The real estate and mortgage slump has made it a year to forget for stockholders of Downey Financial Corp., First American Corp. and Grubb & Ellis Co.
And there are signs there’s still plenty of pain in store.
The three companies have seen their combined market values drop by nearly $1.8 billion so far this year.
That’s nearly as much as Irvine-based subprime lender New Century Financial Corp.’s value dropped during its well-documented collapse in early 2007.
Downey, a Newport Beach-based savings and loan operator, and Santa Ana-based title insurance and business information company First American have seen their market values drop by $700 million to $900 million each in 2008 alone.
That represents a nearly 90% drop in value for Downey, while First American’s shares are off by about 40% in 2008.
Santa Ana-based Grubb & Ellis has seen its value drop by $155 million, or about a third, since the start of the year when the former Chicago-based brokerage company was acquired by the parent company of Santa Ana-based real estate investor Triple Net Properties LLC.
The stock pain has coincided with some boardroom changes.
Last week, Downey chairman Maurice L. McAlister, who cofounded the company and owns 20% of its stock, stepped down. The company also said Chief Executive Daniel Rosenthal retired and appointed Chief Operating Officer Thomas Prince as interim chief executive. Downey said it plans to search for a permanent chief executive.
In late June, Downey president Frederic McGill left after eight months with the savings and loan operator. He was Downey’s third president in less than four years.
Scott Peters, Grubb & Ellis’ chief executive, resigned earlier this month. The company’s looking for a full-time successor.
The three companies aren’t alone among real estate-related businesses having a hard time on Wall Street.
Miami-based Lennar Corp., whose day-to-day operations are run out of Aliso Viejo, has seen its value fall by another $900 million this year to $1.9 billion, after a terrible 2007 that saw its value decline by more than $5 billion.
The stock of Los Angeles-based Maguire Properties Inc.,OC’s second largest landlord,is down nearly $900 million in 2008 and is off more than $1.3 billion since early 2007. The real estate investment trust had a recent market value of $520 million.
Factors in Declines
The OC-based companies can point to different factors in the real estate downturn for their stock declines.
Bad home loans made by Downey have led to its stock dropping; it now counts a market value of about $50 million. On the upside, that’s nearly double what the company was worth earlier this month, although part of the rise was due to short sellers covering their bets that Downey would drop further.
First American’s stock hasn’t declined nearly as much as Downey’s on a percentage basis, dropping by about 40% so far in 2008. That still adds up to a $900 million decline. Its shares also are down by $1.8 billion since a January run-up, when First American’s stock hit its high for the year so far.
The stock of First American,OC’s second-largest public company by 2007 revenue,has been hit hard by the slowdown in home sales and refinancings, which has taken a bite out of First American’s core title insurance business.
First American now counts a value of about $2.2 billion. Officials for the company,which is still planning to spin off the title business into a separate company later this year,say that they haven’t seen signs of a turnaround so far in 2008.
The downturn in the commercial real estate market, rather than housing, has been the cause of Grubb & Ellis’ stock decline. Institutional sales of offices and other buildings are off some 80% from a year ago, and property values are dropping in much of the country.
Grubb & Ellis’ stock has fallen nearly two-thirds since its 2007 high and now is valued at about $245 million.
Bright Spots
Two additional OC-based real estate companies have seen their stock perform better in 2008, although they’re still far from recovering the losses in value seen last year.
Irvine-based Standard Pacific Corp.’s value is up about $20 million for the year to about $260 million, even after a tough week for homebuilders last week. The company lost nearly $1.4 billion of its value in 2007.
Also in Irvine, mortgage investor Impac Mortgage Holdings Inc. has seen its market value increase nearly $45 million in 2008 to about $75 million at last check. Impac’s value declined about $600 million in 2007, due to the mortgage meltdown.
