By John Spence
Shares of real estate investment trusts, which have been
pummeled so far in 2009, were down again Monday on fresh liquidity
worries after mall giant General Growth Properties Inc. said it is
in default under multiple loans.
Commercial real estate stocks have gotten off to a dreadful
start this year. The SPDR Dow Jones Wilshire REIT ETF (RWR) through
Friday was down 30%, trailing the S&P 500 Index (SPX) by nearly
16 percentage points, according to investment researcher
Morningstar Inc. The ETF was off over 5% in midday trading
Monday.
Troubled mall owner General Growth (GGP) in a regulatory filing
late Friday said it is currently in default under certain of its
loans. The stock was down about 9% to 42 cents at last check
Monday.
"The firm reported that - despite these defaults - none of its
lenders have yet taken steps that would require it to immediately
file for bankruptcy protection," Morningstar analyst Todd Lukasik
wrote in a research note Monday on General Growth's filing.
"Still, it appears to be just a matter of time before this firm
is forced into bankruptcy, as the head winds of reduced consumer
spending, excessive leverage, and unreceptive credit markets are
too much to bear, in our opinion," the analyst said.
General Growth is scheduled to release quarterly results after
Monday's closing bell. The company's descent has stood out even in
the decimated REIT sector, where the stocks have been thumped by
the recession, declining property values and rents, and turmoil in
the debt markets.
Shares of the SPDR Dow Jones Wilshire REIT ETF hit an all-time
high of $100.28 in February 2007. It was trading hands at $26.74 in
recent action Monday.
Developers Diversified Realty Corp. (DDR) was down 5% after the
retail REIT said it swung to a fourth-quarter loss after charges.
Like General Growth, the company's stock has been hit hard by
liquidity concerns.
Developers Diversified's board of directors has approved the
payment of the company's first-quarter dividend in a combination of
cash and common stock.
"While our financial results were lowered by significant
impairment charges and certain other non-recurring charges, our
core operating results were in line with expectations and continue
to display relative stability as we weather these unprecedented
economic challenges," said Chief Executive Scott Wolstein. "We made
progress in the fourth quarter, but are extremely focused on
further improving our liquidity and lowering leverage."
REIT shares could fall further if the economy continues to
weaken and the companies are unable to resolve their financing
problems. The stocks are underperforming the broader market "as the
stimulus catalyst passed and the reality of a still weakening
economy and a still dysfunctional credit market remains," said
Deutsche Bank analysts in a note to clients.
-By John Spence, 415-439-6400; AskNewswires@dowjones.com