UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 001-31817

 

CEDAR REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

42-1241468

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

44 South Bayles Avenue, Port Washington, New York 11050-3765

(Address of principal executive offices)     (Zip Code)

(516) 767-6492

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Name of each exchange on which registered

Trading Symbol(s)

Common Stock, $0.06 par value

New York Stock Exchange

CDR

7-1/4% Series B Cumulative Redeemable Preferred Stock, $25.00 Liquidation Value

New York Stock Exchange

CDRpB

6-1/2% Series C Cumulative Redeemable Preferred Stock, $25.00 Liquidation Value

New York Stock Exchange

CDRpC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

At July 31, 2019, there were 89,022,042 shares of Common Stock, $0.06 par value, outstanding.

 

 

1


CEDAR REALTY TRUST, INC.

INDEX

 

Forward-Looking Statements

3

 

 

Part I. Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

 

 

 

 

 

 

Consolidated Balance Sheets – June 30, 2019 and December 31, 2018

4

 

 

 

 

 

 

Consolidated Statements of Operations– Three and six months ended June 30, 2019 and 2018

5

 

 

 

 

 

 

Consolidated Statements of Comprehensive (Loss) Income – Three and six months ended June 30, 2019 and 2018

 

6

 

 

 

 

 

 

Consolidated Statements of Equity– Six months ended June 30, 2019 and 2018

7-10

 

 

 

 

 

 

Consolidated Statements of Cash Flows– Six months ended June 30, 2019 and 2018

11

 

 

 

 

 

 

Notes to Consolidated Financial Statements – June 30, 2019

12-21

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition And Results of Operations

22-29

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

29

 

 

 

 

Item 4.

 

Controls and Procedures

29

 

 

Part II. Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

30

 

 

 

 

Item 1A.

 

Risk Factors

30

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

30

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

30

 

 

 

 

Item 4.

 

Mine Safety Disclosures

30

 

 

 

 

Item 5.

 

Other Information

30

 

 

 

 

Item 6.

 

Exhibits

30

 

 

 

 

Signatures

31

 

 

 

2


 

 

Forward-Looking Statements

Certain statements made in this Form 10-Q or incorporated by reference herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “may”, “will”, “should”, “estimates”, “projects”, “anticipates”, “believes”, “expects”, “intends”, “future”, and words of similar import, or the negative thereof. Factors which could cause actual results to differ materially from current expectations include, but are not limited to:  adverse general economic conditions in the United States and uncertainty in the credit and retail markets; financing risks, such as the inability to obtain new financing or refinancing on favorable terms as the result of market volatility or instability; risks related to the market for retail space generally, including reductions in consumer spending, variability in retailer demand for leased space, tenant bankruptcies, adverse impact of internet sales demand, ongoing consolidation in the retail sector and changes in economic conditions and consumer confidence; risks endemic to real estate and the real estate industry generally; the impact of the Company’s level of indebtedness on operating performance; inability of tenants to meet their rent and other lease obligations; adverse impact of new technology and e-commerce developments on the Company’s tenants; competitive risk; risks related to the geographic concentration of the Company’s properties in the Washington, D.C. to Boston corridor; the effects of natural and other disasters; the inability of the Company to realize anticipated returns from its redevelopment activities; and the risk factors discussed under Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Except for ongoing obligations to disclose material information as required by the federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. All of the above factors are difficult to predict, contain uncertainties that may materially affect the Company’s actual results and may be beyond the Company’s control.  New factors emerge from time to time, and it is not possible for the Company’s management to predict all such factors or to assess the effects of each factor on the Company’s business. Accordingly, there can be no assurance that the Company’s current expectations will be realized.

 

 

3


CEDAR REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

Land

 

$

296,554,000

 

 

$

295,734,000

 

Buildings and improvements

 

 

1,222,918,000

 

 

 

1,212,948,000

 

 

 

 

1,519,472,000

 

 

 

1,508,682,000

 

Less accumulated depreciation

 

 

(375,708,000

)

 

 

(361,969,000

)

Real estate, net

 

 

1,143,764,000

 

 

 

1,146,713,000

 

 

 

 

 

 

 

 

 

 

Real estate held for sale

 

 

7,244,000

 

 

 

11,592,000

 

Cash and cash equivalents

 

 

2,081,000

 

 

 

1,977,000

 

Receivables

 

 

21,535,000

 

 

 

21,977,000

 

Other assets and deferred charges, net

 

 

41,705,000

 

 

 

40,642,000

 

TOTAL ASSETS

 

$

1,216,329,000

 

 

$

1,222,901,000

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Mortgage loan payable

 

$

46,848,000

 

 

$

47,315,000

 

Capital lease obligation

 

 

5,375,000

 

 

 

5,387,000

 

Unsecured revolving credit facility

 

 

99,000,000

 

 

 

100,000,000

 

Unsecured term loans

 

 

472,486,000

 

 

 

472,132,000

 

Accounts payable and accrued liabilities

 

 

47,031,000

 

 

 

26,142,000

 

Unamortized intangible lease liabilities

 

 

12,182,000

 

 

 

13,209,000

 

Total liabilities

 

 

682,922,000

 

 

 

664,185,000

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Cedar Realty Trust, Inc. shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

159,541,000

 

 

 

159,541,000

 

Common stock  ($.06 par value, 150,000,000 shares authorized, 89,025,000 and 90,436,000 shares, issued and outstanding, respectively)

 

 

5,341,000

 

 

 

5,426,000

 

Treasury stock  (3,085,000 and 2,971,000 shares, respectively, at cost)

 

 

(16,470,000

)

 

 

(16,572,000

)

Additional paid-in capital

 

 

870,582,000

 

 

 

875,565,000

 

Cumulative distributions in excess of net income

 

 

(482,258,000

)

 

 

(475,726,000

)

Accumulated other comprehensive (loss) income

 

 

(6,761,000

)

 

 

7,191,000

 

Total Cedar Realty Trust, Inc. shareholders' equity

 

 

529,975,000

 

 

 

555,425,000

 

Noncontrolling interests:

 

 

 

 

 

 

 

 

Minority interests in consolidated joint ventures

 

 

137,000

 

 

 

(112,000

)

Limited partners'  OP Units

 

 

3,295,000

 

 

 

3,403,000

 

Total noncontrolling interests

 

 

3,432,000

 

 

 

3,291,000

 

Total equity

 

 

533,407,000

 

 

 

558,716,000

 

TOTAL LIABILITIES AND EQUITY

 

$

1,216,329,000

 

 

$

1,222,901,000

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

4


CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

35,309,000

 

 

$

37,218,000

 

 

$

71,901,000

 

 

$

74,665,000

 

Other

 

 

351,000

 

 

 

4,132,000

 

 

 

642,000

 

 

 

4,253,000

 

Total revenues

 

 

35,660,000

 

 

 

41,350,000

 

 

 

72,543,000

 

 

 

78,918,000

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating, maintenance and management

 

 

6,162,000

 

 

 

5,994,000

 

 

 

14,129,000

 

 

 

13,788,000

 

Real estate and other property-related taxes

 

 

5,087,000

 

 

 

5,056,000

 

 

 

10,297,000

 

 

 

10,135,000

 

General and administrative

 

 

5,418,000

 

 

 

4,276,000

 

 

 

10,216,000

 

 

 

8,770,000

 

Depreciation and amortization

 

 

10,346,000

 

 

 

10,541,000

 

 

 

20,475,000

 

 

 

20,595,000

 

Total expenses

 

 

27,013,000

 

 

 

25,867,000

 

 

 

55,117,000

 

 

 

53,288,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sales

 

 

2,841,000

 

 

 

-

 

 

 

2,942,000

 

 

 

-

 

Impairment charges

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(21,396,000

)

Total other

 

 

2,841,000

 

 

 

-

 

 

 

2,942,000

 

 

 

(21,396,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

 

11,488,000

 

 

 

15,483,000

 

 

 

20,368,000

 

 

 

4,234,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-OPERATING INCOME AND EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(5,944,000

)

 

 

(5,546,000

)

 

 

(11,835,000

)

 

 

(10,917,000

)

Total non-operating income and expenses

 

 

(5,944,000

)

 

 

(5,546,000

)

 

 

(11,835,000

)

 

 

(10,917,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

 

5,544,000

 

 

 

9,937,000

 

 

 

8,533,000

 

 

 

(6,683,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (income) loss attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority interests in consolidated joint ventures

 

 

(144,000

)

 

 

(133,000

)

 

 

(249,000

)

 

 

(268,000

)

Limited partners' interest in Operating Partnership

 

 

(17,000

)

 

 

(27,000

)

 

 

(19,000

)

 

 

60,000

 

Total net (income) attributable to noncontrolling interests

 

 

(161,000

)

 

 

(160,000

)

 

 

(268,000

)

 

 

(208,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO CEDAR REALTY TRUST, INC.

 

 

5,383,000

 

 

 

9,777,000

 

 

 

8,265,000

 

 

 

(6,891,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

(2,688,000

)

 

 

(2,688,000

)

 

 

(5,376,000

)

 

 

(5,487,000

)

Preferred stock redemption costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,507,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

2,695,000

 

 

$

7,089,000

 

 

$

2,889,000

 

 

$

(15,885,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

 

$

0.08

 

 

$

0.03

 

 

$

(0.19

)

Diluted

 

$

0.03

 

 

$

0.08

 

 

$

0.03

 

 

$

(0.19

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

86,260,000

 

 

 

88,011,000

 

 

 

86,420,000

 

 

 

87,817,000

 

Diluted

 

 

86,260,000

 

 

 

88,166,000

 

 

 

86,420,000

 

 

 

87,817,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

5


CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

5,544,000

 

 

$

9,937,000

 

 

$

8,533,000

 

 

$

(6,683,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income - unrealized (loss) gain on change in fair value of cash flow hedges

 

 

(8,596,000

)

 

 

1,937,000

 

 

 

(14,038,000

)

 

 

7,827,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income

 

 

(3,052,000

)

 

 

11,874,000

 

 

 

(5,505,000

)

 

 

1,144,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (income) attributable to noncontrolling interests

 

 

(108,000

)

 

 

(167,000

)

 

 

(182,000

)

 

 

(237,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income attributable to Cedar Realty Trust, Inc.

