UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

o		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		(I.R.S. Employer
incorporation or organization)		Identification No.)

44 South Bayles Avenue, Port Washington, New York 11050-3765
(Address of principal executive offices) (Zip Code)

(516) 767-6492

Cedar Shopping Centers, Inc.

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At October 31, 2011, there were 68,009,775 shares of Common Stock, $0.06 par value, outstanding.

 

 

CEDAR REALTY TRUST, INC.

INDEX

Forward-Looking Statements			4
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets — September 30, 2011 (unaudited) and December 31, 2010			4
Consolidated Statements of Operations (unaudited) — Three and nine months ended September 30, 2011 and 2010			5
Consolidated Statement of Equity (unaudited) — Nine months ended September 30, 2011			6
Consolidated Statements of Cash Flows (unaudited) — Nine months ended September 30, 2011 and 2010			7
Notes to Consolidated Financial Statements (unaudited) — September 30, 2011			8-37
Item 2. Management’s Discussion and Analysis of Financial Condition And Results of Operations			38-52
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			54
Part II. Other Information
Item 6. Exhibits			55
Signatures			55
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 31
Exhibit 32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Forward-Looking Statements

The information contained in this Form 10Q is unaudited and does not purport to disclose all items required by accounting principles generally accepted in the United States (“GAAP”). In addition, statements made or incorporated by reference herein may include certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1934 and Section 21E of the Securities Exchange Act of 1934 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 have a material adverse effect on the operations and future prospects of the Company are as set forth under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K and include, but are not limited to, the following: real estate investment considerations, such as the effect of economic and other conditions in general and in the Company’s market areas in particular; the financial viability of the Company’s tenants (including an inability to pay rent, filing for bankruptcy protection, closing stores and/or vacating the premises); the continuing availability of acquisition, ground-up development and redevelopment opportunities, on favorable terms; the availability of equity and debt capital (including the availability of construction financing) in the public and private markets; the availability of suitable joint venture partners and potential purchasers of the Company’s properties if offered for sale; the ability of the Company’s joint venture partner to fund its share of future property acquisitions; the adequacy of impairment provisions for properties treated as held for sale/conveyance; changes in interest rates; the fact that returns from acquisition, ground-up development and redevelopment activities may not be at expected levels or at expected times; risks inherent in ongoing ground-up development and redevelopment projects including, but not limited to, cost overruns resulting from weather delays, changes in the nature and scope of ground-up development and redevelopment efforts, changes in governmental regulations relating thereto, and market factors involved in the pricing of material and labor; the need to renew leases or re-let space upon the expiration or termination of current leases and incur applicable required replacement costs; and the financial flexibility of the Company and our joint venture partners to repay or refinance debt obligations when due and to fund tenant improvements and capital expenditures.

CEDAR REALTY TRUST, INC.

		September 30,				December 31,
		2011				2010
		(unaudited)
Assets
Real estate:
Land		$	271,907,000			$	261,673,000
Buildings and improvements			1,088,396,000				1,028,443,000
			1,360,303,000				1,290,116,000
Less accumulated depreciation			(183,274,000	)			(157,803,000	)
Real estate, net			1,177,029,000				1,132,313,000
Real estate held for sale/conveyance			242,844,000				348,743,000
Investment in unconsolidated joint ventures			45,087,000				52,466,000
Cash and cash equivalents			11,642,000				14,166,000
Restricted cash			13,773,000				12,493,000
Receivables:
Rents and other tenant receivables, net			9,456,000				7,048,000
Straight-line rents			13,335,000				12,471,000
Loans and other receivables ($4.3 million and $0.8 million, respectively) and joint venture settlements			5,939,000				6,868,000
Other assets			16,570,000				9,411,000
Deferred charges, net			20,893,000				24,456,000
Assets relating to real estate held for sale/conveyance			2,299,000				2,052,000
Total assets		$	1,558,867,000			$	1,622,487,000
Liabilities and equity
Mortgage loans payable		$	590,965,000			$	550,525,000
Mortgage loans payable — real estate held for sale/conveyance			148,114,000				156,991,000
Secured revolving credit facilities			166,317,000				132,597,000
Accounts payable and accrued liabilities			36,080,000				29,026,000
Unamortized intangible lease liabilities			36,409,000				40,253,000
Liabilities relating to real estate held for sale/conveyance			6,923,000				7,571,000
Total liabilities			984,808,000				916,963,000
Limited partners’ interest in Operating Partnership			4,715,000				7,053,000
Commitments and contingencies			—				—
Equity:
Cedar Realty Trust, Inc. shareholders’ equity:
Preferred stock ($.01 par value, $25.00 per share liquidation value, 12,500,000 shares authorized, 6,400,000 shares issued and outstanding)			158,575,000				158,575,000
Common stock ($.06 par value, 150,000,000 shares authorized 68,010,000 and 66,520,000 shares, respectively, issued and outstanding)			4,081,000				3,991,000
Treasury stock (1,325,000 and 1,120,000 shares, respectively, at cost)			(10,692,000	)			(10,367,000	)
Additional paid-in capital			718,495,000				712,548,000
Cumulative distributions in excess of net income			(359,784,000	)			(231,275,000	)
Accumulated other comprehensive loss			(3,659,000	)			(3,406,000	)
Total Cedar Realty Trust, Inc. shareholders’ equity			507,016,000				630,066,000
Noncontrolling interests:
Minority interests in consolidated joint ventures			56,793,000				62,050,000
Limited partners’ interest in Operating Partnership			5,535,000				6,355,000
Total noncontrolling interests			62,328,000				68,405,000
Total equity			569,344,000				698,471,000
Total liabilities and equity		$	1,558,867,000			$	1,622,487,000

See accompanying notes to consolidated financial statements.

CEDAR REALTY TRUST, INC.

