CEDAR REALTY TRUST 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 fromWashington, D.C. toBoston . AtMarch 31, 2021 , the Company owned and managed a portfolio of 53 operating properties (excluding properties "held for sale") totaling 7.6 million square feet of gross leasable area ("GLA"). The portfolio was 87.8% leased and 86.9% occupied atMarch 31, 2021 . 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 Circumstances and Transactions
COVID-19 Pandemic
As a result of COVID-19, the Company has received numerous rent relief requests, most often in the form of rent deferrals. The Company has entered into lease modifications that deferred approximately$3.3 million and waived approximately$1.8 million of rental income throughMarch 31, 2021 , respectively. To date, the weighted average payback period of deferred rent is approximately 10 months, beginning at various time commencing inJuly 2020 throughMarch 2021 . The Company has collected approximately 96% and 94% of contractual base rents and monthly tenant reimbursements for the quarters endedMarch 31, 2021 andDecember 31, 2020 , respectively. The Company currently remains in active discussions and negotiations with its impacted tenants and anticipates the need to grant additional rent concessions or other lease-related relief, such as the deferral of lease payments for a period of time to be paid over the remaining term of the lease. The nature and financial impact of such additional rent relief is currently unknown as negotiations are in progress.
Real Estate
OnJuly 23, 2020 , the Company entered into a commercial lease agreement (the "Lease") with the Government of theDistrict of Columbia (the "District"), for the lease by the District of office space of approximately 240,000 square feet in a new six-story building to be constructed by the Company atSenator Square . The building is planned to house the new office headquarters for theDistrict of Columbia's Department of General Services' ("DGS") 700-member workforce. The term of the Lease is 20 years and 10 months, to commence upon substantial completion and delivery to DGS. Demolition began on the space in second quarter of 2021 and the Company currently estimates that the space will be delivered during the end of the fourth quarter 2022. Upon completion of the building, the District will be obligated to pay initial annual net rent of approximately$5.4 million per year, subject to a 2.5% annual escalator on each anniversary of rent commencement, plus certain operating costs, property taxes and amortization of tenant improvements together totaling approximately an additional$8.1 million per year, for an aggregate total annual rent of approximately$13.5 million . The Lease provides for a free rent period of 10 months immediately following rent commencement. The Lease also provides the District with a tenant credit of approximately$6.8 million to be applied, at the District's election, against either annual rent or any other tenant payment obligations including tenant improvement costs, in excess of the tenant improvement allowance. Pursuant to the Lease, the landlord will contribute up to$155 per rentable square foot toward the cost of tenant improvements, to be amortized over 240 months. In addition, the Lease provides that the Company will contribute$9.38 per rentable square foot in additional tenant improvement allowance between the 10th and 12th Lease years, upon the District's timely election. The obligations of the District under the Lease are subject to annual budget appropriation. OnMay 5, 2021 , the Company formed a joint venture withGoldman Sachs Urban Investment Group andAsland Capital Partners for the construction of an approximately 258,000 square foot six-story commercial building inWashington D.C. consisting of approximately 240,000 square feet of office space which is 100% leased to theWashington, D.C. ,Department of General Services (DGS) for its headquarters and approximately 18,000 square feet of street-level retail. This building is planned as the first phase ofNortheast Heights , a redevelopment of two existing shopping centers,East River Park andSenator Square , into a mixed-use residential, office and retail property. Further, the joint venture has secured construction financing from JP Morgan not to exceed$105 million . The construction loan initially bears interest at LIBOR plus 200 basis points and has an initial term of three years with two, 20 -------------------------------------------------------------------------------- one-year extension options subject to customary conditions. The Company will have a 10% interest in the joint venture and be a co-general partner along withAsland Capital Partners . As ofMarch 31, 2021 , Carll's Corner, located inBridgeton, New Jersey , The Commons, located inDubois, Pennsylvania andCamp Hill Shopping Center , located inHarrisburg, Pennsylvania have been classified as "real estate held for sale" on the accompanying consolidated balance sheet. OnMay 5, 2021 , the Company sold The Commons for$9.8 million .
