Cedar Realty Trust, Inc. — Q1 2021 Form 10-Q
Business and period: Unaudited results for the three months ended March 31, 2021, compared with Q1 2020. Cedar is a REIT focused on grocery-anchored shopping centers in the Washington, D.C.–Boston corridor. At quarter-end, it owned and managed 53 operating properties totaling 7.6 million square feet; the portfolio was 87.8% leased and 86.9% occupied.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $33.6 million | $42.5 million; down 21.0% |
| Rental revenue | $33.3 million | $35.1 million |
| Property operating income | $20.7 million | $29.6 million; approximate margin 61.6%, versus 69.8% |
| Operating income | $6.0 million | $3.4 million |
| Net income (loss) | $1.3 million | $(2.1) million |
| Net loss attributable to common shareholders | $(1.6) million; $(0.12) per share | $(4.9) million; $(0.39) per share |
| FFO / Operating FFO per diluted share | $0.62 / $0.62 | $1.17 / $1.21 |
| Cash from operating activities | $9.5 million | $13.4 million |
| Cash from investing activities | $(5.7) million | $(9.8) million |
| Cash from financing activities | $(2.3) million | $68.6 million |
At March 31, cash and cash equivalents were $3.1 million, total assets $1.18 billion, and total liabilities $689.9 million. Debt and finance lease obligations were approximately $628.2 million net of unamortized issuance costs; the debt maturity schedule reports $630.0 million before those costs. This included $179.0 million drawn on the revolving facility at quarter-end. As of the filing date, the company reported $59.0 million drawn and $60.0 million available under the revolver, and said it was compliant with financial covenants.
Material changes and notable items
- Revenue fell principally because a dark anchor tenant at Metro Square had terminated its lease before its contractual expiration in 2020, reducing comparative revenue by $7.1 million; redevelopment and disposed or held-for-sale properties also contributed. The prior-year period included a substantial tenant termination payment, which also affected cash-flow comparability.
- Same-property NOI declined 5.1% to $16.6 million. Same-property occupancy was 89.4%, versus 90.7%; leased occupancy was 90.1%, versus 92.8%.
- Interest expense declined 14.7% to $4.7 million. The prior-year period included $7.5 million in impairment charges; Q1 2021 recorded a $1.0 million gain on sale of a Kempsville Crossing outparcel.
- Q1 2021 operating cash flow was lower than the prior-year period. Property improvement spending was $6.9 million, and the company paid $2.7 million in preferred dividends and $0.9 million in common distributions.
Outlook, risks and subsequent events
- No quantified earnings or operating guidance was provided. Management anticipated that further tenant rent concessions or other lease relief could be needed; the amount and financial impact remained uncertain.
- The company collected 96% of contractual base rents and monthly tenant reimbursements in Q1 2021, compared with 94% in Q4 2020. Through March 31, it had deferred approximately $3.3 million and waived approximately $1.8 million of rent. Deferred rents had an approximately 10-month weighted-average payback period.
- COVID-19-related tenant distress, rent collection, leasing and property values pose risks to revenue, cash flow and potential impairment charges. Management also warned that weaker property income could affect future covenant compliance. Revolver borrowings were scheduled to mature in September 2021, subject to a one-year extension option.
- On May 5, 2021, after quarter-end, Cedar closed a $114 million non-recourse mortgage at 3.49%, maturing in 2031, and used proceeds to reduce revolver borrowings. It also sold The Commons for $9.8 million.
- On May 5, Cedar formed a joint venture for a Washington, D.C. development, with a 10% company interest. The planned office building is fully leased to the District’s Department of General Services; the tenant’s lease obligations are subject to annual budget appropriation. Construction financing was secured for up to $105 million.
- Common dividends declared and paid during Q1 were $0.066 per share, down from $0.330 a year earlier. The board declared another $0.066 common dividend after quarter-end. Future dividends remain at the board’s discretion.
Important facts for investors to verify
- Reconcile the $179 million quarter-end revolver balance with the $59 million outstanding and $60 million available reported as of the filing date, including the effects and timing of subsequent financing and repayments.
- Review the September 2021 revolver maturity, extension conditions, covenant headroom and refinancing plans; the May mortgage reduced revolver borrowings but added property-level secured debt.
- Track rent collections, deferred and waived rent, tenant credit quality, occupancy and the pace of recovery in same-property NOI.
- Assess the economics, completion schedule, tenant-improvement obligations and annual appropriation condition for the D.C. development, as well as Cedar’s exposure and capital commitments through its 10% joint-venture interest.
- Interpret FFO and Operating FFO as supplemental non-GAAP measures, not substitutes for GAAP earnings or operating cash flow; Q1 per-share amounts declined year over year.