The credit crisis continues to deepen. Yet another large development has secured financing. This time it’s the mammoth CityCenter project in Las Vegas.

MGM Mirage said Monday that it completed the first stage of its $3 billion financing package for CityCenter, a $9.2 billion Las Vegas Strip casino project being developed with Dubai World.

MGM said it had secured a $1.8 billion senior bank credit facility that will mature in April 2013.

CityCenter has received addition commitment letters of more than $500 million, which executives said will be added to the facility once completed.

CityCenter - which MGM Mirage (nyse: MGM - news - people ) officials have called the most expensive private commercial development in U.S. history - is expected to include six high-rise towers with a 4,000-room hotel-casino, condominiums, boutique hotels and a retail, dining and entertainment complex.

Quoting Green Street Advisors, Bloomberg says commercial real estate is facing a “reckoning.”

This is one reason why it’s so hard to get a read on the true state of the sector. On one hand, we hear a lot of arguments that commercial real estate didn’t experience the same kind of bubble as residential real estate. Values are down and fundamentals are weakening, but we’re not seeing the historic kind of crash that is happening on the residential side.

On the flip side, there seems to be a lot of fear that things got too frothy in 2005, 2006 and 2007. Values got too high, lending got too generous and underwriting got too loose. There’s a feeling that we’re just in a waiting period until the damage from those days gets unleashed.

“The day of reckoning for commercial real estate has been delayed, not dodged, and the delay means that markets for commercial real estate will remain discombobulated long after conditions have improved elsewhere,” wrote Mike Kirby, chairman and director of research of Green Street, the Newport Beach, California-based firm that analyzes real estate investment trusts.

Values for commercial properties have dropped 20 percent from their 2007 peak, yet delinquency rates have been low in part because many loans taken out from 2005 to 2007 were interest-only, requiring no immediate paydown of principal, Kirby said in the firm’s October outlook report.

Low delinquency rates make the commercial market “feel healthier” than the housing market, Kirby wrote. Delinquencies are “certain to shoot higher,” as the economy weakens and borrowing costs rise, he said.

A record $600 billion of commercial mortgage-backed securities were originated between 2005 and 2007. The annual pace in those three years was almost triple the $70 billion a year originated in the first five years of this decade. Those loans now account for almost two-thirds of outstanding CMBS, Kirby said.

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.

Despite the worsening credit crisis, some REITs seem to have been able to line up fairly significant financing packages. So it seems not everybody can get a loan these days, but the market isn’t completely frozen either.

Cedar Shopping Centers got a $77.7 million deal done. Meanwhile, Macerich has lined up more than $500 million in a series of deals.

Update 9:42 AM: The market is embracing these moves. Yesterday’s drop–with stock falling almost 50 percent in a day–may also have been overdone. As a result, General Growth’s stock rebounded right off the bat and is back up $4.00 in early trading today.

General Growth Properties Inc. announced the departure of its chief financial officer as it also suspended the dividend on its common stock, the real-estate investment trust’s latest moves as it strains to deal with a $27 billion debt load.

The mall owner said Bernard Freibaum is no longer employed by the company. He has unloaded some 83% of his 7.6-million-share stake of late to satisfy margin calls, including just short of 3 million shares Thursday. General Growth said Mr. Freibaum still has about $3.4 million of margin debt outstanding.

The firm added that all executives have said they have no more margin loans outstanding, eliminating the need for them to further dump stock in order to pay back the debt.

General Growth’s stock tumbled 48% Thursday, its sharpest decline this year, amid recent stock sales by top executives to cover margin calls and concerns about the financial health of life-insurance companies, a key financing source for the company. The stock closed Thursday at $7.59 and there was no premarket trading; it is down 82% this year.

Link. Bloomberg has a story as well on the implications of General Growth’s debt troubles for other REITs.

UBS isn’t waiting for the bailout to pass. It’s found a way to move some of its commercial and residential mortgage assets. Terms were not disclosed so there’s no way to know how much the bank marked down its assets or who bought them. But perhaps some of the vulture funds we’ve been hearing about were involved.

Shares of UBS soared 10.5%, or 2.06 Swiss francs ($1.81), to 21.76 Swiss francs ($19.21) on Thursday afternoon in Zurich, after the Swiss bank said it had “substantially reduced” its U.S. commercial and residential mortgage-related assets, mainly through disposals. A spokeswoman for UBS declined to value the size of the disposal or say where the toxic assets had gone.

