Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-K

 

 

 

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

For the fiscal year ended December 31, 2012

OR

 

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

COMMISSION FILE NUMBER: 001-31817

 

 

CEDAR REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   42-1241468

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification Number)

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

Registrant’s telephone number, including area code: (516) 767-6492

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

 

Title of each class

  

Name of each exchange on

which registered

Common Stock, $0.06 par value    New York Stock Exchange
8-7/8% Series A Cumulative Redeemable   
Preferred Stock, $25.00 Liquidation Value    New York Stock Exchange
7-1/4% Series B Cumulative Redeemable   
Preferred Stock, $25.00 Liquidation Value    New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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  x    No  ¨

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  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

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. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    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  ¨    No  x

Based on the closing sales price on June 30, 2012 of $5.05 per share, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $345,457,000.

The number of shares outstanding of the registrant’s Common Stock $.06 par value was 71,794,750 on February 28, 2013.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s definitive proxy statement relating to its 2013 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

 

 

 


Table of Contents

CEDAR REALTY TRUST, INC.

TABLE OF CONTENTS

 

     Page No.  

Item No.

  
PART I   

1 and 2. Business and Properties

     3   

1A. Risk Factors

     13   

1B. Unresolved Staff Comments

     21   

3. Legal Proceedings

     21   

4. Mine Safety Disclosures

     21   
PART II   

5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     24   

6. Selected Financial Data

     26   

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

     28   

7A. Quantitative and Qualitative Disclosures about Market Risk

     45   

8. Financial Statements and Supplementary Data

     47   

9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

     100   

9A. Controls and Procedures, including Management Report on Internal Control Over Financial Reporting

     100   
PART III   

10. Directors, Executive Officers and Corporate Governance

     102   

11. Executive Compensation

     102   

12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     102   

13. Certain Relationships and Related Transactions, and Director Independence

     102   

14. Principal Accountant Fees and Services

     102   
PART IV   

15 Exhibits and Financial Statement Schedules

     103   

 

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Table of Contents

Part I.

Items 1 and 2. Business and Properties

General

Cedar Realty Trust, Inc. (the “Company”), organized in 1984, is a fully-integrated real estate investment trust which focuses primarily on ownership and operation of grocery-anchored shopping centers straddling the Washington DC to Boston corridor. At December 31, 2012, the Company owned and managed a portfolio of 67 operating properties (excluding properties “held for sale/conveyance”) totaling approximately 9.8 million square feet of gross leasable area (“GLA”). The portfolio was 91.9% occupied and 92.7% leased at December 31, 2012.

In keeping with its stated goal of reducing overall leverage to an appropriate level by selling non-core assets, the Company determined in 2011 (1) to completely exit the Ohio market, principally the Discount Drug Mart portfolio of drugstore/convenience centers, and concentrate on the region straddling the Washington DC to Boston corridor, (2) to concentrate on grocery-anchored strip centers, by disposing of its mall and single-tenant/triple-net-lease properties, (3) to focus on improving operations and performance at the Company’s remaining properties, and (4) to reduce development activities, by disposing of certain development projects, land acquired for development, and other non-core assets.

On October 10, 2012, the Company concluded definitive agreements with RioCan Real Estate Investment Trust (“RioCan”) to exit the 20% Cedar / 80% RioCan joint venture that owned 22 retail properties. On October 12, 2012, the Company concluded definitive agreements with Homburg Invest Inc. (“HII”) relating to the application of the buy/sell provisions of the joint venture agreements for each of the nine properties owned by the joint venture. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Transactions below for additional information relating to these transactions.

The Company has elected to be taxed as a real estate investment trust (“REIT”) under applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a REIT under those provisions, the Company must have a preponderant percentage of its assets invested in, and income derived from, real estate and related sources. The Company’s objectives are to provide to its shareholders a professionally-managed real estate portfolio consisting primarily of grocery-anchored shopping centers straddling the Washington DC to Boston corridor, which will provide substantial cash flow, currently and in the future, taking into account an acceptable modest risk profile, and which will present opportunities for additional growth in income and capital appreciation.

The Company, organized as a Maryland corporation, has established an umbrella partnership structure through the contribution of substantially all of its assets to Cedar Realty Trust Partnership L.P. (the “Operating Partnership”), organized as a limited partnership under the laws of Delaware. The Company conducts substantially all of its business through the Operating Partnership. At December 31, 2012, the Company owned 99.6% of the Operating Partnership and is its sole general partner. The approximately 281,000 limited Operating Partnership Units (“OP Units”) are economically equivalent to the Company’s common stock and are convertible into the Company’s common stock at the option of the holders on a one-to-one basis.

The Company derives substantially all of its revenues from rents and operating expense reimbursements received pursuant to long-term leases. The Company’s operating results

 

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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 community 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.