 

$

(3,160,000

)

 

$

11,707,000

 

 

$

(5,687,000

)

 

$

907,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

6


 

CEDAR REALTY TRUST, INC.

Consolidated Statement of Equity

Six months ended June 30, 2019

(unaudited)

 

 

 

Cedar Realty Trust, Inc. Shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury

 

 

Additional

 

 

distributions

 

 

other

 

 

 

 

 

 

 

Preferred stock

 

 

Common stock

 

 

stock,

 

 

paid-in

 

 

in excess of

 

 

comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

at cost

 

 

capital

 

 

net income

 

 

income

 

 

Total

 

Balance, December 31, 2018

 

 

6,450,000

 

 

$

159,541,000

 

 

 

90,436,000

 

 

$

5,426,000

 

 

$

(16,572,000

)

 

$

875,565,000

 

 

$

(475,726,000

)

 

$

7,191,000

 

 

$

555,425,000

 

Prior period adjustment - adoption of lease accounting standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(515,000

)

 

 

 

 

 

(515,000

)

Balance, December 31, 2018, restated

 

 

6,450,000

 

 

 

159,541,000

 

 

 

90,436,000

 

 

 

5,426,000

 

 

 

(16,572,000

)

 

 

875,565,000

 

 

 

(476,241,000

)

 

 

7,191,000

 

 

 

554,910,000

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,882,000

 

 

 

 

 

 

2,882,000

 

Unrealized (loss) on change in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,409,000

)

 

 

(5,409,000

)

Share-based compensation, net

 

 

 

 

 

 

 

 

650,000

 

 

 

39,000

 

 

 

22,000

 

 

 

692,000

 

 

 

 

 

 

 

 

 

753,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

1,000

 

 

 

 

 

 

 

 

 

5,000

 

 

 

 

 

 

 

 

 

5,000

 

Common stock repurchases

 

 

 

 

 

 

 

 

(2,050,000

)

 

 

(123,000

)

 

 

 

 

 

(6,721,000

)

 

 

 

 

 

 

 

 

(6,844,000

)

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,688,000

)

 

 

 

 

 

(2,688,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,455,000

)

 

 

 

 

 

(4,455,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,000

)

 

 

 

 

 

 

 

 

(12,000

)

Balance, March 31, 2019

 

 

6,450,000

 

 

$

159,541,000

 

 

 

89,037,000

 

 

$

5,342,000

 

 

$

(16,550,000

)

 

$

869,529,000

 

 

$

(480,502,000

)

 

$

1,782,000

 

 

$

539,142,000

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,383,000

 

 

 

 

 

 

5,383,000

 

Unrealized (loss) on change in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,543,000

)

 

 

(8,543,000

)

Share-based compensation, net

 

 

 

 

 

 

 

 

(13,000

)

 

 

(1,000

)

 

 

80,000

 

 

 

1,053,000

 

 

 

 

 

 

 

 

 

1,132,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

1,000

 

 

 

 

 

 

 

 

 

3,000

 

 

 

 

 

 

 

 

 

3,000

 

Common stock repurchases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,688,000

)

 

 

 

 

 

(2,688,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,451,000

)

 

 

 

 

 

(4,451,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,000

)

 

 

 

 

 

 

 

 

(3,000

)

Balance, June 30, 2019

 

 

6,450,000

 

 

$

159,541,000

 

 

 

89,025,000

 

 

$

5,341,000

 

 

$

(16,470,000

)

 

$

870,582,000

 

 

$

(482,258,000

)

 

$

(6,761,000

)

 

$

529,975,000

 

7


 

CEDAR REALTY TRUST, INC.

Consolidated Statement of Equity

Six months ended June 30, 2019

Continued

(unaudited)

 

 

 

Noncontrolling Interests

 

 

 

 

 

 

 

Minority

 

 

Limited

 

 

 

 

 

 

 

 

 

 

 

interest in

 

 

partners'

 

 

 

 

 

 

 

 

 

 

 

consolidated

 

 

interest in

 

 

 

 

 

 

 

 

 

 

 

joint

 

 

Operating

 

 

 

 

 

 

Total

 

 

 

ventures

 

 

Partnership

 

 

Total

 

 

Equity

 

Balance, December 31, 2018

 

$

(112,000

)

 

$

3,403,000

 

 

$

3,291,000

 

 

$

558,716,000

 

Prior period adjustment - adoption of lease accounting standard

 

 

 

 

 

 

 

 

 

 

 

(515,000

)

Balance, December 31, 2018, restated

 

 

(112,000

)

 

 

3,403,000

 

 

 

3,291,000

 

 

 

558,201,000

 

Net income

 

 

105,000

 

 

 

2,000

 

 

 

107,000

 

 

 

2,989,000

 

Unrealized (loss) on change in fair value of cash flow hedges

 

 

 

 

 

(33,000

)

 

 

(33,000

)

 

 

(5,442,000

)

Share-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

753,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

5,000

 

Common stock repurchases

 

 

 

 

 

 

 

 

 

 

 

(6,844,000

)

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

(2,688,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

(28,000

)

 

 

(28,000

)

 

 

(4,483,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

12,000

 

 

 

12,000

 

 

 

 

Balance, March 31, 2019

 

$

(7,000

)

 

$

3,356,000

 

 

$

3,349,000

 

 

$

542,491,000

 

Net income

 

 

144,000

 

 

 

17,000

 

 

 

161,000

 

 

 

5,544,000

 

Unrealized (loss) on change in fair value of cash flow hedges

 

 

 

 

 

(53,000

)

 

 

(53,000

)

 

 

(8,596,000

)

Share-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

1,132,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

3,000

 

Common stock repurchases

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

(2,688,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

(28,000

)

 

 

(28,000

)

 

 

(4,479,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

3,000

 

 

 

3,000

 

 

 

 

Balance, June 30, 2019

 

$

137,000

 

 

$

3,295,000

 

 

$

3,432,000

 

 

$

533,407,000

 

 

See accompanying notes to consolidated financial statements

8


 

CEDAR REALTY TRUST, INC.

Consolidated Statement of Equity

Six months ended June 30, 2018

(unaudited)

 

 

 

Cedar Realty Trust, Inc. Shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury

 

 

Additional

 

 

distributions

 

 

other

 

 

 

 

 

 

 

Preferred stock

 

 

Common stock

 

 

stock,

 

 

paid-in

 

 

in excess of

 

 

comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

at cost

 

 

capital

 

 

net income

 

 

income

 

 

Total

 

Balance, December 31, 2017

 

 

8,450,000

 

 

$

207,508,000

 

 

 

91,317,000

 

 

$

5,479,000

 

 

$

(18,463,000

)

 

$

875,062,000

 

 

$

(446,944,000

)

 

$

5,694,000

 

 

$

628,336,000

 

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,668,000

)

 

 

 

 

 

(16,668,000

)

Unrealized gain on change in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,868,000

 

 

 

5,868,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

393,000

 

 

 

24,000

 

 

 

5,000

 

 

 

222,000

 

 

 

 

 

 

 

 

 

251,000

 

Redemptions of Series B Shares

 

 

(2,000,000

)

 

 

(47,967,000

)

 

 

 

 

 

 

 

 

 

 

 

1,458,000

 

 

 

(3,507,000

)

 

 

 

 

 

(50,016,000

)

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

 

 

 

 

 

 

 

 

1,000

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,799,000

)

 

 

 

 

 

(2,799,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,595,000

)

 

 

 

 

 

(4,595,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

184,000

 

 

 

 

 

 

 

 

 

184,000

 

Balance, March 31, 2018

 

 

6,450,000

 

 

 

159,541,000

 

 

 

91,710,000

 

 

 

5,503,000

 

 

 

(18,458,000

)

 

 

876,927,000

 

 

 

(474,513,000

)

 

 

11,562,000

 

 

 

560,562,000

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,777,000

 

 

 

 

 

 

9,777,000

 

Unrealized gain on change in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,930,000

 

 

 

1,930,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

(496,000

)

 

 

(30,000

)

 

 

1,729,000

 

 

 

(737,000

)

 

 

 

 

 

 

 

 

962,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

1,000

 

 

 

 

 

 

 

 

 

4,000

 

 

 

 

 

 

 

 

 

4,000

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,688,000

)

 

 

 

 

 

(2,688,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,585,000

)

 

 

 

 

 

(4,585,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,000

)

 

 

 

 

 

 

 

 

(15,000

)

Balance, June 30, 2018

 

 

6,450,000

 

 

$

159,541,000

 

 

 

91,215,000

 

 

$

5,473,000

 

 

$

(16,729,000

)

 

$

876,179,000

 

 

$

(472,009,000

)

 

$

13,492,000

 

 

$

565,947,000

 

 


9


 

CEDAR REALTY TRUST, INC.