		Three months ended September 30,								Nine months ended September 30,
		2011				2010				2011				2010
Revenues:
Rents		$	26,504,000			$	24,384,000			$	78,156,000			$	77,565,000
Expense recoveries			6,271,000				5,735,000				20,365,000				19,637,000
Other			685,000				1,591,000				2,138,000				1,926,000
Total revenues			33,460,000				31,710,000				100,659,000				99,128,000
Expenses:
Operating, maintenance and management			6,430,000				5,674,000				20,780,000				18,993,000
Real estate and other property-related taxes			4,147,000				3,986,000				12,307,000				12,151,000
General and administrative			2,899,000				2,421,000				8,115,000				6,738,000
Management transition charges			—				—				6,530,000				—
Impairment charges			7,419,000				155,000				7,419,000				2,272,000
Acquisition transaction costs and terminated projects			—				2,043,000				1,169,000				3,365,000
Depreciation and amortization			9,801,000				8,846,000				27,844,000				26,942,000
Total expenses			30,696,000				23,125,000				84,164,000				70,461,000
Operating income			2,764,000				8,585,000				16,495,000				28,667,000
Non-operating income and expense:
Interest expense, including amortization of deferred financing costs			(10,475,000	)			(10,523,000	)			(31,155,000	)			(33,174,000	)
Accelerated write-off of deferred financing costs			—				(2,552,000	)			—				(2,552,000	)
Interest income			41,000				3,000				216,000				12,000
Unconsolidated joint ventures:
Equity in income (loss)			327,000				(288,000	)			1,152,000				547,000
Write-off of investment			—				—				(7,961,000	)			—
Gain on sale of land parcel			130,000				—				130,000				—
Total non-operating income and expense			(9,977,000	)			(13,360,000	)			(37,618,000	)			(35,167,000	)
Loss before discontinued operations			(7,213,000	)			(4,775,000	)			(21,123,000	)			(6,500,000	)
Discontinued operations:
Income from operations			619,000				318,000				2,821,000				1,408,000
Impairment charges			(64,671,000	)			(34,000	)			(87,287,000	)			(3,276,000	)
Gain on sales			—				—				502,000				170,000
Total discontinued operations			(64,052,000	)			284,000				(83,964,000	)			(1,698,000	)
Net loss			(71,265,000	)			(4,491,000	)			(105,087,000	)			(8,198,000	)
Less, net loss (income) attributable to noncontrolling interests:
Minority interests in consolidated joint ventures			3,285,000				194,000				3,332,000				(194,000	)
Limited partners’ interest in Operating Partnership			1,455,000				196,000				2,294,000				488,000
Total net loss attributable to noncontrolling interests			4,740,000				390,000				5,626,000				294,000
Net loss attributable to Cedar Realty Trust, Inc.			(66,525,000	)			(4,101,000	)			(99,461,000	)			(7,904,000	)
Preferred distribution requirements			(3,580,000	)			(2,679,000	)			(10,621,000	)			(6,617,000	)
Net loss attributable to common shareholders		$	(70,105,000	)		$	(6,780,000	)		$	(110,082,000	)		$	(14,521,000	)
Per common share attributable to common shareholders (basic and diluted):
Continuing operations		$	(0.09	)		$	(0.10	)		$	(0.40	)		$	(0.20	)
Discontinued operations			(0.96	)			0.00			$	(1.27	)			(0.03	)
		$	(1.05	)		$	(0.10	)		$	(1.67	)		$	(0.23	)
Amounts attributable to Cedar Realty Trust, Inc. common shareholders, net of limited partners’ interest:
Loss from continuing operations		$	(7,334,000	)		$	(7,057,000	)		$	(27,797,000	)		$	(12,862,000	)
(Loss) income from discontinued operations			(62,771,000	)			277,000				(82,777,000	)			(1,825,000	)
Gain on sales of discontinued operations			—				—				492,000				166,000
Net loss		$	(70,105,000	)		$	(6,780,000	)		$	(110,082,000	)		$	(14,521,000	)
Dividends declared per common share		$	0.09			$	0.09			$	0.27			$	0.18
Weighted average number of common shares outstanding			66,800,000				65,835,000				66,253,000				62,999,000

See accompanying notes to consolidated financial statements.

CEDAR REALTY TRUST, INC.

		Cedar Realty Trust, Inc. Shareholders
		Preferred stock								Common stock																Cumulative				Accumulated
						$25.00												Treasury				Additional				distributions				other
						Liquidation								$0.06				stock,				paid-in				in excess of				comprehensive
		Shares				value				Shares				Par value				at cost				capital				net income				(loss)				Total
Balance, December 31, 2010			6,400,000			$	158,575,000				66,520,000			$	3,991,000			$	(10,367,000	)		$	712,548,000			$	(231,275,000	)		$	(3,406,000	)		$	630,066,000
Net loss			—				—				—				—				—				—				(99,461,000	)			—				(99,461,000	)
Unrealized gain on change in fair value of cash flow hedges			—				—				—				—				—				—				—				(253,000	)			(253,000	)
Total other comprehensive loss																																		$	(99,714,000	)
Deferred compensation activity, net			—				—				759,000				46,000				(325,000	)			1,208,000				—				—				929,000
Net proceeds from sale of common stock			—				—				39,000				2,000				—				223,000				—				—				225,000
Net proceeds from dividend reinvestment and direct stock purchase plan			—				—				692,000				42,000				—				4,046,000								—				4,088,000
Preferred distribution requirements			—				—				—				—				—				—				(10,621,000	)			—				(10,621,000	)
Distributions to common shareholders/ noncontrolling interests			—				—				—				—				—				—				(18,427,000	)			—				(18,427,000	)
Contribution from minority interest partners			—				—				—				—				—				—				—				—				—
Reallocation adjustment of limited partners’ interest			—				—				—				—				—				470,000				—				—				470,000
Balance, September 30, 2011			6,400,000			$	158,575,000				68,010,000			$	4,081,000			$	(10,692,000	)		$	718,495,000			$	(359,784,000	)		$	(3,659,000	)		$	507,016,000

		Noncontrolling Interests
						Limited
		Minority				partners’
		interests in				interest in
		consolidated				Operating								Total
		joint ventures				Partnership				Total				equity
Balance, December 31, 2010		$	62,050,000			$	6,355,000			$	68,405,000			$	698,471,000
Net loss			(3,332,000	)			(1,238,000	)			(4,570,000	)			(104,031,000	)
Unrealized gain on change in fair value of cash flow hedges			—				(7,000	)			(7,000	)			(260,000	)
Total other comprehensive loss			(3,332,000	)			(1,245,000	)			(4,577,000	)			(104,291,000	)
Deferred compensation activity, net			—				—				—				929,000
Net proceeds from sale of common stock			—				—				—				225,000
Net proceeds from dividend reinvestment and direct stock purchase plan			—				—				—				4,088,000
Preferred distribution requirements			—				—				—				(10,621,000	)
Distributions to common shareholders/ noncontrolling interests			(2,193,000	)			(207,000	)			(2,400,000	)			(20,827,000	)
Contribution from minority interest partners			268,000				—				268,000				268,000
Reallocation adjustment of limited partners’ interest			—				632,000				632,000				1,102,000
Balance, September 30, 2011		$	56,793,000			$	5,535,000			$	62,328,000			$	569,344,000

See accompanying notes to consolidated financial statements.

CEDAR REALTY TRUST, INC.

Consolidated Statements of Cash Flows
(unaudited)

