Citi wants out and REITs

Citigroup (NYSE:C) is reportedly trying to repay TARP money and get out from under the government’s thumb. But has Citi raised enough money to insulate it from future losses if the economy tanks?
That appears to be the main concern that’s keeping Citi in the government program.

There’s also rising credit card defaults. Bloomberg reports that bad credit card debt rose to 12% at Citi last month. And with the unemployment rate still rising, credit card default rates will keep rising, too. 
Finally, given the lax standards the Treasury used in its stress tests, letting Citi languish for a bit is probably the right move. 
*****Fed Chief Ben Bernanke believes the U.S. economy is no longer in recession. But it also won’t be growing fast enough to affect the jobless rate for a while.  
Of course, as we’ve seen, that doesn’t mean stock prices won’t move higher. Given the government’s desire to underwrite all risk in the stock market, I’m starting to think commercial real estate REITs might be good for a trade.  
*****At the last Fed meeting, Bernanke and other governors said they were concerned about the potential for default of commercial real estate loans. They have also been considering extending loan and guarantee programs to commercial real estate companies. 
Yesterday, Maguire Properties (NYSE:MPG) was up 29% on nearly 8 times normal volume. It’s a REIT (real estate investment trust) which owns mostly office buildings and parking lots in California. In early August, Maguire defaulted on debt payments for 7 properties and had to turn them over to the bank.
The company claims better than $4 billion in assets and has a market cap of just $65 million. There have been recent moves by private equity to start buying distressed real estate. And if the Fed and Treasury are serious about supporting the commercial real estate market with loans and guarantees, beaten down REITs like Maguire Properties could be very attractive. And given the size of yesterday’s move for Maguire stock, it would appear that somebody out there thinks it’s attractive.
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