Cedar Realty Trust, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Cedar is a REIT focused on grocery-anchored shopping centers in urban markets from Washington, D.C. to Boston. At quarter-end it owned and managed 53 operating properties totaling 7.6 million square feet; the portfolio was 88.7% leased and 87.6% occupied.
Key financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $32.2 million | $28.6 million | $65.8 million | $71.1 million |
| Operating income (loss) | $56.4 million | $(0.3) million | $62.4 million | $3.1 million |
| Net income (loss) | $51.5 million | $(6.0) million | $52.7 million | $(8.1) million |
| Net income (loss) attributable to common shareholders | $48.4 million | $(8.8) million | $46.8 million | $(13.7) million |
| Basic and diluted EPS | $3.52 | $(0.67) | $3.41 | $(1.06) |
| Cash provided by operating activities | — | $24.8 million | $24.5 million |
- Q2 revenue rose 12.6%; six-month revenue fell 7.5%. Q2 rental revenue increased to $31.9 million from $28.5 million.
- Net income included $48.9 million of Q2 gains on property sales and a $1.8 million impairment reversal. For the six months, gains on sales were $49.9 million and impairment reversals were $1.8 million; these items materially elevated reported earnings.
- Same-property NOI increased 8.2% for Q2 and 0.8% for the six-month period. Same-property occupancy was 90.1%, down from 90.7% a year earlier; leased percentage was 90.9%, down from 92.1%.
- Nareit FFO per diluted share was $0.59 for Q2 versus $0.41, and $1.21 for the six months versus $1.59. Operating FFO per diluted share was $0.61 and $1.23, respectively, versus $0.41 and $1.62.
Debt, liquidity, and capital allocation
- At June 30, debt and finance lease obligations totaled approximately $526.7 million before unamortized issuance costs; balance-sheet carrying amounts were approximately $523.5 million. Cash and restricted cash totaled $5.8 million.
- The company reported $12.0 million outstanding on its revolving facility and $112.1 million of additional availability as of the filing date. The facility matured in September 2021, with an option to extend one year, subject to conditions. The company said it was exploring secured and unsecured refinancing and was in compliance with its financial covenants.
- In May, Cedar closed a $114 million non-recourse mortgage at a fixed 3.49%, maturing in 2031, secured by five shopping centers. Proceeds reduced revolving borrowings. The company also repaid a $50 million term note during the first half.
- Six-month investing cash flow was $88.3 million provided, primarily reflecting $104.5 million of property-sale proceeds, partly offset by $13.8 million of real estate improvement expenditures and a $2.5 million joint-venture contribution. Financing cash flow used $108.9 million.
- Common dividends were $0.066 per share per quarter in Q2 2021, versus $0.066 in Q2 2020; the six-month common dividend was $0.132 versus $0.396. Preferred dividends continued. The board declared the next quarterly common and preferred dividends payable in August 2021.
Material changes, outlook, and risks
- Property sales during the first half generated $100.7 million in proceeds, including Camp Hill Shopping Center, sold for $89.7 million. Carll’s Corner was classified as held for sale at June 30.
- Revenue comparisons reflect a $7.1 million prior-year item from a dark anchor tenant’s early lease termination at Metro Square, as well as property dispositions and redevelopment activity. Management attributed Q2 same-property NOI improvement in part to COVID-19’s effect on the prior-year comparison.
- COVID-19 remained a material risk to tenant rent payments, occupancy, property values, redevelopment returns, and compliance with debt covenants. Cedar collected 97% of contractual base rents and monthly tenant reimbursements in Q2, compared with 96% in Q1. Through June 30, it had deferred approximately $3.5 million and waived approximately $2.4 million of rent; remaining deferred rent was expected to be repaid over an average of about 10 months.
- A new joint venture with Goldman Sachs Urban Investment Group and Asland Capital Partners is developing a Washington, D.C. office and retail building. The 240,000-square-foot office component is leased to the District’s Department of General Services for 20 years and 10 months, with delivery estimated for late 2022. Cedar has a 10% interest and contributed approximately $2.5 million. The District’s lease obligations are subject to annual budget appropriation; the project also entails construction, tenant-improvement, and lease-credit obligations.
- No formal earnings guidance was provided. Management stated that future dividends remain at the board’s discretion and may be reduced or suspended to conserve cash, reduce debt, or fund capital needs.
- Interest-rate exposure includes $62.0 million of variable-rate debt; a 100-basis-point rate change would change annual interest cost by approximately $0.6 million. Other cited risks include refinancing access and cost, leverage and covenant compliance, retail-sector conditions, tenant failures, redevelopment execution, and geographic concentration.
- Management reported disclosure controls and procedures were effective at June 30, 2021. The filing reported no material change to previously disclosed risk factors and no legal proceedings expected to have a material adverse effect.
Important facts for investors to verify
- How much of reported earnings and FFO is repeatable after excluding property-sale gains and impairment reversals.
- Whether the September 2021 revolving-facility maturity was extended or refinanced, and the terms and covenant headroom of replacement financing.
- Subsequent collection and repayment of deferred rents, tenant waivers, occupancy, and leasing trends.
- Delivery timing, total project costs and funding, tenant-improvement commitments, and appropriation risk for the Washington, D.C. joint-venture project.
- Whether property-sale proceeds and operating cash flow are sufficient to support debt service, redevelopment spending, and declared dividends.