Consolidated Statement of Equity

Six months ended June 30, 2018

Continued

(unaudited)

 

 

Noncontrolling Interests

 

 

 

 

 

 

 

Minority

 

 

Limited

 

 

 

 

 

 

 

 

 

 

 

interest in

 

 

partners'

 

 

 

 

 

 

 

 

 

 

 

consolidated

 

 

interest in

 

 

 

 

 

 

 

 

 

 

 

joint

 

 

Operating

 

 

 

 

 

 

Total

 

 

 

ventures

 

 

Partnership

 

 

Total

 

 

Equity

 

Balance, December 31, 2017

 

$

(609,000

)

 

$

2,384,000

 

 

$

1,775,000

 

 

$

630,111,000

 

Net (loss) income

 

 

135,000

 

 

 

(87,000

)

 

 

48,000

 

 

 

(16,620,000

)

Unrealized gain on change in fair value of cash flow hedges

 

 

 

 

 

22,000

 

 

 

22,000

 

 

 

5,890,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

251,000

 

Redemptions of Series B Shares

 

 

 

 

 

 

 

 

 

 

 

(50,016,000

)

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

(2,799,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

(17,000

)

 

 

(17,000

)

 

 

(4,612,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

(184,000

)

 

 

(184,000

)

 

 

 

Balance, March 31, 2018

 

 

(474,000

)

 

 

2,118,000

 

 

 

1,644,000

 

 

 

562,206,000

 

Net income

 

 

133,000

 

 

 

27,000

 

 

 

160,000

 

 

 

9,937,000

 

Unrealized gain on change in fair value of cash flow hedges

 

 

 

 

 

7,000

 

 

 

7,000

 

 

 

1,937,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

962,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

4,000

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

(2,688,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

(17,000

)

 

 

(17,000

)

 

 

(4,602,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

15,000

 

 

 

15,000

 

 

 

 

Balance, June 30, 2018

 

$

(341,000

)

 

$

2,150,000

 

 

$

1,809,000

 

 

$

567,756,000

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

 

 

10


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

8,533,000

 

 

$

(6,683,000

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Gain on sales

 

 

(2,942,000

)

 

 

 

Impairment charges

 

 

 

 

 

21,396,000

 

Straight-line rents and expenses, net

 

 

(249,000

)

 

 

(492,000

)

Provision for doubtful accounts

 

 

231,000

 

 

 

1,002,000

 

Depreciation and amortization

 

 

20,475,000

 

 

 

20,595,000

 

Amortization of intangible lease liabilities, net

 

 

(1,222,000

)

 

 

(2,882,000

)

Expense relating to share-based compensation, net

 

 

2,043,000

 

 

 

1,837,000

 

Amortization of premium on mortgage loan payable

 

 

 

 

 

(65,000

)

Amortization of deferred financing costs

 

 

651,000

 

 

 

596,000

 

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:

 

 

 

 

 

 

 

 

Rents and other receivables

 

 

138,000

 

 

 

(1,895,000

)

Prepaid expenses and other

 

 

1,239,000

 

 

 

(1,068,000

)

Accounts payable and accrued liabilities

 

 

(505,000

)

 

 

(1,767,000

)

Net cash provided by operating activities

 

 

28,392,000

 

 

 

30,574,000

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Acquisition of real estate

 

 

(9,083,000

)

 

 

 

Expenditures for real estate improvements

 

 

(15,174,000

)

 

 

(14,016,000

)

Net proceeds from sales of real estate

 

 

18,651,000

 

 

 

 

Net cash (used in) investing activities

 

 

(5,606,000

)

 

 

(14,016,000

)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Repayments under revolving credit facility

 

 

(16,000,000

)

 

 

(16,500,000

)

Advances under revolving credit facility

 

 

15,000,000

 

 

 

66,000,000

 

Mortgage repayments

 

 

(508,000

)

 

 

(1,497,000

)

Noncontrolling interests:

 

 

 

 

 

 

 

 

Distributions to limited partners

 

 

(56,000

)

 

 

(34,000

)

Redemptions of preferred stock

 

 

 

 

 

(50,016,000

)

Common stock sales less issuance expenses, net

 

 

8,000

 

 

 

5,000

 

Common stock repurchases

 

 

(6,844,000

)

 

 

 

Preferred stock dividends

 

 

(5,376,000

)

 

 

(5,900,000

)

Distributions to common shareholders

 

 

(8,906,000

)

 

 

(9,180,000

)

Net cash (used in) financing activities

 

 

(22,682,000

)

 

 

(17,122,000

)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

104,000

 

 

 

(564,000

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

1,977,000

 

 

 

7,219,000

 

Cash, cash equivalents and restricted cash at end of period

 

$

2,081,000

 

 

$

6,655,000

 

 

 

 

 

 

 

 

 

 

Reconciliation to consolidated balance sheets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,081,000

 

 

$

1,625,000

 

Restricted cash

 

 

 

 

 

5,030,000

 

Cash, cash equivalents and restricted cash

 

$

2,081,000

 

 

$

6,655,000

 

 

See accompanying notes to consolidated financial statements

 

 

11


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

 

Note 1. Business and Organization

Cedar Realty Trust, Inc. (the “Company”) is a real estate investment trust (“REIT”) that focuses primarily on ownership, operation and redevelopment of grocery-anchored shopping centers in high-density urban markets from Washington, D.C. to Boston. At June 30, 2019, the Company owned and managed a portfolio of 57 operating properties (excluding properties “held for sale”).

Cedar Realty Trust Partnership, L.P. (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 June 30, 2019, the Company owned a 99.4% general and limited partnership interest in, and was the sole general partner of, the Operating Partnership. The limited partners’ interest in the Operating Partnership (0.6% at June 30, 2019) is represented by Operating Partnership Units (“OP Units”). The carrying amount of such interest is adjusted at the end of each reporting period to an amount equal to the limited partners’ ownership percentage of the Operating Partnership’s net equity. The 553,000 OP Units outstanding at June 30, 2019 are economically equivalent to shares of the Company’s common stock. The holders of OP Units have the right to exchange their OP Units for the same number of shares of the Company’s common stock or, at the Company’s option, for cash. Unless specifically noted otherwise, all references to OP Units exclude limited partnership units held by the Company.

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. 

 

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation/Basis of Preparation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by U.S. Generally Accepted Accounting Principles (“GAAP”) for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statement disclosures. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring accruals) have been included. The 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. The unaudited consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The unaudited 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 for which it is the primary beneficiary.

Supplemental Consolidated Statements of Cash Flows Information

 

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

Supplemental disclosure of cash activities:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

11,693,000

 

 

$

10,933,000

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

 

Capitalization of interest and financing costs

 

 

702,000

 

 

 

727,000

 

Recognition of right-of-use assets and related lease liabilities

 

 

14,205,000

 

 

 

 

 


12


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

 

Recently-Adopted Accounting Pronouncements

In February 2016, the FASB issued guidance amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The guidance, effective for annual and interim reporting periods beginning on or after December 15, 2018, requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. The Company is not required to reassess the classification of existing ground leases where it is the lessee and therefore these leases will continue to be accounted for as operating leases. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less continue to be accounted for pursuant to existing guidance for operating leases. Based on the Company’s future obligations under its ground lease and executive office lease agreements for which the Company is the lessee, the newly adopted guidance resulted in the recognition of (1) right-of-use assets of $14.6 million included in other assets and deferred charges, net, and (2) right-of-use liabilities of $14.6 million included in accounts payable and accrued liabilities, on the Company’s consolidated balance sheet as of January 1, 2019.   In the event the Company modifies existing ground leases or enters into new ground leases after adoption of the new standard, such leases may be classified as finance leases . Additionally, the guidance requires that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. During the three and six months ended June 30, 2019, the Company expensed $0.8 million and $1.4 million, respectively, of leasing costs which would have previously been capitalized.

 

The FASB provided lessors with a practical expedient, elected by class of underlying asset, to account for lease and non-lease components as a single lease component if certain criteria are met. Lessors that make these elections are required to provide additional disclosures. The FASB provided an additional (and optional) transition method that allows entities to initially apply the guidance at the adoption date (January 1, 2019) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company applied both these practical expedients upon adoption. The practical expedient allowed the Company to not separate expenses reimbursed by customers from the associated rental revenue if certain criteria were met. The Company assessed these criteria and concluded that the timing and pattern of transfer for rental revenue and the associated rental expense recoveries are the same and, as the leases qualify as operating leases, the Company accounted for and presented rents and expense recoveries as a single component under rental revenues in the consolidated statement of operations for the three and six months ended June 30, 2019. As a result of the adoption of this practical expedient, the Company also presented $29.5 million and $57.6 million of rents and $7.8 million and $17.1 million of expense recoveries as single components in the consolidated statement of operations for the three and six months ended June 30, 2018, respectively, to conform to the new 2019 presentation.  

 

In November 2018, the FASB clarified the existing accounting treatment relating to receivables arising from operating leases, stating that such receivables are not within the scope of the expected credit loss standard and that impairment of receivables arising from operating leases should be accounted for in accordance with the recently-adopted lease accounting standard. This required the Company to review its existing lease portfolio to determine if all future lease payments are probable of collection and, if the Company determined that all future lease payments are not probable of collection, the Company will account for these leases on a cash basis. This required that all amounts that were historically recorded as bad debt expense, and previously included in operating expenses in the Company’s consolidated statement of operations, now be recorded as a direct reduction of rental revenues. As permitted by the standard upon adoption, the Company recorded a $0.5 million prior-period adjustment to opening equity which the Company has reflected in the consolidated statement of equity for the six months ended June 30, 2019.

 

 

 

 

 

 

13


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

Note 3. Real Estate  

Acquisition

On June 19, 2019, the Company purchased Girard Plaza, a shopping center adjacent to its South Philadelphia property, located in Philadelphia, Pennsylvania. The purchase price for the property was $8.5 million, which has been allocated to real estate assets and liabilities.

Dispositions

On February 15, 2019, the Company sold Maxatawny Marketplace, located in Maxatawny, Pennsylvania. The sales price for the property was $10.3 million, which resulted in a gain on sale of $0.1 million, which has been included in continuing operations in the accompanying consolidated statement of operations.

On June 26, 2019, the Company sold Fort Washington Center, located in Fort Washington, Pennsylvania. The sales price for the property was $9.0 million, which resulted in a gain on sale of $2.8 million, which has been included in continuing operations in the accompanying consolidated statement of operations.

Real Estate Held for Sale

As of June 30, 2019, Carll’s Corner, located in Bridgeton, New Jersey, and Suffolk Plaza, located in Suffolk, Virginia, have been classified as “real estate held for sale” on the accompanying consolidated balance sheet. 

The Company, when applicable, conducts a continuing review of the values for all properties “held for sale” based on final 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 for properties in the process of being sold, (2) estimated sales prices, less costs to sell, based on discounted cash flow or income capitalization 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 performed recoverability analyses based on the estimated undiscounted cash flows that were 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. However, as a result of the properties’ meeting the “held for sale” criteria, such properties were written down to the lower of their carrying value and estimated fair values less costs to sell.

Note 4. Fair Value Measurements

The carrying amounts of cash and cash equivalents, restricted cash, rents and other receivables, certain other assets, accounts payable and accrued 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 share-based 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 mortgage loan was estimated using available market information and discounted cash flow analyses based on borrowing rates the Company believes it could obtain with a similar term and maturity.  As of June 30, 2019 and December 31, 2018, the fair value of the Company’s fixed rate mortgage loan payable, which was determined to be Level 3 within the valuation hierarchy, was $45.7 million and $44.4 million, respectively; the carrying value of such loan was $46.8 million and $47.3 million, respectively. As of June 30, 2019 and December 31, 2018, respectively, the aggregate fair values of the Company’s unsecured revolving credit facility and term loans approximated the carrying values. In addition, the fair value of the Company’s mortgage note receivable and capital lease obligation, which were determined to be Level 3 within the valuation hierarchy, approximated their carrying values as of June 30, 2019 and December 31, 2018, respectively.

