Cedar Realty Trust, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. This is an annual filing, not a standalone fourth-quarter report.
Business context and portfolio
Cedar is a REIT focused on grocery-anchored shopping centers along the Washington, D.C.–Boston corridor. At year-end, it owned and managed 65 operating properties totaling 9.39 million square feet; occupancy was 92.6% and leased space was 93.6%. Pennsylvania accounted for 50.5% of portfolio GLA. The company generates substantially all revenue from rent and tenant expense reimbursements.
Financial performance and position
| Metric | 2013 | 2012 |
|---|---|---|
| Total revenue | $138.8 million | $135.7 million |
| Operating income | $39.3 million | $31.7 million |
| Net income | $14.2 million | $34.0 million |
| Net income (loss) attributable to common shareholders | $(1.1) million; $(0.03) per share | $9.9 million; $0.13 per share |
| Funds from operations (FFO) | $44.9 million | $26.7 million |
| Cash provided by operating activities | $49.7 million | $50.5 million |
| Same-property NOI | $74.2 million | $72.9 million |
Same-property NOI grew 1.8% excluding the re-tenanting impact at Oakland Commons (1.9% including it). Year-end average portfolio base rent was $12.31 per square foot, up from $12.05. Cash and cash equivalents were $4.0 million, with $11.1 million of restricted cash unavailable for general obligations.
Continuing-operations debt was $719.8 million at year-end, at a 4.3% weighted-average interest rate: $516.3 million in property mortgages and $203.5 million under the unsecured credit facility. The facility had $91.3 million available. Total assets were $1.332 billion and total liabilities were $796.3 million. Common dividends remained $0.20 per share for 2013.
Changes versus the prior year
- Revenue rose 2.3%; property operating income increased 0.5% as higher rents and expense recoveries were partly offset by higher property costs, including snow removal.
- Operating income rose to $39.3 million, helped by lower G&A, lower interest expense, and a $1.1 million impairment reversal, compared with $5.8 million of net impairment charges in 2012.
- Net income fell to $14.2 million from $34.0 million. 2012 included a $30.5 million gain from exiting the Cedar/RioCan joint venture; 2013 included a $10.5 million gain on extinguishment of debt in discontinued operations. Preferred dividends and redemption costs contributed to the common-shareholder loss.
- FFO increased to $44.9 million from $26.7 million. Operating cash flow was broadly stable. Portfolio occupancy improved from 92.0% to 92.6%.
Transactions, outlook, and risks
- The company acquired Big Y Shopping Center in Connecticut for approximately $34.5 million, funded principally with credit-facility borrowings and partly with OP Units. It sold several non-core properties and land parcels as part of its strategy to concentrate on grocery-anchored centers in its target corridor.
- In August 2013, Cedar amended and extended its unsecured credit facility to $310 million. On February 11, 2014, it closed $150 million of additional unsecured term loans. Management stated that substantially all scheduled 2014 debt requirements would be refinanced with those proceeds. The company also completed a January 2014 common-stock offering, realizing approximately $41.3 million net.
- No quantitative earnings or FFO guidance is provided in the supplied filing text. Management intended to continue regular quarterly dividends, subject to board discretion, cash flow, financial condition, capital needs, and REIT distribution requirements.
- At year-end, Cedar was negotiating conveyances of Gahanna Discount Drug Mart Plaza and McCormick Place; the related non-recourse debt and accrued property obligations totaled $8.1 million, and the company reported those loans in default. Remaining properties classified as held for sale were expected to be sold during 2014. Roosevelt II was conveyed by deed-in-lieu of foreclosure in 2013, satisfying approximately $13.9 million of loan and related obligations.
- Key risks include tenant credit and retail-market conditions, concentration in the Washington, D.C.–Boston region and Pennsylvania, debt maturities and interest-rate exposure, refinancing and covenant constraints, vacancies and lease renewals, and environmental or weather-related liabilities. Giant Foods and Stop & Shop together represented about 15% of 2013 revenue and 12% of GLA.
The filing reports no litigation expected to have a material adverse effect and no known material environmental matters. Ernst & Young issued unqualified opinions on the financial statements and internal controls; management also assessed disclosure controls and internal control over financial reporting as effective.
Important facts for investors to verify
- Reconcile the 2013 common-shareholder loss and $0.03 loss per share with reported net income and FFO, including preferred dividends and unusual discontinued-operation items.
- Review the refinancing and repayment of 2014 maturities, covenant headroom, and available liquidity after the February 2014 term loans and January equity offering.
- Track progress on remaining held-for-sale properties and resolution of the Gahanna and McCormick Place mortgage defaults.
- Assess whether occupancy and same-property NOI gains persist, and monitor lease expirations: 7.7% of occupied GLA and 7.0% of annualized base rent were scheduled to expire in 2014.
- Evaluate tenant and geographic concentration, especially Ahold-affiliated grocery tenants and the Pennsylvania portfolio exposure.