Cedar Realty Trust, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Cedar is a REIT focused on grocery-anchored shopping centers in high-density markets from Washington, D.C. to Boston. At quarter-end, it owned and managed 53 operating properties totaling 7.6 million square feet; the portfolio was 89.8% leased and 87.7% occupied.
Financial results and condition
- Revenue: Q3 revenue was $30.6 million, down 2.0% year over year. Nine-month revenue was $96.3 million, down 5.8%; rental revenue rose slightly to $95.6 million, while other revenue fell sharply.
- Profit and unusual charges: Q3 net loss was $80.9 million, versus net income of $1.4 million in Q3 2020; loss attributable to common shareholders was $83.2 million, or $6.28 per share. The principal driver was $82.7 million of impairment charges. Nine-month net loss was $28.2 million, versus $6.7 million in 2020; common-shareholder loss was $36.4 million, or $2.77 per share.
- Operating performance: Same-property NOI increased 10.5% in Q3 to $17.7 million and 3.8% for the first nine months to $51.0 million. Nine-month FFO was $25.4 million, or $1.84 per diluted share, versus $30.0 million, or $2.17, in 2020; Operating FFO was $25.8 million, or $1.87 per share, versus $30.5 million, or $2.20. These are non-GAAP measures.
- Cash flow: Nine-month operating cash flow was $32.3 million, compared with $26.2 million in 2020. Investing activities provided $81.7 million, largely reflecting $104.5 million of property-sale proceeds, partly offset by $19.6 million of real estate improvements. Financing activities used $110.7 million. Cash and restricted cash totaled $5.0 million at period-end.
- Debt and liquidity: Balance-sheet debt and finance lease obligations totaled approximately $527.2 million, net of unamortized issuance costs. This included $157.0 million of mortgages, $298.8 million of term loans, $66.0 million drawn on the revolver, and $5.3 million of finance leases. The company reported $117.9 million of additional revolver availability and compliance with financial covenants. The revolver was amended to $185 million and extended to August 2024, with two one-year extension options. Reported fixed-rate debt averaged 3.7%; variable-rate revolver borrowings averaged 1.6%.
- Dividends: Common dividends were $0.066 per share for Q3 and $0.198 per share for the nine months, versus $0.066 and $0.462, respectively, in 2020. Preferred dividends were unchanged year over year.
Material changes and strategic developments
- On September 9, 2021, Cedar announced a strategic alternatives process, including a possible sale or merger of the company or sales of its core shopping-center portfolio and redevelopment projects. Management determined certain properties would be sold earlier than previously expected and recorded $82.7 million of impairments; the filing attributes approximately $82.3 million to held-for-use properties and $0.4 million to a property held for sale.
- Nine-month property dispositions generated $100.7 million in sales proceeds. Reported gain on sales was $49.9 million, primarily associated with 2021 dispositions.
- Nine-month revenue was affected by the prior termination of a dark-anchor lease at Metro Square and property sales, partly offset by growth at same-center properties. Q3 same-property NOI improved against the prior-year period, which had been more affected by the pandemic.
- The company formed a 10%-owned joint venture for a Washington, D.C. office-and-retail project. Its office space is fully leased to the D.C. Department of General Services, subject to annual budget appropriation; delivery is estimated for late Q4 2022.
Outlook, risks and contingencies
- The filing provides no specific earnings or FFO guidance. Management was exploring strategic alternatives and refinancing options.
- Cedar collected 97% of contractual base rents and monthly tenant reimbursements in both Q3 and Q2 2021. Through September 30, it had deferred approximately $3.5 million of rent and waived approximately $2.4 million; the weighted-average payback period for remaining deferred rent was about 10 months.
- Management identifies COVID-19 and tenant creditworthiness, rent collection, occupancy and lease renewals, retail-sector and e-commerce pressures, property values, redevelopment execution, geographic concentration, leverage, refinancing access and interest rates as risks. The company also notes that covenant breaches could accelerate debt. A 100-basis-point change in rates on its $66.0 million variable-rate debt would change annual interest cost by approximately $0.7 million.
- Management said it did not expect material adverse consequences from routine legal actions. The filing reported no material changes to the risk factors in the 2020 Form 10-K.
Key facts for investors to verify
- Progress, terms and potential effects of the strategic alternatives process, including whether asset-sale assumptions and impairment valuations change.
- Rent collections, deferred-rent repayments, tenant credit quality, occupancy and leasing trends.
- Debt maturities, refinancing availability, covenant headroom and the effect of interest-rate changes.
- Timing, financing, tenant-improvement commitments and budget-appropriation exposure for the D.C. joint-venture project.
- Cash available for operations, capital spending and dividends, and the Board’s discretion over future distributions.