The Company, the Operating Partnership, their subsidiaries and affiliated partnerships are separate legal entities. For ease of reference, the terms “we”, “our”, “us”, “Company” and “Operating Partnership” (including their respective subsidiaries and affiliates) refer to the business and properties of all these entities, unless the context otherwise requires. The Company’s executive offices are located at 44 South Bayles Avenue, Port Washington, New York 11050-3765 (telephone 516-767-6492). The Company also maintains property management, construction management and/or leasing offices at several of its shopping-center properties. The Company’s website can be accessed at www.cedarrealtytrust.com, where a copy of the Company’s Forms 10-K, 10-Q, 8-K and other filings with the Securities and Exchange Commission (“SEC”) can be obtained free of charge. These SEC filings are added to the website as soon as reasonably practicable. The Company’s Code of Ethics, corporate governance guidelines and committee charters are also available on the website.

The Company’s Properties

Consolidated Portfolio

The following tables summarize information relating to the Company’s consolidated portfolio as of December 31, 2012:

 

State

   Number of
properties
     GLA      Percentage
of GLA
 

Pennsylvania

     31        5,241,641        53.4

Massachusetts

     8        1,308,908        13.3

Connecticut

     6        1,049,125        10.7

Maryland

     7        835,972        8.5

Virginia

     11        817,392        8.3

New Jersey

     3        373,065        3.8

New York

     1        194,082        2.0
  

 

 

    

 

 

    

 

 

 

Total consolidated portfolio

     67        9,820,185        100.0
  

 

 

    

 

 

    

 

 

 

 

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Tenant Concentration

 

Tenant

   Number
of
stores
     GLA      % of GLA     Annualized
base rent
     Annualized
base rent
per sq. ft.
     Percentage
annualized
base rents
 

Top twenty tenants (a):

                

Giant Foods

     14         912,000         9.3   $ 13,789,000       $ 15.12         12.8

LA Fitness

     7         282,000         2.9     4,447,000         15.77         4.1

Farm Fresh

     6         364,000         3.7     3,909,000         10.74         3.6

Stop & Shop

     4         271,000         2.8     2,805,000         10.35         2.6

Dollar Tree

     19         194,000         2.0     1,928,000         9.94         1.8

Food Lion

     7         243,000         2.5     1,925,000         7.92         1.8

Staples

     5         104,000         1.1     1,701,000         16.36         1.6

Shop Rite

     2         118,000         1.2     1,695,000         14.36         1.6

Redner’s

     4         202,000         2.1     1,514,000         7.50         1.4

United Artist

     1         78,000         0.8     1,411,000         18.09         1.3

Shaw’s

     2         125,000         1.3     1,389,000         11.11         1.3

Marshall’s

     6         170,000         1.7     1,366,000         8.04         1.3

Shoppers Food Warehouse

     2         120,000         1.2     1,237,000         10.31         1.2

Ukrop’s

     1         63,000         0.6     1,163,000         18.46         1.1

Kohl’s Department Store

     2         149,000         1.5     1,113,000         7.47         1.0

Carmike Cinema

     1         45,000         0.5     1,034,000         22.98         1.0

Giant Eagle

     1         84,000         0.9     922,000         10.98         0.9

Wal-Mart

     2         150,000         1.5     838,000         5.59         0.8

Dick’s Sporting Goods

     1         56,000         0.6     812,000         14.50         0.8

Rite Aid

     5         54,000         0.5     799,000         14.80         0.7
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Sub-total top twenty tenants

     92         3,784,000         38.5     45,797,000         12.10         42.6

Remaining tenants

     821         5,244,000         53.4     61,639,000         11.75         57.4
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Sub-total all tenants (b)

     913         9,028,000         91.9   $ 107,436,000       $ 11.90         100.0
          

 

 

    

 

 

    

 

 

 

Vacant space

     N/A         792,000         8.1        
  

 

 

    

 

 

    

 

 

         

Total

     913         9,820,000         100.0        
  

 

 

    

 

 

    

 

 

         

 

(a) Several of the tenants listed above share common ownership with other tenants including, without limitation, (i) Giant Foods, Stop & Shop, and Martin’s at Glen Allen (GLA of 63,000; annualized base rent of $418,000), and (ii) Farm Fresh, Shaw’s, Shop ‘n Save (GLA of 53,000; annualized base rent of $412,000), Shoppers Food Warehouse, and Acme Markets (GLA of 172,000; annualized base rent of $756,000).
(b) Comprised of large tenants (greater than 15,000 sq. ft.) and small tenants as follows:

 

      GLA      % of GLA     Annualized
base rent
     Annualized
base rent
per sq. ft.
     Percentage
annualized
base rents
 

Large tenants

     6,322,000         70.0   $ 63,681,000       $ 10.07         59.3

Small tenants

     2,706,000         30.0     43,755,000         16.17         40.7
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

     9,028,000         100.0   $ 107,436,000       $ 11.90         100.0
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

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Lease Expirations

 

