Cedar Realty Trust, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Cedar is a REIT focused on grocery-anchored retail centers, with 19 operating properties at quarter-end. Since its 2022 merger, Cedar has been a wholly owned subsidiary of Wheeler Real Estate Investment Trust (WHLR); its Series B and Series C preferred shares remain publicly traded.
Financial performance
| Metric | Q3 2023 | Q3 2022 | First nine months 2023 | First nine months 2022 |
|---|---|---|---|---|
| Total revenue | $8.62 million | $7.81 million | $25.83 million | $24.96 million |
| Net income (loss) attributable to common shareholders | $0.24 million | $86.62 million | $(6.19) million | $37.60 million |
| Basic and diluted EPS | $0.02 | $6.42 | $(0.45) | $2.82 |
| Net cash from operating activities | — | $4.93 million | $(22.42) million |
- Q3 revenue increased 10.4%; nine-month revenue increased 3.5%. Same-property NOI, a non-GAAP measure, rose 26.5% in Q3 to $5.28 million and 8.0% year to date to $14.77 million.
- Quarter-end same-property occupancy was 85.2%, up from 82.6%; leased occupancy was 88.7%, up from 84.5%. Average base rent was $10.57 per square foot versus $10.37.
- At September 30, cash and cash equivalents were $8.61 million and restricted cash was $10.03 million. Total assets were $234.84 million; total liabilities were $158.83 million and equity was $76.02 million.
- Loans payable, net, were $140.38 million, compared with $131.46 million at year-end 2022. Gross fixed-rate secured loans totaled $144.06 million, secured by 13 properties, with a 5.6% weighted-average contractual rate. No debt maturities were scheduled in the 12 months ending September 30, 2024.
Changes and unusual items
- Comparisons with 2022 are substantially affected by the 2022 sale of the 33-property grocery-anchored portfolio and subsequent merger, which led to discontinued operations and significant transaction and sale gains. The 2022 common-shareholder earnings include large discontinued-operation gains; they are not directly comparable to 2023 results.
- In July 2023, Cedar sold a Carll’s Corner outparcel for $3.0 million and recorded a $2.66 million gain.
- In September 2023, Cedar entered a $11.56 million fixed-rate loan secured by Timpany Plaza at 7.27%, maturing in September 2028. It received $9.06 million at closing; the remaining $2.5 million depends on lease-related contingencies. Payments are interest-only for the first year, then amortize on a 30-year schedule.
- Q3 corporate general and administrative expense fell to $0.68 million from $3.88 million, primarily reflecting lower payroll and other corporate costs following the 2022 transactions. Net interest expense was $2.01 million, versus $0.62 million of net interest income in Q3 2022, which included a swap-termination gain.
Outlook, risks and contingencies
- No numerical earnings or operating guidance is provided. Management says it is working to improve occupancy, including backfilling vacant anchor space and replacing defaulted tenants; tenant improvements and leasing commissions may be funded with restricted cash, asset sales and property financing.
- Management cites tenant payment, renewal and re-leasing risk; financing and refinancing costs; leverage; retail-market and economic conditions; geographic concentration in the Northeast; severe weather, insurance and climate risks; REIT qualification; and cybersecurity. Inflation and higher interest rates may affect the company and tenants.
- The company continues to pay preferred dividends. The board declared post-quarter dividends of $0.453125 per Series B share and $0.406250 per Series C share, payable November 20, 2023. Future declarations remain at the board’s discretion.
- Preferred-stockholder litigation remains in process: a Maryland dismissal is under appeal, and a New York state action is pending. A separate federal securities complaint was dismissed with prejudice in September 2023, and the appeal period expired. The company states outcomes of the remaining matters are uncertain.
- Management concluded disclosure controls were effective as of September 30, 2023; no material change in internal control over financial reporting was reported.
Investor verification priorities
- Confirm the status and conditions for receipt of the remaining $2.5 million Timpany Plaza loan proceeds, and review debt terms, collateral and refinancing exposure.
- Track occupancy, leasing, tenant collections and the costs of filling vacant anchor spaces; compare reported same-property NOI with GAAP cash flows.
- Review liquidity available for operations, debt service, capital spending and preferred dividends, including restrictions on the $10.03 million of restricted cash.
- Monitor the Maryland appeal and New York litigation, as well as related-party management fees and the $8.39 million due to WHLR.
- Distinguish recurring property performance from transaction-related items and the large 2022 discontinued-operation gains when assessing year-over-year results.