CEDAR REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | |
| | Years ended December 31, |
| | 2023 | | 2022 | | |
| REVENUES | | | | | |
| Rental revenues | $ | 33,987,000 | | | $ | 32,963,000 | | | |
| Other revenues | 645,000 | | | 1,334,000 | | | |
| Total revenues | 34,632,000 | | | 34,297,000 | | | |
| EXPENSES | | | | | |
| Operating, maintenance and management | 7,728,000 | | | 8,411,000 | | | |
| Real estate and other property-related taxes | 5,425,000 | | | 5,949,000 | | | |
| Corporate general and administrative | 3,192,000 | | | 10,099,000 | | | |
| Depreciation and amortization | 10,918,000 | | | 9,645,000 | | | |
| Total expenses | 27,263,000 | | | 34,104,000 | | | |
| | | | | | |
| OTHER | | | | | |
| Gain on sale | 2,662,000 | | | — | | | |
| Transaction costs | — | | | (58,959,000) | | | |
| Impairment charges | — | | | (9,350,000) | | | |
| Total other | 2,662,000 | | | (68,309,000) | | | |
| | | | | | |
| OPERATING INCOME (LOSS) | 10,031,000 | | | (68,116,000) | | | |
| | | | | | |
| NON-OPERATING INCOME AND EXPENSES | | | | | |
| Interest expense, net | (8,024,000) | | | (10,894,000) | | | |
| Total non-operating income and expenses | (8,024,000) | | | (10,894,000) | | | |
| | | | | | |
| NET INCOME (LOSS) FROM CONTINUING OPERATIONS | 2,007,000 | | | (79,010,000) | | | |
| | | | | | |
| DISCONTINUED OPERATIONS | | | | | |
| Income from discontinued operations | — | | | 14,302,000 | | | |
| Impairment charges | — | | | (16,629,000) | | | |
| Gain on sales | — | | | 125,500,000 | | | |
| Total income from discontinued operations | — | | | 123,173,000 | | | |
| | | | | | |
| NET INCOME | 2,007,000 | | | 44,163,000 | | | |
| | | | | | |
| Net income attributable to noncontrolling interests: | | | | | |
| | | | | |
| Limited partners' interest in Operating Partnership | — | | | (132,000) | | | |
| Total net income attributable to noncontrolling interests | — | | | (132,000) | | | |
| | | | | | |
| NET INCOME ATTRIBUTABLE TO CEDAR REALTY TRUST, INC. | 2,007,000 | | | 44,031,000 | | | |
| | | | | | |
| Preferred stock dividends | (10,752,000) | | | (10,752,000) | | | |
| | | | | | |
| NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (8,745,000) | | | $ | 33,279,000 | | | |
| | | | | | |
| NET (LOSS) INCOME PER COMMON SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS (BASIC AND DILUTED): | | | | | |
| Continuing operations | $ | (0.64) | | | $ | (6.64) | | | |
| Discontinued operations | — | | | 9.12 | | | |
| | $ | (0.64) | | | $ | 2.48 | | | |
| | | | | | |
| Weighted average number of common shares - basic and diluted | 13,718,000 | | 13,448,000 | | |
See accompanying notes to consolidated financial statements
CEDAR REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | | | | |
| Years ended December 31, |
| 2023 | | 2022 | | |
| | | | | |
| Net income | $ | 2,007,000 | | | $ | 44,163,000 | | | |
| | | | | |
| Unrealized gain on change in fair value of cash flow hedges | — | | | 8,321,000 | | | |
| | | | | |
| Comprehensive income | 2,007,000 | | | 52,484,000 | | | |
| | | | | |
| Comprehensive income attributable to noncontrolling interests | — | | | (195,000) | | | |
| | | | | |
| Comprehensive income attributable to Cedar Realty Trust, Inc. | $ | 2,007,000 | | | $ | 52,289,000 | | | |
See accompanying notes to consolidated financial statements
CEDAR REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
Years ended December 31, 2023 and 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Treasury
stock,
at cost | | Additional
paid-in
capital | | Cumulative
distributions
in excess of
net income | | Accumulated
other
comprehensive
(income) loss | | Total |
| | Preferred stock | | Common stock | | | | | |
| | Shares | | Amount | | Shares | | Amount | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Balance, December 31, 2021 | 6,450,000 | | $ | 159,541,000 | | | 13,658,000 | | $ | 820,000 | | | $ | (13,266,000) | | | $ | 881,009,000 | | | $ | (582,464,000) | | | $ | (8,258,000) | | | $ | 437,382,000 | |
| Net income | — | | — | | — | | — | | — | | — | | 44,031,000 | | — | | 44,031,000 |
| Unrealized gain on change in fair value of cash flow hedges | — | | — | | — | | — | | — | | — | | — | | 8,258,000 | | 8,258,000 |
| Share-based compensation, net | — | | — | | (103,000) | | (6,000) | | 13,266,000 | | (12,300,000) | | — | | — | | 960,000 |
| Purchase of OP Units | — | | — | | — | | — | | — | | — | | — | | — | | — |
| Preferred stock dividends | — | | — | | — | | — | | — | | — | | (10,752,000) | | — | | (10,752,000) |
| Acquisition of minority interests | — | | — | | — | | — | | — | | (1,000,000) | | — | | — | | (1,000,000) |
| Distributions to common shareholders/noncontrolling interests | — | | — | | — | | — | | — | | — | | (397,300,000) | | — | | (397,300,000) |
| Reallocation adjustment of limited partners' interest | — | | — | | — | | — | | — | | 622,000 | | — | | — | | 622,000 |
| Common stock sales, net of issuance expenses | — | | — | | — | | — | | — | | 1,000 | | — | | — | | 1,000 |
| Common stock issuance | — | | — | | 114,000 | | 7,000 | | — | | (7,000) | | — | | — | | — |
| Common stock repurchases | — | | — | | (13,669,000) | | (821,000) | | — | | 821,000 | | — | | — | | — |
| Common stock issued to Wheeler Real Estate Investment Trust, Inc. | — | | — | | 13,718,000 | | 823,000 | | — | | (823,000) | | — | | — | | — |
| Balance, December 31, 2022 | 6,450,000 | | 159,541,000 | | | 13,718,000 | | 823,000 | | | — | | | 868,323,000 | | | (946,485,000) | | | — | | | 82,202,000 | |
| Net income | — | | — | | — | | — | | — | | — | | 2,007,000 | | — | | 2,007,000 | |
| Preferred stock dividends | — | | — | | — | | — | | — | | — | | (10,752,000) | | — | | (10,752,000) | |
| Balance, December 31, 2023 | 6,450,000 | | $ | 159,541,000 | | | 13,718,000 | | $ | 823,000 | | | $ | — | | | $ | 868,323,000 | | | $ | (955,230,000) | | | $ | — | | | $ | 73,457,000 | |
CEDAR REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
Years ended December 31, 2023 and 2022
Continued
| | | | | | | | | | | | | | | | | | | | | | | |
| | Noncontrolling Interests | | |
| | Minority interests in consolidated joint ventures | | Limited partners' interest in Operating Partnership | | Total | | Total
equity |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Balance, December 31, 2021 | $ | — | | | $ | 2,586,000 | | | $ | 2,586,000 | | | $ | 439,968,000 | |
| Net income | — | | | 132,000 | | | 132,000 | | | 44,163,000 | |
| Unrealized gain on change in fair value of cash flow hedges | — | | | 63,000 | | | 63,000 | | | 8,321,000 | |
| Share-based compensation, net | — | | | — | | | — | | | 960,000 | |
| Purchase of OP Units | — | | | (726,000) | | | (726,000) | | | (726,000) | |
| Preferred stock dividends | — | | | — | | | — | | | (10,752,000) | |
| Acquisition of minority interests | — | | | — | | | — | | | (1,000,000) | |
| Distributions to common shareholders/noncontrolling interests | — | | | (1,433,000) | | | (1,433,000) | | | (398,733,000) | |
| Reallocation adjustment of limited partners' interest | — | | | (622,000) | | | (622,000) | | | — | |
| Common stock sales, net of issuance expenses | — | | | — | | | — | | | 1,000 | |
| Common stock issuance | — | | | — | | | — | | | — | |
| Common stock repurchases | — | | | — | | | — | | | — | |
| Common stock issued to Wheeler Real Estate Investment Trust, Inc. | — | | | — | | | — | | | — | |
| Balance, December 31, 2022 | — | | | — | | | — | | | 82,202,000 | |
| Net income | — | | | — | | | — | | | 2,007,000 | |
| Preferred stock dividends | — | | | — | | | — | | | (10,752,000) | |
| Balance, December 31, 2023 | $ | — | | | $ | — | | | $ | — | | | $ | 73,457,000 | |
See accompanying notes to consolidated financial statements
CEDAR REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | |
| | Years ended December 31, |
| | 2023 | | 2022 | | |
| OPERATING ACTIVITIES | | | | | |
| Net income | $ | 2,007,000 | | | $ | 44,163,000 | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Gain on sales | (2,662,000) | | | (125,500,000) | | | |
| Impairment charges | — | | | 25,979,000 | | | |
| Straight-line rents and expenses, net | (854,000) | | | (506,000) | | | |
| Credit adjustments on operating lease receivables | (711,000) | | | 968,000 | | | |
| Depreciation and amortization | 10,918,000 | | | 19,372,000 | | | |
| Above (below) market lease amortization, net | (336,000) | | | (1,080,000) | | | |
| Expense relating to share-based compensation, net | — | | | 1,608,000 | | | |
| Amortization of deferred financing costs | 386,000 | | | 6,105,000 | | | |
| Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | | | |
| Receivables, net | 1,343,000 | | | (15,575,000) | | | |
| Deferred costs and other assets, net | (2,243,000) | | | (5,654,000) | | | |
| Accounts payable, accrued expenses, and other liabilities | 400,000 | | | 29,656,000 | | | |
| Net cash provided by (used in) operating activities | 8,248,000 | | | (20,464,000) | | | |
| | | | | | |
| INVESTING ACTIVITIES | | | | | |
| Expenditures for real estate improvements | (6,456,000) | | | (22,407,000) | | | |
| Net proceeds from sales of real estate | 2,759,000 | | | 699,337,000 | | | |
| Contributions to unconsolidated joint venture | — | | | (155,000) | | | |
| Net cash (used in) provided by investing activities | (3,697,000) | | | 676,775,000 | | | |
| | | | | | |
| FINANCING ACTIVITIES | | | | | |
| Repayments under revolving credit facility | — | | | (70,000,000) | | | |
| Advances under revolving credit facility | — | | | 4,000,000 | | | |
| Repayment of term note | — | | | (300,000,000) | | | |
| Proceeds (termination payment) related to interest rate swap | — | | | 3,400,000 | | | |
| Mortgage proceeds | 9,060,000 | | | 265,000,000 | | | |
| Mortgage repayments | — | | | (130,664,000) | | | |
| Payments of deferred financing costs | (414,000) | | | (7,368,000) | | | |
| Noncontrolling interests: | | | | | |
| Distributions to limited partners | — | | | (966,000) | | | |
| Acquisition of joint venture minority interest share | — | | | (1,000,000) | | | |
| Redemption of OP units | — | | | (467,000) | | | |
| Preferred stock dividends | (10,752,000) | | | (10,752,000) | | | |
| Distributions to common shareholders | — | | | (397,300,000) | | | |
| Net cash used in financing activities | (2,106,000) | | | (646,117,000) | | | |
| | | | | | |
| Net increase in cash, cash equivalents and restricted cash | 2,445,000 | | | 10,194,000 | | | |
| Cash, cash equivalents and restricted cash at beginning of year | 13,463,000 | | | 3,269,000 | | | |
| Cash, cash equivalents and restricted cash at end of year | $ | 15,908,000 | | | $ | 13,463,000 | | | |
| | | | | | |
| Reconciliation to consolidated balance sheets: | | | | | |
| Cash and cash equivalents | $ | 6,518,000 | | | $ | 3,899,000 | | | |
| Restricted cash | 9,390,000 | | | 9,564,000 | | | |
| Cash, cash equivalents and restricted cash | $ | 15,908,000 | | | $ | 13,463,000 | | | |
See accompanying notes to consolidated financial statements
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
Note 1. Business and Organization
The Company is a REIT that focuses on owning and operating income producing retail properties with a primary focus on grocery-anchored shopping centers primarily in the Northeast. At December 31, 2023, the Company owned a portfolio of 19 properties. Seven of these properties are located in Pennsylvania, four in Massachusetts, three in Connecticut, three in New Jersey, one in Maryland and one in Virginia.
The Company, organized as a Maryland corporation, has established an umbrella partnership structure through the contribution of substantially all of its assets to the Operating Partnership, organized as a limited partnership under the laws of Delaware. The Operating Partnership is the entity through which the Company conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. At December 31, 2023, the Company, which is a subsidiary of WHLR, owned a 100.0% interest in, and was the sole general partner of, the Operating Partnership.
As used herein, the "Company" refers to Cedar Realty Trust, Inc. and its subsidiaries on a consolidated basis, including the Operating Partnership or, where the context so requires, Cedar Realty Trust, Inc. only.
Asset Sale and Merger
On March 2, 2022, the Company entered into definitive agreements for the sale of the Company and its assets in a series of related all-cash transactions. Specifically, the Company and certain of its subsidiaries entered into the Asset Purchase Agreement with the Grocery-Anchored Purchasers for the sale of a portfolio of 33 grocery-anchored shopping centers for cash. In addition, the Company entered into the Merger Agreement with WHLR and certain of its affiliates pursuant to which, following closing of the Grocery-Anchored Portfolio Sale, WHLR acquired the balance of the Company's shopping center assets by way of an all-cash merger transaction. The Transactions were unanimously approved by the Company's former Board of Directors and were approved by the Company's common stockholders at a special meeting of stockholders held on May 27, 2022.
On July 7, 2022, the Company and certain of its subsidiaries completed the Grocery-Anchored Portfolio Sale and the East River Park and Senator Square redevelopment asset sales for total gross proceeds of approximately $879 million, including the assumed debt. There were no material relationships among the Company, the Grocery-Anchored Purchasers, or any of their respective affiliates. On August 22, 2022, the Company completed the Merger. Each outstanding share of common stock of the Company and outstanding common unit of the Operating Partnership held by persons other than the Company immediately prior to the Merger were canceled and converted into the right to receive a cash payment of $9.48 per share or unit. As a result of the Merger, WHLR acquired all of the outstanding shares of the Company's common stock, which ceased to be publicly traded on the NYSE. The Company's outstanding 7.25% Series B Preferred Stock and 6.50% Series C Preferred Stock remain outstanding and continue to trade on the NYSE. In addition, prior to consummation of the Merger, the Company's Board of Directors declared a special dividend on shares of the Company's outstanding common stock and OP Units of $19.52 per share, payable to holders of record of the Company's common stock and OP Units at the close of business on August 19, 2022.
In connection with the Transactions, the Company incurred transaction costs of $59.0 million for the year ended December 31, 2022, included in the accompanying consolidated statement of operations, of which $33.5 million relates to employee severance payments.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation/Basis of Preparation
The consolidated financial statements include the accounts and operations of the Company, the Operating Partnership, its subsidiaries, and certain joint venture partnerships in which it participates. The Company consolidates all variable interest entities ("VIEs") for which it is the primary beneficiary. Generally, a VIE is an entity with one or more of the following characteristics: (1) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (2) as a group, the holders of the equity investment at risk (a) lack the power through voting or similar rights to make decisions about the entity's activities that significantly impact the entity's performance, (b) have no obligation to absorb the expected losses of the entity, or (c) have no right to receive the expected residual returns of the entity, or (3) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity's activities either involve, or are conducted on behalf of, an investor that has disproportionately fewer voting rights. A VIE is required to be consolidated by its primary
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
beneficiary. The primary beneficiary of a VIE has (1) the power to direct the activities that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Significant judgments related to these determinations include estimates about the current values, performance of real estate held by these VIEs, and general market conditions.
Limited partnerships and other similar entities are considered variable interest entities unless the limited partners hold substantive kick-out rights or participating rights. Crossroads II, 60%-owned joint venture was consolidated as it was deemed to be a VIE and the Company was the primary beneficiary. The Company (1) guaranteed all related debt, (2) did not require its partners to fund additional capital requirements, (3) had an economic interest greater than its voting proportion and (4) directed the management activities that significantly impacted the performance of the joint venture. See Note 3, Real Estate, for additional details.
The accompanying financial statements are prepared on the accrual basis in accordance with GAAP, which requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements. Actual results could differ from these estimates.