Year of lease

expiration

   Number
of leases
expiring
     GLA
expiring
     Percentage
of GLA
expiring
    Annualized
expiring

base rents
     Annualized
expiring
base rent
per sq. ft.
     Percentage
of  annualized
expiring

base rents
 

Month-to-Month

     36         92,000         1.0   $ 1,275,000       $ 13.86         1.2

2013

     120         460,000         5.1     6,344,000         13.79         5.9

2014

     146         1,269,000         14.1     12,177,000         9.60         11.3

2015

     148         1,282,000         14.2     13,852,000         10.80         12.9

2016

     114         922,000         10.2     10,172,000         11.03         9.5

2017

     113         912,000         10.1     11,838,000         12.98         11.0

2018

     57         643,000         7.1     8,533,000         13.27         7.9

2019

     27         332,000         3.7     3,878,000         11.68         3.6

2020

     34         880,000         9.7     8,208,000         9.33         7.6

2021

     37         419,000         4.6     6,262,000         14.95         5.8

2022

     20         139,000         1.5     1,895,000         13.63         1.8

2023

     16         168,000         1.9     2,225,000         13.24         2.1

Thereafter

     45         1,510,000         16.7     20,777,000         13.76         19.3
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

All tenants

     913         9,028,000         100.0   $ 107,436,000       $ 11.90         100.0
          

 

 

    

 

 

    

 

 

 

Vacant space

     N/A         792,000         N/A           
  

 

 

    

 

 

    

 

 

         

Total portfolio

     913         9,820,000         N/A           
  

 

 

    

 

 

    

 

 

         

 

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Real Estate Summary

 

Property description

  Percent
owned
    Year
acquired
    GLA     Percent
occupied
    Average
base rent
per sq. ft. (a)
    Major tenants (b)

Connecticut

           

Groton Shopping Center

    100     2007        117,186        84.3   $ 11.65      TJ Maxx

Jordan Lane

    100     2005        177,504        99.2     10.89      Stop & Shop

CW Price

Retro Fitness

New London Mall

    40     2009        259,293        94.2     14.24      Shop Rite

Marshalls

Homegoods

Petsmart

AC Moore

Oakland Commons

    100     2007        90,100        100.0     6.37      Wal-Mart

Bristol Ten Pin

Southington Shopping Center

    100     2003        155,842        97.8     6.85      Wal-Mart

NAMCO

The Brickyard

    100     2004        249,200        68.2     7.58      Home Depot

Kohl’s

     

 

 

       

Total Connecticut

        1,049,125       88.8     10.15     
     

 

 

       

Maryland

           

Kenley Village

    100     2005        51,894        73.7     8.77      Food Lion

Metro Square

    100     2008        71,896        100.0     18.87      Shoppers Food Warehouse

Oakland Mills

    100     2005        58,224        100.0     13.39      Food Lion

San Souci Plaza

    40     2009        264,134        78.7     9.93      Shoppers Food Warehouse
Marshalls
Maximum Health and Fitness

St. James Square

    100     2005        39,903        100.0     11.42      Food Lion

Valley Plaza

    100     2003        190,939        100.0     4.98      K-Mart

Ollie’s Bargain Outlet
Tractor Supply

Yorktowne Plaza

    100     2007        158,982        91.1     13.32      Food Lion
     

 

 

       

Total Maryland

        835,972       90.0     10.47     
     

 

 

       

Massachusetts

           

Fieldstone Marketplace

    100     2005/2012        193,970       95.8     11.36      Shaw’s

Flagship Cinema

New Bedford Wine and Spirits

Franklin Village Plaza

    100     2004/2012        304,347       92.6     20.31      Stop & Shop

Marshalls

Team Fitness

Kings Plaza

    100     2007        168,243        92.7     6.15      Work Out World

CW Price

Ocean State Job Lot

Savers

 

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Property description

   Percent
owned
    Year
acquired
     GLA      Percent
occupied
    Average
base rent
per sq. ft. (a)
     Major tenants (b)

Massachusetts (continued)

               

Norwood Shopping Center

     100     2006         102,459         98.2     7.32       Hannaford Brothers
Rocky’s Ace Hardware
Dollar Tree

Price Chopper Plaza

     100     2007         101,824         91.1     11.00       Price Chopper

The Shops at Suffolk Downs

     100     2005         121,251         86.8     12.62       Stop & Shop

Timpany Plaza

     100     2007         183,775         97.0     6.83       Stop & Shop

Big Lots

Gardner Theater

West Bridgewater Plaza

     100     2007         133,039        96.9     8.78       Shaw’s

Big Lots

Planet Fitness

       

 

 

         

Total Massachusetts

          1,308,908        93.9     11.57      
       

 

 

         

New Jersey

               

Carll’s Corner

     100     2007         129,582         85.4     8.85       Acme Markets

Peebles

Pine Grove Plaza

     100     2003         86,089         100.0     10.13       Peebles

Washington Center Shoppes

     100     2001         157,394         93.4     8.82       Acme Markets

Planet Fitness

       

