NEW YORK (AP) - Shares of major real estate investment trusts declined
Friday after KeyBanc Capital Markets analysts said they expect a slowing economy
and tight credit conditions to weigh on growth expectations for most REIT
groups.
In a client note, analyst Dennis I. Forst maintained his "neutral" outlook
on lodging REITs "due to our fear of the psychological and financial impact that
the sluggish economy and prolonged slowdown of the market would have."
However, Forst kept his "Buy" rating on Ashford Hospitality Trust Inc.,
saying the integration of assets from the CNL purchase last year is "moving
along smoothly." Ashford's shares lost 27 cents, or 4.8 percent, to $5.38. Other
lodging REIT stocks also trended downward in trading.
Meanwhile, KeyBanc analyst Jordan Sadler expects apartment REITs to suffer
from slowing rent growth amid an increasing supply of so-called "shadow" rentals
and an uptick in unemployment. Shadow rentals are for-sale homes and condos that
owners can't sell and put on the rental market.
Companies with high leverage and short-term debt are also at risk, he said.
Among the REITs with large debt expirations are Camden Property Trust, Post
Properties Inc. and United Dominion Realty Trust Inc. Camden shares dipped 20
cents to $43.30, while Post's stock edged up 31 cents to $33.90. United Dominion
fell 11 cents to $20.25.
Sadler also said the pace and volume of office leasing will slow.
Additionally, stricter lending standards will keep a host of buyers on the
sidelines, adding downward pressure on office sales prices.
SL Green Realty Corp., Boston Properties Inc. and Digital Realty Trust Inc.
are the best-positioned office REITs. The first two own properties in the best
urban office markets in the U.S., while Digital Realty remains in the
high-demand, low-supply data-center market.
Shares of SL Green slipped 44 cents to $82.73, while Boston Properties'
stock lost $1.94, or 2.2 percent, to $85.10. Digital Realty fell $1.28, or 3.8
percent, to $32.74.
Finally, KeyBanc analyst Marsella Martino remains "cautious" on commercial
finance REITs as sharply higher residential mortgage delinquencies and
foreclosures continue to disrupt credit markets in general.
"At this point investors appear to be on the sidelines for investing in the
space, pending greater visibility into economic conditions, ultimate credit
performance and future of the structured finance markets," the analyst wrote.
Martino's best bets for commercial finance REITs are NorthStar Realty
Finance Corp. and Newcastle Investment Corp., two of the more seasoned
companies. Northstar's stock dropped 48 cents, or 6.2 percent, to $7.24, while
Newcastle shares fell 58 cents, or 6.2 percent, to $8.72.
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