The recent announcement by St. Joe Co that it faces an informal enquiry by the SEC into its accounting practices, and in light of the macro economic pressures facing the US consumer, we thought it was time to consider investor sentiment towards some of the main US Real Estate companies. We look at St. Joe (NYSE:JOE), CB Richard Ellis Group Inc (NYSE:CBG), Grubb and Ellis Co (NYSE:GBE), National Retail Properties (NYSE:NNN) and Simon Property Group (NYSE:SPG).
St. Joe has been targeted by short sellers, particularly after the true value of the Florida real estate developer was questioned by David Einhorn, the man who raised sirens about Lehman’s before its collapse. Looking at investor sentiment, we see conflicting views from both the short and long markets. One way of gauging investor sentiment towards its future profitability is to observe how much is owned by large, long term investors and whether this is changing. We are able to view a proxy for such daily institutional ownership by looking at the holdings of funds who lend their shares which has jumped from 22 to 29 million shares over the past month. However, short sellers have been holding on to their positions with short interest increasing marginally from 23% to 25% of total shares outstanding on loan. It is worth noting that 68% of the lendable supply is currently out on loan. This is considerably higher than the Data Explorers sector average of 10%, which has been falling recently.
CB Richard Ellis Group Inc the large global commercial real estate company with a highly diversified portfolio continues to top the Data Explorers positive investor sentiment list with the share price rallying impressively throughout last year and institutional ownership continuing to increase to 85 million shares in comparison to 65 million shares in January 2010. Short covering over the past year has reduced the percentage of shares outstanding on loan to a steady low of 2%.
Simon Property Group has received recent media attention in Europe about a possible bid for the UK listed Capital Shopping Centres, given its minority stake. However, the company has formally rejected such speculation. Short interest has been relatively static at 2% of total shares outstanding on loan since last summer, which is significantly lower than the 5% of total shares observed in January 2010.
National Retail Properties, which operates in real estate and mortgages, has been subject to negative investor sentiment in the last six months. The share price has fallen from its November high whilst institutional investors reduce their holdings by 5 million shares since January last year to 27 million shares. Short sellers have been piling in as short interest has increased from 12% to 16% since July. We currently see 35% of the lendable supply currently out on loan and it should be noted that the company has issued convertible bonds.
Finally, Grubb and Ellis Co shares tumbled in the middle of last year as it downgraded its outlook. However, the small cap commercial real estate company has seen a partial rebound in its share price in recent days and short interest has decreased from 5.5% to 4.5% of total shares outstanding on loan since December. Institutional investors still seem to be wary of the future of this stock holding a low 5.4 million shares in total, given it is exposed to a highly volatile sector.
