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 . AtJune 30, 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 88.7% leased and 87.6% occupied atJune 30, 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$3.5 million and waived approximately$2.4 million of rental income throughJune 30, 2021 , respectively. As ofJune 30, 2021 , the weighted average payback period for remaining deferred rent receivable is approximately 10 months, beginning at various times fromJuly 2020 throughJune 2021 . The Company has collected approximately 97% and 96% of contractual base rents and monthly tenant reimbursements for the quarters endedJune 30, 2021 andMarch 31, 2021 , respectively. Real Estate OnMay 5, 2021 , the Company formed a joint venture withGoldman Sachs Urban Investment Group andAsland Capital Partners (the "Joint Venture") 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. The term of the lease with DGS is for 20 years and 10 months, to commence upon substantial completion and delivery to the DGS. 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, 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 . The Company has contributed approximately$2.5 million of capital to the Joint Venture as ofJune 30, 2021 . The Company has sold approximately$8.0 million of development costs to the Joint Venture as ofJune 30, 2021 . The Joint Venture 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 Joint Venture 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 Joint Venture will contribute$9.38 per rentable square foot in additional tenant improvement allowance between the 10th and 12th Lease years, upon the District's timely election. The obligations of the District under the Lease are subject to annual budget appropriation. 22
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As of
The following table shows the property dispositions during the six months endedJune 30, 2021 : Gain on Sale/ Date Sales Reversal of Dispositions Location GLA Sold Price Impairment
Kempsville Crossing (land parcel) Virginia Beach, VA - 2/24/2021$ 1,300,000 $ 1,047,000 The Commons Dubois, PA 203,309 5/5/2021 9,761,000 1,849,000Camp Hill Shopping Center Camp Hill, PA 430,198 6/21/2021 89,662,500 48,857,000 633,507$ 100,723,500 $ 51,753,000
The gains on sale and the reversal of impairment are included in operating income in the accompanying consolidated statement of operations
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. 23
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Results of Operations
Comparison of three months ended
Change
2021 2020 Dollars Percent
Revenues $ 32,220,000 $ 28,620,000 $ 3,600,000 12.6%
Property operating expenses (11,347,000 ) (10,486,000 ) (861,000 ) 8.2%
Property operating income 20,873,000 18,134,000 2,739,000
General and administrative (4,873,000 ) (3,906,000 ) (967,000 ) 24.8% Depreciation and amortization (10,257,000 ) (14,426,000 ) 4,169,000 -28.9% Gain on sales 48,857,000 - 48,857,000 n/a Impairment reversal (charges) 1,849,000 (133,000 ) 1,982,000 n/a Interest expense (4,985,000 ) (5,678,000 ) 693,000 -12.2% Net income (loss) 51,464,000 (6,009,000 ) 57,473,000 Net (income) attributable to noncontrolling interests (409,000 ) (88,000 ) (321,000 ) Net income (loss) attributable to Cedar Realty Trust, Inc.$ 51,055,000 $ (6,097,000 ) $ 57,152,000 Revenues were higher as a result of (1) an increase of$3.2 million in rental revenues and expense recoveries attributable to same-center properties, (2) an increase of$0.7 million in rental revenues and expense recoveries attributable to redevelopment properties, which is partially off-set by (3) a decrease of$0.4 million in rental revenues and expense recoveries attributable to properties that were sold or held for sale in 2021 and 2020. Property operating expenses were higher as a result of (1) an increase of$1.0 million in property operating expenses attributable to same center properties, (2) an increase of$0.3 million in property operating expenses attributable to redevelopment properties which is partially off-set by (3) a decrease of$0.4 million in property operating expenses attributable to properties sold or held for sale during 2021 and 2020. General and administrative costs were higher primarily as a result of (1) an increase of$0.3 million related to corporate governance and proxy matters, (2) an increase of$0.2 million related to legal expense, (3) an increase of$0.2 million of accelerated amortization of stock compensation related to the retirement of two board members and (4) an increase of$0.2 million related to payroll and payroll related expenses. Depreciation and amortization expenses were lower as a result of (1) a decrease of$4.6 million attributable to same center properties, (2) a decrease of$0.5 million attributable to properties that were sold or held for sale in 2021 and 2020, which is partially off-set by (3) an increase of$0.9 million attributable to redevelopment properties.
