Business Context and Reporting Period
Company: Cedar Shopping Centers, Inc. (Cedar Realty Trust, Inc.)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2009
Business Overview: A fully-integrated Real Estate Investment Trust (REIT) focused on owning, operating, developing, and redeveloping supermarket-anchored shopping centers in the mid-Atlantic and Northeast coastal states. As of year-end 2009, the portfolio consisted of 119 operating properties totaling approximately 13.0 million square feet of gross leasable area (GLA), with an occupancy rate of 91% (excluding ground-up developments).
Key Financial Metrics
| Metric | 2009 | 2008 |
|---|---|---|
| Total Revenues | $181.7 million | $170.7 million |
| Net Loss (Attributable to Common Shareholders) | ($24.5 million) | $10.5 million |
| Funds From Operations (FFO) | $24.6 million | $56.9 million |
| FFO Per Share (Basic & Diluted) | $0.51 | $1.22 |
| Operating Cash Flow | $51.9 million | $60.8 million |
| Total Assets | $1.78 billion | $1.73 billion |
| Total Debt (Mortgages & Credit Facilities) | $950.7 million | $918.2 million |
| Shareholders' Equity | $539.2 million | $524.0 million |
Material Changes vs. Prior Period
- Net Loss vs. Profit: The Company reported a net loss of $24.5 million attributable to common shareholders in 2009, compared to net income of $10.5 million in 2008. This reversal was primarily driven by a $23.6 million impairment charge related to seven properties transferred to a joint venture with RioCan, as well as increased terminated project costs and acquisition transaction costs.
- Revenue Growth: Total revenues increased 6% to $181.7 million, driven by tenant recoveries and other income, partially offset by decreases in straight-line rents and base rents due to early lease terminations and economic conditions.
- Dividend Suspension and Resumption: In April 2009, the Board suspended cash dividends due to economic conditions and credit market constraints. In December 2009, the Board resumed quarterly dividends at $0.09 per share ($0.36 annualized).
- Discontinued Operations: The Company sold or classified nine drugstore/convenience centers as "held for sale," recording impairment charges of $3.6 million and a gain on sales of $0.6 million.
Guidance, Outlook, and Material Transactions
Significant Transactions
- RioCan Joint Venture: Entered into a definitive agreement with RioCan Real Estate Investment Trust. The Company sold 6.7 million shares to RioCan for $40 million and issued warrants. Additionally, the Company formed an 80% (RioCan) / 20% (Cedar) joint venture to acquire seven of Cedar's properties. Two properties were transferred in late 2009, with the remaining five scheduled for transfer in 2010. The Company expects aggregate net proceeds of approximately $105 million from these transactions.
- Public Offering (Subsequent Event): In February 2010, the Company completed a public offering of 7.5 million shares at $6.60 per share, raising approximately $47 million in net proceeds. An over-allotment option was exercised in March 2010 for an additional $4.4 million.
- Debt Facilities: In November 2009, the Company amended its secured revolving stabilized property credit facility to $265 million (expandable to $400 million) with a maturity of January 2012. Borrowings outstanding were $188 million at year-end.
Risks and Contingencies
- Credit Market Volatility: The Company faces risks regarding the availability of commercial mortgage-backed securities (CMBS) and the ability to refinance existing debt on favorable terms.
- Tenant Financial Viability: Economic downturns and high unemployment rates pose risks to tenant ability to pay rent, potentially leading to vacancies or lease terminations.
- Joint Venture Risks: Reliance on joint venture partners (RioCan, PCP) for funding and decision-making introduces risks regarding partner financial condition and potential disputes.
Investor Verification Checklist
- Impairment Charges: Verify the valuation methodology used for the $23.6 million impairment charge related to the RioCan joint venture properties.
- Debt Maturity Profile: Review the schedule of debt maturities, noting the $188 million stabilized property credit facility maturing in January 2012 and the refinancing risks in a constrained credit market.
- Dividend Sustainability: Assess the Company's ability to maintain the resumed dividend of $0.09 per share given the net loss and reliance on credit facilities for liquidity.
- Joint Venture Execution: Monitor the timeline and proceeds from the remaining property transfers to the RioCan joint venture scheduled for 2010.
- Tenant Concentration: Note that Giant Foods (and affiliates) accounted for approximately 15% of total revenues; monitor the financial health of this key tenant group.