Nov. 5 (Bloomberg) -- General Growth Properties Inc., the second-largest U.S. mall owner, and Kimco Realty Corp., the largest owner of community shopping centers, plunged in New York trading after cutting their earnings forecasts for the year.

General Growth, based in Chicago, cut its forecast for 2008 funds from operations, excluding items, saying it now expects to earn $2.85 to $2.95 a share. It had expected FFO of $3.42 a share. Kimco today forecast 2008 FFO of $2.20 to $2.45 a share, citing ``substantial dislocation in the credit markets and recent turmoil in the equity markets,'' after earlier forecasting a range of $2.70 to $2.78 a share.

Owners of malls and community shopping centers are facing a drop in retail spending as unemployment rises, real estate values fall and the economy weakens. Consumer spending fell 0.3 percent, matching the biggest drop in four years, and the U.S. lost the most jobs in five years in September.

``The consumer is in pain and lacks confidence,'' Kimco Chief Executive Officer Milton Cooper said on a conference call today. ``I think retailers will have a pretty tough 2009 unless there's a new zoom in our economy and the housing market comes back.''

Shares of New Hyde Park, New York-based Kimco fell $2.71, or 12 percent, to $20.59 in New York Stock Exchange composite trading. General Growth plummeted $2.24, or 50 percent, to $2.25, the company's biggest decline since its initial stock sale more than 15 years ago. General Growth's 95 percent decline this year and Kimco's 43 percent drop compare with a 39 percent decline in the Bloomberg Real Estate Investment Trust Index.

Wider Loss

General Growth also reported a wider third-quarter loss, and abandoned its quarterly dividend. Last month it fired Chief Financial Officer Bernard Freibaum after he sold 2.95 million shares to meet margin calls, and put off new development plans.

During a conference call today, analysts and investors criticized General Growth executives for refusing to give details of loans the company's trying to renegotiate. Interim Chief Executive Officer Adam S. Metz said that while the company ``will continue to release loan information in the aggregate,'' it won't discuss loans individually.

``While the new management team articulated a broad strategy for restructuring the balance sheet, no specific details were provided on asset sales or debt negotiations,'' Merrill Lynch & Co. analysts Steve Sakwa and Craig Schmidt said in a note to investors today. They cut their rating on General Growth's shares to underperform from neutral, and Deutsche Bank Securities Inc. analyst Lou Taylor cut his rating on the shares to hold from buy.

New Management

The mall owner last week announced the replacement of CEO John Bucksbaum with Metz. Bucksbaum remains chairman. Thomas H. Nolan Jr. was named interim president in place of Robert Michaels, who remains chief operating officer.

``We are fully aware of our situation,'' Metz said today. The sale of properties is part of General Growth's recovery plan, and the company expects to announce completed transactions by the end of the year, he said. ``These deals take time.''

General Growth intends to sell malls in Las Vegas as part of the plan, and said today it has funded $1.7 billion of new or replacement debt since June 30. It has about another $958 million of borrowings maturing by Dec. 1 that still needs to refinanced and extended.

``As of today, we are current on all of our debt obligations,'' Edmund Hoyt, the company's interim chief financial officer, said during the call.

Net Loss

General Growth's third-quarter net loss widened to $15.4 million, or 6 cents a share, from $9.4 million, or 4 cents, a year earlier, the company said in a statement today. It wrote down the value of a development in Massachusetts.

Revenue fell 5.7 percent to $814.7 million after General Growth sold less land. Funds from operations were 58 cents a share, lower than the 73 cents projected by 13 analysts surveyed by Bloomberg. The measure, which doesn't comply with generally accepted accounting principles, is net income excluding gains or losses and depreciation and amortization.

The company said it won't pay a third quarter dividend. In the second quarter, it paid 50 cents a share. Metz said during today's conference call that it's unlikely General Growth's board will be ``restoring our dividend in the near term.''

Simon Property Group Inc., the biggest U.S. shopping-mall owner, said earlier this week it isn't interested in buying General Growth.

Executive Search

General Growth has hired an executive-search firm to look for a permanent chief financial officer, Metz said during today's conference call, adding that he and Nolan plan to remain in their positions for now.

Kimco CEO Cooper said today that he's aware the new forecast ``will disappoint many of our constituents.'' The company's focus on supermarkets and drugstores as well as discounters, where people shop even during economic slowdowns, will help Kimco, he said. ``In times such as these, the consumer trades down.''

Kimco reported third-quarter net income rose on higher store rents. Profit increased to $96.8 million, or 37 cents a share after the payment of preferred dividends, from $75.1 million, or 29 cents, a year earlier, the company said today in a statement.

Funds from operations jumped to 68 cents a share from 57 cents a year earlier, matching the average estimate of 16 analysts surveyed by Bloomberg. Kimco increased rental revenue 11 percent to $190.5 million.

To contact the reporters on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net; Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

Last Updated: November 5, 2008 16:26 EST