On
Unsecured Revolving Credit Facility and Term Loans
OnAugust 4, 2020 , the Company amended its existing$300 million unsecured credit facility and term loans. After such amendments, the Company's financial ratios and borrowing base are now all computed using trailing four quarters as opposed to the current quarter annualized and interest rate swaps that are a hedge of existing debt are now excluded from the definition of debt. OnOctober 27, 2020 , the Company utilized its revolving credit facility to repay the$75.0 million term loan which was set to mature inFebruary 2021 . The revolving credit facility matures inSeptember 2021 , and may be extended, at the Company's option, for an additional one-year period, subject to customary conditions. OnMay 5, 2021 , the Company closed a non-recourse mortgage for$114.0 million . The mortgage maturesJune 1, 2031 , bears interest at a fixed-rate of 3.49% and requires payment of interest only for the first five years followed by payments of principal and interest based on thirty-year amortization for the remainder of the term. The loan is secured by five shopping centers consisting ofLawndale Plaza , The Shops at Suffolk Downs,Christina Crossing ,Trexlertown Plaza , and The Point. These properties had no pre-existing debt and the proceeds from this new loan were used to reduce amounts outstanding under the Company's revolving credit facility. Common Stock OnNovember 25, 2020 , the Company effected a 1-for-6.6 reverse stock split of the issued and outstanding shares of common stock. Each 6.6 shares of the Company's issued and outstanding common stock were combined into one share of the Company's common stock. The number of authorized shares and the par value of the common stock were not changed. In addition, the Company amended the Limited Partnership Agreement of ourOperating Partnership to effect a corresponding reverse split of the partnership interests of theOperating Partnership . In accordance with GAAP, all shares of common stock, restricted stock units, OP Units and per share/unit information that are presented in this Form 10-Q were adjusted to reflect the reverse split on a retroactive basis for all periods presented. 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. 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 Form 10-K for the year endedDecember 31, 2020 . See Note 2 - "Summary of Significant Accounting Policies" for recently-adopted accounting pronouncements. 21
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Results of Operations
Comparison of three months ended
Change
2021 2020 Dollars Percent
Revenues $ 33,551,000 $ 42,485,000 $ (8,934,000 ) -21.0%
Property operating expenses (12,900,000 ) (12,843,000 ) (57,000 ) 0.4%
Property operating income 20,651,000 29,642,000 (8,991,000 )
General and administrative (4,528,000 ) (5,002,000 ) 474,000 -9.5%
Depreciation and amortization (11,211,000 ) (13,747,000 ) 2,536,000 -18.4%
Gain on sales 1,047,000 - 1,047,000 n/a
Impairment charges - (7,474,000 ) 7,474,000 n/a
Interest expense (4,706,000 ) (5,517,000 ) 811,000 -14.7%
Net income (loss) 1,253,000 (2,098,000 ) 3,351,000
Net (income) attributable to
noncontrolling interests (141,000 ) (148,000 ) 7,000
Net income (loss) attributable to Cedar
Realty Trust, Inc. $ 1,112,000 $ (2,246,000 ) $ 3,358,000
Revenues were lower as a result of (1) $7.1 million relating to a dark anchor
tenant terminating its lease prior to the contractual expiration in 2020 at
Metro Square , (2) a decrease of $1.2 million in rental revenues and expense
recoveries attributable to redevelopment properties, (3) a decrease of $0.5
million in rental revenues and expense recoveries attributable to properties
that were sold or held for sale in 2021 and 2020 and (4) a decrease of $0.2
million in rental revenues and expense recoveries attributable to same-center
properties.
Property operating expenses were higher as a result of (1) an increase of $0.7
million in property operating expenses attributable to same center properties,
partially off-set by (2) a decrease of $0.5 million in property operating
expenses attributable to redevelopment properties and (3) a decrease of $0.1
million in property operating expenses attributable to properties sold or held
for sale during 2021 and 2020.
General and administrative costs were lower primarily as a result of (1) a
decrease of
Depreciation and amortization expenses were lower as a result of (1) a decrease of$1.4 million attributable to redevelopment properties, (2) a decrease of$1.0 million attributable to properties that were sold or held for sale in 2021 and 2020 and (3) a decrease of$0.2 million attributable to same center properties.
Gain on sales in 2021 relates to the sale of an outparcel building at
Impairment charges in 2020 relates to
Interest expense was lower as a result of (1) a decrease in the overall weighted average principal balance which resulted in a decrease in interest expense of$0.4 million , (2) a decrease in the overall weighted average interest rate which resulted in a decrease in interest expense of$0.3 million , and (3) an increase in capitalized interest of$0.2 million .
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 for sale. Consistent with the capital treatment of
such costs under GAAP, tenant improvements, leasing 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.