 

 

         

Total New Jersey

          373,065        92.1     9.16      
       

 

 

         

New York

               

Carman’s Plaza

     100     2007         194,082         91.8     17.11       Pathmark
       

 

 

         
                Extreme Fitness

Home Goods
Department of Motor Vehicle

Pennsylvania

               

Academy Plaza

     100     2001         137,662         90.3     13.63       Acme Markets

Camp Hill

     100     2002         470,117         99.3     13.56       Boscov’s

Giant Foods

LA Fitness

Orthopedic Inst of PA

Barnes & Noble

Staples

Carbondale Plaza

     100     2004         120,689         100.0     6.76       Weis Markets

Peebles

Circle Plaza

     100     2007         92,171         100.0     2.74       K-Mart

 

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Table of Contents

Property description

   Percent
owned
    Year
acquired
     GLA      Percent
occupied
    Average
base rent
per sq. ft. (a)
     Major tenants (b)

Pennsylvania (cotninued)

               

Colonial Commons

     100     2011         466,233         86.5     12.82       Giant Foods
Dick’s Sporting Goods
L.A. Fitness

Ross Dress For Less
Marshalls

JoAnn Fabrics

David’s Furniture
Office Max

Crossroads II

     60     2008         133,717         92.1     20.03       Giant Foods

Fairview Commons

     100     2007         42,314         53.3     9.68       Family Dollar

Fairview Plaza

     100     2003         71,979         100.0     12.39       Giant Foods

Fort Washington

     100     2002         41,000         100.0     19.90       LA Fitness

Gold Star Plaza

     100     2006         71,720         82.2     8.91       Redner’s

Golden Triangle

     100     2003         202,943         98.2     12.47       LA Fitness

Marshalls

Staples

Just Cabinets

Aldi

Halifax Plaza

     100     2003         51,510         100.0     11.89       Giant Foods

Hamburg Commons

     100     2004         99,580         96.4     6.52       Redner’s

Peebles

Huntingdon Plaza

     100     2004         142,845         71.9     5.18       Sears

Peebles

Lake Raystown Plaza

     100     2004         142,559         95.7     12.31       Giant Foods

Tractor Supply

Liberty Marketplace

     100     2005         68,200         89.4     17.56       Giant Foods

Meadows Marketplace

     100     2004/2012         91,518         100.0     15.43       Giant Foods

Mechanicsburg Giant

     100     2005         51,500         100.0     21.78       Giant Foods

Newport Plaza

     100     2003         64,489         100.0     11.55       Giant Foods

Northside Commons

     100     2008         64,710         96.1     9.89       Redner’s Market

Palmyra Shopping Center

     100     2005         111,051         89.2     6.00       Weis Markets
Goodwill

Port Richmond Village

     100     2001         154,908         96.8     12.51       Thriftway

Pep Boys

City Stores, Inc.

River View Plaza

     100     2003         226,786         90.5     18.63       United Artists

Avalon Carpet

Pep Boys

Staples

 

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Table of Contents

Property description

   Percent
owned
    Year
acquired
     GLA      Percent
occupied
    Average
base rent
per sq. ft. (a)
     Major tenants (b)

Pennsylvania (cotninued)

               

South Philadelphia

     100     2003         283,415         79.3     14.58       Shop Rite
Ross Dress For Less

LA Fitness

Modell’s

Swede Square

     100     2003         100,816         97.0     16.10       LA Fitness

The Commons

     100     2004         203,426         87.5     9.34       Bon-Ton

Shop ‘n Save

TJ Maxx

The Point

     100     2000         268,037         99.0     12.41       Burlington Coat Factory
Giant Foods

AC Moore

Staples

Townfair Center

     100     2004         218,662         100.0     9.11       Lowe’s Home Centers
Giant Eagle

Michael’s Store

Trexler Mall

     100     2005         339,363         88.7     9.66       Kohl’s

Bon-Ton

Lehigh Wellness Partners
Trexlertown Fitness Club
Marshall’s

Trexlertown Plaza

     100     2006         316,143         78.9     13.22       Giant Foods

Redner’s

Big Lots

Sears

Tractor Supply

Upland Square

     60     2007         391,578         92.8     16.92       Giant Foods

Carmike Cinema

LA Fitness

Best Buy

TJ Maxx

Bed, Bath & Beyond
A.C. Moore

Staples

Total Pennsylvania

          5,241,641        91.5     12.63      
       

 

 

         

Virginia

               

Annie Land Plaza

     100     2006         42,500         97.18     9.39       Food Lion

Coliseum Marketplace

     100     2005         105,998         100.00     15.97       Farm Fresh

Michael’s

Elmhurst Square

     100     2006         66,250         89.10     9.46       Food Lion

General Booth Plaza

     100     2005         71,639         96.65     12.89       Farm Fresh

 

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Property description

   Percent
owned
    Year
acquired
     GLA      Percent
occupied
    Average
base rent
per sq. ft. (a)
     Major tenants (b)

