Cedar Realty Trust, Inc. — Q1 2015 Form 10-Q
Business context and reporting period. Unaudited results for the three months ended March 31, 2015, compared with Q1 2014. Cedar owns and operates grocery-anchored shopping centers, primarily along the Washington, DC–Boston corridor. At quarter-end, it owned and managed 59 operating properties totaling approximately 9.3 million square feet; the portfolio was 93.1% leased and 92.4% occupied.
Financial results and key metrics
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Total revenue | $38.6 million | $37.7 million |
| Operating income | $10.6 million | $9.1 million |
| Income from continuing operations | $3.2 million | $0.9 million |
| Net income | $3.4 million | $1.7 million |
| Net income attributable to Cedar | $3.5 million | $1.8 million |
| Net loss attributable to common shareholders | $(0.1) million | $(1.8) million |
| Basic and diluted loss per common share | $(0.00) | $(0.03) |
| Operating cash flow | $9.8 million | $7.6 million |
| FFO / Operating FFO | $10.1 million / $10.6 million | $7.3 million / $10.3 million |
- Same-property NOI increased 1.2% to $20.2 million across 52 properties. Same-property occupancy was 93.0%, down from 93.9%; leased space was 93.7%, versus 94.0%. Average base rent rose to $13.04 per square foot from $12.83.
- At March 31, total assets were $1.307 billion, total liabilities $707.5 million, and total equity $599.0 million. Debt was $659.3 million: $361.3 million of mortgages, $48.0 million drawn on the revolving facility, and $250.0 million of term loans.
- Cash and cash equivalents were $3.8 million; restricted cash was $7.8 million. The company reported $184.0 million of additional revolver availability and compliance with all financial covenants.
- Investing activities used $23.5 million; financing activities provided $14.0 million. Cash increased $0.3 million during the quarter.
Material changes versus Q1 2014
- Revenue rose 2.4%, while operating income increased $1.5 million. Continuing-operations income improved by $2.3 million. Lower acquisition costs and interest expense contributed to the improvement; general and administrative expense and impairment charges increased.
- Interest expense declined 9.8% to $7.3 million, primarily reflecting lower outstanding debt. Acquisition costs fell to $0.5 million from $2.9 million. Impairment charges increased to $1.1 million from $0.1 million.
- Operating cash flow increased $2.2 million. Property acquisitions used $24.4 million, compared with $38.9 million in the prior-year quarter; real estate sale proceeds declined to $2.1 million from $24.5 million.
- Share count increased: Cedar issued 5.75 million common shares in a public offering in January and received approximately $41.9 million net proceeds. Quarter-end common shares outstanding were 85.0 million, versus 79.2 million at year-end 2014.
Transactions, outlook, risks and unusual items
- Cedar acquired the remaining 60% interest in New London Mall for $27.3 million, including $16.4 million of assumed mortgage financing, and acquired Lawndale Plaza for approximately $25.2 million. It sold Huntingdon Plaza for $2.2 million.
- The February credit-facility amendment established a $260 million revolver and a $50 million term loan; Cedar also closed $100 million of new term loans. Scheduled 2015 debt requirements included approximately $4.5 million of principal amortization and $73.8 million of balloon payments. Management expected substantially all remaining 2015 requirements to be refinanced using new term-loan proceeds and revolver availability.
- Interest-rate swaps had a $4.9 million fair-value liability. Cedar estimated approximately $3.5 million of accumulated hedge losses would be reclassified to earnings as interest expense over the next 12 months. A 100-basis-point move in rates on $148.0 million of variable-rate debt would change annual interest cost by approximately $1.5 million.
- Common dividends were $0.05 per share for the quarter; Series B preferred dividends were $0.453 per share. The board declared the same per-share amounts for payment in May 2015. Future dividends remain subject to board discretion, cash flow, capital needs, and REIT distribution requirements.
- The filing provides no specific earnings or operating guidance. Management noted that financing availability for development, construction, or refinancing is not assured. Other risks include tenant payment performance, covenant compliance, interest-rate changes, and sustained inflation. Management did not expect pending ordinary-course legal matters to have a material adverse effect.
- Unusual items included the $11.2 million purchase of joint-venture minority interests and $2.0 million of other comprehensive loss, largely reflecting a decline in cash-flow hedge fair value. The company reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether occupancy and same-property NOI trends improve, given lower same-property occupancy despite higher rent and NOI.
- Leasing performance and costs: Q1 comparable new leases showed a 12.1% cash-basis rent increase, with $24.80 per square foot of tenant improvements; renewals showed a 7.3% increase.
- Progress refinancing the $73.8 million of scheduled 2015 balloon payments, and the company’s liquidity after acquisitions, distributions, and debt service.
- Debt maturities, covenant headroom, variable-rate exposure, and the timing and earnings impact of swap-related losses.
- How the common-stock issuance and increased share count affect per-share results, and whether operating cash flow supports dividends and planned investment.