Sector Snap: REIT Stocks Mostly Down

In a client note Thursday, Goldman Sachs analyst Jonathan Habermann said he maintains a "cautious view" on the sector and expects REIT stocks to lose between 10 percent and 15 percent this year as fundamentals weaken because of a slowing economy and higher debt costs.

Similarly, JPMorgan analyst Michael W. Mueller expects REITs to lag the S&P 500 and potentially deliver negative returns for the year.

"Within the group, we think finding a way to play defense ... is the prudent strategy in the current environment," he wrote in a client note Thursday.

REITs face tough credit markets this year as lenders tighten standards because of shrinking interest in assets backed by commercial mortgages. A surge in residential foreclosures has scared investors away from securities backed by all types of real estate. More than $50 billion in risky, short-term commercial loans could default if they're not refinanced this year.

Mueller also downgraded AvalonBay Communities Inc., SL Green Realty Corp., Kimco Realty Corp. and PS Business Parks Inc. to "Neutral" from "Overweight." He slashed Camden Property Trust, Equity Residential, DCT Industrial Trust Inc. and Medical Properties Trust Inc. to "Underweight' from "Neutral."

Shares of AvalonBay slipped 83 cents to $85.69 in early afternoon trading, while Camden edged up 21 cents to $43.68 and Equity Residential fell 1 cent to $33.53. SL Green dipped $1.18 to $83.66, and PS Business fell 59 cents to $44.21.

Kimco's stock declined 20 cents to $32.67, while DCT Industrial fell 3 cents to $8.74. Shares of Medical Properties decreased 22 cents to $9.98.