Virginia (cotninued)

               

Kempsville Crossing

     100     2005         94,477         97.30     11.21       Farm Fresh

Martin’s at Glen Allen

     100     2005         63,328         100.00     6.61       Martin’s

Oak Ridge Shopping Center

     100     2006         38,700         100.00     10.56       Food Lion

Smithfield Plaza

     100     2005/2008         134,664         96.40     9.23       Farm Fresh

Maxway

Peebles

Suffolk Plaza

     100     2005         67,216         100.00     9.40       Farm Fresh

Ukrop’s at Fredericksburg

     100     2005         63,000         100.00     18.47       Ukrop’s Supermarket

Virginia Little Creek

     100     2005         69,620         100.00     11.12       Farm Fresh
       

 

 

         

Total Virginia

          817,392         97.8     11.46      
       

 

 

         

Total Consolidated Portfolio

          9,820,185        91.9   $ 11.90      
       

 

 

    

 

 

   

 

 

    

 

(a) Average base rent is calculated as the aggregate, annualized contractual minimum rent for all occupied spaces divided by the aggregate GLA of all occupied spaces as of December 31, 2012. Tenant concessions are reflected in this measure except for a limited number of short-term (generally one to three months) free rent concessions provided to new tenants that took occupancy prior to the end of the reporting period but within the concession period. Average base rent would have been $11.79 per square foot if all such free rent concessions were reflected.

The terms of the Company’s retail leases generally vary from tenancies at will to 25 years, excluding renewal options. Anchor tenant leases are typically for 10 to 25 years, with one or more renewal options available to the lessee upon expiration of the initial lease term. By contrast, smaller store leases are typically negotiated for five-year terms. The longer terms of major tenant leases serve to protect the Company against significant vacancies and to assure the presence of strong tenants which draw consumers to its centers. The shorter terms of smaller store leases allow the Company under appropriate circumstances to adjust rental rates periodically for non-major store space and, where possible, to upgrade or adjust the overall tenant mix.

Most leases contain provisions requiring tenants to pay their pro rata share of real estate taxes, insurance and certain operating costs. Some leases also provide that tenants pay percentage rent based upon sales volume generally in excess of certain negotiated minimums.

Giant Food Stores, LLC, Stop & Shop, Inc. and Martin’s at Glen Allen, each of which is owned by Ahold N.V., a Netherlands corporation, leased an aggregate of approximately 13%, 13% and 11% of the Company’s GLA at December 31, 2012, 2011 and 2010, respectively, and accounted for an aggregate of approximately 15%, 14% and 14% of the Company’s total revenues during 2012, 2011 and 2010, respectively. No other tenant leased more than 10% of GLA at December 31, 2012, 2011 or 2010, or contributed more than 10% of total revenues during 2012, 2011 or 2010.

 

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Executive Offices

The Company’s executive offices are located at 44 South Bayles Avenue, Port Washington, New York, in which it presently occupies approximately 14,700 square feet pursuant to a lease from a partnership owned in part by the Company’s former Chairman and Chief Executive Officer. The lease expires in February 2020.

Competition

The Company believes that competition for the acquisition and operation of retail shopping and convenience centers is highly fragmented. It faces competition from institutional investors, public and private REITs, owner-operators engaged in the acquisition, ownership and leasing of shopping centers, as well as from numerous local, regional and national real estate developers and owners in each of its markets. It also faces competition in leasing available space at its properties to prospective tenants. Competition for tenants varies depending upon the characteristics of each local market in which the Company owns and manages properties. The Company believes that the principal competitive factors in attracting tenants in its market areas are location, price and other lease terms, the presence of anchor tenants, the mix, quality and sales results of other tenants, and maintenance, appearance, access and traffic patterns of its properties.

Environmental Matters

Under various federal, state, and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or other contaminants at property owned, leased, managed or otherwise operated by such person, and may be held liable to a governmental entity or to third parties for property damage, and for investigation and cleanup costs in connection with such contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such conditions, may adversely affect the owner’s, lessor’s or operator’s ability to sell or rent such property or to arrange financing using such property as collateral. In connection with the ownership, operation and management of real estate, the Company may potentially become liable for removal or remediation costs, as well as certain other related costs and liabilities, including governmental fines and injuries to persons and/or property. Generally, the Company’s tenants must comply with environmental laws and meet any remediation requirements. In addition, leases typically impose obligations on tenants to indemnify the Company from any compliance costs the Company may incur as a result of environmental conditions on the property caused by the tenant. However, if a lease does not require compliance, or if a tenant fails to or cannot comply, the Company could be forced to pay these costs.

The Company believes that environmental studies conducted at the time of acquisition with respect to its properties have not revealed environmental liabilities that would have a material adverse effect on its business, results of operations or liquidity. However, no assurances can be given that existing environmental studies with respect to any of the properties reveal all environmental liabilities, that any prior owner of or tenant at a property did not create a material environmental condition not known to the Company, or that a material environmental condition does not otherwise exist at any one or more of its properties. If a material environmental condition does in fact exist, it could have an adverse impact upon the Company’s financial condition, results of operations and liquidity.

