, at $12.18. Jones Lang LaSalle shares fell 10.1 percent, or $4.55, to $40.40.
Gramercy Capital Corp (GKK.N), a commercial real estate lender and owner of bank branches, fell 17.4 percent, or 64 cents, to $3.04 a share. Gramercy acquired American Financial Realty Trust, whose business entailed buying branch offices and leasing them back to banks, in April.
Cash-strapped Southern California office owner Maguire Properties Inc (MPG.N) fell 18 percent, or $1.24, to $5.81.
Monday morning, German lender Hypo Real Estate, which has provided a slew of loans to companies such as Boston Properties Inc (BXP.N), received the bulk of 35 billion euros, or $50 billion, in credit guarantees from the German government, underscoring the wide reach of the global credit crisis.
Campbell said that any company that has debt coming due is facing an uphill battle. The struggle helped send down shares of General Growth Properties Inc GGP.N, the No. 2 U.S. mall owner, 9.4 percent, or $1.61, at $15.44.
Ratings agency Standard & Poor's on Friday downgraded General Growth's corporate credit further into junk to a "BB" from a "BB+" and placed it on CreditWatch with negative implications. It also placed a "BB-' rating on roughly $5 billion of the company's unsecured debt on CreditWatch with negative implications.
The Chicago-based real estate company, which is on the no-short-selling list, faces roughly $1.2 billion in maturing debt for the remainder of 2008 and has $3.1 billion maturing in 2009.
Also on Monday, Citigroup Inc (C.N) said it would buy the banking operations of Wachovia Corp WB.N, one of Gramercy Capital Corp's largest tenants.
Citi said it expected to close less than 5 percent of the combined branches.
The combination of the financial institutions could add more office space to the New York office market, already braced for a wave of sublet space hitting available due to Bank of America's acquisition of Merrill Lynch, Lehman Brothers's collapse and the troubles at insurer American International Group Inc (AIG.N).
Brookfield Properties Corp (BPO.TO) was down 2.7 percent, or 46 cents, at $16.49 in afternoon trading. Brookfield is the landlord of Merrill Lynch & Co Inc MER.N, which is being bought by Bank of America Corp (BAC.N).
(Reporting by Ilaina Jonas; Editing by Brian Moss)
