The economic slowdown has begun to take its toll on shopping center REITs. Retailers are hurting as consumers cut back on spending. Firms are opening fewer stores and increasing store closings. As a result, vacancies adding up and helped drive down earnings for many REITs during the second quarter.

Overall, nearly half of the shopping center REITs that have reported so far have missed consensus analysis estimates. During earnings calls, a common refrain has emerged with executives preaching caution and predicting that going forward portfolio metrics will continue to erode.

Net occupancy income (NOI) “growth was a little slower--there was softness round the edges,” says Rich Moore, an analyst with RBC Capital Markets. “Anything associated with development seemed to be more difficult than usual,” he added.

With nine of the 14 shopping center REITs filing so far, three--only Kimco Realty Corp., Acadia Realty Trust and Ramco-Gershenson Properties Trust--beat analysts’ estimates. Two, Cedar Shopping Centers, Inc. and Weingarten Realty Investors, met analyst expectations and while four, Developers Diversified Realty, Equity One, Inc., Federal Realty Investment Trust and Urstadt Biddle Properties Inc., missed.

Ohio-based Developers Diversified had the roughest quarter with its earnings coming in $0.06 per share below estimates. The company's FFO, $0.82 per share, also represented a 34.9 percent decrease from the second quarter in 2007. Meanwhile, occupancy at the company’s 163-million-square-foot portfolio fell 40 basis points, to 95.5 percent. Its same-property NOI increased 2.5 percent and average rent, excluding Brazil, rose 2 percent, to $12.41 per square foot. That means, notably, that rents are growing a less than the pace of inflation.

Meanwhile, Equity One, Inc. posted FFO of $0.32 per share, a 5.9 percent decrease from the same period a year ago. Its same-property NOI decreased 2.9 percent and occupancy within its portfolio fell 10 basis points, to 92.8 percent. Contributing to the Miami Beach, Fla.-based REIT's trouble is its footprint. The bulk of its 17.1-million square-foot portfolio is in the Southeast, an area that has suffered disproportionately from the housing downturn, Moore says.

“Given the continued poor outlook for Florida retail in the face of the housing crisis, which has hit that state hard, we remain very cautious on shares of Equity,” he wrote last week in a note.

Federal Realty Investment Trust and Urstadt Biddle Properties were the other two REITs that missed consensus estimates for the quarter.

Rockville, Md.-based Federal Realty Investment Trust saw occupancy within its 18.2- million-square-foot portfolio drop 30 basis points, to 95.8 percent. And occupancy at Greenwich, Conn.-based Urstadt Biddle Properties' 3.7-million-square-foot portfolio declined more than 5 percentage points to 92.4 percent from 98 percent a year ago.

Meanwhile, preeminent developer Kimco Realty Corp., the second largest shopping center owner in the U.S. with 120 million square feet of space, has analysts concerned. While New Hyde Park, N.Y.-based Kimco beat consensus estimates by $0.01 per share in the second quarter, its FFO declined 7 percent to $0.66 per share, compared with the same period last year.

During its analyst call on July 30, Kimco chairman and CEO Milton Cooper said Kimco too will face continued problems with its portfolio occupancy levels as a result of the slumping economy. “All indications are that this downturn will punish the consumer,” Cooper said.

Citing the lack of development opportunities, in July, Credit Suisse analyst Michael Gorman downgraded Kimco's shares to “neutral” from “outperform.”

One bright spot was White Plains, N.Y.-based Acadia Realty Trust, which beat consensus estimates by $0.07 per share. The company, which operates an 8-million-square-foot retail portfolio, posted FFO of $0.41 per share, representing an increase of 57.6 percent. Acadia’s same-store NOI rose 1 percent in the second quarter and its occupancy increased 60 basis points, to 93.9 percent.

Farmington Hills, Mich.-based Ramco-Gershenson Properties Trust beat consensus estimates by $0.01 per share. The REIT’s FFO rose 3.3 percent in the second quarter, to $0.62 per share, though its same-property NOI declined 0.3 percent. Occupancy at its 20-million- square-foot portfolio remained at 94.7 percent.

Oak Brook, Ill.-based Inland Real Estate Corp., reported FFO of $0.36 per diluted share, a 2.9 percent increase over the second quarter of 2007. Same-store NOI rose 3.2 percent over the first quarter. The company did report healthy rent bumps. Average base rents for new and renewal leases rose 14.9 percent and 12.6 percent, respectively, over expiring rents.

As of Wednesday morning, the shopping center REITs that have yet to file their second quarter results include Regency Centers Corp., Kite Realty Group, AmREIT and Saul Centers, Inc. All are scheduled to report by the end of this week.

--Elaine Misonzhnik