Cedar Realty Trust, Inc. — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. This is an annual report, not a standalone fourth-quarter filing. Dollar amounts are in U.S. dollars.
Business context and portfolio
Cedar is a REIT focused on supermarket-anchored shopping centers, principally in the Washington, D.C.–to–Boston corridor. At year-end, it owned and managed 70 consolidated operating properties totaling 9.6 million square feet and held a 20% interest in the Cedar/RioCan joint venture, which owned 22 properties totaling 3.7 million square feet. The filing reports consolidated occupancy of 91.6%; the managed portfolio including Cedar/RioCan was 93.1% leased. Pennsylvania accounted for 34 of the consolidated properties.
Management’s 2011 strategy was to reduce leverage and concentrate on grocery-anchored strip centers in the Mid-Atlantic and Northeast: exit Ohio, dispose of malls and single-tenant properties, and scale back development and other non-core assets.
Financial performance and position
| Metric | 2011 | 2010 |
|---|---|---|
| Total revenue | $135.4 million | $131.6 million |
| Operating income | $21.7 million | $38.9 million |
| Net loss attributable to common shareholders | $(117.8) million; $(1.79) per share | $(51.5) million; $(0.81) per share |
| Funds from operations (FFO), a non-GAAP measure | $26.7 million | $29.5 million |
| Cash flow from operating activities | $39.2 million | $41.7 million |
| Cash flow from investing activities | $(64.2) million | $(29.8) million |
| Cash flow from financing activities | $22.9 million | $(14.9) million |
Revenue increased about 3%, but operating income declined as expenses rose, including depreciation and management-transition costs. The reported net loss was heavily affected by $88.5 million of impairment charges on properties classified as held for sale or conveyance; discontinued operations also included $5.0 million of operating income before impairment. The company separately recorded $7.1 million of impairments in operating expenses and an $8.0 million write-off of a joint-venture investment.
At year-end, reported debt was $755.3 million, comprising $589.0 million of property-specific mortgages and $166.3 million of credit-facility borrowings. An additional $122.6 million of mortgage debt was classified with properties held for sale/conveyance. The weighted-average rate on reported debt was 5.2%. Cash and cash equivalents were $12.1 million, with $14.7 million of restricted cash. Total assets were $1.51 billion and total liabilities were $951.8 million.
The company paid $0.36 per common share in 2011 and reduced its targeted 2012 annual common dividend to $0.20 per share. Preferred distributions remain separate.
Material changes, outlook and risks
- Portfolio sales and impairments: In 2011, Cedar sold properties and land for aggregate reported sales proceeds of $56.5 million, and had further properties classified as held for sale/conveyance. Since January 2009, it had sold or classified 64 properties, totaling approximately 3.3 million square feet, for sale or conveyance.
- Debt refinancing: On January 26, 2012, Cedar replaced two prior facilities with a secured $300 million facility: a $75 million four-year term loan and a $225 million three-year revolving facility. Initial pricing was LIBOR plus 275 basis points. About $62.8 million remained available at closing, subject to covenants and collateral. The facility has extension options and financial and distribution restrictions.
- Near-term obligations and spending: The filing estimates 2012 scheduled principal amortization of $9.3 million and balloon payments of $29.6 million. Planned 2012 redevelopment and remaining development spending was $20–$25 million.
- Joint-venture transactions: Homburg exercised buy/sell rights covering nine properties. Cedar elected to buy Homburg’s interest in two and sell its interest in seven; the company anticipated closing in 2012, subject to lender approvals. Cedar also anticipated completing other held-for-sale transactions during 2012.
- Credit and property risks: Key risks include refinancing and covenant compliance, tenant defaults or vacancies, retail-sector weakness, property-sale proceeds below expectations, and concentrated geographic and tenant exposure. Giant Foods represented approximately 13% of 2011 revenue; Giant Foods and Stop & Shop together represented approximately 16%.
- Other contingencies: Cedar reported no material pending litigation known to management and no known environmental matter expected to materially affect the financial statements, while noting the potential for environmental liabilities. It reported missed mortgage payments on certain properties and was negotiating deed-in-lieu-of-foreclosure conveyances; three Ohio properties were also slated for such conveyances. The filing describes a Philadelphia property mortgage with no payments made since May 2011 and a continuing $250,000 guarantee.
- Management and controls: The CEO and CFO changed in June 2011; transition charges were approximately $6.5 million. The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Whether planned asset sales, Homburg transactions and deed-in-lieu conveyances closed on expected terms, and how much debt was actually removed.
- Available borrowing capacity under the new credit facility, covenant headroom, collateral requirements and upcoming maturities.
- Whether occupancy, leasing spreads, tenant collections and operating cash flow support the reduced common dividend and preferred distributions.
- The extent to which 2011 impairments reflect completed valuation resets versus further potential write-downs in the remaining portfolio.
- How much of the planned 2012 development and redevelopment spending was completed and its effect on liquidity and returns.