		Nine months ended September 30,
		2011				2010
Cash flow from operating activities:
Net loss		$	(105,087,000	)		$	(8,198,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in income of unconsolidated joint ventures			(1,152,000	)			(547,000	)
Distributions from unconsolidated joint ventures			865,000				759,000
Write-off of investment in unconsolidated joint venture			7,961,000				—
Impairment charges			7,419,000				2,272,000
Acquisition transaction costs and terminated projects			1,169,000				1,322,000
Impairments charges — discontinued operations			87,287,000				3,276,000
Gain on sales of real estate			(632,000	)			(170,000	)
Straight-line rents			(1,266,000	)			(1,622,000	)
Provision for doubtful accounts			2,572,000				2,484,000
Depreciation and amortization			32,917,000				35,644,000
Amortization of intangible lease liabilities			(5,055,000	)			(7,478,000	)
Amortization (including accelerated write-off) and market price adjustments relating to stock-based compensation			3,907,000				2,068,000
Amortization (including accelerated write-off) of deferred financing costs			3,212,000				6,620,000
Increases/decreases in operating assets and liabilities:
Rents and other receivables, net			(5,066,000	)			(4,518,000	)
Joint venture settlements			(377,000	)			(3,383,000	)
Prepaid expenses and other			(5,843,000	)			(6,935,000	)
Accounts payable and accrued expenses			(1,464,000	)			(1,349,000	)
Net cash provided by operating activities			21,367,000				20,245,000
Cash flow from investing activities:
Expenditures for real estate and improvements			(76,064,000	)			(20,874,000	)
Net proceeds from sales of real estate			11,708,000				2,056,000
Net proceeds from transfers to unconsolidated Cedar/RioCan joint venture, less cash at dates of transfer			4,787,000				31,395,000
Investments in and advances to unconsolidated joint ventures			(4,185,000	)			(30,396,000	)
Distributions of capital from unconsolidated joint ventures			3,990,000				7,725,000
Increase in loans and other receivables			(4,647,000	)			—
Construction escrows and other			(2,661,000	)			4,632,000
Net cash used in investing activities			(67,072,000	)			(5,462,000	)
Cash flow from financing activities:
Net advances/(repayments) from/(to) revolving credit facilities			33,720,000				(131,239,000	)
Proceeds from mortgage financings			45,791,000				16,272,000
Mortgage repayments			(9,255,000	)			(18,594,000	)
Payments of debt financing costs			—				(1,141,000	)
Termination payment related to interest rate swaps			—				(5,476,000	)
Noncontrolling interests:
Contribution from consolidated joint venture minority interests			268,000				—
Distributions to consolidated joint venture minority interests			(2,193,000	)			(2,186,000	)
Redemptions of Operating Partnership Units			—				(2,834,000	)
Distributions to limited partners			(386,000	)			(526,000	)
Net proceeds from the sales of common stock			4,313,000				138,296,000
Exercise of warrant			—				10,000,000
Preferred stock distributions			(10,650,000	)			(5,907,000	)
Distributions to common shareholders			(18,427,000	)			(16,470,000	)
Net cash provided by (used in) financing activities			43,181,000				(19,805,000	)
Net (decrease) in cash and cash equivalents			(2,524,000	)			(5,022,000	)
Cash and cash equivalents at beginning of period			14,166,000				17,164,000
Cash and cash equivalents at end of period		$	11,642,000			$	12,142,000

See accompanying notes to consolidated financial statements.

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Note 1. Organization and Basis of Preparation

Cedar Realty Trust, Inc. (formerly known as Cedar Shopping Centers, Inc. — the “Company”) was organized in 1984 and elected to be taxed as a real estate investment trust (“REIT”) in 1986. The Company currently focuses primarily on ownership and operation of supermarket-anchored shopping centers. The Company has recently determined (1) to exit the Ohio market, principally the Discount Drug Mart portfolio of drugstore/convenience centers, and concentrate on the mid-Atlantic and Northeast coastal regions (12 properties “held for sale” as of September 30, 2011), (2) to concentrate on grocery-anchored strip centers, by disposing of its mall and single-tenant/triple-net-lease properties (14 properties “held for sale” as of September 30, 2011), and (3) to focus on improving operations and performance at the Company’s remaining properties, and to reduce development activities, by disposing of certain development projects, land acquired for development, and other non-core assets (seven properties “held for sale/conveyance” as of September 30, 2011). In addition, discontinued operations reflect the anticipated consummation of the Homburg joint venture buy/sell transactions (seven properties “held for sale” as of September 30, 2011). At September 30, 2011, the Company owned and managed 92 operating properties (excluding properties “held for sale/conveyance”), including 22 properties in the unconsolidated Cedar/RioCan joint venture.

Cedar Realty Trust Partnership, L.P. (formerly known as Cedar Shopping Centers 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 September 30, 2011 the Company owned a 98.0% economic interest in, and was the sole general partner of, the Operating Partnership. The limited partners’ interest in the Operating Partnership (2.0% at September 30, 2011) 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. Allocations of amounts between the Company and its limited partners include the impact of the equity award shares discussed in Note 2 — “Stock- Based Compensation”. The approximately 1.4 million OP Units outstanding at September 30, 2011 are economically equivalent to the Company’s common stock and are convertible into the Company’s common stock at the option of the respective holders on a one-to-one basis.

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.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

The consolidated financial statements include the accounts and operations of the Company, the Operating Partnership, its subsidiaries, and certain joint venture partnerships in which it participates. The Company consolidates all variable interest entities (“VIEs”) for which it is the primary beneficiary. Generally, a VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) as a group, the holders of the equity investment at risk (i) lack the power to make decisions about the entity’s activities that significantly impacts the entity’s performance through voting or similar rights, (ii) have no obligation to absorb the expected losses of the entity, or (iii) have no right to receive the expected residual returns of the entity, or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The Company follows the accounting guidance for determining whether an entity is a VIE, which requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. The guidance requires an entity to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

With respect to its 13 consolidated operating joint ventures, the Company has general partnership interests of 20% in nine properties, 40% in two properties, 50% in one property, and 75% in one property. As (i) such entities are not VIEs, and (ii) the Company is the sole general partner and exercises substantial operating control over these entities, the Company has determined that such entities should be consolidated for financial statement purposes. Current accounting guidance provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or similar entity in which it owns a minority interest. Seven of the nine 20%-owned properties, and the 50%-owned and 75%-owned properties are treated as “held for sale/conveyance” at September 30, 2011 (see note 3 — “Real Estate — Discontinued Operations and Land Dispositions”).

The Company’s three 60%-owned joint ventures originally formed as development projects in Limerick, Pottsgrove and Stroudsburg, Pennsylvania, are consolidated as they are deemed to be VIEs and the Company is the primary beneficiary in each case. At September 30, 2011, these VIEs owned real estate with a carrying value of $140.0 million. The assets of the consolidated VIEs can be used to settle obligations other than those of the consolidated VIEs. At that date, one of the VIEs had a property-specific mortgage loan payable aggregating $63.8 million, and the real estate owned by the other two VIEs partially collateralized the secured revolving development property credit facility (the “development property credit facility”) to the extent of $28.1 million. Such obligations are guaranteed by, and are recourse to, the Company. For such development projects, the Company reviews the applicable budgets and provides supervisory support. The development project located in Limerick, Pennsylvania is treated as “held for sale/conveyance” at September 30, 2011 (see note 3 — “Real Estate — Discontinued Operations and Land Dispositions”).

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

With respect to its unconsolidated joint ventures, the Company has a 20% interest in a joint venture with RioCan Real Estate Investment Trust of Toronto, Canada, a publicly-traded Canadian real estate investment trust (“RioCan”) formed initially for the acquisition of seven shopping center properties owned by the Company; all seven properties had been transferred to the joint venture by May 2010 and, as of September 30, 2011, the joint venture owned 22 properties. Although the Company provides management and other services, RioCan has significant management participation rights. The Company has determined that this joint venture is not a VIE and, accordingly, the Company accounts for its investment in this joint venture under the equity method. The accounting treatment presentation on the accompanying consolidated statements of operations for the nine months ended September 30, 2010 reflects the results of the properties’ operations through the respective dates of transfer in current operations and, prospectively following their transfer to the joint venture, as “equity in income (loss) of unconsolidated joint ventures”. Accordingly, the accompanying statements of operations for the nine months ended September 30, 2010 includes revenues of $3.3 million applicable to the periods prior to the dates of transfer.

