Update 2:45 PM
Update 2 4:41 PM

I posted about REITs sliding yesterday. It’s happening again today. The news about Macerich and Developers Diversified doesn’t seem to be helping. DDR is down almost 12 percent and Macerich down nearly 16 percent as I write this. But the declines are across the board. General Growth is the only retail REIT in positive territory up 3.3 percent for the day. The losses are not isolated to retail REITs. The Morgan Stanley REIT index is down 9 percent today. But the losses do seem to be more acute at many retail REITs.

I imagine the grim retail sales figures are playing into this. But is there more at work?

Update: I just did a little math. The Morgan Stanley REIT index closed on Friday, Sept. 19 at 913.61–it’s highest point since June. That weekend, of course, was when the credit crunch morphed into full-fledged crisis mode. It was the weekend Lehman wasn’t bailed out, Bank of America agreed to buy Merrill and just a couple of days before the government nationalized AIG. Since that point, the Morgan Stanley index has lost about 34 percent of its value. (It’s now down about 7.4 percent for the day, up a bit from its session lows). In that same time period, the Dow Jones Industrial Average has dropped 22 percent.

The question is, does that make sense?

Update 2: The market ended the day on a major down note. The Dow Jones Industrial Average fell 7.9 percent. The Morgan Stanley REIT Index ended up down 12.9 percent. The Morgan Stanley REIT index had its highest ever close on February 7, 2007 at 1,233.66. At today’s close it stands at 565.42. That means its dropped 54.1 percent.

If REIT values are a proxy for commercial real estate values–which is something I’ve heard argued–than that would mean commercial real estate values have been cut in half in the past 18 months. But, I don’t think that makes much sense.

Two more REITs now have seen executives forced to sell stock because of margin calls. General Growth got hit with a ton of selling because of margin loans, which eventually forced its CFO to step down. Now it has come to light that Macerich CEO Art Coppola and Developers Diversified Chairman and CEO Scott Wolstein both have had to sell stock because of margin calls. Coppola sold $13.9 million in shares while Wolstein sold $20.1 million in shares, according to company SEC filings.

Part of the problem at General Growth was that the firm had asked its way on to the short-sell ban list and then saw its executives sell shares. That created the appearance of impropriety. It made it seem like the company was protecting its share price while executives dumped stock. That’s not necessarily what was going on, but it certainly didn’t look good and is one of the reasons General Growth’s share price has tumbled so much.

That’s not the case at Macerich or Developers Diversified. Instead, the problem here seems to be that the share prices have fallen by so much that they forced margin calls. In Macerich’s case, according to a company SEC filing, Coppola had no choice in the matter.

There’s one other interesting tidbit on the Macerich front, however, which is that even before the margin call, several Macerich executives sold about $20 million in shares in recent weeks, most of which were held by the executives in custodianships for their minor children. At Developers Diversified, meanwhile, a company executive vice president was also forced to sell shares worth $600,000 because of a margin call.

Arthur Coppola, Macerich’s chairman and chief executive, unloaded 345,173 Macerich shares on Thursday and Friday for nearly $13.9 million to cover a collateral requirement on his line of credit with his broker, according to Securities and Exchange Commission filings. The sales amounted to 44% of the Macerich common shares held by Mr. Coppola.

Also last week, Scott Wolstein, chairman and chief executive of Developers Diversified, sold more than 1.2 million shares for roughly $20.1 million to cover margin calls, SEC filings show. The sales cut Mr. Wolstein’s holdings by 45%.

For example, the owners of the 1,200-unit Riverton apartment complex in upper Manhattan had counted on converting deregulated apartments to market-rate rentals at a faster pace. But when that didn’t pan out, they had trouble servicing their debt and were recently in danger of defaulting on their $225 million mortgage.

Trepp has uncovered 1,385 of these thorny commercial loans, totaling some $45 billion. The biggest portion is office properties (31%), followed by retail (25%).

General Growth needs $1.7 billion in the next six months to service its debt, much of it highly leveraged buys made during the boom. The company might be forced to put itself up for sale.

Finding loans to buy or develop a property is just as tough as refinancing one. Wide bond spreads mean that the source of funding that commercial real estate firms have used for the last decade — investment banks — “are more or less off the table,” Clancy says.

Sales volume in commercial real estate is down over 70% from last year, RCA says. A growing number of properties changing hands are distressed, if not in default.

Link.

I have a feeling we’re going to start seeing more announcements like this. If retail REIT shares are trading at a discount–which they arguably are even after rallying some today–then there should be some takeover opportunities in the market.

An affiliate of commercial real estate firm Compson Development offered to buy Agree Realty Corp for about $328.7 million, more than two years after it had made a higher bid that was shot down by Agree Realty.

The latest offer represents a price of about $27.50 per share — 25.3 percent more than Agree Realty’s Friday closing price of $21.95. Shares of Farmington Hills, Michigan-based Agree Realty were up more than 12 percent at $24.61 in late morning trade Monday on the New York Stock Exchange.

Compson Development affiliate Compson Holding Corp had tried to buy Agree Realty for $38.75 per share in cash more than two years ago, but was spurned as Agree Realty believed the offer was “not in the best interests of the shareholders,” Compson president Michael Comparato said in a letter to Agree Realty’s chairman. As of market close on Friday, the value of Agree Realty’s shares was 43 percent below Compson’s original offer, and Agree’s board must immediately find ways to enhance shareholder value, Comparato said in the letter.