Gain on sales in 2021 relates to the sale of
Impairment reversal (charges) in 2021 relates to the sale of The Commons,
located in
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$1.1 million , (2) an increase in capitalized interest of$0.1 million , which is partially off-set by (3) an increase in the overall weighted average interest rate which resulted in an increase in interest expense of$0.4 million and (4) an increase in the amortization of financing costs of$0.1 million . 24
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Comparison of six months ended
Change
2021 2020 Dollars Percent
Revenues $ 65,771,000 $ 71,105,000 $ (5,334,000 ) -7.5%
Property operating expenses (24,247,000 ) (23,329,000 ) (918,000 ) 3.9%
Property operating income 41,524,000 47,776,000 (6,252,000 )
General and administrative (9,401,000 ) (8,908,000 ) (493,000 ) 5.5%
Depreciation and amortization (21,468,000 ) (28,173,000 ) 6,705,000 -23.8%
Gain on sales 49,904,000 - 49,904,000 n/a
Impairment reversal (charges) 1,849,000 (7,607,000 ) 9,456,000 n/a
Interest expense (9,691,000 ) (11,195,000 ) 1,504,000 -13.4%
Net income (loss) 52,717,000 (8,107,000 ) 60,824,000
Net (income) attributable to
noncontrolling interests (550,000 ) (236,000 ) (314,000 )
Net income (loss) attributable to Cedar
Realty Trust, Inc. $ 52,167,000 $ (8,343,000 ) $ 60,510,000
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 $0.9 million in rental revenues and expense
recoveries attributable to properties that were sold or held for sale in 2021
and 2020, which is partially off-set by (3) an increase of $1.2 million in
rental revenues and expense recoveries attributable to same-center properties
and (4) an increase of $1.3 million in rental revenues and expense recoveries
attributable to redevelopment properties.
Property operating expenses were higher as a result of (1) an increase of $0.9
million in property operating expenses attributable to redevelopment properties,
(2) an increase of $0.6 million in property operating expenses attributable to
same center properties, which is partially off-set by (3) a decrease of $0.5
million in property operating expenses attributable to properties sold or held
for sale during 2021 and 2020.
General and administrative costs were higher primarily as a result of (1) an
increase of $0.5 million related to corporate governance and proxy matters, (2)
an increase of $0.3 million related to legal expense, (3) an increase of $0.2
million of accelerated amortization of stock compensation related to the
retirement of two board members, which is partially off-set by (4) a decrease of
$0.2 million in accounting and professional fees and (5) a decrease of $0.3
million in payroll and payroll overhead expenses.
Depreciation and amortization expenses were lower as a result of (1) a decrease
of $4.9 million attributable to same center properties, (2) a decrease of $0.3
million attributable to redevelopment properties and (3) a decrease of $1.4
million attributable to properties that were sold or held for sale in 2021 and
2020.
Gain on sales in 2021 relates to the sale of an outparcel building at Kempsville
Crossing , located in Virginia Beach, Virginia and Camp Hill Shopping Center ,
located in Camp Hill, Pennsylvania .
Impairment reversal (charges) in in 2021 relates to the sale of The Commons,
located in Dubois, Pennsylvania . The impairment charges in 2020 relates to Metro
Square , located in Owings Mill , Maryland and The Commons, located in Dubois,
Pennsylvania
Interest expense was lower as a result of a decrease in the overall weighted
average principal balance which resulted in a decrease in interest expense of
$1.5 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.