Until June 2011, the Company had an approximate 85% limited partner’s interest in an unconsolidated joint venture (increased from approximately 76% in the second quarter of 2011 for a payment of $745,000) which owned a single-tenant property in Philadelphia, Pennsylvania (together with an adjacent property 100%-owned by the Company, and leased to the same tenant, both properties originally acquired for future redevelopment). The Company had determined that this joint venture was not a VIE, as the Company had no control over the entity, did not provide any management or other services to the entity, and had no substantial participating or “kick out” rights. The Company had accounted for its investment in this joint venture under the equity method. The tenant vacated both premises in April 2011, at which time both the joint venture and the Company’s wholly-owned subsidiary had CMBS non-recourse first mortgage loans secured by the properties in the amounts of $14.7 million due for payment in May 2011 and $12.9 million due for payment in March 2012, respectively. The Company reviewed its investment alternatives and determined that it would not be prudent to proceed with the development, sale or lease of the properties, or to advance the funds necessary to pay off the mortgages. Such determination was based on the uncertainty in obtaining favorable revisions to zoning, difficult existing deed restrictions, the uncertainty in achieving required economic returns given the extensive additional capital investments required, and uncertain current market conditions for sale or lease. As a result, in exchange for a payment by the Company of $838,000 to its joint venture partners, the Company (a) obtained appropriate releases, and (b) assigned its limited partnership interest to other partners of the joint venture. Accordingly, the Company wrote off its investment in the joint venture ($8.0 million recorded during the three months ended June 30, 2011), and recorded an impairment charge, included in discontinued operations, related to the value of the 100%-owned adjacent property ($9.1 million recorded during the three months ended June 30, 2011, as more fully discussed in Note 3 — “Real Estate — Discontinued Operations and Land Dispositions”).

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

At September 30, 2011, the Company had a deposit of $0.5 million on a land parcel (which is its maximum exposure) to be purchased for future expansion at an existing property. Although the entity holding the deposit is considered a VIE, it is not consolidated as the Company is not the primary beneficiary.

Note 2. Summary of Significant Accounting Policies

The accompanying 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 statements. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring accruals) have been included. The 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, 2010.

The consolidated financial statements reflect certain reclassifications of prior period amounts to conform to the 2011 presentation, principally to reflect the sale and/or treatment as “held for sale/conveyance” of certain operating properties and the treatment thereof as “discontinued operations”. The reclassifications had no impact on previously-reported net income (loss) attributable to common shareholders or earnings per share.

Real Estate Investments

Real estate investments are carried at cost less accumulated depreciation. The provision for depreciation is calculated using the straight-line method based upon the estimated useful lives of the respective assets of between 3 and 40 years. Depreciation expense amounted to $9.0 million and $8.1 million for the three months ended September 30, 2011 and 2010, respectively, and $25.6 million and $25.0 million for the nine months ended September 30, 2011 and 2010, respectively. Expenditures for betterments that substantially extend the useful lives of the assets are capitalized. Expenditures for maintenance, repairs, and betterments that do not substantially prolong the normal useful life of an asset are charged to operations as incurred.

Upon the sale (or treatment as “held for sale/conveyance”) or other disposition of assets, the cost and related accumulated depreciation and amortization are removed from the accounts (or reclassified) and the resulting gain or impairment loss, if any, are reflected as discontinued operations. In addition, prior periods’ financial statements are reclassified to reflect the operations of the properties sold (or treated as “held for sale/conveyance”) as discontinued operations.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Real estate investments include costs of ground-up development and redevelopment activities, and construction in progress. Capitalized costs, including interest and other carrying costs during the construction and/or renovation periods, are included in the cost of the related asset and charged to operations through depreciation over the asset’s estimated useful life. Interest and financing costs capitalized amounted to $0.9 million and $0.4 million for the three months ended September 30, 2011 and 2010, respectively, and $2.0 million and $1.7 million for the nine months ended September 30, 2011 and 2010, respectively. A variety of costs are incurred in the acquisition, development and leasing of a property, such as pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs, and other costs incurred during the period of development. After a determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. The Company ceases capitalization on the portions substantially completed and occupied, or held available for occupancy, and capitalizes only those costs associated with the portions under development. The Company considers a construction project to be substantially completed and held available for occupancy upon the completion of tenant improvements, but not later than one year from cessation of major construction activity.

Management reviews each real estate investment for impairment whenever events or circumstances indicate that the carrying value of a real estate investment may not be recoverable. The review of recoverability is based on an estimate of the future cash flows that are expected to result from the real estate investment’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If an impairment event exists due to the projected inability to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the carrying value exceeds estimated fair value. Real estate investments held for sale/conveyance are carried at the lower of their respective carrying amounts or estimated fair values, less costs to sell. Depreciation and amortization are suspended during the periods held for sale/conveyance.

During the three months ended March 31, 2010, the Company wrote-off (included in acquisition transaction costs and terminated projects in the consolidated statements of operations) approximately $1.3 million of costs incurred in prior years for a potential development project in Williamsport, Pennsylvania that the Company determined would not go forward.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Conditional asset retirement obligation

A conditional asset retirement obligation is a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within the control of the Company. The Company would record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. Environmental studies conducted at the time of acquisition with respect to all of the Company’s properties did not reveal any material environmental liabilities, and the Company is unaware of any subsequent environmental matters that would have created a material liability. The Company believes that its properties are currently in material compliance with applicable environmental, as well as non-environmental, statutory and regulatory requirements. There were no conditional asset retirement obligation liabilities recorded by the Company during the three and nine months ended September 30, 2011 and 2010, respectively.

Fair Value Measurements

The fair value measurement accounting guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

•

Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2 — Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible while also considering counterparty credit risk in the assessment of fair value. Financial liabilities measured at fair value in the consolidated financial statements consist of interest rate swaps. The fair values of interest rate swaps are determined using widely accepted valuation techniques, including discounted cash flow analysis, on the expected cash flows of each derivative. The analysis reflects the contractual terms of the swaps, including the period to maturity, and uses observable market-based 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 evaluate the likelihood of default. The Company has concluded, as of September 30, 2011, that 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 interest rate swap agreements and, as a result, the Company has determined 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 consists of real estate held for sale/conveyance- discontinued operations.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

The carrying amounts of cash and cash equivalents, restricted cash, rents and other receivables, certain other assets, accounts payable and accrued expenses approximate fair value. The fair value of the Company’s investments ($3.4 million and $0 at September 30, 2011 and December 31, 2010, respectively) and liabilities related to deferred compensation plans ($3.4 million and $0 at September 30, 2011 and December 31, 2010, respectively) were determined to be a Level 1 within the valuation hierarchy, and were based on independent values provided by financial institutions. The valuation of the liability for the Company’s interest rate swaps ($2.2 million and $1.6 million at September 30, 2011 and December 31, 2010, respectively), which is measured on a recurring basis, was determined to be a Level 2 within the valuation hierarchy, and was based on independent values provided by financial institutions. The valuation of the assets for the Company’s real estate held for sale/conveyance — discontinued operations, which is measured on a nonrecurring basis, have been determined to be (i) a Level 2 within the valuation hierarchy, based on the respective contracts of sale or (ii) Level 3 within the valuation hierarchy, where applicable, based on estimated sales prices determined by discounted cash flow analyses if no contract amounts were as yet being negotiated. The discounted cash flow analyses included all estimated cash inflows and outflows over a specific holding period and where applicable, any estimated debt premiums. These cash flows were comprised of unobservable inputs which included contractual rental revenues and forecasted rental revenues and expenses based upon 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 fair value of the Company’s fixed rate mortgage loans was estimated using available market information and discounted cash flows analyses based on borrowing rates the Company believes it could obtain with similar terms and maturities. As of September, 2011 and December 31, 2010, the aggregate fair values of the Company’s fixed rate mortgage loans were approximately $541.3 million and $490.1 million, respectively; the carrying values of such loans were $527.2 million and $488.0 million, respectively, at those dates.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

The following tables show the hierarchy for those assets measured at fair value on a non-recurring basis as of September 30, 2011 and December 31, 2010, respectively:

		Assets Measured at Fair Value on a
		Non-Recurring Basis
		September 30, 2011
Asset Description		Level 1				Level 2				Level 3				Total
Real estate held for sale/conveyance		$	—			$	111,835,000			$	131,009,000			$	242,844,000

		Assets Measured at Fair Value on a
		Non-Recurring Basis
		December 31, 2010
Asset Description		Level 1				Level 2				Level 3				Total
Real estate held for sale/conveyance		$	—			$	22,773,000			$	47,186,000			$	69,959,000	(a)

Intangible Lease Asset/Liability

The Company allocates the fair value of real estate acquired to land, buildings and improvements. In addition, the fair value of in-place leases is allocated to intangible lease assets and liabilities.

