REITs.com

Yet again, the week began with bad news for REITs. Developers Diversified dropped 17% after announcing it was unable to complete a 13-property sale this month as expected. The deal would have brought the REIT $890 million . The struggling General Growth Properties Inc . said it was still trying to extend the maturity date on $900 million in mortgages for two Las Vegas malls. However, by mid-week, the REIT announced it was able to negotiate a second extension and stave off defaulting on the loans, a move that could have led to more defaults and bankruptcy. Meanwhile, Cedar Shopping Centers Inc. announced it was able to postpone repayment of $300 million in debt.

Despite a 13% jump on Friday, Developers Diversified closed the week down 17% compared to last Friday’s close. General Growth Properties dropped 3% on the week while Cedar Shopping Centers jumped 19% on Friday to close out the week up 22%.

REIT ETFs RWR and VNQ are up 3% and 8% respectively compared to last Friday’s close.

In other news:

• Fitch said delinquencies on commercial property mortgages dropped last month because of an increase in loan extensions. It was the first drop in delinquencies since July. Still, Fitch expects delinquencies to rise, especially with mortgages tied to retail and hotel properties.

• First also noted that liquidity for REITs was weakening and warned downgrades were coming for REITs with liquidity shortfalls if funding markets didn’t reopen.

• FBR Capital Markets upgraded its ratings on Corporate Office Properties Trust and Washington REIT to outperform.

• CBRE Realty Finance, Inc. suspended its dividend.

• Several lodging REITs cut their dividends.

• Potlatch Corp. completed the spin-off of its pulp-based businesses.

• First Industrial Realty Trust lowered its earnings forecast by $0.55 a share and announced it will be discontinuing its European operation.

• Republic Properties Corp. has filed suit against Liberty Properties Trust.

• Hong Kong politicians proposed their government buy shares in the country’s Link REIT to prevent rental increases but the motion was voted down.

• Japanese home builder, Daiwa House industry Co. stated it believes the REIT market there will take 3-5 years to recover. Last June, Daiwa House cancelled plans to raise money through a REIT IPO and recently announced plans to sell houses at a loss to generate cash.

As we approach the final two weeks of 2008, REITs are closing out an unprecedented year. Long considered a way to diversify from the volatility of stocks, REITs performed very similar to equities this year, moving in tandem with both their losses and gains. Green Street Advisors estimates that REITs are currently trading at 30% below net asset value, but reminds investors that it’s difficult to accurately assess value in the current market, given the dearth of transactions that can be used as benchmarks.

REITs closed the week strong, most notably ProLogis which had a monster Friday. The stock jumped over 42% after announcing a cash-tender offer on its 5.25% notes due November 15, 2010.  ProLogis is up 64% compared to last Friday’s close.

On the whole, Friday’s boost enabled REITs to post gains on the week. REIT ETFs RWR and VNQ are up 2% and 3% respectively compared to last Friday’s close.

The outlook going forward is far from clear.  Fitch is forecasting a tough year for REITs invested in malls and shopping centers as well as industrial and office properties, but foresees multi-family and healthcare REITs faring better.  Wachovia rates the healthcare REIT sector Overweight citing, in part, their stronger balance sheets and expected increased government spending. They single out Nationwide Health Properties and Senior Housing Properties Trust as REITs that should do well.

Not everyone agrees, though.  Greenstreet Advisors is forecasting a challenging environment for REITs specializing in healthcare properties. They argue that since a substantial percentage of this sector’s income comes from senior-living facilities, low property values might make it more difficult for seniors to sell their homes to finance a move into such a facility. Furthermore, with unemployment rising, more seniors might opt to move in with family instead of a facility to save money. Greenstreet expects this to put near-term downward pressure on Ventas, HCP, and Nationwide Health Properties.

Nationwide is up 10% over last Friday’s close, Senior Housing Properties is up 7%, Ventas is up 15%, and HCP is up 4%.

In other news:

• Cambridge Industrial Trust (Singapore) secured $262 million in financing
• American Land Lease Inc. is being acquired for $438 million.
• Investors are looking to pick up the pieces of Japan’s shattered REITs, including New City Residence Investment Corp
• MHI Hospitality Corp. cut next year’s annual dividend 70 percent
• Saul Centers announced that it will be cutting its dividend due to rising delinquencies in its retail properties.
• Fitch sees imminent defaults at General Growth Properties

Despite the uncertain future, some people are thinking it might be time to buy .

It was a bumpy week for REITs beginning with massive losses on Monday that effectively erased last week’s big gains.  Solvency concerns wiped out roughly a third of Denver-based Prologis and First Industrial Realty Trust’s value.  But REITs bounced back on Tuesday including ProLogis which jumped 26% on the news it secured over a hundred million in financing that it will use to refinance its debt and cut costs.  ProLogis and First Industrial Realty Trust both ended the week with huge gains on Friday up 35% and 21% respectively. While Friday’s surge pushed ProLogis up 27% compared to last Friday’s close, First Industrial slipped 9% on the week.  The REIT ETF, RWR, gained 11% on Friday, enough of a jump to post a 2% gain over last Friday’s close.

Still, the balance of the news this week was negative:

• ProLogis and Weingarten Realty Investors had their credit-ratings downgraded.   
• Prospect Asset Management Inc., a Honolulu-based investment fund, announced that losses incurred 
• Houston-based REIT announced that it believes its stock price is unjustifiably low and has decided to go private as a result.

Despite a tough environment in which many investors are retrenching and cutting costs, others are announcing deals including KBS, AMB Property Corp., Washington Real Estate Investment Trust, Canada’s Skyline Apartment REIT, and Malaysia’s Axis REIT.

The REIT Industry also got a boost in the Philippines where the government passed a bill that will permit REITS being listed on the Philippine Stock Exchange.

Going forward, all eyes will be looking at who will have to cut their dividends and analysts are making a few projections, including forecasting cuts at Anthracite Capital Inc. and NorthStar Realty Finance Corp.