The valuations of the assets and liabilities for the Company’s interest rate swaps, which are measured on a recurring basis, were determined to be Level 2 within the valuation hierarchy, and were based on independent values provided by financial institutions. Such valuations were determined using widely accepted valuation techniques, including discounted cash flow analyses, on the expected cash flows of each derivative. The analyses reflect the contractual terms of the swaps, including the period to maturity, and

14


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

user-observable market-ba sed inputs, including interest rate curves (“significant other observable inputs”). The fair value calculation also includes an amount for risk of non-performance using “significant unobservable inputs” such as estimates of current credit spreads to evalua te the likelihood of default. The Company has concluded that, as of June 30, 2019, the fair value associated with the “significant unobservable inputs” relating to the Company’s risk of non-performance was insignificant to the overall fair value of the int erest rate swap agreements and, as a result, that the relevant inputs for purposes of calculating the fair value of the interest rate swap agreements, in their entirety, were based upon “significant other observable inputs”.

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 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.

Valuations were prepared using internally-developed valuation models. These valuations are reviewed and approved, during each reporting period, by a diverse group of management, as deemed necessary, including personnel from the acquisition, accounting, finance, operations, development and leasing departments, and the valuations are updated as appropriate. In addition, the Company may engage third-party valuation experts to assist with the preparation of certain of its valuations.

The following tables show the hierarchy for those assets measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018, respectively:

 

 

 

June 30, 2019

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Investments related to deferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

compensation liabilities (a)

 

$

740,000

 

 

$

 

 

$

 

 

$

740,000

 

Deferred compensation liabilities (b)

 

$

738,000

 

 

$

 

 

$

 

 

$

738,000

 

Interest rate swaps asset (a)

 

$

 

 

$

498,000

 

 

$

 

 

$

498,000

 

Interest rate swaps liability (b)

 

$

 

 

$

7,274,000

 

 

$

 

 

$

7,274,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Investments related to deferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

compensation liabilities (a)

 

$

616,000

 

 

$

 

 

$

 

 

$

616,000

 

Deferred compensation liabilities (b)

 

$

610,000

 

 

$

 

 

$

 

 

$

610,000

 

Interest rate swaps asset (a)

 

$

 

 

$

8,871,000

 

 

$

 

 

$

8,871,000

 

Interest rate swaps liability (b)

 

$

 

 

$

1,576,000

 

 

$

 

 

$

1,576,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Included in other assets and deferred charges, net in the accompanying consolidated balance sheets.

 

(b) Included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

 

 

As of June 30, 2019, one retail property, totaling $1.8 million, was determined to be a Level 3 asset under the hierarchy, and was measured at fair value less cost to sell on a non-recurring basis using an income capitalization approach, consisting of a

15


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

capitalization rate of 8.5%. In addition, real estate held for sale on the consolidated ba lance sheet as of June 30, 2 019 includes one property for which its fair value exceeds its carrying value .

 

Note 5. Mortgage Loans Payable and Credit Facility

Debt and capital lease obligations are composed of the following at June 30, 2019:

 

 

 

 

 

June 30, 2019

 

 

 

 

 

 

 

 

 

Contractual

 

 

 

Maturity

 

Balance

 

 

interest rates

 

Description

 

dates

 

outstanding

 

 

weighted-average

 

Fixed-rate mortgage

 

Jun 2026

 

$

47,181,000

 

 

3.9%

 

Capital lease obligation

 

Sep 2050

 

 

5,681,000

 

 

5.3%

 

Unsecured credit facilities (a):

 

 

 

 

 

 

 

 

 

 

Variable-rate:

 

 

 

 

 

 

 

 

 

 

Revolving credit facility

 

Sep 2021

(b)

 

99,000,000

 

 

3.9%

 

Term loan

 

Sep 2022

 

 

50,000,000

 

 

4.1%

 

Fixed-rate (c):

 

 

 

 

 

 

 

 

 

 

Term loan

 

Feb 2021

 

 

75,000,000

 

 

3.7%

 

Term loan

 

Feb 2022

 

 

50,000,000

 

 

3.1%

 

Term loan

 

Sep 2022

(d)

 

50,000,000

 

 

2.9%

 

Term loan

 

Apr 2023

 

 

100,000,000

 

 

3.3%

 

Term loan

 

Sep 2024

 

 

75,000,000

 

 

3.8%

 

Term loan

 

Jul 2025

 

 

75,000,000

 

 

4.7%

 

 

 

 

 

 

626,862,000

 

 

3.7%

 

Unamortized issuance costs

 

 

 

 

(3,153,000

)

 

 

 

 

 

 

 

 

$

623,709,000

 

 

 

 

 

 

 

(a)

During the quarter ended June 30, 2019, the weighted average interest rate for the Company’s unsecured credit facilities increased 14 basis points (“bps”) (ranging from an increase of 10 bps to 15 bps for each individual borrowing) as a result of a slight increase in the Company’s leverage ratio.

 

(b)

The revolving credit facility is subject to a one-year extension at the Company’s option.

 

(c)

The interest rates on these term loans consist of the London Interbank Offered Rate (“LIBOR”) plus a credit spread based on the Company’s leverage ratio, for which the Company has interest rate swap agreements which convert the LIBOR rates to fixed rates. Accordingly, these term loans are presented as fixed-rate debt. 

 

(d)

The current interest rate swap agreement expires in February 2020 at which time a new interest rate swap agreement will begin resulting in an effective interest ratio of 3.3%, based on the Company’s leverage ratio at June 30, 2019.  

Unsecured Revolving Credit Facility and Term Loans

As of June 30, 2019, the Company had $117.4 million available for additional borrowings under its revolving credit facility. The Company has a $300 million unsecured credit facility which, as amended and restated on September 8, 2017, consists of (1) a $250 million revolving credit facility, expiring on September 8, 2021, and (2) a $50 million term loan, expiring on September 8, 2022. The revolving credit facility may be extended, at the Company’s option, for an additional one-year period, subject to customary conditions. Under an accordion feature, the facility can be increased to $750 million, subject to customary conditions and lending commitments. Interest on borrowings under the revolving credit facility component can range from LIBOR plus 135 bps to 195 bps (150 bps at June 30, 2019) and interest on borrowings under the term loan component can range from LIBOR plus 130 to 190 bps (145 bps at June 30, 2019), each based on the Company’s leverage ratio. During the quarter ended June 30, 2019, the weighted average interest rate for the Company’s unsecured credit facilities increased 14 bps (ranging from an increase of 10 bps to 15 bps for each individual borrowing) as a result of a slight increase in the Company’s leverage ratio.

The Company’s unsecured credit facility and term loans contain financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum fixed charge coverage, and minimum net worth. In addition, the facility contains

16


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

restrictions including, but not limited to, limits on indebtedness, certain investments and distrib utions. Although the credit facility is unsecured, borrowing availability is based on unencumbered property adjusted net operating income, as defined in the agreements. The Company’s failure to comply with the covenants or the occurrence of an event of def ault under the facilities could result in the acceleration of the related debt and exercise of other lender remedies. As of June 30, 2019, the Company is in compliance with all financial covenants. Interest on borrowings under the unsecured credit facility and term loans are based on the Company’s leverage ratio.

Derivative Financial Instruments

The fair values of the interest rate swaps applicable to the unsecured term loans discussed above are included in other assets and deferred charges, net, and accounts payable and accrued liabilities on the consolidated balance sheet at June 30, 2019. Charges and/or credits relating to the changes in the fair value of the interest rate swaps are made to accumulated other comprehensive income (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 will be reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affect earnings. The Company estimates that approximately $0.3 million of accumulated other comprehensive income will be reclassified as an increase to earnings within the next twelve months.

The following is a summary of the derivative financial instruments held by the Company at June 30, 2019 and December 31, 2018:

 

June 30, 2019

Designation/

 

 

 

 

 

 

 

Fair

 

 

Maturity

 

Balance sheet

Cash flow

 

Derivative

 

Count

 

 

value

 

 

dates

 

location

Qualifying

 

Interest rate swaps

 

 

2

 

 

$

498,000

 

 

2020-2023

 

Other assets and deferred charges, net

Qualifying

 

Interest rate swaps

 

 

6

 

 

$

7,274,000

 

 

2021-2025

 

Accounts payable and accrued liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

Designation/

 

 

 

 

 

 

 

Fair

 

 

Maturity

 

Balance sheet

Cash flow

 

Derivative

 

Count

 

 

value

 

 

dates

 

location

Qualifying

 

Interest rate swaps

 

 

7

 

 

$

8,871,000

 

 

2019-2024

 

Other assets and deferred charges, net

Qualifying

 

Interest rate swaps

 

 

2

 

 

$

1,576,000

 

 

2025

 

Accounts payable and accrued liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The notional values of the interest rate swaps held by the Company at June 30, 2019 and December 31, 2018 were $425.0 million and $425.0 million, respectively.

 

17


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

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 three and six months ended June 30, 2019 and 2018, respectively:

 

 

 

 

 

(Loss) gain recognized in other

 

 

 

 

 

comprehensive (loss) income

 

 

 

 

 

(effective portion)

 

Designation/

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

Cash flow

 

Derivative

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Qualifying

 

Interest rate swaps

 

$

(8,077,000

)

 

$

2,094,000

 

 

$

(12,954,000

)

 

$

7,846,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) recognized in other

 

 

 

 

 

comprehensive (loss) income

 

 

 

 

 

reclassified into earnings (effective portion)

 

 

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

Classification

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Continuing Operations

 

$

519,000

 

 

$

157,000

 

 

$

1,084,000

 

 

$

19,000

 

 

As of June 30, 2019 the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts.  

 

Note 6. Commitments and Contingencies

The Company is a party to certain legal actions arising in the normal course of business. Management does not expect there to be adverse consequences from these actions that would be material to the Company’s consolidated financial statements.

