To get a sense of just how nervous real estate investors are, consider CB Richard Ellis Group Inc.


The world's largest real estate services firm not only soundly beat Wall Street expectations with its second quarter earnings but doubled its 2007 guidance.


But all that apparently amounts to little. Investors have punished the stock, which is off nearly 40 percent in the last two months.


Though the El Segundo company is highly diversified, at its core it's a commercial brokerage, and the fear these days justified or not is that the commercial real estate sector won't escape the larger market downturn spurred by the collapse of subprime lending and the stagnant housing market.


"I think what has taken place with the residential side and the subprime has impacted the sentiment of lenders on the commercial side but there really is limited linkage between residential and commercial space," said Chief Financial Officer Ken Kay.


Limited or not, over the past two weeks at least three analysts have downgraded the company and shares have continued sliding, closing at $25.52 on Sept. 13. As recently as July 19 the shares reached a high of $41.57.


Though a majority of analysts covering the firm still rate it a buy, the most recent hit came early last week when Goldman Sachs analyst Jonathan Habermann downgraded the company along with two real estate investment trusts from "buy" to "neutral."


Even as he wrote that "growth prospects for the company's leading global platform remain positive," Habermann concluded that the tightening of credit terms would likely reduce the company's volume of sales transactions.


Though the company does everything from managing property, to investing in real estate, to developing projects, commissions on brokered commercial real estate sales generated 31 percent of second quarter revenue.


"We believe that the shares could continue to be choppy in the near term," wrote Habermann, who expects the company to see a 15 percent decline in investment sales revenue next year.


Big acquisition

Kay maintains that the fears are overblown, and the debt market where mortgages are securitized and resold is not as volatile in commercial real estate as it is on the residential side.


"There is still a lot of active trading taking place in the marketplace. There are still traditional players that are still participating," Kay said, even though he acknowledged "the cost of leveraging is a bit higher or transactions take longer."

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