The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, which value is then allocated to land, buildings and improvements based on management’s determination of the relative fair values of these assets. In valuing an acquired property’s intangibles, factors considered by management include an estimate of carrying costs during the expected lease-up periods, such as real estate taxes, insurance, other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on its evaluation of current market demand. Management also estimates costs to execute similar leases, including leasing commissions, tenant improvements, legal and other related costs.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

The values of acquired above-market and below-market leases are recorded based on the present values (using discount rates which reflect the risks associated with the leases acquired) of the differences between the contractual amounts to be received and management’s estimate of market lease rates, measured over the terms of the respective leases that management deemed appropriate at the time of the acquisitions. Such valuations include a consideration of the non-cancellable terms of the respective leases as well as any applicable renewal period(s). The fair values associated with below-market rental renewal options are determined based on the Company’s experience and the relevant facts and circumstances that existed at the time of the acquisitions. The values of above-market leases are amortized to rental income over the terms of the respective non-cancelable lease periods. The portion of the values of below-market leases associated with the original non-cancelable lease terms are amortized to rental income over the terms of the respective non-cancelable lease periods. The portion of the values of the leases associated with below-market renewal options that are likely of exercise are amortized to rental income over the respective renewal periods. The value of other intangible assets (including leasing commissions, tenant improvements, etc.) is amortized to expense over the applicable terms of the respective leases. If a lease were to be terminated prior to its stated expiration or not renewed, all unamortized amounts relating to that lease would be recognized in operations at that time.

With respect to the Company’s acquisitions, the fair values of in-place leases and other intangibles have been allocated to the intangible asset and liability accounts. Such allocations are preliminary and are based on information and estimates available as of the respective dates of acquisition. As final information becomes available and is refined, appropriate adjustments are made to the purchase price allocations, which are finalized within twelve months of the respective dates of acquisition.

Unamortized intangible lease liabilities that relate to below-market leases amounted to $36.4 million and $40.3 million at September 30, 2011 and December 31, 2010, respectively. Unamortized intangible lease assets that relate to above-market leases amounted to $0.8 million and $0 at September 30, 2011 and December 31, 2010, respectively.

As a result of recording the intangible lease assets and liabilities, (i) revenues were increased by $1.9 million and $1.7 million for the three months ended September 30, 2011 and 2010, respectively, and $4.3 million and $6.1 million for the nine months ended September 30, 2011 and 2010, respectively, relating to the amortization of intangible lease liabilities, and (ii) depreciation and amortization expense was increased correspondingly by $2.2 million and $2.6 million for the three months ended September 30, 2011 and 2010, respectively, and $5.9 million and $7.3 million for the nine months ended September 30, 2011 and 2010, respectively.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and short-term investments with original maturities of less than ninety days, and include cash at consolidated joint ventures of $6.9 million and $6.7 million at September 30, 2011 and December 31, 2010, respectively.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Restricted Cash

The terms of several of the Company’s mortgage loans payable 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.

Rents and Other Receivables

Management has determined that all of the Company’s leases with its various tenants are operating leases. Rental income with scheduled rent increases is recognized using the straight-line method over the respective non-cancelable terms of the leases. The aggregate excess of rental revenue recognized on a straight-line basis over the contractual base rents is included in straight-line rents on the consolidated balance sheet. Leases also generally contain provisions under which the tenants reimburse the Company for a portion of property operating expenses and real estate taxes incurred, generally attributable to their respective allocable portions of gross leasable area (“GLA”). Such income is recognized in the periods earned. In addition, a limited number of operating leases contain contingent rent provisions under which tenants are required to pay, as additional rent, a percentage of their sales in excess of a specified amount. The Company defers recognition of contingent rental income until those specified sales targets are met. Other contingent fees are recognized when earned.

The Company must make estimates as to the collectability of its accounts receivable related to base rent, straight-line rent, percentage rent, expense reimbursements and other revenues. When management analyzes accounts receivable and evaluates the adequacy of the allowance for doubtful accounts, it considers such things as historical bad debts, tenant creditworthiness, current economic trends, current developments relevant to a tenant’s business specifically and to its business category generally, and changes in tenants’ payment patterns. The allowance for doubtful accounts was $4.6 million and $5.4 million at September 30, 2011 and December 31, 2010, respectively. The provision for doubtful accounts (included in operating, maintenance and management expenses) was $0.5 million and $0.6 million for the three months ended September 30, 2011 and 2010, respectively, and $1.5 million and $1.3 million for the nine months ended September 30, 2011 and 2010, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents in excess of insured amounts and tenant receivables. The Company places its cash and cash equivalents with high quality financial institutions. Management performs ongoing credit evaluations of its tenants and requires certain tenants to provide security deposits and/or suitable guarantees.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Other Assets

Other assets at September 30, 2011 and December 31, 2010 are comprised of the following:

		September 30,				December 31,
		2011				2010
Prepaid expenses		$	9,922,000			$	5,258,000
Investments and cumulative mark-to-market adjustments related to stock-based compensation			3,421,000				2,101,000
Property and other deposits			1,370,000				1,527,000
Leasehold improvements, furniture and fixtures			1,037,000				525,000
Intangible lease assets (i)			820,000				—
		$	16,570,000			$	9,411,000

Deferred Charges, Net

Deferred charges at September 30, 2011 and December 31, 2010 are net of accumulated amortization and are comprised of the following:

		September 30,				December 31,
		2011				2010
Lease origination costs (i)		$	13,496,000			$	13,282,000
Financing costs (ii)			6,688,000				9,623,000
Other			709,000				1,551,000
		$	20,893,000			$	24,456,000

Deferred charges are amortized over the terms of the related agreements. Amortization expense related to deferred charges (including amortization of deferred financing costs included in non-operating income and expense) amounted to $1.9 million and $4.9 million relating to for the three months ended September 30, 2011 and 2010, respectively, and $5.4 million and $8.9 million for the nine months ended September 30, 2011 and 2010, respectively (the amounts for the 2010 periods include the $2.6 million accelerated write-off related to the reduction in commitments under the stabilized property credit facility).

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). A REIT will generally not be subject to federal income taxation on that portion of its income that qualifies as REIT taxable income, to the extent that it distributes at least 90% of such REIT taxable income to its shareholders and complies with certain other requirements. As of September 30, 2011, the Company was in compliance with all REIT requirements.

The Company follows a two-step approach for evaluating uncertain tax positions. Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that more-likely-than-not will be realized upon settlement. Derecognition of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. The use of a valuation allowance as a substitute for derecognition of tax positions is prohibited. The Company has not identified any uncertain tax positions which would require an accrual.