The Company is the lessee under several ground lease and its executive office lease agreements. In accordance with the adoption of the new lease accounting standard (see Note 2 – “Recently-Adopted Accounting Pronouncements”), the Company recorded right-of-use assets and related lease liabilities for these leases as of January 1, 2019. As of June 30, 2019, the Company’s weighted average remaining lease term is approximately 31.2 years and the weighted average discount rate used to calculate the Company’s lease liability is approximately 5.6%. Rent expense under the Company’s ground lease and executive office lease agreements was approximately $0.4 million and $0.2 million for the three months ended June 30, 2019 and 2018, respectively, and $0.8 million and $0.5 million for the six months ended June 30, 2019 and 2018, 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 to the right-of-use liabilities as of June 30, 2019:

 

2019 - remaining

 

$

827,000

 

2020

 

 

1,095,000

 

2021

 

 

956,000

 

2022

 

 

955,000

 

2023

 

 

956,000

 

Thereafter

 

 

30,466,000

 

Total undiscounted future minimum lease payments

 

 

35,255,000

 

Future minimum lease payments, discount

 

 

(21,050,000

)

Right-of-use liabilities

 

$

14,205,000

 

 

Note 7. Shareholders’ Equity

Preferred Stock

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:

   

18


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

 

 

Series B

 

 

Series C

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

Par value

 

$

0.01

 

 

$

0.01

 

 

 

 

 

 

 

 

 

Liquidation value

 

$

25.00

 

 

$

25.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

Series B

 

 

Series C

 

 

Series B

 

 

Series C

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

Shares authorized

 

 

1,450,000

 

 

 

6,450,000

 

 

 

1,450,000

 

 

 

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

 

On December 18, 2018, the Company’s Board of Directors approved a stock repurchase program, which authorized the Company to purchase up to $30.0 million of the Company’s common stock in the open market or through private transactions, subject to market conditions, from time to time, through December 18, 2019. During the six months ended June 30, 2019, the Company repurchased approximately 2,050,000 shares at a weighted average price per share of $3.34. Since approval of the plan on December 18, 2018, the Company has repurchased a total of 2,823,000 shares at a weighted average price per share of $3.25.

Dividends

The following table provides a summary of dividends declared and paid per share:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Common stock

 

$

0.050

 

 

$

0.050

 

 

$

0.100

 

 

$

0.100

 

7.25% Series B Preferred Stock

 

$

0.453

 

 

$

0.453

 

 

$

0.906

 

 

$

0.906

 

6.50% Series C Preferred Stock

 

$

0.406

 

 

$

0.406

 

 

$

0.813

 

 

$

0.813

 

 

On July 16, 2019, the Company’s Board of Directors declared a dividend of $0.05 per share with respect to its common stock. At the same time, the Board declared dividends 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 distributions are payable on August 20, 2019 to shareholders of record on August 9, 2019.

 

Note 8. Revenues

Rental revenues for the three and six months ended June 30, 2019 and 2018, respectively, comprise the following:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Base rents

 

$

26,352,000

 

 

$

26,865,000

 

 

$

52,753,000

 

 

$

54,022,000

 

Expense recoveries

 

 

7,950,000

 

 

 

7,767,000

 

 

 

17,144,000

 

 

 

17,053,000

 

Percentage rent

 

 

265,000

 

 

 

127,000

 

 

 

447,000

 

 

 

216,000

 

Straight-line rents

 

 

111,000

 

 

 

246,000

 

 

 

335,000

 

 

 

492,000

 

Amortization of intangible lease liabilities, net

 

 

631,000

 

 

 

2,213,000

 

 

 

1,222,000

 

 

 

2,882,000

 

Total rents

 

$

35,309,000

 

 

$

37,218,000

 

 

$

71,901,000

 

 

$

74,665,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

Note 9. Share-Based Compensation

The following tables set forth certain share-based compensation information for the three and six months ended June 30, 2019 and 2018, respectively:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Expense relating to share/unit grants

 

$

1,140,000

 

 

$

973,000

 

 

$

2,237,000

 

 

$

2,054,000

 

Amounts capitalized

 

 

(112,000

)

 

 

(110,000

)

 

 

(194,000

)

 

 

(217,000

)

Total charged to operations

 

$

1,028,000

 

 

$

863,000

 

 

$

2,043,000

 

 

$

1,837,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company’s 2017 Stock Incentive 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 available for issuance under the plan by 2.0 million shares, to a new total of 6.0 million shares. 2.4 million shares remained available for grants pursuant to the 2017 Plan as of June 30, 2019.

During the six months ended June 30, 2019, there were 522,000 restricted shares issued, with a weighted average grant date fair value of $3.22 per share.

Note 10. 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 the three months ended June 30, 2019 and 2018, the Company had 2.8 million and 3.6 million, respectively, of weighted average unvested restricted shares outstanding that were participating securities. For the six months ended June 30, 2019 and 2018, the Company had 2.8 million and 3.8 million, respectively, of weighted average unvested restricted shares outstanding that were participating securities. The following table provides a reconciliation of the numerator and denominator of the EPS calculations for the three and six months ended June 30, 2019 and 2018:

 

20


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

June 30, 2019

(unaudited)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

5,544,000

 

 

$

9,937,000

 

 

$

8,533,000

 

 

$

(6,683,000

)

Preferred stock dividends

 

 

(2,688,000

)

 

 

(2,688,000

)

 

 

(5,376,000

)

 

 

(5,487,000

)

Preferred stock redemptions costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,507,000

)

Net (income) attributable to noncontrolling interests

 

 

(161,000

)

 

 

(160,000

)

 

 

(268,000

)

 

 

(208,000

)

Net earnings allocated to unvested shares

 

 

(138,000

)

 

 

(294,000

)

 

 

(282,000

)

 

 

(412,000

)

Net income (loss) attributable to vested common shares

 

$

2,557,000

 

 

$

6,795,000

 

 

$

2,607,000

 

 

$

(16,297,000

)

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of vested common shares outstanding, basic

 

 

86,260,000

 

 

 

88,011,000

 

 

 

86,420,000

 

 

 

87,817,000

 

Assumed vesting of market performance-based restricted stock units

 

 

-

 

 

 

155,000

 

 

 

-

 

 

 

-

 

Weighted average number of vested common shares outstanding, diluted

 

 

86,260,000

 

 

 

88,166,000

 

 

 

86,420,000

 

 

 

87,817,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share attributable to common shareholders, basic

 

$

0.03

 

 

$

0.08

 

 

$

0.03

 

 

$

(0.19

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share attributable to common shareholders, diluted

 

$

0.03

 

 

$

0.08

 

 

$

0.03

 

 

$

(0.19

)

 

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 the three and six months ended June 30, 2019, no restricted stock units (“RSU’s”) would have been issuable under the Company’s President and CEO market performance-based equity award had the measurement period ended on June 30, 2019; therefore this market performance-based equity award had no impact in calculation diluted EPS. In addition, fully-diluted EPS for the three months ended June 30, 2018 includes RSU’s that would be been issuable had  the measurement period ended on June 30, 2018, whereas for the six months ended June 30, 2018, these shares were excluded as they were anti-dilutive.  Net income/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 were 553,000 and 347,000 for the three months ended June 30, 2019 and 2018, respectively, and 553,000 and 347,000 for the six months ended June 30, 2019 and 2018, respectively.   

 

Note 11. Subsequent Events

In determining subsequent events, management reviewed all activity from July 1, 2019 through the date of filing this Qua rterly Report on Form 10-Q. There were no events or transactions that occurred that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

 

 

21


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s consolidated financial statements and related notes thereto included elsewhere in this report.

Executive Summary

The Company is a fully-integrated real estate investment trust that focuses primarily on ownership, operation and redevelopment of grocery-anchored shopping centers in high-density urban markets from Washington, D.C. to Boston. At June 30, 2019, the Company owned and managed a portfolio of 57 operating properties (excluding properties “held for sale”) totaling 8.6 million square feet of gross leasable area (“GLA”). The portfolio was 91.5% leased and 91.4% occupied at June 30, 2019.

The Company derives substantially all of its revenues from rents and operating expense reimbursements received pursuant to leases. The Company’s operating results therefore depend on the ability of its tenants to make the payments required by the terms of their leases. The Company focuses its investment activities on grocery-anchored shopping centers. The Company believes that, because of the need of consumers to purchase food and other staple goods and services generally available at such centers, its type of “necessities-based” properties should provide relatively stable revenue flows even during difficult economic times.

Significant Transactions

Acquisition

On June 19, 2019, the Company purchased Girard Plaza, a shopping center adjacent to its South Philadelphia property, located in Philadelphia, Pennsylvania. The purchase price for the property was $8.5 million, which has been allocated to real estate assets and liabilities.

Dispositions

On February 15, 2019, the Company sold Maxatawny Marketplace, located in Maxatawny, Pennsylvania. The sales price for the property was $10.3 million, which resulted in a gain on sale of $0.1 million, which has been included in continuing operations in the accompanying consolidated statement of operations.

On June 26, 2019, the Company sold Fort Washington Center, located in Fort Washington, Pennsylvania. The sales price for the property was $9.0 million, which resulted in a gain on sale of $2.8 million, which has been included in continuing operations in the accompanying consolidated statement of operations.

Real Estate Held for Sale

 

As of June 30, 2019, Carll’s Corner, located in Bridgeton, New Jersey and Suffolk Plaza, located in Suffolk, Virginia have been classified as “real estate held for sale” on the accompanying consolidated balance sheet. 

 

Equity

 

On December 18, 2018, the Company’s Board of Directors approved a stock repurchase program, which authorized the Company to purchase up to $30.0 million of the Company’s common stock in the open market or through private transactions, subject to market conditions, from time to time, through December 18, 2019. During the six months ended June 30, 2019, the Company repurchased approximately 2,050,000 shares at a weighted average price per share of $3.34. Since approval of the plan on December 18, 2018, the Company has repurchased a total of 2,823,000 shares at a weighted average price per share of $3.25.

