REIT Stocks Battered by Earnings Disappointments
Real-estate stocks took a battering on a flood of earnings reports, including several from big companies that disappointed investors.</br></br>The company that fared the worst didn't release earnings at all but warned they wouldn't be good. Mills Corp., a big shopping-mall owner, said third-quarter results will be "substantially below expectations" because of an accounting issue.</br></br>Investors had expected strong third-quarter results to be a boost for real-estate investment trust stocks, which have fallen on worries about rising interest rates and sliding consumer confidence. What they got was the Mills announcement Monday after the bell and disappointing reports yesterday from the likes of Equity Office Properties Trust, the biggest office-building landlord in the country. REIT shares overall were down just more than 2% yesterday, making the industry the second-worst performer among Dow Jones U.S. industry groups after electric utilities, off slightly more.</br></br>Broadly, REIT third-quarter earnings have been good as office, apartment and retail real-estate markets improve. Yesterday's downturn was a reversal from last week, when REITs rallied on good earnings reports and outlooks from mall REIT Simon Property Group and others.</br></br>Philip Martin, senior vice president of equity research for Stifel, Nicolaus & Co., described what happened to REITs yesterday as a "knee- jerk reaction" to earnings that came in a little lower than predicted at a time of increasing interest rates and rising inflation.