Real Estate IPOs: Thanks, but No Thanks

Futures rose as jobless claims were a bit lighter than expected; August Existing Home Sales out at 10 AM ET; the expectations of 5.35 million sales would be the highest level in two years; again the cynics will peg this to the expiration of the first time home buyer tax credit.

There was little in the way of surprise in the Fed statement, but the fact that yesterday was an outside reversal day (where the S&P 500's high and low for the day exceed those of the preceding day) has technician's a little concerned.


1) Thanks but no thanks to real estate IPOs: I have just spent a couple days moderating a Family Wealth conference, where very rich families discuss where they should be putting their money. One of the big themes was how much money should be invested in commercial real estate (there was, as you might imagine, a lot of cash on the sidelines).

If the reception to several commercial real estate investment trust (REIT) IPOs is any indication, they would do well to wait.

There were four REIT IPOs scheduled to price this week and next, all designed to pick at the carcasses of commercial and residential properties, most of it on the mortgage side.

So far, only two have priced, both of those a day late, and both raised half what they anticipated.

Colony Financial (CLNY) sold 12.5 milion shares at $20 (half the 25 m share talk); Apollo Commercial Real Estate Finance (ARI) sold 10 million shares (also half the share talk), also at $20. Both will be buying real estate debt instruments.

The problem? The same issue that came up at the conference: 1) may be too early to start buying commercial real estate, 2) too many coming at once, and 3) REITs may not be the right vehicle for aquisition of commercial real estate.

Foursquare Capital Corp. (FSQR) which is acquiring residential mortgages, should price tonight, while Ladder Capital Realty (LCG) is scheduled to price next week.

2) Rite Aid Corp. stock is down 8% pre-open after posting its ninth straight quarterly loss. The drugstore chain says sales continued to decline in the second quarter, however, losses narrowed to $0.14/share on lower overhead costs. Analysts were expecting a loss of $0.16. Rite Aid's outlook has soured on expectation of a continuing weak economy and high unemployment, and is lowering its fiscal 2110 view to a loss of $0.48 to $0.74 a share, from an expected loss of $0.33 to $0.59.

3) Goldman is raising their price targets on a number of retailers about 10 percent, including Gap, Chicos, J Crew, Urban Outfitters, Abercrombie & Fitch, Aeropostale and American Eagle.


4) National Semiconductor up 4 percent pre open as it was raised to buy at Citigroup.



Questions? Comments?