Real Estate Investments
Real estate investments are carried at cost less accumulated depreciation. The provision for depreciation is calculated using the straight-line method based upon the estimated useful lives of the respective assets of between 3 and 40 years, with buildings being depreciated at the upper end of the range. Depreciation expense, net of discontinued operations, amounted to $10.0 million and $8.5 million for 2023 and 2022, respectively. Expenditures for betterments that substantially extend the useful lives of the assets are capitalized. Expenditures for maintenance, repairs, and betterments that do not substantially prolong the normal useful life of an asset are charged to operations as incurred.
Real estate investments include costs of development and redevelopment activities, and construction in progress. Capitalized costs, including interest and other carrying costs during the construction and/or renovation periods, are included in the cost of the related asset and charged to operations through depreciation over the asset's estimated useful life. A variety of costs are incurred in the development and leasing of a property, such as pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs, and other costs incurred during the period of development. After a determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. The Company ceases capitalization on the portions substantially completed and occupied, or held available for occupancy, and capitalizes only those costs associated with the portions under development. The Company considers a construction project to be substantially completed and held available for occupancy upon the completion of tenant improvements, but not later than one year from cessation of major construction activity.
The Company allocates the fair value of real estate acquired to land, buildings and improvements. In addition, the fair value of in-place leases is allocated to intangible lease assets and liabilities. The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, which value is then allocated to land, buildings and improvements based on management's determination of the fair values of these assets. In valuing an acquired property's intangibles, factors considered by management include an estimate of carrying costs during the expected lease-up periods, such as real estate taxes, insurance, other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on its evaluation of current market demand. Management also estimates costs to execute similar leases, including leasing commissions, tenant improvements, legal and other related costs.
The values of acquired above market and below market leases are recorded based on the present values (using discount rates which reflect the risks associated with the leases acquired) of the differences between the contractual amounts to be received and management's estimate of market lease rates, measured over the terms of the respective leases that management deemed appropriate at the time of the acquisitions. Such valuations include consideration of the non-cancelable terms of the respective leases as well as any applicable renewal periods. The fair values associated with below market rental renewal options are determined based on the Company's experience and the relevant facts and circumstances that existed at the time of the acquisitions. The values of above market leases are amortized to rental income over the terms of the respective non-cancelable lease periods. The portion of the values of below market leases associated with the original non-cancelable lease terms are amortized to rental income over the terms of the respective non-cancelable lease periods. The portion of the values of the leases associated with below market renewal options that are likely of exercise are amortized to rental income over the respective renewal periods. The value of other intangible assets (including leasing commissions, tenant improvements, etc.) is amortized to expense over the applicable terms of the respective leases. If a lease were to
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
be terminated prior to its stated expiration or not renewed, all unamortized amounts relating to that lease would be recognized in operations at that time.
Management reviews each real estate investment for impairment whenever events or circumstances indicate that the carrying value of a real estate investment may not be recoverable. The review of recoverability of real estate investments held for use is based on an estimate of the future cash flows that are expected to result from the real estate investment's use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, capital expenditures, competition and other factors. If an impairment event exists due to the projected inability to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the carrying value exceeds estimated fair value.
Properties Held for Sale
The Company may decide to sell properties that are held for use. The Company records these properties as held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year.
The carrying values of the assets and liabilities of properties determined to be held for sale, principally the net book values of the real estate and the related mortgage loans payable expected to be assumed by the buyers, are reclassified as "held for sale" on the Company's consolidated balance sheets at the time such determinations are made, on a prospective basis only.
The Company, when applicable, conducts a continuing review of the values for all properties "held for sale" based on estimated sales prices and sales contracts entered into. Impairment charges/reversals, if applicable, are based on a comparison of the carrying values of the properties with either (1) actual sales prices less costs to sell for properties sold, or contract amounts less costs to sell for properties in the process of being sold, (2) estimated sales prices, less costs to sell, based on discounted cash flow analyses, if no contract amounts are being negotiated (see Note 4, Fair Value Measurements), or (3) with respect to land parcels, estimated sales prices, less costs to sell, based on comparable sales completed in the selected market areas. Prior to the Company's determination to dispose of properties, which are subsequently reclassified to "held for sale", the Company performs recoverability analyses based on the estimated undiscounted cash flows that are expected to result from the real estate investments' use and eventual disposal. The projected undiscounted cash flows of each property reflects that the carrying value of each real estate investment would be recovered. Properties meeting the "held for sale" criteria, are written down to the lower of their carrying value and estimated fair values less costs to sell.
The Company follows the guidance for reporting discontinued operations, whereby a disposal of an individual property or group of properties is required to be reported in "discontinued operations" only if the disposal represents a strategic shift that has, or will have, a major effect on the Company's operations and financial results. The results of operations for those properties not meeting such criteria are reported in "continuing operations" in the consolidated statements of operations.
Cash and Cash Equivalents / Restricted Cash
Cash and cash equivalents consist of cash in banks and short-term investments with original maturities when purchased of less than ninety days.
The terms of the secured term loans may require the Company to deposit certain replacement and other reserves with its lenders. Such "restricted cash" is generally available only for property-level requirements for which the reserves have been established. Restricted cash represents amounts held by lenders for real estate taxes, insurance, reserves for capital improvements, leasing costs and tenant security deposits.
Fair Value Measurements
The accounting guidance for fair value measurement establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:
•Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
•Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible while also considering counterparty credit risk in the assessment of fair value.
Revenue Recognition and Receivables
The Company's underlying assets relating to rental revenue activity is solely retail space. The Company retains substantially all of the risks and benefits of ownership of these underlying assets and accounts for these leases as operating leases. The Company combines lease and nonlease components in lease contracts, which includes combining base rent and tenant reimbursement revenue.
Rental income with scheduled rent increases is recognized using the straight-line method over the respective non-cancelable terms of the leases. The aggregate excess of rental revenue recognized on a straight-line basis over the contractual base rents is included in receivables on the consolidated balance sheet. Leases also generally contain provisions under which the tenants reimburse the Company for a portion of property operating expenses and real estate taxes incurred, generally attributable to their respective allocable portions of gross leasable area. Such income is recognized in the periods earned. In addition, a limited number of operating leases contain contingent rent provisions under which tenants are required to pay, as additional rent, a percentage of their sales in excess of a specified amount.
The Company's leases generally require the tenant to reimburse the Company for a substantial portion of its expenses incurred in operating, maintaining, repairing, insuring and managing the shopping center and common areas (collectively defined as Common Area Maintenance or "CAM" expenses). This significantly reduces the Company's exposure to increases in costs and operating expenses resulting from inflation or other outside factors. These reimbursements are considered nonlease components which the Company combines with the lease component. The Company calculates the tenant's share of operating costs by multiplying the total amount of the operating costs by the tenant's pro-rata percentage of square footage to total square footage of the property. The Company also receives monthly payments for these reimbursements from substantially all its tenants throughout the year. The Company recognizes tenant reimbursements as variable lease income.
The Company defers recognition of contingent rental income until those specified sales targets are met. Revenues also include items such as lease termination fees, which tend to fluctuate more than rents from year to year. Termination fees are fees that the Company has agreed to accept in consideration for permitting certain tenants to terminate their lease prior to the contractual expiration. The Company recognizes lease termination fees, which are included in revenues on the consolidated statements of operations, in the year that the lease is terminated and collection of the fee is reasonably assured. Upon early lease termination, the Company records losses related to unrecovered intangibles and other assets.
The Company determines an allowance for the uncollectible portion of accrued rents and accounts receivable based upon customer credit-worthiness (including expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. All amounts that were historically recorded as bad debt expense, and previously included in operating expenses in the Company's consolidated statement of operations, are now recorded as a reduction of rental revenues.
Segment Information
The Company's primary business is the ownership and operation of grocery-anchored shopping centers. The Company reviews operating and financial information for each property on an individual basis and, accordingly, each property represents an individual operating segment. The Company evaluates financial performance using property operating income, which consists of rental income and other property income, less operating expenses and real estate taxes. The Company has no operations outside of the United States of America. Therefore, the Company has aggregated its properties into one reportable segment as the properties share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business strategies, are typically located in similar markets, and have similar tenant mixes.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
Lease Commitments
The Company determines if an arrangement is a lease at inception. Operating leases, in which the Company is the lessee, are included in deferred costs and other assets, net, and accounts payable, accrued expenses, and other liabilities on the Company's consolidated balance sheets.
