Cedar Shopping Centers, Inc. (CEDAR) - Q1 2011 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2011. Cedar Shopping Centers, Inc. is a fully-integrated Real Estate Investment Trust (REIT) focused on the ownership, operation, development, and redevelopment of supermarket-anchored shopping centers, primarily in the mid-Atlantic and Northeast coastal states. As of the reporting date, the Company owned and managed 114 operating properties totaling approximately 14.9 million square feet of Gross Leasable Area (GLA), with a portfolio occupancy rate of approximately 92.1% (excluding ground-up development properties).
Key Financial Metrics
| Metric | Q1 2011 | Q1 2010 |
|---|---|---|
| Total Revenues | $41.62 million | $41.79 million |
| Operating Income | $11.31 million | $12.19 million |
| Net Loss (GAAP) | $(9.09) million | $(1.16) million |
| Net Loss Attributable to Common Shareholders | $(12.31) million | $(3.49) million |
| Funds From Operations (FFO) | $(2.46) million | $6.56 million |
| Net Cash Provided by Operating Activities | $4.23 million | $3.69 million |
| Total Debt (Mortgage + Revolvers) | $852.61 million | $804.74 million |
| Cash and Cash Equivalents | $15.47 million | $14.17 million |
Material Changes vs. Prior Period
- Discontinued Operations & Impairments: The significant increase in Net Loss is primarily driven by discontinued operations. The Company recorded $9.92 million in impairment charges related to properties classified as "held for sale" (primarily drug store/convenience centers in Ohio). This compares to $0.25 million in impairment charges for the same period in 2010.
- Revenue Stability: Total revenues remained relatively flat ($41.62M vs $41.79M). Increases in base rents from new developments and expense recoveries were offset by decreases in non-cash straight-line rents and amortization of intangible lease liabilities.
- Expense Increases: Property operating expenses increased by 9% ($15.66M vs $14.37M), driven by higher snow removal costs, bad debt expense, and real estate taxes. General and administrative expenses rose 22% due to employee termination costs, partially offset by lawsuit settlement proceeds.
- Debt Position: Total secured debt increased by approximately $48 million, reflecting new mortgage financings ($28.1M) and increased utilization of revolving credit facilities ($22.0M net advances) to fund acquisitions and development.
Outlook, Risks, and Unusual Items
- Asset Disposition Strategy: The Company is actively disposing of underperforming assets, specifically drug store/convenience centers. On April 29, 2011 (subsequent to period end), the Company entered into a contract to sell 14 "held for sale" properties for a net aggregate price of $33.2 million.
- Joint Venture Activity: The Company continues to manage a 20% interest in a joint venture with RioCan Real Estate Investment Trust. In Q1 2011, the Company elected to purchase an 80% interest in one specific property (Meadows Marketplace) from its joint venture partner, Homburg Invest Inc., while selling its interest in eight other properties to Homburg.
- Development Risks: A significant risk involves a development project in an unconsolidated joint venture. Due to zoning uncertainties and market conditions, the partnership may not proceed with development or sale. The Company noted a potential impairment charge of approximately $9 million in the second quarter of 2011 if the investment is deemed unrecoverable.
- Liquidity: The Company maintains $91.5 million in availability under its stabilized property credit facility and $46.9 million under its development property credit facility (as of March 31, 2011). The development facility was extended for one year in April 2011.
Investor Verification Checklist
- Impairment Realization: Verify the closing of the 14-property sale contract signed on April 29, 2011, to confirm the recovery of carrying values and the elimination of the "held for sale" classification.
- Joint Venture Impairment: Monitor Q2 2011 filings for the potential $9 million impairment charge related to the unconsolidated joint venture development project.
- Debt Maturities: Review the status of the $150 million development property credit facility (matured June 2011, extended) and the $70.7 million construction facility (matures September 2011) to ensure refinancing or extension is secured.
- FFO Performance: Analyze the negative FFO of $(2.46) million to understand the impact of discontinued operations on the Company's core operating performance metrics.
- Dividend Coverage: Confirm that the declared dividend of $0.09 per common share is sustainable given the GAAP net loss and negative FFO for the quarter.