Cedar Realty Trust, Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012; financial statements are unaudited. Cedar is a REIT focused on supermarket-anchored shopping centers, primarily between Washington, D.C. and Boston. At quarter-end, it owned and managed 67 operating properties and held a 20% interest in a 22-property Cedar/RioCan joint venture. The managed portfolio was 92.2% leased, including 90.6% for Cedar’s properties and 96.4% for the joint venture properties.
Key financial metrics
| Metric | Q1 2012 | Q1 2011 / prior date |
|---|---|---|
| Total revenue | $34.5 million | $34.5 million |
| Property operating income | $23.7 million; 68.8% of revenue | $21.9 million; 63.5% of revenue |
| Operating income | $4.4 million | $9.3 million |
| Net loss attributable to common shareholders | $9.3 million; $0.14 loss per share | $12.3 million; $0.18 loss per share |
| Funds from operations (FFO), non-GAAP | $5.3 million | $7.7 million |
| Cash provided by operating activities | $11.2 million | $4.2 million |
| Cash and cash equivalents | $10.8 million | $12.1 million at Dec. 31, 2011 |
| Total assets / total liabilities | $1.484 billion / $936.7 million | $1.512 billion / $951.8 million at Dec. 31, 2011 |
Q1 investing activities provided $8.7 million, mainly reflecting $9.2 million of property-sale proceeds. Financing activities used $21.2 million, including mortgage repayments, distributions and credit-facility repayments. Debt in the MD&A debt schedule totaled $751.3 million: $586.2 million of property-specific mortgages and $165.1 million drawn under credit facilities. The balance sheet separately reports $114.2 million of mortgage debt relating to properties held for sale/conveyance. The company reported $66.9 million of remaining availability under its new credit facility at quarter-end, subject to covenant measurements and collateral.
Changes versus the prior comparable period
- Revenue was essentially unchanged, as higher rents and other income were offset by lower tenant expense recoveries.
- Property operating expenses fell 14.4%, principally because snow-removal costs declined by $1.9 million; property operating income increased 8.1%.
- Operating income declined as depreciation and amortization rose by $7.0 million, partly reflecting accelerated depreciation following demolition of a building. Q1 2012 also included a $2.6 million accelerated write-off of deferred financing costs.
- Net loss attributable to common shareholders narrowed by $3.0 million, helped by a $1.1 million impairment reversal in discontinued operations versus $10.3 million of impairment charges in Q1 2011. FFO declined by $2.4 million.
- The company sold nine properties for aggregate stated proceeds of $13.6 million during the quarter. Since Jan. 1, 2011, it had sold or classified as held for sale/conveyance 54 properties, approximately 2.9 million square feet.
Outlook, management commentary and risks
- Management’s strategy is to exit Ohio, concentrate on grocery-anchored strip centers in the Mid-Atlantic and Northeast, reduce development activity, sell non-core assets and lower leverage. No specific earnings or FFO guidance is provided.
- On Jan. 26, 2012, Cedar replaced two facilities nearing expiry with a $300 million secured facility: a $75 million term loan and a $225 million revolving facility. Borrowings bore a weighted-average rate of 3.1% at quarter-end. The facility has leverage, interest-coverage, fixed-charge-coverage and net-worth covenants.
- For the remainder of 2012, scheduled debt principal amortization was approximately $6.8 million, with $29.6 million of scheduled balloon payments. The filing states total debt maturities extend through 2029; the maturity schedule also shows substantial 2013 obligations.
- Four properties were in the process of being conveyed to lenders; the applicable subsidiaries had stopped making payments and were in default on the non-recourse mortgages. Subsequent to quarter-end, Kingston Plaza sold for approximately $1.2 million on April 12, and Stadium Plaza sold for approximately $5.4 million on May 3.
- The 2012 common dividend target was reduced to $0.05 per share quarterly ($0.20 annualized), from $0.09 per quarter in the comparable period. The board declared a $0.05 common dividend after quarter-end; future dividends remain discretionary.
- A 1 percentage-point move in rates, applied to the $228.6 million of variable-rate debt identified in the market-risk disclosure, would change annual interest cost by approximately $2.3 million. Cedar also cites tenant payment performance, financing availability, covenant compliance and property-sale execution as relevant risks.
- Management said legal actions in the normal course were not expected to have a material adverse effect. Disclosure controls were assessed as effective, with no material change in internal controls reported for the quarter.
Important facts for investors to verify
- Reconcile debt and liquidity, including the $114.2 million of debt classified with held-for-sale/conveyance properties, facility availability and upcoming maturities.
- Track progress and outcomes of property sales and lender conveyances, including the four properties in default and the disclosed post-quarter sales.
- Assess whether occupancy, same-property rents and operating costs sustain property-level performance as the portfolio is reshaped.
- Evaluate the sustainability of FFO and the reduced dividend relative to cash flows, debt service and capital needs.
- Review covenant headroom, interest-rate exposure and refinancing access; the filing does not provide a clear numerical covenant cushion.