CDR-PB

Cedar Shopping Centers, Inc. - 10-Q Summary

Business Context and Reporting Period

This filing is a Quarterly Report (Form 10-Q) for Cedar Shopping Centers, Inc. (a Maryland corporation and REIT) for the period ended March 31, 2007. The Company focuses on the ownership, operation, development, and redevelopment of supermarket-anchored community shopping centers and drug store-anchored convenience centers, primarily in the Northeast and Mid-Atlantic regions. As of March 31, 2007, the portfolio consisted of 99 properties totaling approximately 10.2 million square feet of gross leasable area (GLA), with an overall occupancy rate of approximately 93%.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by approximately 21% ($6.2 million) compared to Q1 2006. This growth was driven primarily by property acquisitions (15 properties acquired between Jan 2006 and Mar 2007) and development activities.
• Profitability: Net income applicable to common shareholders increased significantly from $1.0 million to $3.7 million. Operating income rose from $10.9 million to $13.7 million.
• Expense Increases: Operating expenses increased by $1.6 million, largely due to higher real estate taxes, snow removal costs, and general administrative costs associated with growth. Depreciation and amortization increased by $1.3 million due to new assets.
• Capital Structure: The Company utilized its secured revolving credit facility, increasing borrowings by $24.1 million during the quarter to fund acquisitions and operations. Total debt increased by approximately $22 million.
• Equity: The Company issued 275,000 shares of common stock in January 2007 (over-allotment exercise) for net proceeds of $4.1 million.

Outlook, Risks, and Subsequent Events

• Subsequent Acquisitions: On April 4, 2007, the Company acquired five supermarket-anchored shopping centers in Eastern Pennsylvania for approximately $91.9 million. Financing included assuming $42.8 million in existing mortgages, new financing of $14.3 million, and $34.8 million from the revolving credit facility.
• Joint Ventures: Effective April 2, 2007, the Company entered into a joint venture with Homburg Invest Inc. regarding nine properties valued at approximately $170 million. The Company will retain a 20% interest and continue to consolidate the properties. Additionally, a new development joint venture was formed for a 700,000 sq. ft. center in Pottsgrove, PA.
• Liquidity: As of March 31, 2007, the Company had approximately $198.8 million available under its $300 million secured revolving credit facility. The facility expires in January 2009.
• Risks: Primary risks include interest rate fluctuations on variable-rate debt (approx. $97.4 million outstanding), tenant creditworthiness, and the ability to refinance debt obligations. A 1% change in interest rates on variable debt would impact net income by approximately $974,000 annually.
• Dividends: On April 23, 2007, the Board approved a quarterly common dividend of $0.225 per share and a preferred dividend of $0.554688 per share, payable May 21, 2007.

Investor Verification Checklist

• Verify the impact of the April 2007 acquisitions ($91.9 million) on leverage ratios and future cash flows.
• Review the terms of the new joint venture with Homburg Invest Inc., specifically the "promote" structure and fee arrangements.
• Monitor the utilization of the $300 million revolving credit facility, noting $92.6 million was drawn as of March 31, 2007.
• Assess the sustainability of the dividend payout ratio given that dividends ($9.9 million) exceeded net income applicable to common shareholders ($3.7 million) for the quarter.
• Confirm the status of the 49% unconsolidated joint venture investment and its contribution to equity income.