Cedar Realty Trust, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; balance-sheet comparisons are with December 31, 2012. The unaudited filing covers a REIT focused on grocery-anchored shopping centers from Washington, D.C., to Boston. At quarter-end it owned and managed 67 operating properties totaling approximately 9.8 million square feet; occupancy was 91.5% and leased area was 92.8%.
Financial performance and position
- Revenue: $37.0 million, up 7.5% from $34.4 million. Rents increased to $28.4 million from $26.6 million; expense recoveries rose to $8.3 million from $6.9 million.
- Operating results: Property operating income was $25.3 million versus $23.6 million, a 68.4% margin on revenue versus 68.7% a year earlier. Operating income was $13.2 million versus $4.3 million. Continuing-operations income was $4.4 million, compared with a $7.9 million loss.
- Net income and per-share result: Net income was $3.9 million versus a $4.9 million net loss. Net loss attributable to common shareholders was $0.9 million, or $0.02 per diluted share, versus a $9.3 million loss, or $0.14 per share. Preferred dividends and $1.2 million of Series A redemption costs affected the common-shareholder result.
- NOI and FFO: Same-property NOI was essentially flat at $19.6 million versus $19.5 million. Management said it would have grown 1.2% excluding the Oakland Commons anchor-replacement downtime, or 1.8% if snow-removal costs matched 2012. FFO was $6.9 million versus $5.3 million; FFO is a non-GAAP measure and is not a measure of cash available for distributions.
- Cash flow: Operating cash flow was $9.8 million, down from $11.2 million. Investing activities provided $1.3 million versus $8.7 million; financing used $13.8 million versus $21.2 million. Cash and cash equivalents ended at $4.9 million, down from $7.5 million at year-end; restricted cash was $12.4 million.
- Debt and liquidity: Total debt was $731.4 million, comprising $566.2 million in property-specific mortgages and $165.2 million under the credit facility. Weighted-average interest rate was 4.7%. The company reported $73.4 million available under its facility. For the remainder of 2013, scheduled principal amortization was approximately $6.7 million and balloon payments approximately $73.4 million, including $59.7 million subject to a one-year extension option.
- Balance sheet and equity: Total assets were $1.36 billion and total liabilities $813.8 million. Total equity was $543.3 million. Real estate held for sale/conveyance was $76.8 million.
Material changes and notable transactions
- Revenue growth primarily reflected a property acquired in Q4 2012 and higher rents and expense recoveries at existing properties. Property expenses rose, including higher snow-removal costs. Lower depreciation and amortization—principally due to a prior-year accelerated depreciation charge—and lower interest expense helped improve operating results.
- In February, the company issued Series B preferred shares and received approximately $54.7 million net proceeds; in March it redeemed all remaining Series A preferred shares for approximately $35.4 million. Series B carries a 7.25% dividend rate; Series A carried 8.875%.
- The company repaid $38.0 million of mortgage debt during the quarter, including $32.6 million in prepayments, and incurred approximately $522,000 in related early-extinguishment costs.
- A previously written-off developer loan was settled for $1.1 million in March, resulting in a $1.1 million impairment reversal. A land parcel sale generated a $291,000 gain.
- Management reported 40 leases signed covering 225,400 square feet. Renewals achieved a 7.3% increase over prior rent; comparable new leases achieved a 12.3% increase.
Outlook, risks, and contingencies
- Management’s 2013 common-dividend target was $0.20 per share annually, or $0.05 quarterly. Future declarations remain at the board’s discretion and depend on cash flow, financial condition, capital needs, REIT distribution requirements, and other factors. The quarter’s declared common dividend was $0.05 per share.
- The company was negotiating with lenders to convey four properties through short sale, foreclosure, or deed-in-lieu processes. Their non-recourse mortgages and accrued interest totaled approximately $24.0 million; the related subsidiaries had stopped making payments and were in default. If conveyed, the company estimated aggregate gains of approximately $11.7 million based on liabilities exceeding property carrying values. Timing and outcomes were not assured.
- Credit-facility covenants include leverage, interest-coverage, fixed-charge-coverage, and net-worth requirements; a breach or default could accelerate debt. Management disclosed interest-rate exposure: a 1% change in rates on $225.4 million of variable-rate debt would change annual interest cost by approximately $2.3 million.
- Management cited reliance on tenant rent payments, refinancing and financing availability, and potential effects of sustained inflation. It said normal-course legal actions were not expected to have a material adverse effect. No specific earnings guidance was provided.
Important facts for investors to verify
- Progress and final outcomes of the four delinquent, non-recourse mortgage conveyances, including any realized gains or additional costs.
- Sources for the $73.4 million of scheduled 2013 balloon payments and whether the extension option applies to the expected maturities.
- Occupancy, leasing, and same-property NOI trends, particularly anchor replacement at Oakland Commons and recurring snow-removal impacts.
- Cash available for dividends after debt service, capital spending, and preferred dividends; compare the stated common-dividend target with subsequent board declarations.
- Reconcile the reported $0.9 million common-shareholder loss with the EPS note’s $1.1 million loss numerator, which includes an allocation to unvested restricted shares.