Right-of-use ("ROU") assets represent the right to use an underlying asset for the lease term and the lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU assets include any lease payments made and excludes lease incentives. The Company's lease terms may include options to extend the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company combines lease and associated nonlease components. The lease components are the majority of its leasing arrangements and the Company accounts for the combined component as an operating lease. In the event the Company modifies existing ground leases or enters into new ground leases, such leases may be classified as finance leases.
Transaction Costs
All costs associated with the Grocery-Anchored Portfolio Sale and the Merger, were expensed as incurred.
Income Taxes
The Company, organized in 1984, has elected to be taxed as a real estate investment trust ("REIT") under the Code. A REIT will generally not be subject to federal income taxation on that portion of its income that qualifies as REIT taxable income, to the extent that it distributes at least 90% of such REIT taxable income to its stockholders and complies with certain other requirements. As of December 31, 2023, the Company was in compliance with all REIT requirements.
The Company follows a two-step approach for evaluating uncertain federal, state and local tax positions. Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that more-likely-than-not will be realized upon settlement. Derecognition of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. The Company has not identified any uncertain tax positions which would require an accrual.
Derivative Financial Instruments
Prior to the Merger, the Company occasionally utilized derivative financial instruments, principally interest rate swaps, to manage its exposure to fluctuations in interest rates. The Company had established policies and procedures for risk assessment, and the approval, reporting and monitoring of derivative financial instruments. Derivative financial instruments had to be effective in reducing the Company's interest rate risk exposure in order to qualify for hedge accounting. When the terms of an underlying transaction were modified, or when the underlying hedged item ceased to exist, all changes in the fair value of the instrument were marked-to-market with changes in value included in net income for each period until the derivative financial instrument matured or was settled. Any derivative financial instrument used for risk management that did not meet the hedging criteria was marked-to-market with the changes in value included in net income.
Share-Based Compensation
During 2017, the Company's shareholders approved the 2017 Stock Incentive Plan (the "2017 Plan"), which replaced the Company's 2012 Stock Incentive Plan (the "2012 Plan"). As of the effective date of the 2017 Plan, the Company may not grant any further awards under the 2012 Plan. The 2017 Plan establishes the procedures for the granting of, among other things, restricted stock awards. On May 1, 2019, the Company's shareholders approved an amendment to the 2017 Plan, which increased the maximum number of shares of the Company's common stock that may be issued pursuant to the 2017 Plan by 303,000 shares, to a new total of 909,000 shares (see Note 14, Share-Based Compensation), and the maximum number of shares that may be granted to a participant in any calendar year may not exceed 76,000. All grants issued pursuant to the 2017 Plan generally vest (1) at the end of designated time
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
periods for time-based grants, or (2) upon the completion of a designated period of performance for performance-based grants and satisfaction of performance criteria. Time–based grants are valued according to the market price for the Company's common stock at the date of grant. For performance-based grants, the Company generally engages an independent appraisal company to determine the value of the shares at the date of grant, taking into account the underlying contingency risks associated with the performance criteria. The value of all grants are being expensed on a straight-line basis over their respective vesting periods (irrespective of achievement of the market performance-based grants) adjusted, as applicable, for forfeitures. For restricted share grants subject to graded vesting, the amounts expensed are at least equal to the measured expense of each vested tranche. Based on the terms of the 2017 Plan, those grants of restricted shares that are contributed to the Rabbi Trusts are classified as treasury stock on the Company's consolidated balance sheet. The 2017 Plan was terminated in connection with the Merger.
Supplemental Consolidated Statements of Cash Flows Information
| | | | | | | | | | | | | |
| Years ended December 31, |
| 2023 | | 2022 | | |
| Supplemental disclosure of cash activities: | | | | | |
| Cash paid for interest | $ | 7,495,000 | | | $ | 14,344,000 | | | |
| Supplemental disclosure of non-cash activities: | | | | | |
| Capitalization of interest and financing costs | — | | | 1,035,000 | | | |
| Buildings and improvements included in accounts payable, accrued expenses, and other liabilities | 136,000 | | | 1,463,000 | | | |
| Payoff of mortgages through mortgage assumptions | — | | | 157,925,000 | | | |
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued guidance which requires disclosure of incremental segment information on both an annual and interim basis. The guidance will require that the Company continue to disclose existing segment information required by FASB Accounting Standards Codification Topic 280, as well as significant segment expenses and other segment items that are regularly provided to the chief operating decision maker ("CODM"). The Company will also be required to disclose the title and position of the CODM and how the CODM uses reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. The guidance will be effective for the Company's fiscal year beginning on January 1, 2024 and interim periods within the Company's fiscal year beginning on January 1, 2025. The Company is currently in the process of evaluating the guidance, but does not believe it will have a material effect on the Company's consolidated financial statements.
Other accounting standards that have been recently issued or proposed by the FASB or other standard-setting bodies are not currently applicable to the Company or are not expected to have a significant impact on the Company’s financial position, results of operations and cash flows.
Note 3. Real Estate
Investment in unconsolidated joint venture
On May 5, 2021, the Company formed a joint venture with Goldman Sachs Urban Investment Group and Asland Capital Partners (the "Joint Venture") for the construction of an approximately 258,000 square foot six-story commercial building in Washington, D.C. consisting of approximately 240,000 square feet of office space which is 100% leased to the Washington, D.C., Department of General Services for its headquarters and approximately 18,000 square feet of street-level retail. On August 5, 2022, the Joint Venture was sold in connection with the Grocery-Anchored Portfolio Sale. The Company contributed approximately $4.8 million of capital to the Joint Venture through its tenure.
2022 Acquisition
On June 28, 2022, the Company acquired a 40% minority ownership percentage in the Crossroads II joint venture for $1.0 million. The Company's ownership interest in Crossroads II was included in the Grocery-Anchored Portfolio Sale that occurred on July 7, 2022.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
Dispositions
Excluding the Grocery-Anchored Portfolio Sale, during 2023 and 2022, the Company sold the properties listed below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | Location | | Date
Sold | | Sales
Price | | Gain on Sale/
Impairment |
| 2023 | | | | | | | | |
| Carll's Corner outparcel building | | Bridgeton, NJ | | 7/11/2023 | | $ | 3,000,000 | | | $ | 2,662,000 | |
| | | | | | | | | |
| 2022 | | | | | | | | |
| Riverview Plaza | | Philadelphia, PA | | 5/16/2022 | | $ | 34,000,000 | | | $ | (361,000) | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Impairments
Impairments of $9.4 million for the year ended December 31, 2022 also include those related to the Company's then-investment in the unconsolidated joint venture and the then-note receivable associated with Senator Square. These impairments are included in operating loss in the accompanying consolidated statement of operations.
