Property REIT

Bernanke : Commercial Property May Pose Risk for Economy

Commercial real estate could be the next catalyst for a major market correction….. (according to Bernanke).

Among the key points noted:

1. Commercial market is potentially bigger than the residential market (hence, a much larger problem here)

2. Increased vacancy, declining rents, falling prices. That almost sum up the 3 pillars of real estate. If all of them are still falling, then we have not seen the bottom yet. It is still falling. Companies are still not hiring. More restructuring are going on.

3. Which leads me to the third point. Debt ratio. Essentially, now is the worst time to go ‘long’ on property related stocks (including REITs). Lots of them are highly geared and with falling demand, prices and rents, it is extremely difficult for them to increased revenue. I am not sure how they are going to raise the funds to pay. But, I see a possible repeat of GM, or CIT.

4. At some point in time, the musical chair party will stop. And some will no longer be with us. So, do be careful out there.


Credit Suisse Selling ACC and ARE among many others.

GR pointed me to the MMFAIS site, highlighting how CS has been selling lots of stuffs (err.. I mean holdings).

Among the very long list includes counters like ACC and ARE; both are REITs.

The interesting fact here is 100% of both counters are sold off.

A lot of the sales took place this month (May 2009).

Maybe, it does not mean anything at all. Since I do not know how CS operates. But, I guess 100% sale can suggest that it is not attractive to hold them long term.


Alexandria Real Estate (ARE) : Bearish Outlook

I have been bearish on various REITs for quite some time. The key reason is the amount of leveraged they have.

Surely, in this economic climate, financial institutions will be cutting back and reducing their lending exposures

With this in mind, highly leveraged REITs will faced significant challenges in raising funds to finance their borrowings.

For more in depth reads on such issue, try searching for Morningstar, Seeking Alpha and of course, via Google.

One of a possible short position which I have attempted is on  ARE.

From a technical analysis point of view, ARE  has just broke its long term support at around $32.

You can look at the chart here. For the past few sell down, it was able to hold at that level. But, last few trading days sees the support being broken and till Friday, it did not manage to clear that level.

Will this be the beginning of  a major slide for ARE?

Take a look at the chart:

Look at the volume that is associated with that price level. History suggest that there’s volume supporting it at around $32 range.

But, a further break down will suggest that this price level will not hold.