“One of many alternatives available to the board of directors to maximize shareholder value would be to reconsider a sale of the company,” Comparato said.

Link.

Inland American, which last month bought shares in CapLease Inc., has purchased shares in another REIT. This time it’s Ramco-Gershenson Properties Trust, according to an SEC filing from Friday. Inland now owns 1,652,887 shares in Ramco-Gershenson, about 9 percent of the company’s outstanding stock.

Torto Wheaton Research has put a special section on its site exploring the ramifications of the financial crisis on the commercial real estate industry.

CoStar has an excellent chart up along with a story analyzing store openings and closings. A must read.

On store closings, 36% of the CFOs surveyed and 57% of the top 100 retailers’ CFOs said they will have closed stores in 2008. However, suggesting the bulk of these closures are only in the normal course of business, only 33% of the top 100 said 2008 store closings would be up over 2007 — 50% said the number of closings would be about the same, while 17% said less stores would be closed.

On a more positive note, 77% of all CFOs and 67% of the top 100 CFOs, said their companies did not or would not reduce or delay store opening plans in 2008. However, continued credit market mayhem could have adverse impact on store expansion plans for the remainder of 2008 and into 2009, as 41% of CFOs said they had seen some tightening of credit from their lenders.

One hint of the impending likelihood of less stores being opened in 2009 is reflected in the table below; as most retailers have yet to share their 2009 store opening guidance with the public. Some retailers have already stated they would only open stores in 2009 that were signed off many months ago; this could be a trend we increasingly see as retailers announce 2009 store opening plans over the next three months.

Several REITs have arranged new financing deals in the past couple of weeks. I thought it might be interesting to run a little comparison of the terms. Here’s what I’ve come up with.

Today was just brutal for mall REITs. Many had been trading at or near 52-week lows already. But you could say that about a lot of companies in many sectors. And, for the most part, declines at mall REITs have been relatively in-line with the broader market. Today was a bit different, however. General Growth ended the day down 41.94 percent at $4.50 per share. The Dow was down 5 percent. Many other mall REITs fell by 10 percent or more.

Here’s a look at the bloodbath.

• Taubman Centers, $35.70 -10.14 percent
• Simon Property Group, $73.01, -10.23 percent
• Macerich Co., $41.52, -11.23 percent
• PREIT, $11.22, -19.16 percent
• Glimcher Realty Trust, $6.19, -23.99 percent
• CBL & Associates Properties, $9.02, -35.98 percent

In contrast, other retail REITs were down today, but not by nearly as large margins.

• Saul Centers, $42.70, -0.93 percent
• Kite Realty Group, $9.63, -2.73 percent
• Agree Realty Corp., $23.87, -3.09 percent
• Equity One, $17.90 -3.87 percent
• Acadia Realty Trust, $22.04 -3.97 percent
• Weingarten Realty Investors, $26.98, -5.40 percent
• Regency Centers, $49.94, -6.37 percent
• Federal Realty Trust, $66.32, -6.37 percent
• Cedar Shopping Centers, $11.04, -6.91 percent
• Inland Realty Corp., $12.25, -6.99 percent
• Urstadt Biddle, $16.40, -8.02 percent
• Kimco Realty Corp., $27.67, -8.71 percent
• Ramco-Gersenson Properties Trust, $17.88, -11.00 percent
• Developers Diversified Realty, $22.26, -12.74 percent

As I’m writing this, General Growth’s stock is at $4.03 per share–down nearly 50 percent on the day.

The new round of selling comes as analysts raise the possibility of bankruptcy for the REIT.

Shares of General Growth Properties Inc. were down more than 45% in midday trade Tuesday on growing fears the real estate investment trust may not be able to refinance its debt, which could force it to seek a buyer or declare bankruptcy. “The REIT’s stress is mostly due to over-leveraging acquisitions in the past five years,” Stifel Nicolaus analysts wrote in a note. Last week, Moody’s Investors Service cut General Growth’s debt ratings, citing strained financial flexibility and expected profit pressure due to an economic slowdown. The company recently replaced its chief financial officer and suspended its dividend. General Growth shares were the biggest percentage decliner among stocks listed on the New York Stock Exchange at last check Tuesday.

I’m stunned at how quickly this now seems to be snowballing. There have been concerns about the company’s debt load for a while. It’s been more than a year. People have wondered about it ever since the credit crisis really took hold last September. I think the red flags really came out after Centro began to have its problems. Everyone looked around and realized that General Growth was the company with the most debt.

But things have really begun to spiral out of control in just the last 30 days. Could the company really be on its last legs this fast? It’s hard to fathom. There’s an even more harrowing question now to ask: If General Growth can fall, could we see other retail real estate companies on the brink?

Here are some links to older stories for reference:

• October 3, General Growth CFO Steps Down; Company Suspends Dividend
• October 2, GGP Under Fire for Inclusion on Short-Sell Ban List
• October 1, Could General Growth Be Sold?
• September 23, Short Selling Banned on General Growth
• September 22, General Growth Strikes Back
• September 16, General Growth Offers More Recourse
• August 12, Another Look at GGP’s Debt
• August 6, Analysis of GGP’s Debt
• July 25, Stories With Bigger Implications?
• July 14, GGP Lines Up New Financing
• April 16, GGP’s Growing Debt Problem