Derivative Financial Instruments

The Company occasionally utilizes derivative financial instruments, principally interest rate swaps, to manage its exposure to fluctuations in interest rates. The Company has established policies and procedures for risk assessment, and the approval, reporting and monitoring of derivative financial instruments. Derivative financial instruments must be effective in reducing the Company’s interest rate risk exposure in order to qualify for hedge accounting. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income for each period until the derivative financial instrument matures or is settled. Any derivative financial instrument used for risk management that does not meet the hedging criteria is marked-to-market with the changes in value included in net income. The Company has not entered into, and does not plan to enter into, derivative financial instruments for trading or speculative purposes. Additionally, the Company has a policy of entering into derivative contracts only with major financial institutions. On January 20, 2010, the Company paid approximately $5.5 million to terminate interest rate swaps applicable to the financing for its development joint venture project in Stroudsburg, Pennsylvania.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

As of September 30, 2011, the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts. Additionally, based on the rates in effect as of September 30, 2011, if a counterparty were to default, the Company would receive a net interest benefit. At September 30, 2011, the Company had approximately $36.2 million of mortgage loans payable subject to interest rate swaps. Such interest rate swaps converted LIBOR-based variable rates to fixed annual rates of 5.2% and 6.5% per annum. At that date, the Company had accrued liabilities of $2.2 million (included in accounts payable and accrued expenses on the consolidated balance sheet) relating to the fair value of interest rate swaps applicable to existing mortgage loans payable. Charges and/or credits relating to the changes in fair values of such interest rate swaps are made to accumulated other comprehensive (loss) income, noncontrolling interests (minority interests in consolidated joint ventures and limited partners’ interest), or operations (included in interest expense), as appropriate.

The following is a summary of the derivative financial instruments held by the Company at September 30, 2011 and December 31, 2010:

										Notional values																Balance				Fair value
Designation/										September 30,								December 31,				Expiration				sheet				September 30,				December 31,
Cash flow		Derivative				Count				2011				Count				2010				dates				location				2011				2010
Qualifying		rate swaps					3			$	32,255,000				2			$	20,218,000				2011 - 2020			Accounts payable and accrued expenses				$	2,210,000			$	1,642,000

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 nine months ended September 30, 2011 and 2010:

						Amount of (loss) recognized in other								Amount of (loss) recognized in other
						comprehensive (loss) (effective portion)								comprehensive (loss) (effective portion)
Designation/						Three months ended September 30,								Nine months ended September 30,
Cash flow		Derivative				2011				2010				2011				2010
Qualifying		swaps				$	(676,000	)		$	(133,000	)		$	(265,000	)		$	(420,000	)

There was no ineffectiveness recorded in earnings for the three and nine months ended September 30, 2011 and 2010.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Limited Partners Interest In Operating Partnership (Mezz OP Units)

The Company follows the accounting guidance related to noncontrolling interests in consolidated financial statements, which clarifies that a noncontrolling interest in a subsidiary (minority interests or certain limited partners’ interest, in the case of the Company), subject to the classification and measurement of redeemable securities, is an ownership interest in a consolidated entity which should be reported as equity in the parent company’s consolidated financial statements. The guidance requires a reconciliation of the beginning and ending balances of equity attributable to noncontrolling interests and disclosure, on the face of the consolidated income statement, of those amounts of consolidated net income attributable to the noncontrolling interests. The Company classifies the balances related to minority interests in consolidated joint ventures and limited partners’ interest in the Operating Partnership into the consolidated equity accounts, as appropriate (certain non-controlling interests of the Company are classified in the mezzanine section of the balance sheet (the “Mezz OP Units”) as such Mezz OP Units do not meet the requirements for equity classification, as certain of the holders of OP Units have registration rights that provide such holders with the right to demand registration under the federal securities laws of the common stock of the Company issuable upon conversion of such OP Units). The Company adjusts the carrying value of the Mezz OP Units each period to equal the greater of its historical carrying value or its redemption value. Through September 30, 2011, there have been no cumulative net adjustments recorded to the carrying amounts of the Mezz OP Units.

The following is an analysis of the activity relating to the Mezz OP units:

Balance, December 31, 2010		$	7,053,000
Net loss			(1,056,000	)
Unrealized gain on change in fair value of cash flow hedges			(5,000	)
Total other comprehensive loss			(1,061,000	)
Distributions			(174,000	)
Reallocation adjustment of limited partners’ interest			(1,103,000	)
Balance, September 30, 2011		$	4,715,000

Management Transition Charges

In June 2011, the Company’s then Chairman of the Board, CEO and President retired, and the employment of the Company’s then Chief Financial Officer ended. Pursuant to their respective employment and/or separation agreements, (a) they are to receive an aggregate of approximately $3.7 million in cash severance payments (including the cost of related payroll taxes and benefits, and substantially all of which has been funded), and (b) all of their unvested restricted share grants became vested and all related amounts were written off (an aggregate of approximately $2.0 million — see “Stock-Based Compensation” below). Together with approximately $0.8 million of other costs, primarily professional fees and expenses related to the hiring of a new President/CEO and Chief Financial Officer, the Company recorded an aggregate of approximately $6.5 million as “management transition charges”.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Stock-Based Compensation

The Company’s 2004 Stock Incentive Plan (the “Incentive Plan”) establishes the procedures for the granting of incentive stock options, stock appreciation rights, restricted shares, performance units and performance shares. The maximum number of shares of the Company’s common stock that may be issued pursuant to the Incentive Plan is 4,850,000 (including a 2,100,000 share increase approved by shareholders on June 15, 2011), and the maximum number of shares that may be granted to a participant in any calendar year may not exceed 250,000. All grants issued pursuant to the Incentive Plan are “restricted stock grants” which generally vest (i) at the end of designated time periods for time-based grants, or (ii) upon the completion of a designated period of performance for performance-based grants and satisfaction of performance criteria. Time—based grants are valued according to the market price for the Company’s common stock at the date of grant. The value of all grants is being expensed on a straight-line basis over the respective vesting periods (irrespective of achievement of the performance grants) adjusted, as applicable, for forfeiture assumptions. Those grants of restricted shares that are transferred to Rabbi Trusts are classified as treasury stock on the Company’s consolidated balance sheet, and have been adjusted, as applicable, for fluctuations in the market value of the Company’s common stock. For performance-based grants, the Company generally engages an independent appraisal company to determine the value of the shares at the date of grant, taking into account the underlying contingency risks associated with the performance criteria.

In January 2009, the Company issued 218,000 shares of common stock as performance-based grants, based on the total annual return on an investment in the Company’s common stock (“TSR”) over the three-year period ending December 31, 2011, with 75% to vest if such TSR is equal to, or greater than an average of 6% TSR per year on the Company’s common stock, and 25% to vest based on a comparison of TSR for such three years to the Company’s peer group. The independent appraisal determined the values of the performance-based shares to be $5.44 and $6.48 per share, respectively, compared to a market price at the date of grant of $7.02 per share. After the accelerated vesting in June 2011 of certain of these shares, as discussed below, 82,000 shares remain of the 2009 performance-based award.

