Cedar Shopping Centers, Inc. (CEDAR) - 10-Q Summary
Business Context and Reporting Period
Company: Cedar Shopping Centers, Inc. (CEDAR)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2010
Business Overview: A fully-integrated REIT focused on the ownership, operation, development, and redevelopment of supermarket-anchored shopping centers in the coastal mid-Atlantic and New England states. As of September 30, 2010, the Company owned and managed 125 operating properties totaling approximately 14.5 million square feet of gross leasable area (GLA), with a portfolio occupancy rate of approximately 90.8% (excluding ground-up development properties).
Key Financial Metrics
| Financial Metric (Nine Months Ended Sept 30, 2010) | Value |
|---|---|
| Total Revenues | $125.6 million |
| Net Loss (GAAP) | $(8.2) million |
| Net Loss Attributable to Common Shareholders | $(14.5) million |
| Funds From Operations (FFO) | $16.8 million |
| FFO Per Common Share (Diluted) | $0.26 |
| Net Cash Provided by Operating Activities | $20.2 million |
| Total Assets | $1.65 billion |
| Total Liabilities | $898.2 million |
| Total Debt (Mortgages + Revolvers) | $812.6 million |
| Cash and Cash Equivalents | $12.1 million |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased by 6% ($8.1 million) compared to the nine months ended September 30, 2009. This was primarily driven by the transfer of seven properties to the Cedar/RioCan joint venture, resulting in the loss of associated rental income, and a decrease in non-cash amortization of intangible lease liabilities.
- Net Loss vs. Net Income: The Company reported a net loss of $8.2 million for the nine months ended September 30, 2010, compared to net income of $11.4 million in the prior year period. The loss was significantly impacted by non-cash impairment charges of $2.3 million related to properties transferred to the joint venture and terminated development projects.
- Debt Reduction: Total secured debt decreased from $946.0 million at December 31, 2009, to $812.6 million at September 30, 2010. This reduction was achieved through the transfer of approximately $95 million in fixed-rate mortgages to the Cedar/RioCan joint venture and net repayments of $131.2 million on revolving credit facilities.
- Equity Capitalization: The Company raised significant capital through equity offerings, including a public offering of common stock ($47.0 million net proceeds) and preferred stock ($67.3 million net proceeds), as well as proceeds from the exercise of a warrant by RioCan ($10.0 million).
Guidance, Outlook, and Risks
Management Commentary & Outlook: Management continues to pursue a strategy of acquiring stabilized, supermarket-anchored properties, often through the Cedar/RioCan joint venture. The Company resumed common stock dividends in December 2009 at $0.09 per share ($0.36 annualized). Liquidity is expected to be managed through operating cash flows, credit facilities, and potential future equity or debt issuances. The Company reduced its stabilized property credit facility commitment from $285 million to $185 million in September 2010 to reduce unused fees and amortization costs.
Risks and Contingencies:
- Market Conditions: The Company faces risks related to the general economic climate, tenant financial viability, and the availability of capital markets for refinancing and acquisitions.
- Joint Venture Execution: Future growth is partially dependent on the success of the Cedar/RioCan joint venture and the ability to acquire additional properties on favorable terms.
- Interest Rate Risk: The Company has exposure to variable interest rates on approximately $210 million of debt. A 1% increase in interest rates would increase annual interest costs by approximately $1.9 million on unhedged variable debt.
- Impairment Risk: The Company recorded significant impairment charges in the current period related to discontinued operations and joint venture transfers, indicating potential valuation risks in its portfolio.
Key Facts for Investor Verification
- Joint Venture Transfers: Verify the impact of the seven properties transferred to the Cedar/RioCan joint venture on future revenue streams and the accounting treatment of the $64 million in net proceeds received.
- Impairment Charges: Review the specific details of the $2.3 million impairment charge related to the Blue Mountain Commons property and the $1.3 million write-off of the Williamsport, PA development project.
- Debt Covenants: Confirm compliance with financial covenants on the $185 million stabilized property credit facility and the $150 million development facility, particularly regarding leverage ratios and distribution limits (95% of FFO).
- Equity Dilution: Assess the impact of recent common and preferred stock issuances on earnings per share and the Company's capital structure.
- Discontinued Operations: Monitor the status of the 11 drug store/convenience centers classified as discontinued operations and the associated $3.3 million impairment charge.