Hypo Rescued

Hypo Real Estate Holding was rescued over the weekend. This is an ominous sign for commercial real estate because Hypo was a big player in financing the sector. At least part of the problem seems to be how Hypo was funding itself as opposed to this stemming from its pool of assets.

"It was basically a funding mismatch. The maturity of the liabilities was shorter than that of the assets," said Philip Haessler of German broker Equinet. "As the financial crisis and the funding situation deteriorated, in large part because of the bankruptcy of Lehman, HRE found itself unable to cover its short-term liabilities."

"It was a strategic mistake. Under different circumstances it wouldn't have been an issue. But now nobody trusts anyone and it's impossible to raise short-term funding," he said.

HRE said the additional credit line "became necessary as a result of the intensification of the financial crisis in the last week."

HRE shares fell 35% in Frankfurt trading, a measure of how concerned investors still are that the bailout in place may not be enough. The shares are down 86% so far this year.

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