Discontinued Operations
On July 7, 2022, the Company and certain of its subsidiaries completed the Grocery-Anchored Portfolio Sale and the East River Park and Senator Square redevelopment asset sales for total gross proceeds of approximately $879 million, including the assumed debt. The assets sold in these transactions were:
| | | | | | | | | | | | | | | | | | | | |
| Property Name | | Location | | Property Name | | Location |
| Academy Plaza | | Philadelphia, PA | | New London Mall | | New London, CT |
| Bethel Shopping Center | | Bethel, CT | | Newport Plaza | | Newport, PA |
| Carmans Plaza | | Massapequa, NY | | Northside Commons | | Campbelltown, PA |
| Christina Crossing | | Wilmington, DE | | Norwood Shopping Center | | Norwood, MA |
| Colonial Commons | | Harrisburg, PA | | Oak Ridge Shopping Center | | Suffolk, VA |
| Crossroads II | | Bartonsville, PA | | Oakland Mills | | Columbia, MD |
| East River Park | | Washington, DC | | Palmyra Shopping Center | | Palmyra, PA |
| Elmhurst Square | | Portsmouth, VA | | Quartermaster Plaza | | Philadelphia, PA |
| Fishtown Crossing | | Philadelphia, PA | | Senator Square | | Washington, DC |
| Franklin Village Plaza | | Franklin, MA | | Shoppes at Arts District | | Hyattsville, MD |
| General Booth Plaza | | Virginia Beach, VA | | Swede Square | | E. Norriton Township, PA |
| Girard Plaza | | Philadelphia, PA | | The Point | | Harrisburg, PA |
| Groton Shopping Center | | Groton, CT | | The Shops as Bloomfield Station | | Bloomfield, NJ |
| Halifax Plaza | | Halifax, PA | | The Shops at Suffolk Downs | | Revere, MA |
| Jordan Lane | | Wethersfield, PA | | Trexlertown Plaza | | Trexlertown, PA |
| Kempsville Crossing | | Virginia Beach, VA | | Valley Plaza | | Hagerstown, MD |
| Lawndale Plaza | | Philadelphia, PA | | Yorktowne Plaza | | Cockeysville, MD |
| Meadows Marketplace | | Hummelstown, PA | | | | |
The Grocery-Anchored Portfolio Sale represented a strategic shift and had a material effect on the Company's operations and financial results, and, therefore, the Company determined that it was deemed a discontinued operation. Accordingly, the portfolio of 33 grocery-anchored shopping centers were classified as held for sale and the results of their operations were classified as discontinued operations in 2022.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
The following is a summary of income from discontinued operations:
| | | | | | | | | | | | | |
| Years ended December 31, |
| 2023 | | 2022 | | |
| REVENUES | | | | | |
| Rental revenues | $ | — | | | $ | 44,130,000 | | | |
| Other revenues | — | | | 184,000 | | | |
| Total revenues | — | | | 44,314,000 | | | |
| EXPENSES | | | | | |
| Operating, maintenance and management | — | | | 9,557,000 | | | |
| Real estate and other property-related taxes | — | | | 6,749,000 | | | |
| Corporate general and administrative | — | | | 469,000 | | | |
| Depreciation and amortization | — | | | 9,726,000 | | | |
| Total expenses | — | | | 26,501,000 | | | |
| | | | | | |
| | | | | | |
| OPERATING INCOME | — | | | 17,813,000 | | | |
| | | | | | |
| NON-OPERATING INCOME AND EXPENSES | | | | | |
| Interest expense, net | — | | | (3,511,000) | | | |
| Total non-operating income and expenses | — | | | (3,511,000) | | | |
| | | | | | |
| INCOME FROM DISCONTINUED OPERATIONS | — | | | 14,302,000 | | | |
| | | | | | |
| Impairment charges | — | | | (16,629,000) | | | |
| Gain on sales | — | | | 125,500,000 | | | |
| | | | | | |
| TOTAL INCOME FROM DISCONTINUED OPERATIONS | $ | — | | | $ | 123,173,000 | | | |
Net cash provided by operating activities from discontinued operations was $0.0 million and $25.9 million for the years ended December 31, 2023 and 2022, respectively. Net cash provided by investing activities from discontinued operations was $0.0 million and $651.5 million for the years ended December 31, 2023 and 2022, respectively.
Note 4. Fair Value Measurements
The carrying amounts of cash and cash equivalents, restricted cash, rents and other receivables, certain other assets, accounts payable, accrued expenses and other liabilities, and variable-rate debt approximate their fair value due to their terms and/or short-term nature. The fair value of the Company's investments and liabilities related to deferred compensation were determined to be Level 1 within the valuation hierarchy, and were based on independent values provided by financial institutions.
The fair value of the Company's fixed rate secured term loans were estimated using available market information and discounted cash flow analyses based on borrowing rates the Company believes it could obtain with similar terms and maturities. As of December 31, 2023 and 2022, the fair value of the Company's fixed rate secured term loans, which were determined to be Level 3 within the valuation hierarchy, was $131.4 million and $131.8 million, respectively, and the carrying value of such loans, was $140.5 million and $131.5 million, respectively.
Nonfinancial assets and liabilities measured at fair value in the consolidated financial statements consist of real estate held for sale, which, if applicable, are measured on a nonrecurring basis, and have been determined to be (1) Level 2 within the valuation hierarchy, where applicable, based on the respective contracts of sale, adjusted for closing costs and expenses, or (2) Level 3 within the valuation hierarchy, where applicable, based on estimated sales prices, adjusted for closing costs and expenses, determined by
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
discounted cash flow analyses, income capitalization analyses or a sales comparison approach if no contracts had been concluded. The discounted cash flow and income capitalization analyses include all estimated cash inflows and outflows over a specific holding period and, where applicable, any estimated debt premiums. These cash flows were composed of unobservable inputs which included forecasted rental revenues and expenses based upon existing in-place leases, market conditions and expectations for growth. Capitalization rates and discount rates utilized in these analyses were based upon observable rates that the Company believed to be within a reasonable range of current market rates for the respective properties. The sales comparison approach is utilized for certain land values and includes comparable sales that were completed in the selected market areas. The comparable sales utilized in these analyses were based upon observable per acre rates that the Company believes to be within a reasonable range of current market rates for the respective properties.
As a result of the Grocery-Anchored Portfolio Sale, the Company has no interest rate swap and deferred compensation assets or liabilities as of December 31, 2023 and 2022.
For the year ended December 31, 2022, the Company recorded impairments of $9.4 million related to Riverview Plaza, located in Philadelphia, Pennsylvania, which was sold that same year, and the Company's then-investment in the unconsolidated joint venture and the then-note receivable associated with Senator Square located in Washington D.C., both of which assets were sold in the Grocery-Anchored Portfolio Sale. These charges are included in impairment charges in the consolidated statement of operations. The fair value of the assets was determined to be Level 2. Such assets have an aggregate fair value of $0.0 million as of December 31, 2022.
Note 5. Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents in excess of insured amounts and tenant receivables. The Company places its cash and cash equivalents with high quality financial institutions. Management performs ongoing credit evaluations of its tenants and requires certain tenants to provide security deposits and/or suitable guarantees.
Excluding properties included in discontinued operations, there were no tenants that accounted for an aggregate of more than 10% of the Company's total revenues during 2023 and 2022.
For the year ended December 31, 2023, one property constitutes approximately 14.6% of the Company's revenues and five properties constitute approximately 90.4% of the Company's property operating income in the aggregate.
The Company's properties are located largely in the Northeast, which exposes it to greater economic risks than if the properties it owned were located in a greater number of geographic regions (in particular, 7 of the Company's properties are located in Pennsylvania).
Note 6. Receivables, net
Receivables, net at December 31, 2023 and 2022 are composed of the following:
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Rents and other receivables, net | $ | 1,894,000 | | | $ | 2,904,000 | |
| Straight-line rents, net | 4,463,000 | | | 3,231,000 | |
| $ | 6,357,000 | | | $ | 6,135,000 | |
As of December 31, 2023 and 2022, the Company's allowance for uncollectible receivables totaled $0.5 million and $2.6 million, respectively.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
Note 7. Deferred Costs and Other Assets, net
Deferred costs and other assets, net, at December 31, 2023 and 2022 are composed of the following:
| | | | | | | | | | | |
| | December 31, |
| | 2023 | | 2022 |
| Lease origination costs | $ | 5,501,000 | | | $ | 4,747,000 | |
| Right-of-use assets | 2,059,000 | | | 2,062,000 | |
| Prepaid expenses | 1,504,000 | | | 1,029,000 | |
| | | |
| | | |
| Other | 77,000 | | | 86,000 | |
| Total other assets and deferred charges, net | $ | 9,141,000 | | | $ | 7,924,000 | |
Deferred costs are amortized over the terms of the related agreements. Amortization expense related to deferred costs, net of discontinued operations, amounted to $1.0 million and $1.1 million for 2023 and 2022, respectively. The unamortized balances of deferred lease origination costs is net of accumulated amortization of $10.7 million and $10.6 million at December 31, 2023 and 2022, respectively. Deferred lease origination costs will be charged to future operations as follows:
| | | | | |
| | Lease
origination
costs |
| 2024 | $ | 874,000 | |
| 2025 | 806,000 | |
| 2026 | 747,000 | |
| 2027 | 700,000 | |
| 2028 | 568,000 | |
| Thereafter | 1,806,000 | |
| | $ | 5,501,000 | |
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
Note 8. Loans Payable, net
Debt is composed of the following at December 31, 2023 and 2022 and collateralized by 13 properties at December 31, 2023 and 12 properties at December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | December 31, 2023 | | December 31, 2022 |
| Description | | Maturity
dates | | Balance outstanding | | Contractual
interest rates
weighted-average | | Balance outstanding | | Contractual
interest rates
weighted-average |
| Fixed-rate secured term loans: | | | | | | | | | | |
| Timpany Plaza | | Sep 2028 | | $ | 9,060,000 | | | 7.3% | | $ | — | | | n/a |
Term loan, 10 properties | | Nov 2032 | | 110,000,000 | | | 5.3% | | 110,000,000 | | | 5.3% |
| Patuxent Crossing/Coliseum Marketplace | | Jan 2033 | | 25,000,000 | | | 6.4% | | 25,000,000 | | | 6.4% |
| | | | 144,060,000 | | | 5.6% | | 135,000,000 | | | 5.5% |
| Unamortized issuance costs | | | | (3,566,000) | | | | | (3,538,000) | | | |
| | | | | $ | 140,494,000 | | | | | $ | 131,462,000 | | | |
On July 11, 2022, in connection with the Grocery-Anchored Portfolio Sale, the Company's then-existing unsecured credit facility and term loans were paid off and terminated, and the then-existing mortgage loans payable were assumed by the Grocery-Anchored Purchasers.
