CEDAR REALTY TRUST, INC. quarterly report, Q2 FY2023

Business Context and Reporting Period

Cedar Realty Trust, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2023. The company focuses on grocery-anchored retail properties, primarily in the Northeast, and owned 19 operating properties at quarter-end. Following its August 2022 merger, Cedar is a wholly owned subsidiary of Wheeler Real Estate Investment Trust, Inc. (WHLR); Cedar’s Series B and Series C preferred shares remain publicly traded.

Financial Results and Key Metrics

First-half FFO was a loss of $0.627 million, or $0.05 per diluted common share; Operating FFO was the same. These are non-GAAP measures and are not substitutes for net income or operating cash flow. Same-property occupancy was 84.5% and leased occupancy was 87.7% at quarter-end, compared with 83.1% and 83.3%, respectively, a year earlier. First-half lease renewals produced a 4.82% weighted average rate increase.

At June 30, 2023, total assets were $227.198 million and total liabilities were $151.425 million. Debt had a $135.0 million gross principal balance, represented by two fixed-rate term loans at weighted average rates of 5.3% and 6.4%; carrying value, net of issuance costs, was $131.555 million. The loans are collateralized by 12 properties and mature in November 2032 and January 2033. Cash and cash equivalents were $1.291 million, with an additional $10.533 million in restricted cash. Total equity was $75.773 million.

Changes Versus the Prior Comparable Period

Second-quarter revenue decreased 1.7% year over year; first-half revenue increased 0.4%. Same-property NOI rose in both periods, while operating results also reflect the smaller post-disposition portfolio. Net losses were substantially lower than in 2022, principally because the prior-year periods included large merger and asset-sale transaction costs and impairment charges, as well as earnings and impairments from properties subsequently sold. Those prior-year discontinued operations should not be treated as directly comparable ongoing results.

First-half operating cash flow declined to $5.806 million from $16.082 million in 2022. Investing cash flow was $(2.069) million, compared with $14.779 million provided in 2022, which included real estate sale proceeds. Financing cash flow was $(5.376) million, entirely reflecting preferred dividends in 2023; 2022 included debt repayments and common distributions. Cash, cash equivalents and restricted cash together decreased $1.639 million during the first half.

Outlook, Risks, and Unusual Items

• Management provided no numerical earnings or operating guidance. It said it is working to improve occupancy, including backfilling vacant anchor spaces and replacing defaulted tenants; related tenant improvements and leasing commissions may be funded partly from restricted cash, asset dispositions and property financing.
• The company reported no scheduled debt maturities in the 12 months ending June 30, 2024. Management said operating needs, debt service, leasing costs and other liquidity requirements are funded primarily from operations and restricted cash.
• The Board declared third-quarter 2023 preferred dividends of $0.453125 per Series B share and $0.406250 per Series C share, payable August 21, 2023. Future declarations remain subject to the Board’s discretion and the company’s cash flow, financial condition and REIT distribution requirements.
• On July 11, 2023, Cedar sold a Carll’s Corner outparcel for $3.0 million; it had been classified as held for sale at quarter-end.
• Preferred-stockholder litigation remains a key contingency. On August 1, 2023, after the quarter-end, a Maryland court dismissed the consolidated Sydney and Kim cases without leave to amend; plaintiffs could seek reconsideration or appeal. A separate federal securities action and a New York preferred-stockholder action remained unresolved as described in the filing.
• Key disclosed risks include tenant nonpayment, bankruptcy or nonrenewal; re-leasing and retail-market conditions; refinancing costs and interest rates; leverage; geographic concentration in the Northeast; weather and other property risks; REIT qualification; and cybersecurity. The company stated that its disclosure controls were effective and that there were no material changes to internal control over financial reporting during the quarter.

Most Important Facts for Investors to Verify

• Availability and permitted use of the $10.533 million of restricted cash, alongside only $1.291 million of unrestricted cash.
• Tenant credit, anchor-space vacancy and whether occupancy gains translate into rent collections and sustainable NOI.
• Terms, collateral coverage and refinancing implications of the $135.0 million gross fixed-rate debt and the loans’ long-dated maturities.
• Payment capacity and continued declaration of preferred dividends, and the company’s obligations to WHLR, including $8.556 million due to WHLR at quarter-end.
• Developments in the pending litigation, including any appeal of the Maryland dismissal, and the associated potential costs or liability.