CDR-PB

Cedar Shopping Centers, Inc. (CDR) - 2006 10-K Summary

Business Context and Reporting Period

Company: Cedar Shopping Centers, Inc. (a Maryland corporation and REIT)
Reporting Period: Fiscal year ended December 31, 2006
Business Model: Fully-integrated, self-administered REIT focused on owning, operating, developing, and redeveloping supermarket-anchored community shopping centers and drug store-anchored convenience centers.
Portfolio: 97 properties totaling approximately 10.1 million square feet of Gross Leasable Area (GLA) across nine states, primarily in the Northeast and Mid-Atlantic regions. The portfolio was 92.5% leased as of year-end.

Key Financial Metrics (Year Ended Dec 31, 2006)

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 60% to $126.5 million, driven primarily by the acquisition of 13 shopping centers and 8 land parcels in 2006 (aggregate cost ~$240.7 million).
• Expense Increases: Property operating expenses rose 58% and depreciation/amortization increased 69%, consistent with the expanded asset base.
• Interest Expense: Non-operating expenses increased 107% due to higher borrowing levels used to finance acquisitions and higher short-term interest rates.
• Portfolio Expansion: GLA grew from 8.4 million sq. ft. in 2005 to 10.1 million sq. ft. in 2006.
• Capital Markets: The Company raised significant capital through equity offerings, including a December 2006 sale of 7.5 million shares for net proceeds of ~$113.8 million and a forward sales agreement settlement yielding ~$44.2 million.

Guidance, Outlook, Risks, and Unusual Items

• Liquidity: The Company maintains a $300 million secured revolving credit facility (expandable to $400 million). As of Dec 31, 2006, $209.5 million remained available. Liquidity is also supported by $17.9 million in cash.
• Development Plans: Management plans to spend approximately $60 million in 2007 on development and redevelopment activities.
• Key Risks:
  • Concentration: 55% of total revenues in 2006 were derived from properties in Pennsylvania. Giant Foods/Stop & Shop (Ahold N.V.) accounted for 14% of total revenues.
  • Interest Rate Risk: The Company has $73.3 million in variable-rate debt. A 1% change in interest rates would impact net income by approximately $733,000 annually.
  • Refinancing: Significant debt maturities exist, requiring successful refinancing or repayment to avoid forced asset sales.
  • REIT Compliance: Must distribute at least 90% of taxable income to maintain tax status, which may require borrowing or asset sales if cash flow timing differs from taxable income recognition.
• Unusual Items: Recognized a $141,000 gain on the sale of a 20% interest in an unconsolidated joint venture (Red Lion shopping center) in May 2006.

Investor Verification Checklist

• Acquisition Integration: Verify the performance and lease-up rates of the 13 properties acquired in 2006, particularly the large Shore Mall acquisition ($45M).
• Debt Maturity Wall: Review the schedule of mortgage maturities, noting $67.2 million due in 2008 and $62.2 million due in 2011, to assess refinancing risk.
• Tenant Concentration: Monitor the financial health of Giant Foods/Stop & Shop, which represents a significant portion of revenue and GLA.
• FFO vs. Dividends: Confirm that FFO ($1.21/share) continues to cover the dividend payout ($0.90/share) to ensure sustainability.
• Development Costs: Track the $60 million planned spend for 2007 development projects against budget and expected returns.