KeyBank Credit Agreement
On August 22, 2022, the Company entered into the KeyBank Credit Agreement for $130.0 million and was collateralized by all of the Company's remaining 19 properties following the Transactions. As of December 31, 2022, the KeyBank Credit Agreement was repaid with the proceeds from the Term Loan Agreement, 10 properties and Patuxent Crossing/Coliseum Marketplace Loan Agreement.
Term Loan Agreement, 10 properties
On October 28, 2022, the Company entered into the Term Loan Agreement, 10 properties for $110.0 million at a fixed rate of 5.25% with interest-only payments due monthly. Wheeler REIT, L.P. provided a limited recourse indemnity in connection with such loan. Commencing on December 10, 2027, until the maturity date of November 10, 2032, monthly principal and interest payments will be made based on a 30-year amortization schedule calculated based on the principal amount as of that time. The Term Loan Agreement, 10 properties is collateralized by 10 properties, consisting of Brickyard Plaza, Fairview Commons, Gold Star Plaza, Golden Triangle, Hamburg Square, Pine Grove Plaza, Southington Center, Trexler Mall, Washington Center and Webster Commons, and proceeds were used to paydown the Company's KeyBank Credit Agreement.
Patuxent Crossing/Coliseum Marketplace Loan Agreement
On December 21, 2022, the Company entered into the Patuxent Crossing/Coliseum Marketplace Loan Agreement for $25.0 million at a fixed rate of 6.35% with interest-only payments due monthly through maturity on January 6, 2033. The Patuxent Crossing/Coliseum Marketplace Loan Agreement is collateralized by 2 properties, consisting of Patuxent Crossing and Coliseum Marketplace, and proceeds were used to satisfy the remaining obligation of the KeyBank Credit Agreement and released the remaining collateral under that agreement.
Timpany Plaza Loan Agreement
On September 12, 2023, the Company entered into the Timpany Plaza Loan Agreement for $11.56 million at a fixed rate of 7.27% with interest-only payments due monthly for the first twelve months. Commencing on September 12, 2024, until the maturity date of September 12, 2028, monthly principal and interest payments will be made based on a 30-year amortization schedule calculated based on the principal amount as of that time. On the closing date, the Company received $9.06 million of the $11.56 million, and the remaining $2.5 million will be received upon the satisfaction of certain lease-related contingencies within one year of the agreement date. The Timpany Plaza Loan Agreement is collateralized by the Timpany Plaza shopping center.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
Scheduled Principal Payments
Scheduled principal payments on secured term loans at December 31, 2023, due on various dates from 2024 to 2033, are as follows:
| | | | | |
| 2024 | $ | 74,000 | |
| 2025 | 306,000 | |
| 2026 | 329,000 | |
| 2027 | 481,000 | |
| 2028 | 9,456,000 | |
| Thereafter | 133,414,000 | |
| | $ | 144,060,000 | |
Derivative Financial Instruments
The Company terminated its outstanding interest rate swaps as part of the Grocery-Anchored Portfolio Sale for a $3.4 million benefit, which is included in interest expense, net on the consolidated statement of operations for the year ended December 31, 2022. Charges and/or credits relating to the changes in the fair value of the interest rate swaps were made to accumulated other comprehensive loss, limited partners' interest, or operations (included in interest expense), as applicable. Over time, the unrealized gains and losses recorded in accumulated other comprehensive loss were reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affected earnings.
The following presents the effect of the Company's derivative financial instruments on the consolidated statements of operations and the consolidated statements of equity for the years ended 2023 and 2022, respectively:
| | | | | | | | | | | | | | | | | | | | |
| | | | Gain recognized in other
comprehensive income (loss)
(effective portion) |
Designation/
Cash flow | | Derivative | | Years ended December 31, |
| | 2023 | | 2022 |
| Qualifying | | Interest rate swaps | | $ | — | | | $ | 6,001,000 | |
| | | | | | | |
| | | | (Loss) recognized in other
comprehensive income (loss)
reclassified into earnings (effective portion) |
| | | | | Years ended December 31, |
| | | Classification | | 2023 | | 2022 |
| | | Continuing Operations | | $ | — | | | $ | (2,320,000) | |
Note 9. Intangible Lease Asset/Liability
Unamortized intangible lease liabilities that relate to below market leases amounted to $2.7 million and $3.1 million at December 31, 2023 and December 31, 2022, respectively. Unamortized intangible lease assets that relate to above market leases amounted to $0.0 million and $0.1 million at December 31, 2023 and December 31, 2022, respectively.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
The unamortized balance of intangible lease liabilities at December 31, 2023 is net of accumulated amortization of $43.3 million, and will be credited to future operations as follows:
| | | | | |
| 2024 | $ | 257,000 | |
| 2025 | 243,000 | |
| 2026 | 243,000 | |
| 2027 | 243,000 | |
| 2028 | 243,000 | |
| Thereafter | 1,426,000 | |
| | $ | 2,655,000 | |
Note 10. Commitments and Contingencies
The Company is the lessee under several ground lease agreements and its executive office lease agreement. The executive office lease agreement was terminated during the third quarter of 2022. As of December 31, 2023, the Company's weighted average remaining lease term is approximately 47.8 years and the weighted average discount rate used to calculate the Company's lease liability is approximately 8.6%. Rent expense under the Company's ground lease and executive office lease agreements was approximately $0.2 million and $0.3 million for 2023 and 2022, respectively.
The following table represents a reconciliation of the Company's undiscounted future minimum lease payments for its ground lease and executive office lease agreements applicable to lease liabilities as of December 31, 2023:
| | | | | |
| 2024 | $ | 179,000 | |
| 2025 | 179,000 | |
| 2026 | 179,000 | |
| 2027 | 179,000 | |
| 2028 | 179,000 | |
| Thereafter | 7,673,000 | |
| Total undiscounted future minimum lease payments | 8,568,000 | |
| Future minimum lease payments, discount | (6,509,000) | |
| Lease liabilities | $ | 2,059,000 | |
Insurance
The Company carries comprehensive liability, property, fire, flood, wind, extended coverage, business interruption and rental loss insurance covering all of the properties in its portfolio under an insurance policy, in addition to other coverages, such as trademark and pollution coverage that may be appropriate for certain of its properties. Additionally, the Company carries a directors', officers', entity and employment practices liability insurance policy that covers such claims made against the Company and its directors and officers. The Company believes the policy specifications and insured limits are appropriate and adequate for its properties given the relative risk of loss, the cost of the coverage and industry practice; however, its insurance coverage may not be sufficient to fully cover losses.
Regulatory and Environmental
As the owner of the buildings on our properties, the Company could face liability for the presence of hazardous materials (e.g., asbestos or lead) or other adverse conditions (e.g., poor indoor air quality) in its buildings. Environmental laws govern the presence, maintenance, and removal of hazardous materials in buildings, and if the Company does not comply with such laws, it could face fines for such noncompliance. Also, the Company could be liable to third parties (e.g., occupants of the buildings) for damages related to exposure to hazardous materials or adverse conditions in its buildings, and the Company could incur material expenses with respect to abatement or remediation of hazardous materials or other adverse conditions in its buildings. In addition, some of the Company's tenants routinely handle and use hazardous or regulated substances and wastes as part of their operations at our properties, which are subject to regulation. Such environmental and health and safety laws and regulations could subject the Company or its tenants to
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
liability resulting from these activities. Environmental liabilities could affect a tenant's ability to make rental payments to the Company, and changes in laws could increase the potential liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect the Company's operations. The Company is not aware of any material contingent liabilities, regulatory matters or environmental matters that may exist.