UBS’s comments on Thursday suggest it could have disposed of up to 10.0 billion Swiss francs ($8.8 billion) of its toxic assets, said Jean Sassus, an analyst at Raymond James Equities in Paris. “This shows that there are buyers out there who we didn’t know about before, which is good news for everyone,” he said.

UBS declined to say whether the assets were going into government or private hands, but Sassus said the most likely situation was that a club of investors, possibly distressed debt funds, had snapped them up.

A few months ago we linked to an item from Boston about how the mayor wanted greater assurances from developers about financing before giving the green light to large projects. At the time, the Filene’s redevelopment was stalled because of lack of financing.

It appears that even amid the credit crisis, the project was able to secure financing. The big question, of course, is what the terms are. They are not described in the story.

After weeks of uncertainty about the struggling project, developer John B. Hynes III and partner Vornado Realty Trust have secured financing to proceed with construction on the 1.25 million-square-foot mixed-used site, which will include retail shops, condominiums, a hotel, and offices in the historic department store building and a new 38-story tower next to it.

The head of the company building the project, John F. Fish of Suffolk Construction Co., said he was told by the developers to ramp up construction work because the team had locked in its final pieces of funding in recent days.

“We’ve been given the green light to move forward, and the financing has been validated, so we’re in good shape,” Fish said. His firm has even bought the structural steel for the complex.

The project has been in the works for a while.

I just received this in my inbox. ICSC is supporting the bailout package.

I’m continually befuddled by the support for this bailout. There’s no question that some action is necessary to help restore the credit markets. But there’s been a ton written at this point at why the bill, as structured, may be insufficient to do that at economics blogs like Mish’s Global Economic Trend Analysis, Calculated Risk and Clusterstock. How about what Nouriel Roubini has proposed?

It will push a lot of money to the banks while exposing taxpayers to a lot of risk. It doesn’t address the issue of recapitalizing the banks. It doesn’t explain how these assets the government is buying will be valued. It doesn’t do anything to help homeowners stay in their homes.

Anyway, here’s ICSC’s take:

Dear ICSC Member:

Our industry has been held hostage to a lack of liquidity in the commercial real estate markets for several months, but recently the ability to obtain loans, capital guarantees and access to financial markets has become untenable. Furthermore, consumers have lost faith in the basic financial institutions that our customers rely on everyday.

Clearly, our elected officials are being asked to make a difficult decision, allocating billions of taxpayers dollars to clean up a problem that never should have been allowed to happen. However, we must restore the global faith and credit in our capital markets. If this legislation is not passed, there could be damaging long-term effects to our nation’s economy and certainly to our industry.

Please click here to send an email to your US Senator to express your support of the economic recovery package. The Senate needs to know that there are Americans who understand the long-term economic ramifications of inaction.

Thank you for your support of the retail real estate industry.

Betsy Laird
ICSC Senior Vice President of Global Public Policy

Realty Income closed a public offering today and raised $100 million in the process. It will use the proceeds to pay down debt.

A lot of the public retail REITs in recent weeks have employed a variety of options to pay down debt. As far as I can tell, most have succeeded.

Moody’s has cut the ratings of iStar financial, which specializes in commercial real estate lending, to junk. A company spokesperson tells the Wall Street Journal, however, that iStar should weather this fine for the time being.

One of the stunners in the article is the line about Moody’s expecting iStar’s nonperforming assets to grow to be more than 8 percent of its total assets. That sounds extreme. It’s certainly a much higher level of distress than I think currently exists.

Andrew Backman, iStar’s senior vice president of investor relations and marketing, called Moody’s action “disappointing” but “not surprising.” He reiterated that the company has no near-term plans to raise additional debt or equity capital. “There is no immediate impact from losing our investment-grade rating,” Mr. Backman said.

Until recently, the biggest challenge facing the company was how it would handle billions of dollars of loans and funding commitments to condominium developers that it assumed when it acquired Fremont General Corp. last year. Those types of assets have a higher chance of default in today’s housing slump.

On the positive note, Moody’s said iStar appears to have “adequate liquidity” to meet its debt obligations and funding commitments through 2009 “even in a stressed scenario.”

Investors often look to iStar — a bellwether name in the group of lenders specializing in financing commercial property deals — to get a broad overview of the financial health of the commercial real-estate sector nationwide. So far, that market hasn’t seen the kind of devastating losses felt in the residential market. But the worsening credit markets and a weakening U.S. economy have started to take a toll.