Cedar Realty Trust, Inc. — 2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014. This is an annual report, not a standalone fourth-quarter filing; selected unaudited Q4 data are noted below.
Business context
Cedar is a REIT focused primarily on grocery-anchored shopping centers along the Washington, D.C.–Boston corridor. At year-end, it owned and managed 59 operating properties totaling 9.247 million square feet; the portfolio was 93.3% leased and 92.9% occupied. Pennsylvania represented 52.9% of portfolio GLA.
Key financial metrics
| Metric | 2014 | 2013 |
|---|---|---|
| Total revenue | $148.2 million | $139.6 million |
| Operating income | $50.7 million | $39.4 million |
| Net income | $28.7 million | $14.2 million |
| Net income (loss) attributable to common shareholders | $14.6 million | $(1.1) million |
| Diluted earnings per common share | $0.18 | $(0.03) |
| Funds from Operations (FFO; non-GAAP) | $40.3 million | $44.9 million |
| Cash provided by operating activities | $50.9 million | $49.5 million |
| Debt outstanding | $665.4 million | $719.8 million |
| Cash and cash equivalents | $3.5 million | $4.0 million |
Revenue grew 6.2%; operating income was 34.2% of revenue. Same-property NOI, a non-GAAP measure, increased 1.8% to $75.0 million across 50 properties. Year-end same-property occupancy was 93.3%, down 0.5 percentage point, while average base rent rose to $12.87 per square foot from $12.71. Common dividends remained $0.20 per share for the year. Q4 2014 revenue was $36.7 million, net income $4.3 million, and net income attributable to common shareholders $0.7 million.
Changes, transactions and financing
- Revenue growth reflected acquisitions, same-property performance and redevelopment, partly offset by properties sold or classified as held for sale. Same-property NOI growth benefited from higher rent, partly offset by lower occupancy.
- Cedar acquired Quartermaster Plaza in Philadelphia for approximately $92.3 million, including assumed mortgage debt. It sold or conveyed properties for approximately $53.3 million in continuing operations and $74.8 million in discontinued operations during 2014.
- Operating income included $6.4 million of gains on sales; 2014 continuing-operations impairment charges were $3.1 million. Net income also included $11.1 million from discontinued operations, including sale and debt-extinguishment gains.
- FFO declined 10.2% year over year despite higher revenue. The filing cites lower FFO adjustments, including lower real estate depreciation and gains on sales, as relevant to the reconciliation; FFO is not cash flow or cash available for distributions.
- Debt fell by $54.4 million year over year. The company issued $150 million of unsecured term loans in 2014 and raised approximately $41.3 million net from a 6.9 million-share common-stock offering. At year-end, $187.7 million was available under the revolving facility.
- After year-end, Cedar raised approximately $41.9 million net from a January 2015 common-stock offering and, in February 2015, amended its credit facility and closed $100 million of additional unsecured term loans. The filing said these proceeds would refinance substantially all 2015 debt requirements.
Outlook, risks and contingencies
The filing provides no quantified earnings or operating guidance. Management intended to continue regular quarterly dividends, but future declarations remained subject to Board discretion, cash flow, financial condition and capital needs. Management stated that 2015 debt requirements included approximately $6.1 million of scheduled amortization and $104.4 million of balloon payments.
Key risks include retail-sector weakness, tenant defaults or vacancies, competition and online sales, geographic concentration, interest rates, refinancing and covenant compliance, redevelopment execution, severe weather and environmental exposure. Giant Food and Stop & Shop, under common Ahold ownership, together accounted for approximately 14% of 2014 revenue and 11% of year-end GLA. Variable-rate debt of $122.0 million at year-end would have an estimated $1.2 million annual interest-cost impact from a 100-basis-point rate change. The company reported compliance with debt covenants; management disclosed no known material environmental matters and no litigation expected to materially affect the financial statements. The auditor gave unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- How much of the improvement in reported earnings came from property operations versus dispositions, discontinued operations and other nonrecurring items.
- Whether leasing, occupancy and same-property NOI trends can stabilize or improve, particularly at properties with notable vacancies.
- Completion and cost of refinancing 2015 maturities, as well as liquidity and covenant headroom after the subsequent financing transactions.
- Impact of the January 2015 share issuance on per-share results and future dividend capacity.
- Tenant credit exposure, especially the combined Ahold-owned grocery tenants, and the portfolio’s Pennsylvania and corridor concentration.