CDR-PB

Cedar Shopping Centers, Inc. (CDR) - 2004 Annual Report Summary

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2004. Cedar Shopping Centers, Inc. is a self-administered and self-managed Real Estate Investment Trust (REIT) focused on the ownership, operation, development, and redevelopment of community and neighborhood shopping centers. The portfolio is concentrated primarily in Pennsylvania, with additional properties in Connecticut, Maryland, Massachusetts, and New Jersey. As of year-end, the Company owned 31 properties aggregating approximately 4.9 million square feet of gross leasable area (GLA).

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 92% to $51.1 million from $26.7 million in 2003, driven primarily by the acquisition of eight shopping centers (1.4 million sq. ft.) and land for development during 2004.
• Profitability: The Company returned to profitability with net income of $7.9 million, compared to a net loss of $21.3 million in 2003. The 2003 loss was significantly impacted by one-time transaction costs ($12.0 million) related to the acquisition of the external advisor and debt extinguishment costs ($6.9 million).
• Debt Levels: Total debt increased to $248.6 million from $162.5 million in 2003 to fund acquisitions and development. The Company utilized a $100 million secured revolving credit facility (with $31.8 million available at year-end) and issued new mortgage debt.
• Capital Structure: In 2004, the Company raised approximately $94.9 million through public offerings of preferred and common stock, proceeds which were used to reduce the secured revolving credit facility.

Outlook, Risks, and Management Commentary

• Acquisition Strategy: Management continues to seek opportunistic acquisitions of stabilized properties and redevelopment opportunities. In early 2005, the Company announced a non-binding agreement to acquire a portfolio of 27 properties in Ohio for approximately $90 million.
• Development Pipeline: The Company is actively redeveloping several properties, including Camp Hill Mall, Golden Triangle, and Carbondale Plaza. A $49 million construction financing commitment was secured in February 2005 for the Camp Hill Mall project.
• Dividends: The Company paid dividends of $0.835 per share in 2004. Future dividends depend on cash flow, capital requirements, and REIT distribution requirements.
• Risks: Key risks include interest rate fluctuations (approximately $87 million of debt is variable rate), tenant concentration (Giant Foods/Stop & Shop represent ~10% of revenue), and the ability to refinance debt obligations. The Company also faces risks related to the redevelopment of properties, including cost overruns and leasing delays.

Investor Verification Checklist

• Debt Maturities: Verify the schedule of mortgage repayments, noting $16.1 million due in 2005 (including the $14 million Camp Hill Mall obligation) and the terms of the secured revolving credit facility.
• Variable Rate Exposure: Confirm the current interest rate environment impact on the $87.2 million of variable-rate debt, which bears interest at LIBOR plus a spread.
• Development Progress: Monitor the status of redevelopment projects (Camp Hill Mall, Golden Triangle, Carbondale Plaza) to ensure they meet projected cost and leasing targets.
• Tenant Concentration: Review the financial health of major anchor tenants, particularly Giant Foods and Stop & Shop, which collectively account for approximately 10% of total revenues.
• Ohio Acquisition: Track the progress of the proposed $90 million acquisition of 27 properties in Ohio announced in February 2005.