Critical Accounting Policies

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition and the allowance for doubtful accounts receivable, real estate investments and purchase accounting allocations related thereto, asset impairments, and derivatives used to hedge interest-rate risks. Management’s estimates are based both on information that is currently available and on various other assumptions management believes to be reasonable under the circumstances. Actual results could differ from those estimates and those estimates could be different under varying assumptions or conditions.

 

22


 

The Company believes there have been no material changes to the items disclosed as its critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on For m 10-K for the year ended December 31, 2018.  See Note 2 – “Summary of Significant Accounting Policies” for recently-adopted accounting pronouncements.

Results of Operations

Comparison of three months ended June 30, 2019 to June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

2019

 

 

2018

 

 

Dollars

 

 

Percent

 

Revenues

 

$

35,660,000

 

 

$

41,350,000

 

 

$

(5,690,000

)

 

-13.8%

 

Property operating expenses

 

 

(11,249,000

)

 

 

(11,050,000

)

 

 

(199,000

)

 

1.8%

 

Property operating income

 

 

24,411,000

 

 

 

30,300,000

 

 

 

(5,889,000

)

 

 

 

 

General and administrative

 

 

(5,418,000

)

 

 

(4,276,000

)

 

 

(1,142,000

)

 

26.7%

 

Depreciation and amortization

 

 

(10,346,000

)

 

 

(10,541,000

)

 

 

195,000

 

 

-1.8%

 

Gain on sale

 

 

2,841,000

 

 

 

 

 

 

2,841,000

 

 

n/a

 

Interest expense

 

 

(5,944,000

)

 

 

(5,546,000

)

 

 

(398,000

)

 

7.2%

 

Net income

 

 

5,544,000

 

 

 

9,937,000

 

 

 

(4,393,000

)

 

 

 

 

Net (income) attributable to noncontrolling interests

 

 

(161,000

)

 

 

(160,000

)

 

 

(1,000

)

 

 

 

 

Net income attributable to Cedar Realty Trust, Inc.

 

$

5,383,000

 

 

$

9,777,000

 

 

$

(4,394,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues were lower primarily as a result of (1) $5.4 million relating to a dark anchor tenant terminating its lease prior to the contractual expiration in 2018 at West Bridgewater Plaza, (2) a decrease of $0.8 million in rental revenues and expense recoveries attributable to properties that were sold or held for sale in 2019 and 2018, and (3) a decrease of $0.3 million in rental revenues and expense recoveries attributable to same-center properties which was driven by the adoption of the new lease accounting standard (see Note 2 – “Recently-Adopted Accounting Pronouncements”), partially offset by (1) an increase of $0.5 million in rental revenues and expense recoveries attributable to properties acquired in 2019 and 2018, and (2) an increase of $0.1 million in rental revenues and expense recoveries attributable to redevelopment properties.

Property operating expenses were higher primarily as a result of an increase of $0.4 million in property operating expenses attributable to properties acquired in 2019 and 2018, partially offset by a decrease of $0.2 million in property operating expenses attributable to properties that were sold or held for sale in 2019 and 2018.

General and administrative costs were higher primarily as a result of (1) an increase in payroll expense of $0.5 million relating to the adoption of the new lease accounting standard in 2019 which no longer permits the capitalization of initial direct leasing costs, and (2) an increase in payroll and payroll related expenses of $0.3 million related to the hiring of several new employees.

Depreciation and amortization expenses were lower as a result of a decrease of $1.0 million attributable to properties that were sold or held for sale in 2019 and 2018, partially offset by (1) an increase of $0.4 million attributable to redevelopment properties, (2) an increase of $0.3 million attributable to same-center properties, and (3) an increase of $0.1 million attributable to properties acquired in 2019 and 2018.

Gain on sale in 2019 relates to the sale of Fort Washington Center, located in Fort Washington, Pennsylvania.

Interest expense was higher primarily as a result of an increase of $0.6 million as a result of an increase in the overall weighted average interest rate, partially offset by a decrease of $0.1 million as a result of a decrease in the overall weighted average outstanding principal balance of debt.  


23


 

Comparison of six months ended June 30, 2019 to June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

2019

 

 

2018

 

 

Dollars

 

 

Percent

 

Revenues

 

$

72,543,000

 

 

$

78,918,000

 

 

$

(6,375,000

)

 

-8.1%

 

Property operating expenses

 

 

(24,426,000

)

 

 

(23,923,000

)

 

 

(503,000

)

 

2.1%

 

Property operating income

 

 

48,117,000

 

 

 

54,995,000

 

 

 

(6,878,000

)

 

 

 

 

General and administrative

 

 

(10,216,000

)

 

 

(8,770,000

)

 

 

(1,446,000

)

 

16.5%

 

Depreciation and amortization

 

 

(20,475,000

)

 

 

(20,595,000

)

 

 

120,000

 

 

-0.6%

 

Gain on sales

 

 

2,942,000

 

 

 

 

 

 

2,942,000

 

 

n/a

 

Impairment charges

 

 

 

 

 

(21,396,000

)

 

 

21,396,000

 

 

n/a

 

Interest expense

 

 

(11,835,000

)

 

 

(10,917,000

)

 

 

(918,000

)

 

8.4%

 

Net income (loss)

 

 

8,533,000

 

 

 

(6,683,000

)

 

 

15,216,000

 

 

 

 

 

Net (income) attributable to noncontrolling interests

 

 

(268,000

)

 

 

(208,000

)

 

 

(60,000

)

 

 

 

 

Net income (loss) attributable to Cedar Realty Trust, Inc.

 

$

8,265,000

 

 

$

(6,891,000

)

 

$

15,156,000

 

 

 

 

 

 

Revenues were lower primarily as a result of (1) $5.4 million relating to a dark anchor tenant terminating its lease prior to the contractual expiration in 2018 at West Bridgewater Plaza, (2) a decrease of $1.7 million in rental revenues and expense recoveries attributable to properties that were sold or held for sale in 2019 and 2018, and (3) a decrease of $0.9 million in rental revenues and expense recoveries attributable to same-center properties which was driven by the adoption of the new lease accounting standard (see Note 2 – “Recently-Adopted Accounting Pronouncements”), partially offset by (1) an increase of $1.0 million in rental revenues and expense recoveries attributable to properties acquired in 2019 and 2018, (2) an increase of $0.3 million in rental revenues and expense recoveries attributable to redevelopment properties, and (3) an increase of other income of $0.2 million.

Property operating expenses were higher primarily as a result of (1) an increase of $0.7 million in property operating expenses attributable to properties acquired in 2019 and 2018, and (2) an increase of $0.4 million in property operating expenses attributable to the Company’s redevelopment properties, partially offset by (1) a decrease of $0.4 million in property operating expenses attributable to properties that were sold or held for sale in 2019 and 2018, and (2) a decrease of $0.3 million in property operating expenses attributable to same-center properties which was driven by the adoption of the new lease accounting standard (see Note 2 – “Recently-Adopted Accounting Pronouncements”).

General and administrative costs were higher primarily as a result of (1) an increase in payroll expense of $0.9 million relating to the adoption of the new lease accounting standard in 2019 which no longer permits the capitalization of initial direct leasing costs, and (2) an increase in payroll and payroll related expenses of $0.3 million related to the hiring of several new employees.

Depreciation and amortization expenses remained consistent as a result of a decrease of $1.4 million attributable to properties that were sold or held for sale in 2019 and 2018, offset by (1) an increase of $0.7 million attributable to redevelopment properties, (2) an increase of $0.3 million attributable to properties acquired in 2019 and 2018, and (3) an increase of $0.3 million attributable to same-center properties.

Gain on sales in 2019 relates to the sale of Maxatawny Marketplace, located in Maxatawny, Pennsylvania and Fort Washington Center, located in Fort Washington, Pennsylvania.

Impairment charges in 2018 relate to impairments on (1) Carll’s Corner, located in Bridgeton, New Jersey, and (2) West Bridgewater Plaza, located in West Bridgewater Massachusetts, which was sold on September 28, 2018.

Interest expense was higher primarily as a result of (1) an increase of $0.8 million as a result of an increase in the overall weighted average interest rate, and (2) an increase of $0.1 million as a result of an increase in the overall weighted average outstanding principal balance of debt.  

Same-Property Net Operating Income

Same-property net operating income (“same-property NOI”) is a widely-used non-GAAP financial measure for REITs that the Company believes, when considered with financial statements prepared in accordance with GAAP, is useful to investors as it provides an indication of the recurring cash generated by the Company’s properties by excluding certain non-cash revenues and expenses, as well as other infrequent items such as lease termination income which tends to fluctuate more than rents from year to year. Properties are included in same-property NOI if they are owned and operated for the entirety of both periods being compared, except for properties undergoing significant redevelopment and expansion until such properties have stabilized, and properties classified as held

24


 

for sale. Consistent with the capital treatment of such costs under GAAP, tenant improvements, lea sing commissions and other direct leasing costs are excluded from same-property NOI.

The most directly comparable GAAP financial measure is consolidated operating income. Same-property NOI should not be considered as an alternative to consolidated operating income prepared in accordance with GAAP or as a measure of liquidity. Further, same-property NOI is a measure for which there is no standard industry definition and, as such, it is not consistently defined or reported on among the Company’s peers, and thus may not provide an adequate basis for comparison among REITs.

The following table reconciles same-property NOI to the Company’s consolidated operating income:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Operating income

 

$

11,488,000

 

 

$

15,483,000

 

 

$

20,368,000

 

 

$

4,234,000

 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

5,418,000

 

 

 

4,276,000

 

 

 

10,216,000

 

 

 

8,770,000

 

Gain on sales

 

 

(2,841,000

)

 

 

 

 

 

(2,942,000

)

 

 

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

21,396,000

 

Depreciation and amortization

 

 

10,346,000

 

 

 

10,541,000

 

 

 

20,475,000

 

 

 

20,595,000

 

Straight-line rents

 

 

(111,000

)

 

 

(246,000

)

 

 

(335,000

)

 

 

(492,000

)

Amortization of intangible lease liabilities

 

 

(631,000

)

 

 

(2,213,000

)

 

 

(1,222,000

)

 

 

(2,882,000

)

Other adjustments

 

 

(29,000

)

 

 

(100,000

)

 

 

(117,000

)

 

 

(141,000

)

NOI related to properties not defined as same-property

 

 

(4,225,000

)

 

 

(8,207,000

)

 

 

(8,111,000

)

 

 

(12,804,000

)

Same-property NOI

 

$

19,415,000

 

 

$

19,534,000

 

 

$

38,332,000

 

 

$

38,676,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of same properties

 

 

48

 

 

 

48

 

 

 

48

 

 

 

48

 

Same-property occupancy, end of period

 

 

91.3

%

 

 

91.9

%

 

 

91.3

%

 

 

91.9

%

Same-property leased, end of period

 

 

91.4

%

 

 

92.1

%

 

 

91.4

%

 

 

92.1

%

Same-property average base rent, end of period

 

$

13.19

 

 

$

13.09

 

 

$

13.19

 

 

$

13.09

 

 

Same-property NOI decreased 0.6% and 0.9% for the comparative three and six month periods, respectively. The results were driven primarily by a decrease of 60 bps in occupancy, partially offset by an increase in average base rents of $0.10 per square foot.