 

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Employees

As of December 31, 2012, the Company had 88 employees (84 full-time and four part-time). The Company believes that its relations with its employees are good.

Item 1A. Risk Factors

Although improving, economic conditions in the U.S. economy in general, and specifically uncertainty in the credit markets and retail environment, could adversely affect our ability to continue to pay dividends or cause us to reduce further the amount of our dividends.

The Company paid dividends totaling $0.20 per share during 2012, reduced from $0.36 per share during 2011. However, as a result of the state of the U.S. economy, constrained capital markets, and the difficult retail environment, there can be no assurance that the Company will not be forced, once again, to reduce or suspend (as done on April 2, 2009 until reinstituted on January 20, 2010) the payment of dividends.

Any volatility and instability in the credit markets could adversely affect our ability to obtain new financing or to refinance existing indebtedness.

Any instability in the credit markets may negatively impact our ability to access debt financing, to arrange property-specific financing or to refinance our existing debt as it matures on favorable terms or at all. As a result, we may be forced to seek potentially less attractive financings, including equity investments, on terms that may not be favorable to us. In doing so, the Company may be compelled to dilute the interests of existing shareholders that could also adversely reduce the trading price of our common stock.

Our properties consist primarily of grocery-anchored community shopping centers. Our performance therefore is linked to economic conditions in the market for retail space generally.

Our properties consist primarily of grocery-anchored community shopping centers, and our performance therefore is linked to economic conditions in the market for retail space generally. This also means that we are subject to the risks that affect the retail environment generally, including the levels of consumer spending, the willingness of retailers to lease space in our shopping centers, tenant bankruptcies, changes in economic conditions and consumer confidence. A downturn in the U.S. economy and reduced consumer spending could impact our tenants’ ability to meet their lease obligations due to poor operating results, lack of liquidity or other reasons, and therefore decrease the revenue generated by our properties and/or the value of our properties. Our ability to lease space and negotiate and maintain favorable rents could also be negatively impacted by the state of the U.S. economy. Moreover, the demand for leasing space in our shopping centers could also significantly decline during a significant downturn in the U.S. economy that could result in a decline in our occupancy percentage and reduction in rental revenues. The U.S. economy has experienced, and is expected to continue to experience, substantial unemployment at rates which approach their highest levels in the country’s history. Such levels of reported unemployment may in fact mask more serious unemployment issues, such as persons who have not sought to re-enter the labor force after having been unemployed for substantial periods of time and, further, may not fairly reflect persons who are under-employed or temporarily employed. Sustained levels of high unemployment can be expected to have a serious negative impact on consumer spending in affected areas. While unemployment levels may vary considerably in different areas of the country, and within the

 

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markets in which we presently operate, any sustained unemployment may have a continuing negative impact on sales by our tenants at our various shopping centers.

There has been ongoing pressure on prices of petroleum products resulting from actual or potential dislocations in the world’s supply caused by political turmoil in countries which are major sources or distribution links for such products. This has tended to adversely impact the pricing of gasoline, among other products, in this country, which may cause shoppers to restrict their trips by automobile to shopping centers, reduce their purchases of gasoline and other products from the fuel service stations at several of our properties, as well as reduce their levels of discretionary spending, all of which, in turn, could adversely affect sales at our properties.

Our performance and value are subject to risks associated with real estate assets and with the real estate industry.

Our performance and value are subject to risks associated with real estate assets and with the real estate industry, including, among other things, risks related to adverse changes in national, regional and local economic and market conditions. Our continued ability to make expected distributions to our shareholders depends on our ability to generate sufficient revenues to meet operating expenses, future debt service and capital expenditure requirements. Events and conditions generally applicable to owners and operators of real property that are beyond our control may decrease cash available for distribution and the value of our properties. These events and conditions include, but may not be limited to, the following:

 

  1. local oversupply, increased competition or declining demand for real estate;

 

  2. local economic conditions, which may be adversely impacted by plant closings, business layoffs, industry slow-downs, weather conditions, natural disasters and other factors;

 

  3. non-payment or deferred payment of rent or other charges by tenants, either as a result of tenant-specific financial ills, or general economic events or circumstances adversely affecting consumer disposable income or credit;

 

  4. vacancies or an inability to rent space on acceptable terms;

 

  5. increased operating costs, including real estate taxes, insurance premiums, utilities, and repairs and maintenance;

 

  6. volatility and/or increases in interest rates, or the non-availability of funds in the credit markets in general;

 

  7. increased costs of complying with current, new or expanded governmental regulations;

 

  8. the relative illiquidity of real estate investments;

 

  9. changing market demographics;

 

  10. changing traffic patterns;

 

  11. an inability to arrange property-specific replacement financing for maturing mortgage loans in acceptable amounts and/or on acceptable terms.

