Cedar Realty Trust, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed February 13, 2020. The filing is an annual report, not a standalone fourth-quarter filing. Cedar is a REIT focused on grocery-anchored shopping centers in the Washington, D.C.–to–Boston corridor.
Business and portfolio
At year-end, Cedar owned and managed 56 operating properties, excluding properties held for sale, totaling 8.3 million square feet. The portfolio was 93.2% leased and 91.5% occupied. Pennsylvania accounted for 48.6% of portfolio GLA. Ahold-affiliated grocery tenants—Giant Foods, Stop & Shop and Food Lion—represented approximately 11% of GLA and 12% of 2019 revenue.
Key financial metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Total revenue | $144.1 million | $152.0 million |
| Operating income | $25.1 million | $31.3 million |
| Net income | $1.6 million | $4.4 million |
| Net loss attributable to common shareholders | $(9.7) million; $(0.12) per share | $(10.5) million; $(0.13) per share |
| Operating cash flow | $53.7 million | $57.9 million |
| FFO / Operating FFO | $42.1 million / $40.8 million; $0.46 / $0.45 per diluted share | $45.2 million / $53.6 million; $0.49 / $0.58 per diluted share |
| Debt obligations, balance-sheet carrying value | $630.6 million | $624.8 million |
| Cash and cash equivalents | $2.7 million | $2.0 million |
| Common dividend | $0.20 per share | $0.20 per share |
Property operating income was $95.7 million, or approximately 66% of revenue. Same-property NOI increased 0.3% to $76.2 million; average base rent rose to $13.48 per square foot from $13.26, while same-property occupancy slipped to 91.3% from 91.8%.
At December 31, 2019, Cedar reported $95.6 million available under its revolving facility. Debt included $156.0 million of variable-rate borrowings and $477.3 million of fixed-rate debt; the reported average rates were 3.2% and 3.6%, respectively. Management said the company was in compliance with financial covenants.
Changes and notable items
- Revenue declined 5.2% year over year. The comparison benefited in 2018 from $5.4 million of revenue associated with an early dark-anchor lease termination; 2019 also reflected properties sold or held for sale and lease-accounting changes.
- Operating income fell $6.3 million. Expenses rose, including depreciation and amortization, which increased $5.8 million, partly due to $4.3 million of accelerated depreciation at redevelopment properties.
- Impairment charges were $8.9 million in 2019, compared with $20.7 million in 2018. The 2019 charge related to The Commons, which was classified as held for sale along with Carll’s Corner and Suffolk Plaza at year-end.
- 2019 acquisitions and dispositions included the $8.5 million purchase of Girard Plaza and sales of Maxatawny Marketplace and Fort Washington Center for a combined $19.4 million.
- Cedar repurchased approximately 2.05 million common shares in 2019 for $6.8 million. Its repurchase authorization expired in December 2019.
- Operating FFO declined to $40.8 million from $53.6 million, including the absence of 2018 adjustments for preferred-stock redemption and debt-extinguishment costs and the 2019 reversal of $1.5 million of previously accrued management-transition costs.
Outlook, risks and contingencies
The filing provides no formal earnings or occupancy guidance. Management said it intends to continue regular quarterly dividends, but future payments are at the board’s discretion and may be reduced or suspended to preserve cash, reduce debt or fund redevelopment and other capital needs. The common dividend was $0.20 per share in each of 2017–2019.
Debt refinancing is a significant near-term consideration: scheduled principal maturities include approximately $182.1 million in 2021 and $151.2 million in 2022, before unamortized issuance costs. The company also disclosed approximately $13.6 million of outstanding construction commitments. A 100-basis-point change in rates on its $156.0 million of variable-rate debt would change annual interest cost by approximately $1.6 million.
Principal risks include retail-sector weakness, tenant defaults or bankruptcies, e-commerce, leasing and redevelopment execution, the company’s regional and tenant concentration, refinancing and interest-rate exposure, and the ability to sustain distributions. Cedar also disclosed environmental and insurance risks; management reported no known environmental matter expected to have a material financial impact. The company reported no litigation expected to have a material adverse effect.
Subsequent event: In January 2020, Cedar agreed to accept a payment for an anchor tenant’s early lease termination. The filing estimates approximately $7.1 million of other income and a $7.5 million impairment charge in first-quarter 2020, and says the property would be classified as held for sale.
Important facts for investors to verify
- Whether Cedar can refinance or repay the substantial 2021–2022 maturities on acceptable terms and maintain covenant compliance.
- Whether leasing, occupancy and same-property NOI trends improve, particularly at redevelopment and held-for-sale properties.
- The cash-flow coverage and sustainability of common and preferred dividends, considering common-shareholder losses and preferred distributions.
- The final accounting and sale outcome for the three properties held for sale at year-end and the additional property identified in the January 2020 subsequent event.
- How tenant credit quality, regional concentration and variable-rate debt affect results; verify the reported FFO and Operating FFO alongside GAAP earnings and cash flow.