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Case-Shiller Index Falls By Record 4.5%

Everyday more Economist’s like Robert J. Shiller are expressing concern that the threat of a recession is coming, but there are plenty of other clues that we are facing unprecedented risks. Consider publicly traded Real Estate Investment Trusts (REIT). Over the last few years most REIT’s performed extremely well. But the fundamentals are deteriorating and the trading values that took years to build could potentially be wiped out in as many months by the those nasty stock market vultures and fast buck artists commonly known as short sellers. Take Equity One (ticker: EQY) as an example of the perfect storm. Equity One is traded on the New York Stock Exchange. While Equity One’s exposure is nationwide it is based in Florida and so is a huge chunk of its portfolio. The double whammy facing Equity One is that unlike a diversified REIT it primarily invests in “retail” real estate. Equity One disclosed in the latest supplement to it’s quarterly report that its overall vacancy rate is already over 6%, but the shocker is the fact that the rate almost doubles (to a little over 12% vacancy) when the tenants shop is less 10,000 sq ft. The real danger for Equity One is that this group of tenants represents over 70% of Equity One’s shopping center revenue. When you consider that less than 30% of Equity One’s current shopping center tenants are Anchor’s (defined as having over 10,000 sq ft.) you really get goose bumps because at least the bigger retailers have the capital reserves to weather the storm. …And you thought only Realtors and builders had it bad.