Cedar Shopping Centers, Inc. - 10-Q Summary
Business Context and Reporting Period
Company: Cedar Shopping Centers, Inc. (Cedar Realty Trust, Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2007
Business Overview: A fully-integrated REIT focused on owning, operating, developing, and redeveloping supermarket-anchored community shopping centers and drug store-anchored convenience centers. As of June 30, 2007, the portfolio consisted of 106 properties totaling approximately 10.6 million square feet of gross leasable area (GLA), primarily in the Northeast and Mid-Atlantic regions. The portfolio was approximately 93% leased.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2007 | Six Months Ended June 30, 2006 |
|---|---|---|
| Total Revenues | $72,399,000 | $59,578,000 |
| Net Income | $10,514,000 | $7,072,000 |
| Net Income Applicable to Common Shareholders | $6,576,000 | $3,134,000 |
| Funds From Operations (FFO) | $26,471,000 | $19,502,000 |
| Net Cash Provided by Operating Activities | $24,900,000 | $17,409,000 |
| Total Debt (Mortgage + Revolver) | $700,752,000 | $568,073,000 |
| Cash and Cash Equivalents | $18,258,000 | $11,755,000 |
| Dividends to Common Shareholders | $19,871,000 | $13,568,000 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 21.5% year-over-year, driven primarily by property acquisitions (21 centers acquired since Jan 1, 2006) and lease commencements at development and stabilized properties.
- Profitability: Net income applicable to common shareholders more than doubled to $6.6 million, reflecting higher operating income from the expanded portfolio.
- Expense Increases: General and administrative expenses rose 87% to $5.2 million, largely due to costs associated with the retirement of a senior executive and the hiring of his replacement ($1.5 million). Interest expense increased due to borrowings for acquisitions, partially offset by proceeds from a December 2006 common stock offering.
- Debt Levels: Total debt increased by approximately $132.7 million. The secured revolving credit facility utilization increased from $68.5 million to $139.0 million to fund acquisitions and operations.
- Acquisitions: During the six months ended June 30, 2007, the company acquired eight shopping and convenience centers, including a significant $91.9 million acquisition of five centers in Eastern Pennsylvania in April 2007.
Outlook, Risks, and Management Commentary
- Liquidity: The company maintains a $300 million secured revolving credit facility (expandable to $400 million), with approximately $139.8 million available as of June 30, 2007. Liquidity is also supported by $18.3 million in cash and cash equivalents.
- Joint Ventures: In April 2007, the company entered into a joint venture with Homburg Invest Inc. regarding nine properties valued at approximately $170 million. The company will hold a 20% interest and act as the sole general partner. Additionally, a new development joint venture for a 700,000 sq. ft. center in Pottsgrove, PA, was initiated.
- Dividends: On July 19, 2007, the Board approved a quarterly common dividend of $0.225 per share and a preferred dividend of $0.554688 per share.
- Risks: Primary market risk is interest rate exposure on variable-rate debt (approx. $143.8 million). A 1% change in interest rates would impact net income by approximately $1.4 million annually. Other risks include tenant creditworthiness, lease renewals, and development cost overruns.
- Discontinued Operations: The company classified Stadium Plaza (East Lansing, MI) as "held for sale" in May 2007. Results for this property are reported as discontinued operations.
Key Facts for Investor Verification
- Share Count: 44,230,866 shares of Common Stock outstanding as of August 3, 2007.
- Stock Offering: Proceeds from a December 2006 offering ($113.8 million) and a January 2007 over-allotment ($4.1 million) were used to reduce revolver debt and fund acquisitions.
- Dividend Coverage: Verify the sustainability of the $0.225 quarterly dividend against FFO of $0.57 per share (six months ended June 30, 2007).
- Debt Covenants: The revolving credit facility is subject to leverage and distribution covenants (limited to 95% of FFO).
- Accounting Revision: Note that the 2006 cash flow statement was revised to reclassify certain real estate expenditures from operating to investing activities.