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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:
For the three months ended March 31,
2021 2020
Operating income $ 5,959,000 $ 3,419,000
Add (deduct):
General and administrative 4,528,000 5,002,000
Gain on sales (1,047,000 ) -
Impairment charges - 7,474,000
Depreciation and amortization 11,211,000 13,747,000
Straight-line rents (131,000 ) (43,000 ) Amortization of intangible lease liabilities (277,000 ) (459,000 ) Other adjustments (26,000 ) (58,000 ) NOI related to properties not defined as same-property (3,604,000 ) (11,575,000 ) Same-property NOI$ 16,613,000 $ 17,507,000 Number of same properties 45 45 Same-property occupancy, end of period 89.4 % 90.7 % Same-property leased, end of period 90.1 % 92.8 % Same-property average base rent, end of period $ 13.53 $ 13.73
Same-property NOI for the comparable three month periods decreased 5.1% as a result of the negative impact of the COVID-19 pandemic which reduced rental revenues for the same-property portfolio.
Leasing Activity
The following is a summary of the Company's retail leasing activity during the
three months ended
Tenant
New rent Prior rent Cash basis improvements
Leases per per % per
signed GLA sq.ft. ($) sq.ft. ($) change sq.ft. ($)
Renewals 21 144,100 16.16 16.14 0.1 % 2.56
New Leases -
Comparable 4 33,500 21.84 20.66 5.7 % 17.91 (a)
New Leases -
Non-Comparable (b) 6 90,600 16.21 n/a n/a 66.22 (a)
Total (c) 31 268,200 16.88 n/a n/a 25.98
(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
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 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 access to financing for development projects, financing for
additional construction projects, or proceeds from refinancing of existing debt.
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Effective April 28, 2020 , the average closing price of the Company's common
stock had been less than $1.00 over the prior 30-consecutive trading day period,
and as a result, the Company received notice from the NYSE that the Company has
until December 31, 2020 to regain compliance with the minimum share price
requirement. The threat of delisting and/or a delisting of the Company's common
stock could have adverse effects, such as restricting the Company's ability to
obtain equity financing. On October 27, 2020 , to regain compliance with the
minimum NYSE share price requirement, the Company's Board of Directors approved
a plan to amend the Company's articles of incorporation to effect a reverse
stock split of the issued and outstanding shares of common stock.
On November 25, 2020 , the Company effected a 1-for-6.6 reverse stock split of
the issued and outstanding shares of common stock. Each 6.6 shares of the
Company's issued and outstanding common stock were combined into one share of
the Company's common stock. The number of authorized shares and the par value of
the common stock were not changed. In addition, the Company amended the Limited
Partnership Agreement of our Operating Partnership to effect a corresponding
reverse split of the partnership interests of the Operating Partnership .
On August 4, 2020 , the Company amended its existing $300 million unsecured
credit facility and term loans. After such amendments, the Company's financial
ratios and borrowing base are now all computed using the trailing four quarters
as opposed to the current quarter annualized and interest rate swaps that are a
hedge of existing debt are now excluded from the definition of debt. The $300
million unsecured credit facility consists of (1) a $250 million revolving
credit facility, and (2) a $50 million term loan. 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 unsecured credit facility and term
loans are based on 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 restrictions including, but not limited to, limits on
indebtedness, certain investments and distributions. 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. Although the credit facility is unsecured, borrowing
availability is based on unencumbered property adjusted net operating income for
the trailing twelve months, as defined in the agreements. As of the date of
filing this Quarterly Report on Form 10-Q, the Company had $59.0 million
outstanding and $60.0 million available for additional borrowings under its
revolving credit facility, and was in compliance with all financial covenants.
However, the COVID-19 pandemic may negatively impact the Company's future
ability to remain compliant with all financial covenants, including the ability
to generate sufficient unencumbered property adjusted net operating income to
support current borrowings (See "Item 1A - Risk Factors" in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 ). The
Company's unencumbered property adjusted net operating income was not
significantly impacted by the COVID-19 pandemic until the quarter ended June 30,
2020 .
On May 5, 2021 , the Company closed a non-recourse mortgage for $114.0 million .