In January 2010, the Company issued 227,000 shares of common stock as performance-based grants. As modified in September 2010, one-half of these amounts will vest upon the satisfaction of the following conditions: (a) if the TSR on the Company’s common stock is at least an average of 6% per year for the three years ending December 31, 2012, and (b) if there is a positive comparison of TSR on the Company’s common stock to the median of the TSR for the Company’s peer group for the three years ending December 31, 2012. The independent appraisal determined the values of the category (a) and (b) performance-based shares to be $4.56 per share and $6.00 per share, respectively, compared to a market price at the date of grant of $6.70 per share. After the accelerated vesting in June 2011 of certain of these shares, as discussed below, 84,000 shares remain of the 2010 performance-based award.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

In January 2011, the Company issued 275,000 shares of common stock as performance-based grants. One-half of these amounts will vest upon the satisfaction of the following conditions: (a) if the TSR on the Company’s common stock is at least an average of 8% per year for the three years ending December 31, 2013, and (b) if there is a positive comparison of TSR on the Company’s common stock to the median of the TSR for the Company’s peer group for the three years ending December 31, 2013. The independent appraisal determined the values of the category (a) and (b) performance-based shares to be $4.40 per share and $5.91 per share, respectively, compared to a market price at the date of grant of $6.54 per share. After the accelerated vesting in June 2011 of certain of these shares, as discussed below, 123,000 shares remain of the 2011 performance-based award.

In connection with the retirement of the Company’s Chairman of the Board, CEO and President, and the end of the employment of the Company’s Chief Financial Officer (see “Management Transition Charges” above), all of their outstanding restricted share grants, consisting of time-based grants (284,000 shares) and performance-based grants (422,000 shares) became vested (an aggregate of 706,000 shares), and were expensed in full at the then market value of the shares (an aggregate of approximately $2.0 million).

The Company’s new President and CEO is to receive restricted share grants totaling 2.5 million shares, one-half of which are to be time-based, vesting upon the seventh anniversary of the date of grant (vesting on June 15, 2018), and the other half to be performance-based, to be earned if the TSR on the Company’s common stock is at least an average of 6.5% per year for the seven years ending June 15, 2018. The independent appraisal determined the value of the performance-based award to be $4.39 per share compared to a market price at the date of grant of $4.98 per share. As a result of existing limitations within the Incentive Plan, only 250,000 shares have been issued, 1,750,000 shares are being accounted for as an “equity award”, and 500,000 shares are being accounted for as a “liability award”. The values of the equity and liability awards are being expensed on a straight-line basis over the vesting period. Consistent with such awards to other recipients, dividends are paid on all the shares, including the equity and liability award shares, with the dividends paid on the equity award shares treated as distributions to common shareholders and included in the statement of equity, and the dividends paid on the liability award shares treated as compensation and included in the statement of operations. In addition, with respect to the liability award, adjustments to reflect changes in the fair value of the award (based on changes in the market price of the Company’s common stock) are also charged to operations. It is the Company’s intention to seek a modification of the terms of the Incentive Plan (or to adopt a new stock incentive plan) so as to permit the grant of the entire 2.5 million shares. Until such changes are effectuated, the Company will issue 250,000 shares each calendar year, thereby reducing the liability established for the equity award. If, by June 15, 2018, the entire 2.5 million shares have not been issued, the parties have agreed to satisfy any remaining Company obligations on a mutually-agreeable economic basis.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

The Company’s new Chief Financial Officer received a time-based restricted share grant totaling 137,000 shares, vesting 25% annually on each of the next four anniversary dates of June 7, 2011.

In addition to the above, there were other time-based restricted shares issued, which amounted to 0 shares and 1,000 shares for the three months ended September 30, 2011 and 2010, respectively, and 299,000 shares and 279,000 shares for the nine months ended September 30, 2011 and 2010, respectively. The following table sets forth certain stock-based compensation information for the three and nine months ended September 30, 2011 and 2010, respectively:

		Three months ended September 30,								Nine months ended September 30,
		2011				2010				2011				2010
Restricted share grants (a)			—				4,000				961,000				509,000
Weighted average per-share value		$	—			$	6.17			$	5.40			$	6.54
Grant date values of restricted stock awards :
Restricted share grants		$	—			$	22,000			$	5,192,000			$	3,330,000
Equity award		$	—			$	—			$	8,199,000			$	—
Liability award		$	—			$	—			$	2,490,000			$	—
Charged to operations:
Expense relating to stock-based compensation		$	978,000			$	856,000			$	4,789,000			$	2,446,000
Adjustments to reflect changes in market price of Company’s common stock			(39,000	)			(2,000	)			(707,000	)			(377,000	)
Total charged to operations		$	939,000			$	854,000			$	4,082,000	(b)		$	2,069,000
Non-vested shares (a):
Non-vested, beginning of period			1,209,000				1,344,000				1,280,000				980,000
Restricted share grants			—				4,000				961,000				509,000
Vested during period			—				—				(1,017,000	)			(141,000	)
Forfeitures/cancellations			—				(1,000	)			(15,000	)			(1,000	)
Non-vested, end of period			1,209,000				1,347,000				1,209,000				1,347,000
Weighted average value of non-vested shares (based on valuation at date of grant)		$	5.36			$	6.33			$	5.36			$	6.33
Weighted average value of shares forfeited (based on valuation at date of grant)		$	—			$	7.93			$	5.68			$	7.93
Weighted average value of shares vested during the period (based on valuation at date of grant)		$	—			$	—			$	6,611,000	(c)		$	2,193,000

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

At September 30, 2011, 2.3 million shares remained available for grants pursuant to the Incentive Plan (before consideration of the 1,750,000 shares and 500,000 shares, respectively, applicable to the equity and liability awards), and an aggregate of $13.9 million applicable to all such grants and awards remains to be expensed over various periods ending in June 2018.

Earnings/ Dividends 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 issued pursuant to the Company’s stock-based compensation program are considered participating securities, as such shares have non-forfeitable rights to receive dividends). Unvested restricted shares 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 and nine months ended September 30, 2011, the Company had 3.0 million and 2.1 million, respectively, weighted average unvested restricted shares outstanding (including the weighted average impact of the 2.0 million shares awarded to the Company’s new President/CEO in June 2011). EPS for the 2010 periods is calculated based on the data presented in the consolidated statements of operations for those periods. The following table provides a reconciliation of the numerator and denominator of the EPS calculations for the 2011 periods:

		Three months ended				Nine months ended
		September 30, 2011				September 30, 2011
Numerator
(Loss) from continuing operations		$	(7,213,000	)		$	(21,123,000	)
Preferred distribution requirements			(3,580,000	)			(10,621,000	)
Less, net loss attribuatble to noncontrolling interests			4,740,000				5,626,000
Less, earnings allocated to unvested shares			(266,000	)			(546,000	)
Loss from continuing operations available for common shareholders			(6,319,000	)			(26,664,000	)
Results from discontinued operations			(64,052,000	)			(83,964,000	)
Net (loss) available for common shareholders, basic and diluted		$	(70,371,000	)		$	(110,628,000	)
Denominator
Weighted average number of vested common shares outstanding			66,800,000				66,253,000
Earnings (loss) per common share, basic and diluted
Continuing operations		$	(0.09	)			(0.40	)
Discontinued operations			(0.96	)			(1.27	)
		$	(1.05	)		$	(1.67	)

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

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. The net loss attributable to noncontrolling interests of the Operating Partnership has been excluded from the numerator and the related OP Units have been excluded from the denominator for the purpose of calculating diluted EPS as there would have been no effect had such amounts been included. The weighted average number of OP Units outstanding for the three months ended September 30, 2011 and 2010 were 1,415,000 and 1,892,000, respectively, and the weighted average number of OP Units outstanding for the nine months ended September 30, 2011 and 2010 were 1,415,000 and 1,941,000, respectively. In addition, warrants for the purchase of OP Units (83,000 for all periods) have been excluded as they were anti-dilutive.