 

Leasing Activity

The following is a summary of the Company’s retail leasing activity during the six months ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant

 

 

 

 

 

 

 

 

 

 

 

 

New rent

 

 

Prior rent

 

 

Cash basis

 

 

improvements

 

 

 

 

Leases

 

 

 

 

 

 

per

 

 

per

 

 

%

 

 

per

 

 

 

 

signed

 

 

GLA

 

 

sq.ft. ($)

 

 

sq.ft. ($)

 

 

change

 

 

sq.ft. ($)

 

 

Renewals

 

 

59

 

 

 

767,400

 

 

 

13.24

 

 

 

13.41

 

 

 

-1.2

%

 

 

1.79

 

 

New Leases - Comparable

 

 

16

 

 

 

86,500

 

 

 

13.61

 

 

 

12.81

 

 

 

6.3

%

 

 

36.58

 

(a)

New Leases - Non-Comparable (b)

 

 

4

 

 

 

11,700

 

 

 

43.14

 

 

n/a

 

 

n/a

 

 

 

0.00

 

(a)

Total (c)

 

 

79

 

 

 

865,600

 

 

 

13.68

 

 

n/a

 

 

n/a

 

 

 

5.42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Includes both tenant allowance and landlord work. Excludes first generation space.

 

(b)

Includes leases signed at first generation and expansion spaces.

 

(c)

Legal fees and leasing commissions averaged a combined total of $0.92 per square foot.

Liquidity and Capital Resources

The Company funds operating expenses and other short-term liquidity requirements, including debt service, tenant improvements, leasing commissions, preferred and common dividend distributions and distributions to minority interest partners, if made, primarily from its operations. The Company may also use its revolving credit facility for these purposes. The Company expects to fund long-term liquidity requirements for property acquisitions, redevelopment costs, capital improvements, and maturing debt initially with its revolving credit facility, and ultimately through a combination of issuing and/or assuming additional debt, the sale of

25


 

equity securities, the issuance of additional OP Units, and/or the sale of properties. Although the Company believes it has access to secured and unsecured financing, there can be no assurance that the Company will have the availability of financing on completed development projects, additional construction financing, or proceeds from the refinancing of existing debt.

As of June 30, 2019, the Company had $117.4 million available for additional borrowings under its revolving credit facility. The Company has a $300 million unsecured credit facility which, as amended and restated on September 8, 2017, consisting of (1) a $250 million revolving credit facility, and (2) a $50 million term loan. Under an accordion feature, the facility can be increased to $750 million, subject to customary conditions and lending commitments.

The Company’s unsecured credit facility and term loans contain financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum fixed charge coverage, and minimum net worth. In addition, the facilities contain restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. Although the credit facilities are unsecured, borrowing availability is based on unencumbered property adjusted net operating income, as defined in the agreements. The Company’s failure to comply with the covenants or the occurrence of an event of default under the facilities could result in the acceleration of the related debt and exercise of other lender remedies. As of June 30, 2019, the Company is in compliance with all financial covenants. Interest on borrowings under the unsecured credit facility and term loans are based on the Company’s leverage ratio.

Debt and capital lease obligations are composed of the following at June 30, 2019:

 

 

 

 

 

June 30, 2019

 

 

 

 

 

 

 

 

 

Contractual

 

 

 

Maturity

 

Balance

 

 

interest rates

 

Description

 

dates

 

outstanding

 

 

weighted-average

 

Fixed-rate mortgage

 

Jun 2026

 

$

47,181,000

 

 

3.9%

 

Capital lease obligation

 

Sep 2050

 

 

5,681,000

 

 

5.3%

 

Unsecured credit facilities (a):

 

 

 

 

 

 

 

 

 

 

Variable-rate:

 

 

 

 

 

 

 

 

 

 

Revolving credit facility

 

Sep 2021

(b)

 

99,000,000

 

 

3.9%

 

Term loan

 

Sep 2022

 

 

50,000,000

 

 

4.1%

 

Fixed-rate (c):

 

 

 

 

 

 

 

 

 

 

Term loan

 

Feb 2021

 

 

75,000,000

 

 

3.7%

 

Term loan

 

Feb 2022

 

 

50,000,000

 

 

3.1%

 

Term loan

 

Sep 2022

(d)

 

50,000,000

 

 

2.9%

 

Term loan

 

Apr 2023

 

 

100,000,000

 

 

3.3%

 

Term loan

 

Sep 2024

 

 

75,000,000

 

 

3.8%

 

Term loan

 

Jul 2025

 

 

75,000,000

 

 

4.7%

 

 

 

 

 

 

626,862,000

 

 

3.7%

 

Unamortized issuance costs

 

 

 

 

(3,153,000

)

 

 

 

 

 

 

 

 

$

623,709,000

 

 

 

 

 

 

 

(a)

During the quarter ended June 30, 2019, the weighted average interest rate for the Company’s unsecured credit facilities increased 14 bps (ranging from an increase of 10 bps to 15 bps for each individual borrowing) as a result of a slight increase in the Company’s leverage ratio.

 

(b)

The revolving credit facility is subject to a one-year extension at the Company’s option.

(c)  The interest rates on these term loans consist of LIBOR plus a credit spread based on the Company’s leverage ratio, for which the Company has interest rate swap agreements which convert the LIBOR rates to fixed rates. Accordingly, these term loans are presented as fixed-rate debt. 

(d) The current interest rate swap agreement expires in February 2020 at which time a new interest rate swap agreement will begin resulting in an effective interest ratio of 3.3%, based on the Company’s leverage ratio at June 30, 2019.  


26


 

The following tab le details the Company’s debt and capital lease obligation maturities at June 30, 2019:

 

 

 

Mortgage Loan

 

 

Capital Lease

 

 

Revolving

 

 

Term

 

 

 

 

 

Year

 

Payable

 

 

Obligation

 

 

Credit Facility

 

 

Loans

 

 

Total

 

2019

 

$

502,000

 

 

$

17,000

 

 

$

-

 

 

$

-

 

 

$

519,000

 

2020

 

 

1,034,000

 

 

 

33,000

 

 

 

-

 

 

 

-

 

 

 

1,067,000

 

2021

 

 

1,074,000

 

 

 

35,000

 

 

 

99,000,000

 

(a)

 

75,000,000

 

 

 

175,109,000

 

2022

 

 

1,116,000

 

 

 

37,000

 

 

 

-

 

 

 

150,000,000

 

 

 

151,153,000

 

2023

 

 

1,160,000

 

 

 

39,000

 

 

 

-

 

 

 

100,000,000

 

 

 

101,199,000

 

Thereafter

 

 

42,295,000

 

 

 

5,520,000

 

 

 

-

 

 

 

150,000,000

 

 

 

197,815,000

 

 

 

$

47,181,000

 

 

$

5,681,000

 

 

$

99,000,000

 

 

$

475,000,000

 

 

$

626,862,000

 

 

(a)

The revolving credit facility is subject to a one-year extension at the Company’s option.

The remaining property-specific mortgage loan payable matures in 2026. Mortgage loans payable 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, and is not available to fund other property-level or Company-level obligations.

In order to continue qualifying as a REIT, the Company is required to distribute at least 90% of its “REIT taxable income”, as defined in the Internal Revenue Code of 1986, as amended (the “Code”). The Company paid common and preferred stock dividends during 2018, and has continued to declare and pay common and preferred stock dividends during 2019. While the Company intends to continue paying regular quarterly dividends, future dividend declarations will continue to be at the discretion of the Board of Directors, and will depend on the cash flow and financial condition of the Company, capital requirements, annual distribution requirements under the REIT provisions of the Code, and such other factors as the Board of Directors may deem relevant. Additionally, the Company may reduce or suspend payment of dividends to retain cash and reduce debt obligations and/or to fund redevelopments and other capital needs.

Net Cash Flows

 

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows provided by (used in):

 

 

 

 

 

 

 

 

Operating activities

 

$

28,392,000

 

 

$

30,574,000

 

Investing activities

 

$

(5,606,000

)

 

$

(14,016,000

)

Financing activities

 

$

(22,682,000

)

 

$

(17,122,000

)

 

Operating Activities

Net cash provided by operating activities, before net changes in operating assets and liabilities, was $27.5 million for the six months ended June 30, 2019 and $35.3 million for the six months ended June 30, 2018. The decrease was primarily a result of (1) the Company accepting a payment of $4.3 million in consideration for permitting a dark anchor tenant to terminate its lease prior to the contractual expiration in 2018, (2) an increase in cash paid for interest, and (3) property dispositions in 2019 and 2018.

Investing Activities

 

Net cash flows used in investing activities were primarily the result of the Company’s property acquisitions, expenditures for property improvements and property disposition activities. During the six months ended June 30, 2019 the Company incurred expenditures of $15.2 million for property improvements, and acquired a property for $9.1 million, which was partially offset by $24.3 million in proceeds from the sales of properties. During the six months ended June 30, 2018, the Company incurred expenditures of $14.0 million for property improvements.

Financing Activities

 

During the six months ended June 30, 2019, the Company paid $14.3 million of preferred and common stock distributions, had $6.8 million of common stock repurchases, had net repayments of $1.0 million under the revolving credit facility and $0.5 million of mortgage repayments. During the six months ended June 30, 2018, the Company paid $50.0 million to partially redeem shares of its

27


 

Series B Preferred Stock, had $15.1 million of preferred and c ommon stock distributions, and $1.5 million of repayments of mortgage obligations, which w ere partially offset by net borrowings of $49.5 million under the revolving credit facility.