Litigation
The Company is involved in various legal proceedings in the ordinary course of its business, including, but not limited to commercial disputes. The Company believes that such litigation, claims and administrative proceedings will not have a material adverse impact on its financial position or its results of operations. The Company records a liability when it considers the loss probable and the amount can be reasonably estimated. In addition, the below legal proceedings are in process:
As described in Note 1, on March 2, 2022, the Company entered into definitive agreements for the Transactions, which provided for the sale of the Company and its assets in a series of related all-cash transactions. On April 8, 2022, several purported holders of the Company's outstanding preferred stock filed a putative class action complaint against the Company, the Board of Directors prior to the Merger, and WHLR in Montgomery County Circuit Court, Maryland entitled Sydney, et al. v. Cedar Realty Trust, Inc., et al., (Case No. C-15-CV-22-001527).
On May 6, 2022, the Plaintiffs in Sydney filed a motion for a preliminary injunction. Also on May, 6, 2022, a purported holder of the Company's outstanding preferred stock filed a separate putative class action complaint against the Company and the Board of Directors prior to the Merger in the United States District Court for the District of Maryland, entitled Kim v. Cedar Realty Trust, Inc., et al., Civil Action No. 22-cv-01103. On May 11, 2022, the Company, the former Board of Directors of the Company and WHLR removed the Sydney action to the United States District Court for the District of Maryland, Case No. 8:22-cv-01142-GLR. On May 16, 2022, the court ordered that a hearing on the Sydney Plaintiffs' motion for preliminary injunction be held on June 22, 2022. On June 2, 2022, the Plaintiffs in Kim also filed a motion for a preliminary injunction. The court consolidated the motions for preliminary injunction.
On June 23, 2022, following a hearing, the court issued an order denying both motions for preliminary injunction, holding that the Plaintiffs in both cases were unlikely to succeed on the merits and that Plaintiffs had not established that they would suffer irreparable harm if the injunction was denied.
By order dated July 11, 2022, the court consolidated the Sydney and Kim cases and set an August 24, 2022 deadline for the Plaintiffs in both cases to file a consolidated amended complaint. Plaintiffs filed their amended complaint on August 24, 2022. The amended complaint alleges on behalf of a putative class of holders of the Company's preferred stock, among other things, claims for breach of contract against the Company and the former Board of Directors with respect to the articles supplementary governing the terms of the Company's preferred stock, breach of fiduciary duty against the former Board of Directors, and tortious interference and aiding and abetting breach of fiduciary duty against WHLR. On October 7, 2022, Defendants moved to dismiss the amended complaint. Plaintiffs opposed the motion to dismiss and filed a motion to certify a question of law to Maryland's Supreme Court. On August 1, 2023, the court issued a decision and order granting Defendants' motions to dismiss, without leave to amend, and denying Plaintiffs' motion to certify a question of law to the Maryland Supreme Court. The Plaintiffs appealed the dismissal to the United States Court of Appeals for the Fourth Circuit, Case No. 23-1905, docketed on August 30, 2023. The appeal has been fully briefed. At this juncture, the outcome of the litigation remains uncertain.
On July 11, 2022, a purported holder of the Company's outstanding preferred stock filed a complaint against the Company and the Board of Directors prior to the Merger in the United States District Court for the Eastern District of New York, entitled High Income Securities Fund v. Cedar Realty Trust, Inc., et al., No. 2:22-cv-4031. The complaint alleged that the Defendants violated Section 10(b) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions, and that the former Board of Directors are control persons under Section 20(a) of the Exchange Act. On September 25, 2023, the Court granted Defendants' motion to dismiss the complaint with prejudice, and the time within which the Plaintiff could have appealed such decision has passed.
On October 14, 2022, a purported holder of the Company's outstanding preferred stock filed a putative class action against the Company, the Board of Directors prior to the Merger, and WHLR in Nassau County Supreme Court, New York entitled Krasner v. Cedar Realty Trust, Inc., et al., (Case No. 613985/2022). The complaint alleges on behalf of a putative class of holders of the Company's preferred stock, among other things, claims for breach of contract against the Company and the former Board of Directors with respect to the articles supplementary governing the terms of the Company's preferred stock, breach of fiduciary duty against the
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
former Board of Directors, and tortious interference and aiding and abetting breach of fiduciary duty against WHLR. The complaint seeks, among other relief, an award of monetary damages, attorneys' fees, and expert fees. The Defendants filed motions in the Nassau County action to dismiss or stay the case based both on the pendency of the lawsuit in Maryland in which the same claims were asserted by other preferred stockholders and on the merits. The court held a hearing on the motions on October 27, 2023, and on December 4, 2023 granted the motions to dismiss based on the pendency of the lawsuit in Maryland without addressing the merits.
Note 11. Shareholders' Equity
Preferred Stock
The Company's 7.25% Series B Cumulative Redeemable Preferred Stock "Series B Preferred Stock" has no stated maturity, is not convertible into any other security of the Company, and is redeemable, in whole or in part, at the Company's option beginning May 22, 2017 at a price of $25.00 per share plus accrued and unpaid distributions.
The Company's 6.50% Series C Cumulative Redeemable Preferred Stock "Series C Preferred Stock" has no stated maturity, is not convertible into any other security of the Company, and is redeemable at the Company's option beginning August 24, 2022 at a price of $25.00 per share plus accrued and unpaid distributions.
The Company is authorized to issue up to 12,500,000 shares of preferred stock. The following tables summarize details about the Company's preferred stock:
| | | | | | | | | | | | | | | | | | | | | | | |
| Series B
Preferred Stock | | Series C
Preferred Stock | | | | |
| Par value | $ | 0.01 | | | $ | 0.01 | | | | | |
| Liquidation value | $ | 25.00 | | | $ | 25.00 | | | | | |
| | | | | | | | |
| | December 31, 2023 | | December 31, 2022 |
| | Series B
Preferred Stock | | Series C
Preferred Stock | | Series B
Preferred Stock | | Series C
Preferred Stock |
| Shares authorized | 6,050,000 | | | 6,450,000 | | | 6,050,000 | | | 6,450,000 | |
| Shares issued and outstanding | 1,450,000 | | | 5,000,000 | | | 1,450,000 | | | 5,000,000 | |
| Balance | $ | 34,767,000 | | | $ | 124,774,000 | | | $ | 34,767,000 | | | $ | 124,774,000 | |
Common Stock
The Company had a Dividend Reinvestment and Direct Stock Purchase Plan ("DRIP") which offered a convenient method for shareholders to invest cash dividends and/or make optional cash payments to purchase shares of the Company's common stock. Such purchases were at 100% of market value. There were no significant transactions under the DRIP during 2022. At December 31, 2022, there were no shares authorized under the DRIP since the DRIP was terminated in connection with the Transactions.
Dividends
The following table provides a summary of dividends declared and paid per share:
| | | | | | | | | | | |
| | Years ended December 31, |
| | 2023 | | 2022 |
| Common stock | $ | — | | | $ | 19.586 | |
7.25% Series B Preferred Stock | $ | 1.813 | | | $ | 1.813 | |
6.50% Series C Preferred Stock | $ | 1.625 | | | $ | 1.625 | |
On August 9, 2022, the Company's Board of Directors declared a special dividend on shares of the Company's outstanding common stock of $19.52 per share, payable to holders of record of the Company's common stock at the close of business on August 19, 2022.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
On August 26, 2022, the Company paid merger consideration of $9.48 per share on shares of the Company's outstanding common stock.
At December 31, 2023 and 2022, there were $1.2 million and $1.2 million, respectively, of accrued preferred stock dividends.
Note 12. Revenues
Rental revenues for 2023 and 2022, respectively, are comprised of the following:
| | | | | | | | | | | |
| Years ended December 31, |
| 2023 | | 2022 |
| Base rents | $ | 23,902,000 | | | $ | 23,997,000 | |
| Expense recoveries - variable lease revenue | 7,705,000 | | | 8,001,000 | |
| Percentage rent - variable lease revenue | 479,000 | | | 531,000 | |
| Straight-line rents | 854,000 | | | 77,000 | |
| Above (below) market lease amortization, net | 336,000 | | | 896,000 | |
| 33,276,000 | | | 33,502,000 | |
| Credit adjustments on operating lease receivables | 711,000 | | | (539,000) | |
| Total rental revenues | $ | 33,987,000 | | | $ | 32,963,000 | |
The Company reviews the collectability of charges under its tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. In the event that collectability with respect to any tenant changes, the Company recognizes an adjustment to rental income. The Company's review of collectability of charges under its operating leases includes any accrued rental revenues related to the straight-line method of reporting rental revenue.