Dividends to common shareholders declared were $6.3 million ($0.09 per share) and $5.9 million ($0.09 per share) for the three months ended September 30, 2011 and 2010, respectively, and $18.4 million ($0.27 per share) and $11.8 million ($0.18 per share) for the nine months ended September 30, 2011 and 2010, respectively.

Supplemental consolidated statements of cash flows information

		Nine months ended September 30,
		2011				2010
Supplemental disclosure of cash activities:
Interest paid		$	35,630,000			$	37,206,000
Supplemental disclosure of non-cash activities:
Assumption of mortgage loans payable upon disposition			(4,975,000	)			(7,740,000	)
Conversion of OP Units into common stock			—				177,000
Purchase accounting allocations:
Intangible lease assets			(5,764,000	)			—
Intangible lease liabilities			753,000				(2,600,000	)
Other non-cash investing and financing activities:
Accrued interest rate swap liabilities			568,000				(1,450,000	)
Accrued real estate improvements and construction escrows			3,557,000				(1,777,000	)
Accrued financing costs and other			—				(463,000	)
Capitalization of deferred financing costs			568,000				674,000
Deconsolidation of properties transferred to joint venture:
Real estate, net			—				139,745,000
Mortgage loans payable			—				(94,058,000	)
Other assets/liabilities, net			—				(3,574,000	)
Investment in and advances to unconsolidated joint venture			—				9,423,000
Settlement receivable from unconsolidated joint venture			—				3,824,000

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

Recently-Issued Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-04, “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S GAAP and IFRS”. This update defines fair value, clarifies a framework to measure fair value, and requires specific disclosures of fair value measurements. The guidance is effective for interim and annual reporting periods beginning after January 1, 2012 and is required to be applied prospectively. The Company does not expect adoption of this guidance to have a material impact on its financial condition or results of operations.

In June 2011, the FASB issued Accounting Standards Update 2011-05, “Presentation of Comprehensive Income”. This standard eliminates the current requirement to report other comprehensive income and its components in the statement of equity and instead requires the components of other comprehensive income to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is effective for interim and annual reporting periods beginning after January 1, 2012 and is required to be applied retrospectively. Other than presentation in the financial statements, the adoption of this guidance will have no effect on the Company’s financial position or results of operations.

Note 3. Real Estate/Investment in Cedar/RioCan Joint Venture/Discontinued Operations

At September 30, 2011 a substantial portion of the Company’s real estate was pledged as collateral for mortgage loans payable and the revolving credit facilities. The following are the significant real estate transactions that occurred during the nine months ended September 30, 2011.

Wholly-owned properties

On January 14, 2011, the Company acquired Colonial Commons, a shopping center located in Lower Paxton Township, Pennsylvania. The purchase price for the property was approximately $49.1 million. At closing, the Company entered into a first mortgage in the amount of $28.1 million, which bears interest at 5.6% per annum and matures in February 2021.

RioCan Joint Venture

The Company and RioCan have entered into an 80% (RioCan) and 20% (Cedar) joint venture (i) initially for the purchase of seven supermarket-anchored properties previously owned by the Company (completed in May 2010), and (ii) then to acquire additional primarily supermarket-anchored properties in the Company’s primary market areas, in the same joint venture format. The joint venture agreement provides that, any time after December 10, 2012, either the Company or RioCan may initiate a “buy/sell” arrangement pursuant to which the initiating party can designate a value for all the joint venture’s properties (in the aggregate), and the other party may then elect either to sell its proportionate ownership interest in the joint venture based on that value or to purchase the initiating party’s ownership interest based on such valuation.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

On April 15, 2011, the joint venture acquired Northwoods Crossing shopping center, located near Boston, Massachusetts. The purchase price was approximately $23.4 million, including the assumption of a $14.4 million first mortgage maturing in 2016 and bearing interest at 6.4% per annum.

The Company earned fees from the joint venture of approximately $0.7 million and $1.7 million for the three months ended September 30, 2011 and 2010, respectively, and $1.9 million and $2.0 million for the nine months ended September 30, 2011 and 2010, respectively, representing accounting fees, management fees, acquisition fees and financing fees. Such fees are included in other revenues in the accompanying statements of operations. At September 30, 2011, the Company was owed approximately $1.6 million related principally to such fees.

During the three and nine months ended September 30, 2010, the Company recorded impairment charges of approximately $0.2 million and $2.3 million, respectively, related principally to the remaining completion work at the Blue Mountain Commons property transferred to the joint venture in December 2009. In connection with the joint venture transactions, the Company paid fees to its investment advisor of approximately $2.2 million for the nine months ended September 30, 2010, which are included in transaction costs in the accompanying statement of operations.

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

The following summarizes certain financial information related to the Company’s investment in the Cedar/RioCan unconsolidated joint venture at September 30, 2011 and December 31, 2010, respectively, and for the three and nine months ended September 30, 2011 and 2010, respectively:

		September 30, 2011				December 31, 2010
Assets:
Real estate, net (a)		$	536,662,000			$	524,447,000
Cash and cash equivalents			11,215,000				5,934,000
Restricted cash			3,488,000				4,464,000
Rent and other receivables			3,365,000				2,074,000
Straight-line rent			2,282,000				1,000,000
Deferred charges, net			6,959,000				13,269,000
Other assets			13,166,000				8,514,000
Total assets		$	577,137,000			$	559,702,000
Liabilities and partners’ capital:
Mortgage loans payable (a) (b)		$	318,960,000			$	293,400,000
Due to the Company			1,626,000				6,036,000
Unamortized lease liability			23,483,000				24,573,000
Other liabilities			7,966,000				7,738,000
Total liabilities			352,035,000				331,747,000
Preferred stock			97,000				97,000
Partners’ capital:
RioCan			179,918,000				181,239,000
The Company			45,087,000				46,619,000
Total partners’ capital			225,005,000				227,858,000
Total liabilities and partners’ capital		$	577,137,000			$	559,702,000

Cedar Realty Trust, Inc.
Notes to Consolidated Financial Statements
September 30, 2011
(unaudited)

		Three months ended September 30,								Nine months ended September 30,
		2011				2010				2011				2010
Revenues		$	15,538,000			$	6,812,000			$	46,827,000			$	15,058,000
Property operating and other expenses			1,361,000				629,000				5,327,000				1,837,000
Management fees to the Company			501,000				228,000				1,451,000				503,000
Real estate taxes			1,826,000				841,000				5,377,000				1,659,000
Acquisition transaction costs			55,000				3,867,000				913,000				4,461,000
General and administrative			87,000				56,000				219,000				155,000
Depreciation and amortization			5,339,000				1,665,000				15,479,000				3,460,000
Interest and other non-operating expenses, net			4,835,000				2,335,000				13,914,000				4,166,000
Net income (loss)		$	1,534,000			$	(2,809,000	)		$	4,147,000			$	(1,183,000	)
RioCan			1,207,000				(2,243,000	)			3,318,000				(946,000	)
The Company			327,000				(566,000	)			829,000				(237,000	)
		$	1,534,000			$	(2,809,000	)		$	4,147,000			$	(1,183,000	)