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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:
For the three months ended June 30, For the six months ended June 30,
2021 2020 2021 2020
Operating income (loss) $ 56,449,000 $
(331,000 )
4,873,000 3,906,000 9,401,000 8,908,000
Gain on sales (48,857,000 ) - (49,904,000 ) -
Impairment (reversal) charges (1,849,000 ) 133,000 (1,849,000 ) 7,607,000
Depreciation and amortization 10,257,000 14,426,000 21,468,000 28,173,000
Straight-line rents (229,000 ) 988,000 (359,000 ) 945,000
Amortization of intangible lease
liabilities (263,000 ) (307,000 ) (539,000 ) (766,000 )
Other adjustments 14,000 (59,000 ) (15,000 ) 12,000
NOI related to properties not
defined as same-property (3,605,000 ) (3,245,000 ) (7,209,000 ) (14,820,000 ) Same-property NOI
$ 16,790,000 $
15,511,000
Number of same properties 45 45 45 45 Same-property occupancy, end of period 90.1 % 90.7 % 90.1 % 90.7 % Same-property leased, end of period 90.9 % 92.1 % 90.9 % 92.1 % Same-property average base rent, end of period $ 13.55 $ 13.73 $ 13.55$ 13.73
Same-property NOI for the comparable three and six month periods increased 8.2% and 0.8%, respectively, as a result of the negative impact of the COVID-19 pandemic which reduced rental revenues for prior year same-property portfolio.
Leasing Activity
The following is a summary of the Company's retail leasing activity during the
six months ended
Tenant
New rent Prior rent Cash basis improvements
Leases per per % per
signed GLA sq.ft. ($) sq.ft. ($) change sq.ft. ($)
Renewals 44 297,300 14.55 14.37 1.2 % 2.08
New Leases -
Comparable 19 79,600 18.45 20.08 -8.1 % 31.49 (a)
New Leases -
Non-Comparable (b) 8 100,400 17.18 n/a n/a 69.59 (a)
Total (c) 71 477,300 15.75 n/a n/a 21.18
(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.
26
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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 had
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 $12.0 million
outstanding and $112.1 million available for additional borrowings under its
revolving credit facility, and was in compliance with all financial covenants.
On May 5, 2021 , the Company closed a non-recourse mortgage for $114.0 million .
The mortgage matures June 1, 2031 , bears interest at a fixed-rate of 3.49% and
requires payment of interest only for the first five years followed by payments
of principal and interest based on thirty-year amortization for the remainder of
the term. The loan is secured by five shopping centers consisting of Lawndale
Plaza , The Shops at Suffolk Downs, Christina Crossing , Trexlertown Plaza , and
The Point. These properties had no pre-existing debt and the proceeds from this
new loan were used to reduce amounts outstanding under the Company's revolving
credit facility.
27
-------------------------------------------------------------------------------- Debt and finance lease obligations are composed of the following atJune 30, 2021 : June 30, 2021 Contractual Maturity Balance interest rates Description dates outstanding weighted-average Fixed-rate mortgage Franklin Village Jun 2026$ 45,113,000 3.9% Shops at Suffolk Downs (a) June 2031 15,600,000 3.5% Trexlertown Plaza (a) June 2031 36,100,000 3.5% The Point (a) June 2031 29,700,000 3.5% Christina Crossing (a) June 2031 17,000,000 3.5% Lawndale Plaza (a) June 2031 15,600,000 3.5%Senator Square finance lease obligation Sep 2050 5,615,000 5.3% 164,728,000 3.6% Unsecured credit facilities (b): Variable-rate: Revolving credit facility (c) Sep 2021 12,000,000 1.7% Term loan Sep 2022 50,000,000 1.8% Fixed-rate (d): 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% 526,728,000 3.6% Unamortized issuance costs (3,208,000 )$ 523,520,000 (a) The mortgages for these properties are cross-collateralized.
(b) During the third quarter of 2021, the weighted average interest rate for
the Company's unsecured credit facilities will decrease 15 basis points
("bps") as a result of a decrease in the Company's leverage ratio.
(c) The revolving credit facility is subject to a one-year extension at the
Company's option.
