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Margin Calls Hit Two More REITs

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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%.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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