Cedar Realty Trust, Inc. — Q1 2023 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2023. Cedar owned 19 operating retail properties, primarily grocery-anchored centers in the Northeast, and was a wholly owned subsidiary of Wheeler Real Estate Investment Trust (WHLR) following the August 2022 merger. The common stock was no longer publicly traded; Series B and Series C preferred stock remained listed.
Financial results and liquidity
- Revenue: $8.923 million, up 2.4% from $8.715 million. Rental revenue was $8.641 million.
- Property performance: Property operating income was $5.123 million versus $5.236 million. Same-property NOI, a non-GAAP measure, was $4.668 million, up 2.8%. Same-property occupancy improved to 84.8% from 83.8%; leased occupancy was 87.2% versus 83.9%. Average base rent was $10.28 per square foot versus $10.53.
- Profit and margins: Continuing-operations net income was $14,000, compared with a $6.815 million loss. After $2.688 million of preferred dividends, the net loss attributable to common shareholders was $2.674 million, or $0.19 per share, versus a $3.745 million loss, or $0.28 per share. Total expenses were $7.005 million; interest expense was $1.904 million.
- Cash flow: Operating cash flow was $1.507 million, down from $8.705 million. Investing used $475,000, principally for property improvements; financing used $2.688 million, reflecting preferred dividends. Cash and equivalents were $1.654 million and restricted cash was $10.153 million at quarter-end.
- Debt and balance sheet: Secured term loans had $135 million principal outstanding, with a $131.552 million net carrying value. The loans are fixed-rate, weighted-average rate 5.5%, secured by 12 properties, and mature in November 2032 and January 2033. Total assets were $231.582 million, total liabilities $152.054 million, and equity $79.528 million.
- Liquidity: Management cited operations and $10.2 million of restricted cash as primary resources for operating needs, debt service, tenant improvements and leasing commissions. No scheduled debt maturities fall in the 12 months ending March 31, 2024.
Material changes versus prior period
Revenue rose modestly, while property operating expenses increased 9.2% to $3.8 million and property operating income declined. General and administrative expense fell to $712,000 from $2.911 million, and interest expense declined to $1.904 million from $2.707 million. The prior-year quarter included $3.735 million in transaction costs and $197,000 of impairment charges; neither recurred in Q1 2023. The comparison is also affected by the 2022 sale of the grocery-anchored portfolio and other assets: discontinued operations contributed $5.738 million of income in Q1 2022 and none in Q1 2023. Management attributed lower cash from operations primarily to those completed transactions.
Outlook, risks and unusual items
- No specific earnings or operating guidance was provided. Management said it is seeking to improve occupancy, including backfilling vacant anchor spaces and replacing defaulted tenants; related tenant improvements and leasing costs may be funded partly by restricted cash, asset sales and property financing.
- The company paid preferred dividends through Q1 and declared Q2 dividends of $0.453125 per Series B share and $0.406250 per Series C share. Future declarations remain at the board’s discretion and depend on cash flow, financial condition, capital needs and REIT distribution requirements.
- Several lawsuits brought by preferred-stock holders concerning the merger and preferred-stock rights remained unresolved; the filing states outcomes are uncertain. A separate securities-law action also remained pending. The company filed no liability amount for these matters in the presented balance sheet; it records a liability when loss is considered probable and estimable.
- Disclosed risks include tenant payment defaults or bankruptcies, leasing and re-leasing, financing and refinancing costs, leverage, retail-sector and economic conditions, geographic concentration, severe weather and climate effects, insurance adequacy, REIT qualification, cybersecurity, and integration with WHLR. Management reported no material change to previously disclosed risk factors and concluded disclosure controls were effective.
- WHLR provides property-management and leasing services. Cedar paid WHLR $0.4 million for these services during the quarter and owed it $8.0 million at March 31, 2023, primarily for costs paid on Cedar’s behalf.
Important facts for investors to verify
- Availability and permitted uses of the $10.153 million in restricted cash, and the funding plan for leasing, tenant improvements and other obligations.
- Occupancy, anchor-space backfilling, tenant credit quality and rent trends, including the decline in average base rent.
- Progress and potential financial exposure from the preferred-stock and securities litigation.
- Debt covenants, collateral terms, refinancing requirements and the implications of the two long-dated fixed-rate loans.
- Whether preferred dividends can be sustained given the common-shareholder loss and operating cash flow of $1.507 million.