NEWS HEADLINES
Wall Street Crumbles as Oil Climbs
By Margot Crabtree
The AFT Index faltered as the economy faded under the onslaught of high oil prices when our trading session ended June 11, 2008. Only two of the 14 companies tracked in the index inched their way into positive terrain.
Despite an upgrade of apartment real estate investment trusts (REITs) by Keefe, Bruyette & Woods analyst Stephen Swett, major market forces applied downward pressure to the REIT sector, and the index closed at 960.08, a 51.04-point, or 5.05 percent, slide. Swett upped his rating on the sector to “neutral” from “underweight,” noting that apartment market values are “likely to hold up better than for commercial real estate.” In his research note to clients, Swett wrote that “with less downside risk, we now believe apartments REITs can hold their relative valuations.”
Wall Street struggled to maintain its balance amid weakening consumer spending and skyrocketing oil prices. As our session ended, the price of crude was hovering around $135 a barrel, after having flirted with $140 for brief periods the week before. Investors grimly digested remarks by Fed chief Ben Bernanke suggesting that inflationary pressures might persuade the central bankers to raise rates later this year.
“There are not a lot of positive things you can point to right now,” said Michael Binger, portfolio manager at Thrivent Investment Management in Minneapolis. “We have commodity prices higher, inflation up, the prospect of the Fed raising interest rates instead of lowering, a worldwide slowdown, and an economic slowdown in the United States.”
Associated Estates Realty muscled its way into positive terrain after the company announced a June 5 dual listing on NASDAQ, in addition to its listing on the New York Stock Exchange. AEC is the first REIT to dual-list its shares. “We believe that listing on NASDAQ will provide enhanced visibility for AEC,” said Jeffrey Friedman, president and CEO. “NASDAQ will provide us with valuable additional market intelligence, investor relations and corporate communications benefits at a lower cost.” AEC added 0.11 points, or 0.90 percent, and was the top dollar and percentage gainer this session. AEC closed at 12.36.
Centerline Holding fell 0.31 points, or 10.84 percent, and closed at 2.55. Centerline announced a restructuring of its commercial real estate unit after the retirement of the company’s executive managing director, Larry Duggins. In the commercial real estate group, the Agency Products unit will be led by William Hyman. Mark Brown will helm the company’s Commercial Products sector, including its equity division. Centerline was the top percentage loser.
On the last day of our trading session, investment firm Goldman Sachs sounded a cautious note for U.S. REITS, saying the worst is yet to come, with slower growth rates and greater funding costs. Although REITs have so far outperformed the broader markets, Goldman said the fundamentals are only now beginning to absorb the risk. Goldman’s top “sell” ideas include AFT Index components Camden Property Trust and AvalonBay Communities. Camden Property fell 4.46 points, or 8.78 percent, and was the top dollar loser in the index this session. Camden Property closed at 46.35. AvalonBay lost 3.78 points, or 3.8 percent, and ended at 95.63.
AFT Index Gainers and Losers
$ Gainer – Associated Estates Realty Corp. -- .11
$ Loser – Camden Property Trust -- -4.46
% Gainer – Associated Estates Reatlty Corp. -- .90%
% Loser -- Centerline Holding Co. -- -10.84%
Advancers: 2
Decliners: 12
Source: Trade Trends, Inc., (509) 327-1279
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