Cedar Realty Trust, Inc. — FY 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; filed February 19, 2016. The filing also reports fourth-quarter results. Cedar is a REIT focused on grocery-anchored shopping centers, primarily along the Washington, D.C.–Boston corridor.
Business and portfolio
- Owned and managed 60 operating properties, excluding properties held for sale, totaling approximately 9.46 million square feet. At year-end, the portfolio was 91.5% leased and 90.5% occupied.
- Pennsylvania accounted for 27 properties and 52.9% of portfolio GLA. Giant Food and Stop & Shop, both owned by Ahold, together represented approximately 11% of GLA and 12% of 2015 revenue.
- Revenue is primarily rent and tenant expense reimbursements under leases. The Company owned 99.6% of its Operating Partnership.
Financial performance
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Total revenue | $149.2 million | $148.2 million |
| Property operating income | $104.6 million | $103.4 million |
| Operating income | $50.0 million | $50.7 million |
| Net income attributable to Cedar | $22.1 million | $29.0 million |
| Net income attributable to common shareholders | $7.7 million | $14.6 million |
| Basic and diluted EPS | $0.09 | $0.18 |
| FFO / Operating FFO | $45.1 million / $46.4 million | $40.3 million / $42.5 million |
| Cash from operating activities | $59.1 million | $50.9 million |
Revenue increased 0.7%; property operating income rose about 1.2%, while operating income declined about 1.5%. The property operating income margin was approximately 70.1% of revenue, versus 69.8% in 2014. Common-shareholder income and EPS declined despite higher FFO and Operating FFO. Operating FFO per diluted share was $0.54, unchanged from 2014; FFO per diluted share increased to $0.53 from $0.51.
Fourth-quarter 2015 revenue was $37.7 million, net income was $6.8 million, and net income attributable to common shareholders was $3.4 million, or $0.04 per share. The comparable 2014 quarter reported revenue of $36.7 million, net income of $4.3 million, and common-shareholder income of $0.7 million, or $0.01 per share.
Balance sheet, cash flow and capital
- Year-end total assets were $1.322 billion, total liabilities $724.0 million, and total equity $597.5 million. Net real estate was $1.249 billion.
- Total debt was $677.0 million, up from $665.4 million in 2014. It comprised $299.0 million of fixed-rate mortgages, $78.0 million drawn on the revolving facility, and $300.0 million of term loans. Weighted-average debt cost was 3.7%.
- Cash and cash equivalents were $2.1 million; restricted cash was $5.6 million and generally limited to specified property-level uses. The revolver had $182.0 million of additional borrowing availability. The Company reported compliance with its debt covenants.
- Debt maturities include $129.3 million in 2016 and $155.7 million in 2019, the latter including the $78.0 million revolver and $75.0 million term loan. A one-year extension option applies to the revolver. Management reported $1.1 million of outstanding construction commitments.
- Operating cash flow was $59.1 million; investing cash flow was a $47.9 million outflow and financing cash flow a $12.7 million outflow. Cash declined by $1.4 million during the year.
- Common dividends remained $0.20 per share for 2015, 2014 and 2013; preferred dividends were $1.812 per Series B share in each year. The Board declared the next quarterly common dividend of $0.05 per share in January 2016.
Material changes, outlook and risks
- 2015 acquisitions included East River Park in Washington, D.C. for $39.0 million, Lawndale Plaza for $25.2 million, and the remaining 60% interest in New London Mall for $27.3 million. The Company sold Kenley Village and Circle Plaza for a combined $4.1 million and sold Huntingdon Plaza for $2.2 million.
- Same-property NOI increased 1.9% to $81.6 million across 52 properties. Average base rent rose $0.35 per square foot to $13.24, partly offset by same-property occupancy falling 210 basis points to 91.4%.
- Management described a capital-migration strategy: sell properties and reinvest in higher-quality assets in target markets, redevelopment, or debt reduction. It cautioned that near-term returns on disposed assets may exceed returns on reinvested proceeds and that sales below carrying value could trigger impairment charges.
- No quantitative earnings or FFO guidance is provided in the supplied filing text. Management intended to continue regular quarterly dividends, subject to Board discretion, cash flow, financial condition, capital needs and REIT distribution requirements.
- Key risks include retail-sector weakness, tenant defaults or bankruptcies, online sales, vacancies and lease rollover, the geographic concentration of the portfolio, interest rates and refinancing, leverage and covenant limits, redevelopment execution, environmental exposure, and potential impairment. A 100-basis-point change in rates on $128 million of variable-rate debt would change annual interest cost by approximately $1.3 million.
- Unusual items affecting comparisons include 2014 property-sale gains and discontinued-operation gains; in 2015, lower interest expense and the absence of those 2014 gains influenced reported results. The Company recorded a $0.2 million impairment reversal in 2015 versus $3.1 million of impairment charges in 2014, as reported in selected financial data.
- The independent auditor issued unqualified opinions on the financial statements and internal controls; management also concluded controls were effective. The Company reported no litigation expected to have a material adverse effect and no known material environmental liabilities.
Important facts for investors to verify
- Review the 2016 and 2019 maturity schedule, refinancing plans, extension terms and covenant headroom; assess the low unrestricted cash balance alongside revolver availability.
- Track occupancy, lease renewals and leasing costs, particularly at under-occupied centers, and determine whether rent growth can offset the decline in same-property occupancy.
- Evaluate the sustainability of the $0.20 annual common dividend against cash flow, debt service, preferred dividends and planned capital spending.
- Assess the concentration of revenue and GLA in Ahold-affiliated grocers and the portfolio’s heavy Pennsylvania and corridor exposure.
- Reconcile GAAP earnings with FFO and Operating FFO, including recurring capital needs and the effects of acquisitions, dispositions, and noncash adjustments.