Cedar Realty Trust, Inc. — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015; unaudited. Cedar is a REIT focused on grocery-anchored shopping centers between Washington, D.C. and Boston. At quarter-end it owned and managed 59 operating properties totaling approximately 9.3 million square feet; the portfolio was 93.2% leased and 92.2% occupied.
Financial and operating results
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Total revenue | $36.7 million | $37.3 million | $75.4 million | $75.0 million |
| Operating income | $12.6 million | $15.0 million | $23.2 million | $24.0 million |
| Income from continuing operations | $5.4 million | $6.8 million | $8.7 million | $7.7 million |
| Net income attributable to common shareholders | $1.9 million | $13.5 million | $1.8 million | $11.6 million |
| Basic and diluted EPS | $0.02 | $0.17 | $0.02 | $0.15 |
| Net cash provided by operating activities | — | — | $27.3 million | $22.9 million |
- Q2 revenue decreased 1.5%; first-half revenue increased 0.5%. Same-property NOI rose 2.2% for the quarter and 2.0% for the six-month comparison. Same-property occupancy declined 100 basis points in Q2 and 90 basis points for the six-month comparison; average base rent increased.
- Q2 net income attributable to common shareholders fell to $1.9 million from $13.5 million. First-half net income attributable to common shareholders was $1.8 million versus $11.6 million. The 2014 comparisons included significant discontinued-operations gains, including $8.0 million from property sales and $1.4 million from debt extinguishment; those gains did not recur in 2015.
- First-half FFO was $21.6 million versus $19.9 million; Operating FFO was $22.2 million versus $21.4 million. These are company-reported non-GAAP measures and are not cash flow measures.
- First-half investing cash flow was a use of $23.7 million, versus a source of $18.7 million in 2014; financing cash flow was a source of $1.3 million, versus a use of $41.6 million. Cash and cash equivalents were $8.4 million at June 30; restricted cash was an additional $8.4 million.
Balance sheet, debt and liquidity
- Total assets were $1.298 billion and total liabilities $697.6 million at June 30, 2015. Total equity was $600.0 million.
- Debt totaled $654.5 million: $354.5 million of mortgage loans and $300 million of unsecured term loans. The revolving credit facility had no borrowings outstanding. Cedar reported $215.6 million available under the revolver and compliance with all financial covenants.
- The company amended its $310 million unsecured credit facility in February. The amended facility comprises a $260 million revolver maturing in 2019 and a $50 million term loan maturing in 2020. It also closed $100 million of additional term loans. Interest-rate swaps fixed rates on specified term loans at 2.8%–4.0%, with effective dates and maturities varying by loan.
- Cedar reported $2.9 million of scheduled principal amortization and $68.7 million of balloon payments remaining for 2015 as of June 30, and said it repaid all remaining 2015 debt requirements after quarter-end using revolver availability. It reported that a 100-basis-point change in rates on $50 million of variable-rate debt would change annual interest cost by approximately $0.5 million.
Material changes, transactions and outlook
- Cedar acquired the remaining 60% interest in its New London, Connecticut property for $27.3 million, including $16.4 million of assumed mortgage financing, and acquired Philadelphia’s Lawndale Plaza for approximately $25.2 million.
- It sold Kenley Village for $2.3 million and Huntingdon Plaza for $2.2 million. Circle Plaza was sold for $1.8 million on July 23, 2015. Other properties remained classified as held for sale.
- A January common-stock offering of 5.75 million shares generated approximately $41.9 million in net proceeds. Common shares issued and outstanding increased from 79.2 million at year-end 2014 to 85.0 million at June 30, 2015. The company’s at-the-market programs expired May 29, 2015; no shares were sold under them during the first half.
- The quarterly common dividend was $0.05 per share and the Series B preferred dividend was $0.453 per share. The board declared the same per-share dividends for payment in August. Future dividends remain subject to board discretion and the company’s financial condition and REIT distribution requirements.
- No specific earnings or operating guidance is provided in the filing. Management describes liquidity plans involving operating cash flow, revolver borrowings, debt and equity issuance, OP Units, and property sales; it cautions that financing availability is not assured. Management cites tenant ability to pay, occupancy, financing and refinancing access, interest rates, and prolonged inflation as risks. It expects no material adverse consequences from routine legal actions.
- Approximately $3.8 million of accumulated hedge losses was expected to be reclassified as a charge to earnings over the following 12 months. Management reported disclosure controls and procedures were effective as of June 30, 2015.
Important facts for investors to verify
- Whether occupancy and leasing trends stabilize: portfolio occupancy was 92.2%, and same-property occupancy was lower year over year despite NOI growth.
- Revolver availability, covenant headroom, debt maturities and the effect of interest rates, including the post-quarter repayment of remaining 2015 requirements.
- Whether operating cash flow supports capital spending, debt service and common and preferred distributions.
- Returns and integration of the New London interest and Lawndale Plaza acquisitions, and the timing and proceeds of remaining held-for-sale properties.
- The impact of the 5.75 million-share offering on per-share results and the expected hedge-loss reclassification.