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REIT Shorts Near A Record High

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This isn't a positive sign. Nicholas Yulico at TheStreet.com, one of the best reporters covering the REIT market, has a story up showing that short interests in REIT stocks are approaching all-time highs.

REITs shares have had a rough go of it for nearly a year now. Every company is well off its 52-week high. This is in spite of the fact that most REITs are still reporting robust results and generally meeting analyst expectations.

But, as Yulico points out, trading in REIT stocks has become much more volatile than it once was. REIT stocks used to barely move that much one way or another. Those days seem to be long gone. Now, REIT stocks seem to fluctuate just as much as the rest of the market. So is this rise in short selling merely a sign of that or do investors know something?

Short interest on the U.S. MSCI REIT Index is at 10%, compared with 4% for the entire New York Stock Exchange, according to data compiled by Bloomberg. Investors who sell stocks short profit from declines in the share price.

SNL Financial, which tracks a wider index of REIT stocks, says the median short interest on the group rose to 8% at the end of February, compared with 4.5% a year ago.

The high short-interest levels are catching the eyes of several dedicated REIT money managers, who tell TheStreet.com that REIT stocks are generally trading below the private-market values of their real estate. The sector has been slammed lately amid the difficulties in the credit markets and job market uncertainty.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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