(d) 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 atJune 30, 2021 : Mortgage Loan Finance Lease Revolving Term Year Payable Obligation Credit Facility Loans Total 2021$ 542,000 $ 19,000 12,000,000 (c) $ -$ 12,561,000 2022 1,116,000 37,000 - 100,000,000 101,153,000 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 153,836,000 5,435,000 - - 159,271,000$ 159,113,000 $ 5,615,000 $ 12,000,000 $ 350,000,000 $ 526,728,000
(a) The revolving credit facility is subject to a one-year extension at the
Company's option.
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$0.01 per common share, or 28
-------------------------------------------------------------------------------- suspend payment of dividends to retain cash and reduce debt obligations and/or to fund redevelopments and other capital needs. The Company intends to continue to operate its business in a manner that will allow it to qualify as a REIT forU.S. federal income tax requirements. Net Cash Flows For the six months ended June 30, 2021 2020 Cash flows provided by (used in): Operating activities$ 24,804,000 $ 24,518,000 Investing activities$ 88,254,000 $ (18,644,000 ) Financing activities$ (108,862,000 ) $ 59,612,000 Operating Activities Net cash provided by operating activities, before net changes in operating assets and liabilities, was$24.8 million for the six months endedJune 30, 2021 and$31.2 million for the six months endedJune 30, 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 2020. Investing Activities Net cash flows provided by (used in) investing activities were primarily the result of the Company's expenditures for property improvements and property disposition activities. During the six months endedJune 30, 2021 the Company received$104.5 million in proceeds from the sale of properties, which was partially off-set by$138 million for property improvements and$2.5 million in contributions to an unconsolidated joint venture. During the six months endedJune 30, 2020 , the Company incurred expenditures of$18.6 million for property improvements. Financing Activities During the six months endedJune 30, 2021 , the Company had net payments of$163.0 million under the revolving credit facility, a$50.0 million of term note pay-off,$7.2 million of preferred and common stock distributions,$0.5 million of mortgage repayments, and$1.6 million of debt financing costs,$0.5 million of termination payments related to a swap liability, which were partially offset by net property specific mortgage note payables of$114.0 million . During the six months endedJune 30, 2020 , the Company had net advances of$70.9 million under the revolving credit facility, which was partially offset by$10.7 million of preferred and common stock distributions, and$0.5 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
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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, 2021 and 2020 is
as follows:
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Net income (loss) attributable to
common shareholders $ 48,367,000 $ (8,785,000 ) $ 46,791,000 $ (13,719,000 )
Real estate depreciation and
amortization 10,227,000 14,400,000 21,420,000 28,105,000
Limited partners' interest 287,000 (52,000 ) 278,000 (80,000 )
Gain on sales (48,857,000 ) - (49,904,000 ) -
Impairment (reversal) charges (1,849,000 ) 133,000 (1,849,000 ) 7,607,000
Consolidated minority interests:
Share of income 122,000 140,000 272,000 316,000
Share of FFO (88,000 ) (118,000 ) (201,000 ) (261,000 )
FFO applicable to diluted common
shares 8,209,000 5,718,000 16,807,000 21,968,000
Redevelopment costs (a) 230,000 - 230,000 483,000
Financing costs (b) 44,000 - 44,000 -
Operating FFO applicable to diluted
common shares $ 8,483,000 $ 5,718,000 FFO per diluted common share $ 0.59$ 0.41 $ 1.21 $ 1.59 Operating FFO per diluted common share $ 0.61$ 0.41 $ 1.23 $ 1.62 Weighted average number of diluted common shares (c): Common shares and equivalents 13,855,000 13,762,000 13,845,000 13,757,000 OP Units 81,000 81,000 81,000 81,000 13,936,000 13,843,000 13,926,000 13,838,000
(a) Includes redevelopment project costs expensed pursuant to GAAP such as
certain demolition and lease termination costs.
(b) Represents acceleration of amortization of financing costs related to term note paid-off prior to maturity.
(c) 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/units 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 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 costs 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.
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