 

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Our substantial indebtedness and any constraints on credit may impede our operating performance, and put us at a competitive disadvantage.

Our substantial debt may harm our business and operating results by (1) requiring us to use a substantial portion of our available liquidity to pay required debt service and/or repayments or establish additional reserves, which would reduce amounts available for distributions, (2) placing us at a competitive disadvantage compared to competitors that have less debt or debt at more favorable terms, (3) making us more vulnerable to economic and industry downturns and reducing our flexibility in responding to changing business and economic conditions, and (4) limiting our ability to borrow more money for operations or capital expenditures. In addition, increases in interest rates may impede our operating performance and put us at a competitive disadvantage. Further, payments of required debt service or amounts due at maturity, or creation of additional reserves under loan agreements, could adversely affect our liquidity.

If we fail to dispose of properties presently held for sale or reduce our outstanding indebtedness, our financial condition and results of operations may be adversely affected.

We have announced plans to dispose of certain shopping centers and land parcels owned by us and to use the proceeds from the dispositions to reduce our outstanding indebtedness. If we fail to dispose of these properties in a timely fashion or if we do not realize the proceeds presently anticipated from such sales, we will not be able to reduce our outstanding debt as presently planned and we may require new or additional impairment provisions, which would adversely affect our financial condition and results of operations.

As substantially all of our revenues are derived from rental income, failure of tenants to pay rent or delays in arranging leases and occupancy at our properties could seriously harm our operating results and financial condition.

Substantially all of our revenues are derived from rental income from our properties. Our tenants may experience a downturn in their respective businesses and/or in the economy generally at any time that may weaken their financial condition. As a result, any such tenants may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent, or declare bankruptcy. Any leasing delays, failure to make rental or other payments when due, or tenant bankruptcies, could result in the termination of tenants’ leases, which would have a negative impact on our operating results. In addition, adverse market and economic conditions and competition may impede our ability to renew leases or re-let space as leases expire, which could harm our business and operating results.

Our business may be seriously harmed if a major tenant fails to renew its lease(s) or vacates one or more properties and prevents us from re-leasing such premises by continuing to pay base rent for the balance of the lease terms. In addition, the loss of such a major tenant could result in lease terminations or reductions in rent by other tenants at the affected properties, as provided in their respective leases.

We may be restricted from re-leasing space based on existing exclusivity lease provisions with some of our tenants. In these cases, the leases contain provisions giving the tenant the exclusive right to sell particular types of merchandise or provide specific types of services within the particular retail center, which limits the ability of other tenants within that center to sell such merchandise or provide such services. When re-leasing space after a vacancy by one of such other tenants, such lease provisions may limit the number and types of prospective tenants for the

 

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vacant space. The failure to re-lease space or to re-lease space on satisfactory terms could harm operating results.

Any bankruptcy filings by, or relating to, one of our tenants or a lease guarantor would generally bar efforts by us to collect pre-bankruptcy debts from that tenant, or lease guarantor, unless we receive an order permitting us to do so from the bankruptcy court. A bankruptcy by a tenant or lease guarantor could delay efforts to collect past due balances, and could ultimately preclude full or, in fact, any collection of such sums. If a lease is affirmed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must generally be paid in full. However, if a lease is disaffirmed by a tenant in bankruptcy, we would have only an unsecured claim for damages, which would be paid normally only to the extent that funds are available, and only in the same percentage as is paid to all other members of the same class of unsecured creditors. It is possible, and indeed likely, that we would recover substantially less than, or in fact no portion of, the full value of any unsecured claims we hold, which may in turn harm our financial condition.

Specifically, Giant Food Stores, LLC, Stop & Shop, Inc. and Martin’s at Glen Allen, each of which is owned by Ahold N.V., a Netherlands corporation, leased an aggregate of approximately 13% of the Company’s GLA at December 31, 2012, and accounted for an aggregate of approximately 15% of the Company’s total revenues during 2012. No other tenant leased more than 10% of GLA at December 31, 2012 or contributed more than 10% of total revenues during 2012.

“New Technology” developments may impact customer traffic at certain tenants’ stores and ultimately sales at such stores.

We may be adversely affected by developments of new technology which may cause the business of certain of our tenants to become substantially diminished or functionally obsolete, with the result that such tenants may be unable to pay rent, become insolvent, file for bankruptcy protection, close their stores, or terminate their leases. Examples of the potentially adverse effects of new technology on retail businesses include, amongst other things, the advent of on-line movie rentals on video stores, the effect of “e-books” and small screen readers on book stores, and increased sales of many products “on-line”.

Substantial recent annual increases in on-line sales have also caused many retailers to sell products on line on their websites with pick-ups at a store or warehouse or through deliveries. With special reference to our principal tenants, on-line grocery orders are available and especially useful in urban areas, but have not yet become a major factor affecting grocers in our portfolio.

