Property stocks face U.S. assault

They call it a stair-step approach. It starts low but keeps climbing. Basically they gave them a 5-year holiday,said Berman,who was a director at South African firm ApexHi Properties before starting his business.

You have a massive amount of bad debts that were written at incredibly low rates being reset. So even though Treasuries are pretty decent,the reset rates will be way above what these guys can afford.

U.S. home foreclosure actions spiked in March and set a quarterly record despite federal programmes to help homeowners from defaulting on mortgages.

The U.S. economy remains fragile with at least 65 percent of reported gross domestic product numbers attributed to government spending,and banks are still holding bad assets on their balance sheets,Berman said.

Nothing has changed. It8217;s a purely band-aid type solution where they threw more debts at the over-debt situation,he said.

Berman declined to specify the size of his fund,but said about 60 percent of the fund had exposure to the U.S. real estate investment trust REIT market,20 percent to UK REITs and 10 percent to Australian REITs.

VT International Global Macro Freestyle REIT Fund was the 10th best-performing hedge fund by single managers as of last June,according to the Australian Fund Monitors.

Berman buys put options to short his positions,and also trades some ETFs.

Currently,he has a short position in U.S.-listed ETF fund,SPDR Samp;P Homebuilders. One of the few individual stocks in which he is also taking a short position is U.S. homebuilder Hovnanian Enterprises Inc.

In Australia,Berman is bearish on Westfield Group,which generates about 40 percent of its operating income in the United States,and Lend Lease,which has taken on a few major projects including Sydney8217;s waterfront Barangaroo project.

Every time I open the paper,Lend Lease is winning a contract. Winning every auction isn8217;t always the best thing because you tend to overpay,he said.

Westfield shares are down 2.9 percent in 2010 and have slumped 10 percent in the past week alone. Lend Lease is down by more than a fifth this year,and has also dropped 10 percent in the past week.

The U.S. REIT market has more than doubled since hitting its lows in March 2009,on hopes that the economy is on the mend.

He said all REIT markets now have strong correlations and falls in the U.S. market should drag down other REIT markets.

All in all,there is massive structural damage out there which is not fixed yet. So I8217;ve got this view which is curbing my ability or my desire to go long in the market,he said.