Cedar Realty Trust, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 14, 2020. Cedar owns and operates grocery-anchored shopping centers, primarily in the Washington, D.C.–Boston corridor. At quarter-end it had 55 operating properties, 8.3 million square feet of gross leasable area, and portfolio occupancy of 90.2% (91.8% leased).
Financial performance and position
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Total revenue | $42.5 million | $36.9 million |
| Rental revenue | $35.1 million | $36.6 million |
| Operating income | $3.4 million | $8.9 million |
| Net income (loss) | $(2.1) million | $3.0 million |
| Net income (loss) attributable to common shareholders | $(4.9) million; $(0.06) per share | $0.2 million; $0.00 per share |
| Operating cash flow | $13.4 million | $9.2 million |
| Capital expenditures for property improvements | $9.8 million | $8.8 million |
| Same-property NOI | $18.0 million, up 0.8% | $17.8 million |
- Revenue rose 15.2%, primarily from a roughly $7.1 million payment for a dark anchor tenant’s early lease termination at Metro Square. Excluding that unusual income, rental revenues were lower year over year.
- Operating income fell as depreciation and amortization increased 35.7% to $13.7 million and the Company recorded $7.5 million of impairments on properties held for sale. Depreciation included $2.1 million of accelerated depreciation tied to redevelopment demolition and a $0.9 million lease-related write-off.
- Same-property NOI increased 0.8%; average base rent rose to $13.64 per square foot from $13.56, partly offset by occupancy declining to 91.2% from 91.4%.
- Cash and cash equivalents were $74.9 million at March 31, versus $2.7 million at year-end. The increase primarily reflected net revolving-credit borrowings of $76.0 million. Financing cash flow was $68.6 million; investing cash flow was $(9.8) million.
- Debt and finance lease obligations were approximately $706.5 million net of unamortized issuance costs. At quarter-end, revolving borrowings were $182.0 million; unsecured term loans were $473.0 million and the mortgage loan was $46.1 million. The reported weighted-average rate on total debt was 3.3%.
- Interest-rate swap liabilities rose to $22.1 million from $7.2 million at year-end. The quarter included a $15.0 million unrealized loss on cash-flow hedges in other comprehensive loss.
Material changes and unusual items
- Four properties—Carll’s Corner, Suffolk Plaza, The Commons, and Metro Square—were classified as held for sale. Impairment charges totaled $7.5 million, including charges related to Metro Square and The Commons.
- The Metro Square lease termination generated approximately $7.1 million of reported other revenue; the cash-flow discussion describes an $8.0 million payment received. The filing does not clearly reconcile the difference between the payment and the amount recognized as revenue.
- The Company drew on its revolving facility to preserve financial flexibility. Quarter-end balance-sheet borrowings were $182.0 million; as of the filing date, the Company reported $176.9 million outstanding and only $31,000 available for additional borrowing.
- The Board reduced the quarterly common dividend to $0.01 per share from $0.05, effective with the April 15, 2020 declaration, expected to preserve $3.6 million of cash per quarter. Preferred dividends were unchanged.
Outlook, risks, and contingencies
- Management said Q1 results were not significantly affected by COVID-19, but collected approximately 70% of April contractual base rents and monthly tenant reimbursements. Tenant negotiations were ongoing, with rent concessions or deferrals anticipated; their amount and financial impact were not yet known.
- The Company anticipated COVID-19 would negatively affect Q2 2020 revenue and potentially results for the remainder of the year. It identified tenant payment defaults or bankruptcies, further rent relief, property impairments, redevelopment delays, and reduced access to financing as risks.
- Near-term redevelopment and non-essential capital spending was reduced. The filing gives two 2020 spending estimates: approximately $15 million for three ongoing mixed-use redevelopment projects, and approximately $20 million for mixed-use redevelopments and value-add renovations combined, excluding specified capitalized overhead, interest, and real estate taxes.
- The Company reported compliance with financial covenants as of the filing date, but warned that COVID-19 could impair future compliance. Borrowing availability depends in part on unencumbered-property net operating income. Its revolving facility matures in September 2021, with an optional one-year extension; scheduled debt maturities include $75 million of term loans in 2021.
- The Company received an NYSE notice after its common stock’s average closing price fell below $1.00 for 30 consecutive trading days. It had until December 31, 2020 to regain compliance and said it would consider available options, including a reverse stock split. Potential delisting could impair equity access and affect certain agreements.
- Management reported no material expected adverse consequences from ordinary-course legal proceedings. No formal earnings guidance was provided. The Company stated it intended to maintain REIT qualification; future dividends remain subject to Board discretion and financial conditions.
Important facts for investors to verify
- Subsequent rent collection rates, tenant concessions and deferrals, and any resulting changes in receivables, bad-debt provisions, or revenue.
- Actual availability under the revolving facility and covenant headroom, given the reported $31,000 of availability and dependence on property NOI.
- Timing, prices, and any further impairments or gains on the four properties held for sale; also reconcile the $8.0 million cash payment with the $7.1 million revenue recognized.
- Progress toward the NYSE minimum share-price requirement and any effect on financing, debt agreements, or shareholder liquidity.
- Execution of reduced capital-spending plans, upcoming debt maturities, and the sustainability of common and preferred dividends.