Funds From Operations

Funds From Operations (“FFO”) is a widely recognized supplemental non-GAAP measure utilized to evaluate the financial performance of a REIT. The Company presents FFO in accordance with the definition adopted by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT generally defines FFO as net income attributable to common shareholders (determined in accordance with GAAP), excluding gains (losses) from sales of real estate properties, impairment provisions on real estate properties, plus real estate related depreciation and amortization, and adjustments for partnerships and joint ventures to reflect FFO on the same basis. The Company considers FFO to be an appropriate measure of its financial performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than other depreciable assets.

The Company also considers Operating Funds From Operations (“Operating FFO”) to be an additional meaningful financial measure of financial performance because it excludes items the Company does not believe are indicative of its core operating performance, such as non-capitalized acquisition pursuit costs, amounts relating to early extinguishment of debt and preferred stock redemption costs, management transition costs and certain redevelopment costs. The Company believes Operating FFO further assists in comparing the Company’s performance across reporting periods on a consistent basis by excluding such items.

FFO and Operating FFO should be reviewed with net income attributable to common shareholders, the most directly comparable GAAP financial measure, when trying to understand the Company’s operating performance. FFO and Operating FFO do not represent cash generated from operating activities and should not be considered as an alternative to net income attributable to common shareholders or to cash flow from operating activities. The Company’s computations of FFO and Operating FFO may differ from the computations utilized by other REITs and, accordingly, may not by comparable to such REITs.

A reconciliation of net income (loss) attributable to common shareholders to FFO and Operating FFO for the three and six months ended June 30, 2019 and 2018 is as follows:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss) attributable to common shareholders

 

$

2,695,000

 

 

$

7,089,000

 

 

$

2,889,000

 

 

$

(15,885,000

)

Real estate depreciation and amortization

 

 

10,300,000

 

 

 

10,490,000

 

 

 

20,383,000

 

 

 

20,494,000

 

Limited partners' interest

 

 

17,000

 

 

 

27,000

 

 

 

19,000

 

 

 

(60,000

)

Gain on sales

 

 

(2,841,000

)

 

 

 

 

 

(2,942,000

)

 

 

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

21,396,000

 

Consolidated minority interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share of income

 

 

144,000

 

 

 

133,000

 

 

 

249,000

 

 

 

268,000

 

Share of FFO

 

 

(107,000

)

 

 

(120,000

)

 

 

(186,000

)

 

 

(244,000

)

FFO applicable to diluted common shares

 

 

10,208,000

 

 

 

17,619,000

 

 

 

20,412,000

 

 

 

25,969,000

 

Preferred stock redemption costs

 

 

 

 

 

 

 

 

 

 

 

3,507,000

 

Operating FFO applicable to diluted common shares

 

$

10,208,000

 

 

$

17,619,000

 

 

$

20,412,000

 

 

$

29,476,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per diluted common share

 

$

0.11

 

 

$

0.19

 

 

$

0.22

 

 

$

0.28

 

Operating FFO per diluted common share

 

$

0.11

 

 

$

0.19

 

 

$

0.22

 

 

$

0.32

 

Weighted average number of diluted common shares (a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

90,526,000

 

 

 

91,929,000

 

 

 

90,694,000

 

 

 

91,788,000

 

OP Units

 

 

553,000

 

 

 

347,000

 

 

 

553,000

 

 

 

347,000

 

 

 

 

91,079,000

 

 

 

92,276,000

 

 

 

91,247,000

 

 

 

92,135,000

 

 

(a) The weighted average number of diluted common shares used to compute FFO and Operating FFO applicable to diluted common shares includes OP Units and unvested restricted shares that are excluded from the computation of diluted EPS.

 

Inflation

Inflation has been relatively low in recent years and has not had a significant detrimental impact on the Company’s results of operations. There have been mixed indications of an increase in inflation in the U.S. economy. If inflation rates increase, substantially

28


 

all of the Company’s tenant leases contain provisions designed to partially mitigate the negative impact of inflation in the near term. Such lease provisions include clauses that require tenants to reimburse the Company for inflation-sensitive co sts such as real estate taxes and many of the operating expenses it incurs. Significant inflation rate increases over a prolonged period of time may have a material adverse impact on the Company’s business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

One of the principal market risks facing the Company is the risk of interest rate changes, primarily through its variable-rate revolving credit facility and term loans. The Company’s objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows, and to lower its overall borrowing costs. To achieve these objectives, the Company may borrow at either fixed rates or at variable rates and enter into derivative financial instruments, such as interest rate swaps, to mitigate its interest rate risk. The Company does not enter into derivative or interest rate transactions for speculative purposes. The Company is not directly subject to foreign currency risk.

The Company has entered into forward interest rate swap agreements which convert the LIBOR rates to fixed rates for certain unsecured term loans. At June 30, 2019, the Company had $0.5 million included in deferred charges and other assets, net, in addition to $7.3 million included in accounts payable and accrued liabilities on the consolidated balance sheet relating to the fair value of the interest rate swaps applicable to certain unsecured term loans.

 

At June 30, 2019, long-term debt consisted of a fixed-rate mortgage loan payable, a capital lease obligation, unsecured term loans, and the Company’s unsecured variable-rate credit facility. Excluding unamortized premiums and debt issuance costs, the average interest rate on the $477.9 million of fixed-rate debt outstanding was 3.7%, with maturities at various dates through 2050. The average interest rate on the $149.0 million of variable-rate debt outstanding, which consists of the unsecured revolving credit facility and a term loan, was 4.0%. With respect to the $149.0 million of variable-rate debt, if contractual interest rates either increase or decrease by 100 bps, the Company’s interest cost would increase or decrease respectively by approximately $1.5 million per annum.

With respect to the Company’s fixed rate mortgage notes and unsecured term loans, changes in interest rates generally do not affect the Company’s interest expense as these notes are at fixed rates for extended terms. Because the Company presently intends to hold its existing fixed-rate debt either to maturity or until the sale of the associated property, these fixed-rate notes pose an interest rate risk to the Company’s results of operations and its working capital position only upon the refinancing of that indebtedness. The Company’s possible risk is from increases in long-term interest rates that may occur as this may increase the cost of refinancing maturing fixed-rate debt. In addition, the Company may incur prepayment penalties or defeasance costs when prepaying or defeasing debt.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), designed to ensure that information required to be disclosed in its filings under the Exchange Act is reported within the time periods specified in the rules and regulations of the Securities and Exchange Commission (“SEC”). In this regard, the Company has formed a Disclosure Committee currently comprising several of the Company’s executive officers as well as certain other employees with knowledge of information that may be considered in the SEC reporting process. The Committee has responsibility for the development and assessment of the financial and non-financial information to be included in the reports filed with the SEC, and assists the Company’s Chief Executive Officer and Chief Financial Officer in connection with their certifications contained in the Company’s SEC filings. The Committee meets regularly and reports to the Audit Committee on a quarterly or more frequent basis. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated its disclosure controls and procedures as of June 30, 2019, and have concluded that such disclosure controls and procedures are effective.

During the three months ended June 30, 2019, there have been no changes in the Company’s internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

 

 


29


 

Part II

Other Information

Item 1.

Legal Proceedings

The Company is not presently involved in any litigation, nor, to its knowledge, is any litigation threatened against the Company or its subsidiaries, which is either not covered by the Company’s liability insurance, or, in management’s opinion, would result in a material adverse effect on the Company’s financial position or results of operations.

Item 1A.

Risk Factors

There were no material changes to the Risk Factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable

Item 5.

Other Information

None.

Item 6.

Exhibits

 

Exhibit 10.1

First Amendment to Cedar Realty Trust, Inc. 2017 Stock Incentive Plan, incorporated by reference to Annex A of the Definitive Proxy Statement filed on March 29, 2019.

 

Exhib it 31.1

Rule 13a-14(a) Certification of Chief Executive Officer

 

Exhibit 31.2

Rule 13a-14(a) Certification of Chief Financial Officer

 

Exhibit 32.1

Section 1350 Certification of Chief Executive Officer

 

Exhibit 32.2

Section 1350 Certification of Chief Financial Officer

 

Exhibit 101.INS

XBRL Instance Document

 

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document

 

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

 

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

 

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document

 

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

30


 

SI GNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CEDAR REALTY TRUST, INC.

 

By:

/s/ BRUCE J. SCHANZER

 

By:

/s/ PHILIP R. MAYS

 

Bruce J. Schanzer

 

 

Philip R. Mays

 

President and Chief Executive Officer

(Principal executive officer)

 

 

Executive Vice President, Chief Financial Officer and Treasurer

 

 

 

 

(Principal financial officer)

 

 

 

 

 

 

August 1, 2019

 

 

 

 

 

31

Exhibit 31.1

CERTIFICATION

I, Bruce J. Schanzer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cedar Realty Trust, Inc. (the “Company” or “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))  for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:  August 1, 2019

 

/s/ BRUCE J. SCHANZER

Bruce J. Schanzer

President and Chief Executive Officer

 

Exhibit 31.2

CERTIFICATION

I, Philip R. Mays, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cedar Realty Trust, Inc. (the “Company” or “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))  for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: August 1, 2019

 

/s/ PHILIP R. MAYS

Philip R. Mays

Executive Vice President, Chief Financial Officer and Treasurer

 

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce J. Schanzer, Chief Executive Officer of Cedar Realty Trust, Inc. (the “Company”), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby certify, to the best of my knowledge, as follows:

1. The Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, I have executed this Certification this 1 st day of August, 2019.

 

/s/ BRUCE J. SCHANZER

Bruce J. Schanzer

President and Chief Executive Officer

 

Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Philip R. Mays, Chief Financial Officer of Cedar Realty Trust, Inc. (the “Company”), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby certify, to the best of my knowledge, as follows:

1. The Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, I have executed this Certification this 1 st day of August, 2019.

 

/s/ PHILIP R. MAYS

Philip R. Mays

Executive Vice President, Chief Financial Officer and Treasurer