CDR-PB

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, 2007
Business Overview: A fully-integrated, self-administered REIT focused on supermarket-anchored community shopping centers and drug store-anchored convenience centers. The portfolio consists of 118 properties totaling approximately 12.0 million square feet of gross leasable area (GLA), located primarily in the Northeast and Mid-Atlantic regions (9 states). As of year-end, the portfolio was approximately 93% leased, with the stabilized portfolio at 96% leased.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 22% to $152.9 million, driven primarily by the acquisition of 20 shopping centers (1.9 million sq. ft.) for approximately $295 million during 2007.
• Profitability: Net income applicable to common shareholders nearly doubled to $14.1 million from $7.5 million. Operating income rose to $61.2 million.
• Debt Expansion: Total indebtedness increased significantly to $851.5 million (from $568.1 million) to fund acquisitions and development. This included $190.4 million drawn on the secured revolving credit facility.
• Joint Ventures: Formed a joint venture with Homburg Invest Inc. involving nine properties valued at approximately $170 million. The Company received $53.2 million in cash proceeds, which was used to reduce revolver balances, though the properties remain consolidated.
• Stock Performance: The common stock price declined from a closing price of $15.91 in December 2006 to $10.23 in December 2007.

Guidance, Outlook, and Risks

Management Outlook: The Company plans to spend between $140 million and $200 million in 2008 on development and redevelopment activities. It continues to seek stabilized acquisitions and development opportunities to achieve long-term cash flow growth. The Company intends to maintain its REIT status by distributing at least 90% of taxable income.

Key Risks and Contingencies:

• Interest Rate Risk: The Company has significant variable-rate debt ($195.2 million). A 1% increase in interest rates would decrease net income by approximately $1.95 million annually.
• Tenant Concentration: Giant Foods (and its affiliate Stop & Shop) accounted for approximately 15% of total revenues in 2007. The loss of a major anchor tenant could materially impact results.
• Refinancing Risk: Substantial indebtedness must be refinanced or repaid as it matures. Inability to refinance on favorable terms could force asset sales or impact liquidity.
• Development Risks: Ongoing development projects face risks of cost overruns, delays, and failure to achieve targeted occupancy or rental rates.

Investor Verification Checklist

• Debt Covenants: Verify compliance with the $300 million secured revolving credit facility covenants, specifically the leverage limits and the restriction that distributions cannot exceed 95% of FFO.
• Joint Venture Terms: Review the specific "promote" structures and preferred return rates (9.25%) in the Homburg joint venture to understand the Company's upside potential versus downside risk.
• Lease Expirations: Assess the impact of lease expirations, noting that approximately 5.6% of GLA and 5.9% of base rents expire in 2008.
• Development Pipeline: Monitor the $140-$200 million capital expenditure plan for 2008 to ensure funding sources (equity, debt, or JV proceeds) are secured.
• Property Held for Sale: Track the disposition of the Stadium Plaza property in Michigan, classified as "held for sale" since May 2007.