By Kate Gibson
The stock market has for weeks been dogged by talk of trouble
lurking in commercial real estate, yet investors focused on the Dow
Jones Real Estate Index must not have gotten the memo.
The real estate benchmark's up nearly 50% since early March,
exceeding the performance of the broad market, despite commercial
mortgage delinquencies hitting 11-year highs in April.
On Thursday, property research firm Trepp LLC reported that the
level of loans 30 days or more behind in payments last month
climbed to 2.45%, with the credit squeeze making it hard for
landlords to refinance bank loans.
The delinquencies are up "by a factor of five from a year ago,"
said Nick Kalivas, equity analyst at MF Global Research. "Even
though commercial real estate lags the cycle, the numbers highlight
the battle banks face in producing profits."
Bill Feingold, managing director at Newport Value Partners,
sounded a similar note of caution, saying he's "very concerned
about commercial real estate."
In particular, Feingold's worried that the stock market has
gotten ahead of itself, rallying on earnings from banks and other
companies that stem from cost-cuts as opposed to growth.
On Friday, the Dow Jones U.S. Real Estate Index (IYR) rose 1.4%
to 33.05, up 48.8% from its March 6 close of 22.21.
Meanwhile, the major stock indexes were mixed after the Labor
Department reported job losses slowed in April. .
The Dow Jones Industrial Average (DJI) up 65.16 points at
8,475.01. The S&P 500 (SPX) added 8.18 points to 915.57, and
the Nasdaq Composite (RIXF) shed 1.79 points to 1,714.45.