Cedar Realty Trust, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance-sheet figures are as of March 31, 2022. Cedar owned and managed 50 operating properties, totaling 7.4 million square feet, primarily grocery-anchored centers from Washington, D.C. to Boston. Portfolio occupancy was 89.3%; 91.6% was leased.
Key financial results
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $30.5 million | $33.6 million | Down 9.2% |
| Property operating income | $18.8 million | $20.7 million | Down $1.8 million |
| Operating income | $3.2 million | $6.0 million | Down $2.8 million |
| Net income (loss) | $(1.1) million | $1.3 million | Declined $2.3 million |
| Net loss attributable to common shareholders | $(3.7) million | $(1.6) million | Loss widened |
| Loss per common share | $(0.28) | $(0.12) | Loss widened |
| Net cash from operating activities | $8.7 million | $9.5 million | Down $0.8 million |
| Same-property NOI | $16.9 million | $16.6 million | Up 1.7% |
| FFO per diluted share | $0.38 | $0.62 | Down $0.24 |
| Operating FFO per diluted share | $0.65 | $0.62 | Up $0.03 |
Capital expenditures for real estate improvements were $9.6 million; cash, cash equivalents and restricted cash totaled $2.3 million at quarter-end, including $2.1 million unrestricted cash. Total assets were $1.02 billion and total equity was $443.6 million.
Debt, liquidity and distributions
Balance-sheet debt and finance lease obligations totaled approximately $530.9 million, comprising $156.6 million of mortgage loans, $5.3 million of finance lease obligations, $70.0 million drawn on the revolver and $299.0 million of term loans. The company reported $110.1 million of additional revolving-credit availability and compliance with financial covenants. Fixed-rate debt averaged 3.7%; the $70.0 million variable-rate revolver carried a 2.0% rate. A 100-basis-point rate change on variable-rate debt would change annual interest cost by approximately $0.7 million.
Operating cash flow was below investment outlays: $9.6 million of property improvements and $0.2 million contributed to a joint venture. Financing activities included $3.6 million of common and preferred distributions, partially offset by $4.0 million of net revolver advances. The quarterly common dividend was $0.066 per share; preferred dividends were $0.453 per Series B share and $0.406 per Series C share.
Material changes and unusual items
- Revenue decreased primarily because of properties sold or held for sale and redevelopment properties; same-property revenue and NOI increased modestly.
- General and administrative expense fell 34.4%, mainly due to lower payroll costs associated with the strategic-alternatives process. Depreciation and amortization also declined.
- Q1 2022 included $3.7 million of transaction costs and a $0.7 million impairment charge. The 2021 comparison included a $1.0 million gain on sale.
- Higher same-property NOI and Operating FFO should be viewed alongside weaker GAAP earnings and lower FFO; Operating FFO adds back the transaction costs.
- Cash-flow hedge fair-value changes contributed $8.3 million of unrealized gains to comprehensive income; this was not operating profit. The company expected approximately $1.7 million of accumulated hedge loss to be reclassified to earnings over the following 12 months.
Transactions, outlook and risks
On March 2, 2022, Cedar entered definitive agreements for related all-cash transactions: a $840.0 million sale of 33 grocery-anchored centers, with specified redevelopment assets potentially adding up to $80.5 million if not sold beforehand, followed by a Wheeler Real Estate Investment Trust merger valuing the remaining portfolio at $291.3 million. Management estimated net proceeds after transaction expenses of more than $29 per share for distribution to shareholders. The transactions were expected to close by the end of Q2 2022, subject to customary conditions, including common-stockholder approval at a special meeting scheduled for May 27. These are expectations, not completed outcomes. The Series B and C preferred shares were expected to remain outstanding after the transaction.
Completion could trigger a change-of-control default under substantially all outstanding debt absent lender waivers or consents, allowing acceleration and potentially a make-whole premium. Five shareholder lawsuits filed after quarter-end challenged transaction disclosures; a separate preferred-stockholder class action disputes preferred holders’ rights and seeks to enjoin the merger or distributions. The company said it considered the allegations without merit. Management provided no operating earnings guidance in the supplied filing text.
COVID-related relief through March 31 included approximately $3.5 million of rent deferrals and $2.4 million of rent waivers; 97% of contractual base rents and monthly reimbursements were collected in each of Q1 2022 and Q4 2021. Other disclosed risks include tenant payment and renewal capacity, retail-sector and macroeconomic pressures, interest-rate and refinancing exposure, property redevelopment returns, and the geographic concentration of assets.
Investor verification priorities
- Confirm whether stockholders approved the transactions and whether all sales and the merger closed on the anticipated terms and schedule.
- Verify final net proceeds per share and how proceeds and transaction costs were allocated, including treatment of preferred stock and any related claims.
- Check lender consents, debt repayment or acceleration terms, and any make-whole amounts associated with the change of control.
- Track outcomes of the transaction-related lawsuits and whether they affected closing or distributions.
- Monitor rent collections, deferred-rent recovery, liquidity, occupancy, and the gap between recurring cash generation, capital spending and distributions.