The mortgage matures June 1, 2031 , bears interest at a fixed-rate of 3.49% and
requires payment of interest only for the first five years followed by payments
of principal and interest based on thirty-year amortization for the remainder of
the term. The loan is secured by five shopping centers consisting of Lawndale
Plaza , The Shops at Suffolk Downs, Christina Crossing , Trexlertown Plaza , and
The Point. These properties had no pre-existing debt and the proceeds from this
new loan were used to reduce amounts outstanding under the Company's revolving
credit facility.
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-------------------------------------------------------------------------------- Debt and finance lease obligations are composed of the following atMarch 31, 2021 : March 31, 2021 Contractual Maturity Balance interest rates Description dates outstanding weighted-average Fixed-rate mortgage Jun 2026$ 45,381,000 3.9% Finance lease obligation Sep 2050 5,622,000 5.3% Unsecured credit facilities: Variable-rate: Revolving credit facility (a) Sep 2021 179,000,000 1.7% Term loan Sep 2022 50,000,000 1.8% Fixed-rate (b): Term loan Feb 2022 50,000,000 3.3% Term loan Sep 2022 50,000,000 3.5% Term loan Apr 2023 100,000,000 3.5% Term loan Sep 2024 75,000,000 3.9% Term loan Jul 2025 75,000,000 4.8% 630,003,000 3.1% Unamortized issuance costs (1,832,000 )$ 628,171,000
(a) The revolving credit facility is subject to a one-year extension at the Company's option.
(b) 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. The Company is currently exploring secured and unsecured refinancing options with various lenders. The following table details the Company's debt and finance lease obligation maturities atMarch 31, 2021 : Mortgage Loan Finance Lease Revolving Term Year Payable Obligation Credit Facility Loans Total 2021$ 810,000 $ 26,000 179,000,000 (a) $ -$ 179,836,000 2022 1,116,000 37,000 - 150,000,000 151,153,000 2023 1,160,000 39,000 - 100,000,000 101,199,000 2024 1,206,000 41,000 - 75,000,000 76,247,000 2025 1,253,000 44,000 - 75,000,000 76,297,000 Thereafter 39,836,000 5,435,000 - - 45,271,000$ 45,381,000 $ 5,622,000 $ 179,000,000 $ 400,000,000 $ 630,003,000
(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 2020, and has continued to declare and pay common and preferred stock dividends during 2021. 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 Board of Directors may reduce, as it did with theMay 2020 common stock dividend of$0.01 per common share, or suspend payment of dividends to retain cash and reduce debt obligations and/or to fund redevelopments and other capital needs. The 25 --------------------------------------------------------------------------------
Company intends to continue to operate its business in a manner that will allow
it to qualify as a REIT for
Net Cash Flows
For the three months ended March 31,
2021 2020
Cash flows provided by (used in):
Operating activities $ 9,542,000 $ 13,389,000
Investing activities $ (5,701,000 ) $ (9,813,000 )
Financing activities $ (2,340,000 ) $ 68,559,000
Operating Activities
Net cash provided by operating activities, before net changes in operating
assets and liabilities, was $12.3 million for the three months ended March 31,
2021 and $20.0 million for the three months ended March 31, 2020 . The decrease
was primarily a result of the Company accepting a payment of $8.0 million in
consideration for permitting a dark anchor tenant to terminate its lease prior
to the contractual expiration in 2020, which was partially offset by (1) the
negative impact of the COVID-19 pandemic in 2020, and (2) property dispositions
in 2019.
Investing Activities
Net cash flows used in investing activities were primarily the result of the
Company's expenditures for property improvements and property disposition
activities. During the three months ended March 31, 2021 the Company incurred
expenditures of $6.9 million for property improvements, which was partially
offset by $1.2 million in proceeds from the sale of properties. During the three
months ended March 31, 2020 , the Company incurred expenditures of $9.8 million
for property improvements.
Financing Activities
During the three months ended March 31, 2021 , the Company had $3.6 million of
preferred and common stock distributions, $0.3 million of mortgage repayments,
and $2.5 million of debt financing costs, which were partially offset by net
advances of $4.0 million under the revolving credit facility. During the three
months ended March 31, 2020 , the Company had net advances of $76.0 million under
the revolving credit facility, which was partially offset by $7.2 million of
preferred and common stock distributions, and $0.3 million of mortgage
repayments.
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 (determined in accordance with GAAP), excluding gains
(losses) from sales of real estate properties, impairment write-downs on real
estate properties directly attributable to decreases in the value of depreciable
real estate, 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.
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A reconciliation of net (loss) income attributable to common shareholders to FFO
and Operating FFO for the three months ended
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