Annual future base rents due to be received under non-cancelable operating leases in effect at December 31, 2023 are approximately as follows:
| | | | | |
| 2024 | $ | 24,680,000 | |
| 2025 | 24,042,000 | |
| 2026 | 22,237,000 | |
| 2027 | 20,212,000 | |
| 2028 | 15,329,000 | |
| Thereafter | 51,420,000 | |
| $ | 157,920,000 | |
Total future minimum rents do not include expense recoveries for real estate taxes and operating costs, or percentage rents based upon tenants' sales volume. Such amounts do not include amortization of intangible lease liabilities.
Note 13. 401(k) Retirement Plan
The Company had a 401(k) retirement plan (the "Plan"), which permitted all eligible employees to defer a portion of their compensation under the Code. Pursuant to the provisions of the Plan, the Company could make discretionary contributions on behalf of eligible employees. The Company made contributions to the Plan of $145,000 for 2022. The Plan was terminated as a result of the Company's merger with WHLR.
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
Note 14. Share-Based Compensation
The following tables set forth certain share-based compensation information for 2023 and 2022, respectively:
| | | | | | | | | | | |
| | Years ended December 31, |
| | 2023 | | 2022 |
| Expense relating to share/unit grants | $ | — | | | $ | 1,662,000 | |
| Amounts capitalized | — | | | (54,000) | |
| Total charged to operations | $ | — | | | $ | 1,608,000 | |
At December 31, 2023 and 2022, there were no shares available for grants pursuant to the Company's 2017 Stock Incentive Plan since this plan was terminated in connection with the Merger.
During 2022, there were 7,000 time-based restricted shares issued with a weighted average grant date fair value of $26.31 per share.
The total fair value of shares vested during 2022 was $11.9 million.
Former President and CEO Employment Contract
On June 15, 2018, the Company's then-President and CEO was granted a market performance-based equity award of 227,272 restricted stock units ("RSUs") and 227,272 dividend equivalent rights ("DERs") of the Company. Each RSU represents a contingent right to receive one share of common stock if certain market performance criteria are achieved. Each DER accrues and will be deemed to be reinvested into the Company's common stock for which payment will only be made for the portion of the market performance-based equity award that are earned and vest. During the three years ending June 15, 2021 (the "Interim Performance Period"), a maximum of 113,636 shares were earned. Any portion of the market performance-based equity award that was not earned as of the end of the Interim Performance Period was to be carried forward for calculation for the five years ending June 15, 2023 (the "Full Performance Period"). The percentage of the market performance-based equity award to be earned was to be determined based on the Company's annual return on an investment in the Company's common stock ("TSR") over the Interim Performance Period and/or over the Full Performance Period as follows: if average annual TSR (1) is below 4%, the percentage of grant earned would be 0%, (2) equals 4%, the percentage of grant earned would be 33.3%, (3) equals 6.5%, the percentage of grant earned would be 66.7%, and (4) equals 10% or above, the percentage of grant earned would be 100%. Linear interpolation was to be applied to determine the percentage of the market performance-based equity award that is earned where the average annual TSR over the performance period falls between the percentages set forth above. Based on market performance for the Interim Performance Period, it was determined the Company's then-President and CEO earned 113,636 shares. Accordingly, on July 20, 2021, the Company issued 113,636 common shares to the then-President and CEO and paid him $0.3 million for the related DERs.
On August 22, 2022, due to a change in control of the Company in connection with the Transactions, the RSUs fully vested. On August 26, 2022, the Company's then-President and CEO received an aggregate cash payment of $3.3 million, representing the aggregate per share merger consideration and per share special dividend amount attributable to the vested RSUs, along with $0.5 million for the related DERs.
Note 15. Earnings Per Share
Basic earnings per share ("EPS") is calculated by dividing net income (loss) attributable to the Company's common shareholders by the weighted average number of common shares outstanding for the period including participating securities (restricted shares that have non-forfeitable rights to receive dividends issued pursuant to the Company's share-based compensation program are considered participating securities). Unvested restricted shares that are participating securities are not allocated net losses and/or any excess of dividends declared over net income, as such amounts are allocated entirely to the common shareholders. For 2023 and 2022, the
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
Company had 0.0 million and 0.2 million, respectively, of weighted average unvested restricted shares outstanding. The following table provides a reconciliation of the numerator and denominator of the EPS calculations for 2023 and 2022, respectively:
| | | | | | | | | | | |
| | Years ended December 31, |
| | 2023 | | 2022 |
| Numerator | | | |
| Net income (loss) from continuing operations | $ | 2,007,000 | | | $ | (79,010,000) | |
| Preferred stock dividends | (10,752,000) | | | (10,752,000) | |
| Net loss attributable to noncontrolling interests | — | | | 355,000 | |
| Net earnings allocated to unvested shares | — | | | 58,000 | |
| Loss from continuing operations, net of noncontrolling interest, attributable to vested common shares | (8,745,000) | | | (89,349,000) | |
| Income from discontinued operations, net of noncontrolling interests, attributable to vested common shares | — | | | 122,686,000 | |
| Net (loss) income attributable to vested common shares | $ | (8,745,000) | | | $ | 33,337,000 | |
| Denominator | | | |
| Weighted average number of vested common shares outstanding, basic and diluted | 13,718,000 | | | 13,448,000 | |
| Net (loss) income per common share attributable to common shareholders (basic and diluted): | | | |
| Continuing operations | $ | (0.64) | | | $ | (6.64) | |
| Discontinued operations | — | | | 9.12 | |
| | $ | (0.64) | | | $ | 2.48 | |
Fully-diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into shares of common stock. For 2023, there were no market performance-based equity awards issued or outstanding. For 2022, no RSUs would have been issuable under the Company's then-President and CEO's market performance-based equity award (see Note 14, Share-Based Compensation) had the measurement period ended on December 31, 2022, and therefore, this market performance-based equity award had no impact in calculating diluted EPS for this period. Net loss attributable to noncontrolling interests of the Operating Partnership has been excluded from the numerator and the related OP Units have been excluded from the denominator for the purpose of calculating diluted EPS as there would have been no dilutive effect had such amounts been included. The weighted average number of OP Units outstanding was 0 and 44,000 for 2023 and 2022, respectively.
Note 16. Related Party Transactions
With the completion of the Company's merger with WHLR, the Company became a subsidiary of WHLR. WHLR performs property management and leasing services for the Company pursuant to the Wheeler Real Estate Company Management Agreement. The management fee is 4% of gross operating income, and leasing commissions range from 3% to 6%. During the years ended December 31, 2023 and 2022, the Company paid WHLR $2.1 million and $1.0 million, respectively, for these services. The Operating Partnership and WHLR's operating partnership, Wheeler REIT, L.P., are party to the Cost Sharing Agreement. The related party amounts due to WHLR at December 31, 2023 and 2022 are comprised of:
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Financings and real estate taxes | $ | 7,166,000 | | | $ | 7,166,000 | |
| Management fees | 225,000 | | | 110,000 | |
| Leasing commissions | 161,000 | | | 85,000 | |
| Cost Sharing Agreement allocations (a) | 548,000 | | | — | |
| Other | (6,000) | | | (33,000) | |
| Total | $ | 8,094,000 | | | $ | 7,328,000 | |
Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
December 31, 2023
(a)Includes allocations for executive compensation and directors' liability insurance. In 2022, WHLR did not make any allocations to the Company for these services due to certain limitations set forth in the Cost Sharing Agreement.
Note 17. Subsequent Events
On January 23, 2024, the Company's Board of Directors declared a dividend of $0.453125 and $0.406250 per share with respect to the Company's Series B Preferred Stock and Series C Preferred Stock, respectively. The dividends were paid on February 20, 2024 to shareholders of record on February 9, 2024.
On February 29, 2024, the Company entered into a revolving credit agreement with KeyBank National Association to draw up to $9.5 million (the "Revolving Credit Agreement"). The interest rate under the Revolving Credit Agreement is the daily SOFR, plus applicable margins of 0.10% plus 2.75%. Interest payments are due monthly, and principal is due at maturity on February 28, 2025. The Revolving Credit Agreement may be extended, at the Company's option, for up to two additional three-month periods, subject to customary conditions. The Revolving Credit Agreement is collateralized by 6 properties, consisting of Carll's Corner, Fieldstone Marketplace, Oakland Commons, Kings Plaza, Oregon Avenue and South Philadelphia, and proceeds will be used for capital expenditures and tenant improvements for such properties.
