Cedar Realty Trust, Inc. — Q1 2024 Form 10-Q
Business context and reporting period
For the three months ended March 31, 2024, Cedar Realty Trust operated 19 income-producing retail properties, primarily grocery-anchored shopping centers in the Northeast. The company is a subsidiary of Wheeler Real Estate Investment Trust, Inc. (WHLR); WHLR provides property management and leasing services.
Financial and operating results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $8.765 million | $8.923 million |
| Operating income | $2.500 million | $1.918 million |
| Net income | $323,000 | $14,000 |
| Net loss attributable to common shareholders | $2.365 million; $0.17 per share | $2.674 million; $0.19 per share |
| Operating cash flow | $2.066 million | $1.507 million |
| Capital expenditures for property improvements | $2.102 million | $475,000 |
Same-Property NOI, a non-GAAP measure, rose 3.3% to $4.817 million. Same-property occupancy was 85.3% (84.8% prior year), leased percentage was 89.5% (87.2%), and average base rent was $10.59 per square foot ($10.28). At March 31, total assets were $233.6 million, total liabilities $162.5 million, and equity $71.1 million. Cash and cash equivalents were $5.334 million; restricted cash was $9.792 million.
Loans payable, net, totaled $142.583 million, including $993,000 associated with property held for sale. Fixed-rate secured term loans had a weighted-average contractual rate of 5.6%; the revolving facility rate is daily SOFR plus stated margins of 0.10% and 2.75%. The company paid $2.688 million in preferred dividends during the quarter.
Changes versus the prior comparable period
- Revenue declined 1.8%, primarily because Q1 2023 included insurance reimbursements; same-center rent and expense recoveries partly offset the decrease.
- Operating income increased by $582,000. Lower general and administrative costs, including lower legal and professional fees, and reduced depreciation more than offset higher interest expense.
- Net income rose from $14,000 to $323,000, but remained insufficient to cover preferred dividends; the common-shareholder loss narrowed by $309,000.
- Operating cash flow increased, while property-improvement spending rose to $2.102 million, which the company attributed to increased leasing activity.
- Interest expense increased 14.3% to $2.177 million, reflecting higher average debt balances and rates and greater deferred-financing-cost amortization.
Outlook, risks and unusual items
- No numerical earnings or operating guidance is provided. Management says it is working to improve occupancy, including backfilling vacant anchor space and replacing defaulted tenants.
- The company has $6.1 million of outstanding construction commitments. It expects the $1.387 million drawn on the revolving facility, due February 28, 2025, to be repaid with proceeds from property sales. The facility is secured by six properties and may be extended for two three-month periods, subject to conditions.
- South Philadelphia property components were classified as held for sale following a commitment to sell. The related assets totaled $13.890 million at quarter-end.
- The company received $1.0 million of deferred Timpany Plaza loan proceeds in March and anticipates another $1.5 million upon satisfaction of additional lease-related contingencies.
- A preferred-stockholder class action relating to the 2022 transactions was dismissed in 2023; plaintiffs appealed, with a Fourth Circuit hearing scheduled for May 9, 2024. The outcome remains uncertain.
- Management cites exposure to tenant payment defaults and bankruptcies, retail demand and e-commerce, Northeast geographic concentration, inflation, interest rates, financing and refinancing conditions, property-sale execution, and litigation. It cautions that sustained high inflation could adversely affect the business.
- The board declared Q2 preferred dividends of $0.453125 per Series B share and $0.406250 per Series C share, payable May 20, 2024. Future declarations remain discretionary and depend on cash flow, financial condition, capital needs, and REIT distribution requirements.
- Management reported disclosure controls were effective as of March 31, 2024 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress and timing of South Philadelphia property sales and whether proceeds will repay the revolving facility at its February 2025 maturity.
- Whether the remaining $1.5 million Timpany Plaza loan proceeds are released and what contingencies remain.
- Leasing, occupancy and tenant-credit trends, including the costs required to backfill vacant anchor space; new leases were signed at an average rate 12.46% below prior rates.
- Ability to fund $6.1 million of construction commitments, property improvements and preferred dividends from operating cash and available financing.
- Developments in the preferred-stockholder appeal and the potential financial impact of the litigation.