Window Redressing - TheStreet

Window Redressing

A few outsized share movements among the REITs lead some investors to assume the worst. They're probably right.
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SAN FRANCISCO -- Last Thursday, you'll recall, I wrote about the

seamy underbelly of window dressing, although I did not have specific examples of bellybutton lint to offer.

Susequently, I've received examples of some alleged "painting of the tape" which occurred last Thursday in real estate investment trust stocks. (I guess somebody took



Several names were mentioned by various players in the REIT industry, but two stand out as the most egregious examples of stocks which enjoyed outsized moves on the final day of the quarter.

On Sept. 29,

CenterPoint Properties


closed at 31 13/16, leaving it down 13.1% for the quarter. Heading into the final 90 minutes of the session the next day (and the quarter), the stock was under 32 before closing the New York session at 33 1/16.

However, in after-hours activity, "it subsequently traded 1,000 shares on various third markets" via four different trades "with final ramping getting CenterPoint to 33 3/4," recalled Carl Tash, CEO of

Cliffwood Partners

, a Los Angeles-based hedge fund active in the REIT market. "This is blatant and aggressive manipulation in the third market." (The stock traded a total of 81,800 shares that day.)


PS Business Parks

(PSB) - Get Report

was at 23 heading into the final day of the third quarter, for which it was down 5.6%. On Sept. 30, the stock was at 23 1/4 with an hour to go in the session before closing at 26. Over two-thirds of the stock's daily volume of 246,900 shares were exchanged in that final hour, including 99,500 of orders (presumably buy) posted at the close, according to data at


"Come on, guys. While PSB is a very good company, just how are you creating value for your investors when you buy it at $26 on Sept. 30 when it's been trading at $23 for the last three months?" Ralph Block, a vice president at

Bay Isle Financial

, wrote in


last Friday. "For this we pay you big bucks?"

As telling as the action on Thursday was the fact that CenterPoint fell 2.4% on Oct. 1 while PS Business lost 10.6%. By comparison, the

Morgan Stanley

REIT index dipped 0.6% on Oct. 1; the previous day, both stocks had outpaced the index's 1% rise.

Block manages the $23 million

Undiscovered Managers Real Estate

fund, which is long PS Business. Still, he was disturbed by the action Thursday because it inevitably led to Friday's giveback.

"There's no free lunch," he said in an interview. "It's bad for the REIT industry, which needs more credibility. It irritates the hell out of me when I see it."

Cliffwood Partners had both long and short positions in some stocks that moved dramatically on Thursday, although Tash would not name names. "We came out OK, but I don't like it, period," he said. "I would rather let the world play out its fate vs. this silliness. It's indicative that no one thinks they'll get caught. No one cares about the

Securities and Exchange Commission


Block and Tash agreed that REIT stocks are particularly vulnerable to these kinds of shenanigans, partly because they're thinly traded. Also, since REIT funds are focused on total return, some managers believe an extra 25 or 50 basis points of performance can make a difference in their marketing efforts.

"As REITs have been doing so poorly, the

painting the tape activity is getting much more aggressive," Tash said. "It's obnoxious. To me, it's a bit disappointing, and brokers are just as guilty as the firms they take orders from."

Asked to clarify, Tash said it was curious there were "at least 15 stocks" with heavy buying on the close Thursday, but only two order imbalances by his recollection.

The absence of order imbalance announcements "tells me there's a trader willing to take the other side and go short," he said. "People said 'I need this to close at this price or higher,' and the specialists or the client's broker is happy to take the other side because they know the stock will be down

the next day. It's a great trade. I understand financially why they're willing."

However, there is that pesky fact that the SEC forbids manipulating the markets.

In keeping with the agency's S.O.P., a spokeswoman for the SEC said "we neither confirm nor deny the existence of SEC investigations or inquiries."

As for who may have been behind some of the allegedly untoward stock movements, several industry players mentioned the

(CSRSX) - Get Report

Cohen & Steers Realty Shares as a prime suspect, if only because of its size. On Sept. 30, the net asset value of the roughly $1.5 billion fund rose 1.8% (vs. the 1% gain for the REIT index) to 36.08. On Oct. 1, the fund's NAV fell 1% while its benchmark index slid 0.6%.

Cohen & Steers' New York offices had already closed when I tried to call this afternoon. I will try to follow up with people there in the coming days and, as always, give them a chance to reply, should they choose to do so.

Kibbles & Tidbits

In the midst of the market's rally



Ron Insana

effusively declared

General Electric

(GE) - Get Report

as the "stock of the day." Sure, GE rose 2.3% to an all-time high of 123 11/16, but the parent of that network was just the sixth-biggest influence (among gainers) among the

Dow Jones Industrial Average


My concern is that Insana, who deservedly is one of the most respected financial reporters on air or off, is hanging out with

Maria Bartiromo

too much. Who knows what goes on during the changeover from the first to second hour of "Street Signs?" Is Bartiromo giving

cheerleading lessons?

Meanwhile, I love the new Stuart ad. But let us all say a silent prayer in hope that


(AMTD) - Get Report

will soon do


about the guy with the boat.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

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