Competition may impede our ability to renew leases or re-let spaces as leases expire, which could harm our business and operating results.

We also face competition from similar retail centers within our respective trade areas that may affect our ability to renew leases or re-let space as leases expire. Certain national retail chain bankruptcies and resulting store closings/lease disaffirmations have generally resulted in increased available retail space which, in turn, has resulted in increased competitive pressure to renew tenant leases upon expiration and to find new tenants for vacant space at such properties. In addition, any new competitive properties that are developed within the trade areas of our existing properties may result in increased competition for customer traffic and creditworthy tenants. Increased competition for tenants may require us to make tenant and/or capital

 

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improvements to properties beyond those that we would otherwise have planned to make. Any unbudgeted tenant and/or capital improvements we undertake may reduce cash that would otherwise be available for distributions to shareholders. Ultimately, to the extent we are unable to renew leases or re-let space as leases expire, our business and operations could be negatively impacted.

The financial covenants in our loan agreements may restrict our operating or acquisition activities, which may harm our financial condition and operating results.

The financial covenants in our loan agreements may restrict our operating or acquisition activities, which may harm our financial condition and operating results. The mortgages on our properties contain customary negative covenants, such as those that limit our ability, without the prior consent of the lender, to sell or otherwise transfer any ownership interest, to further mortgage the applicable property, to enter into leases, or to discontinue insurance coverage. Our ability to borrow under our secured revolving credit facilities is subject to compliance with these financial and other covenants, including restrictions on property eligible for collateral, the payment of dividends, and overall restrictions on the amount of indebtedness we can incur. If we breach covenants in our debt agreements, the lenders could declare a default and require us to repay the debt immediately and, if the debt is secured, could take possession of the property or properties securing the loan.

A substantial portion of our properties straddle the Washington DC to Boston corridor, which exposes us to greater economic risks than if our properties were owned in several geographic regions.

Our properties are located largely in the region that straddles the Washington DC to Boston corridor, which exposes us to greater economic risks than if we owned properties in more geographic regions (in particular, 31 of our consolidated properties are located in Pennsylvania). Any adverse economic or real estate developments resulting from the regulatory environment, business climate, fiscal problems or weather in such regions could have an adverse impact on our prospects. In addition, the economic condition of each of our markets may be dependent on one or more industries. An economic downturn in one of these industry sectors may result in an increase in tenant vacancies, which may harm our performance in the affected markets. High barriers to entry in the Washington DC to Boston corridor due to mature economies, road patterns, density of population, restrictions on development, and high land costs, coupled with large numbers of often overlapping government jurisdictions, may make it difficult for the Company to continue to grow in these areas.

Our success depends on key personnel whose continued service is not guaranteed.

Our success depends on the efforts of key personnel, whose continued service is not guaranteed. Key personnel could be lost because we could not offer, among other things, competitive compensation programs. The loss of services of key personnel could materially and adversely affect our operations because of diminished relationships with lenders, sources of equity capital, construction companies, and existing and prospective tenants, and the ability to conduct our business and operations without material disruption.

 

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Natural disasters and severe weather conditions could have an adverse impact on our cash flow and operating results.

Some of our properties could be subject to potential natural or other disasters. In addition, we may acquire properties that are located in areas which are subject to natural disasters. Properties could also be affected by increases in the frequency or severity of hurricanes or other storms, whether such increases are caused by global climate changes or other factors. The occurrence of natural disasters or severe weather conditions can increase investment costs to repair or replace damaged properties, increase operating costs, increase future property insurance costs, and/or negatively impact the tenant demand for lease space. If insurance is unavailable to us, or is unavailable on acceptable terms, or if our insurance is not adequate to cover business interruption or losses from such events, our earnings, liquidity and/or capital resources could be adversely affected.

Potential losses may not be covered by insurance.

Potential losses may not be covered by insurance. We carry comprehensive liability, fire, flood, extended coverage and rental loss insurance under a blanket policy covering all of our properties. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. We do not carry insurance for losses such as from war, nuclear accidents, and nuclear, biological and chemical occurrences from terrorist’s acts. Some of the insurance, such as that covering losses due to wind, floods and earthquakes, is subject to limitations involving large deductibles or co-payments and policy limits that may not be sufficient to cover losses. Additionally, certain tenants have termination rights in respect of certain casualties. If we receive casualty proceeds, we may not be able to reinvest such proceeds profitably or at all, and we may be forced to recognize taxable gain on the affected property. If we experience losses that are uninsured or that exceed policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.

Future terrorist attacks could harm the demand for, and the value of, our properties.

Future terrorist attacks, such as the attacks that occurred in New York, Pennsylvania and Washington, DC on September 11, 2001, and other acts of terrorism or war, could harm the demand for, and the value of, our properties. Terrorist attacks could directly impact the value of our properties through damage, destruction, loss or increased security costs, and the availability of insurance for such acts may be limited or may be subject to substantial cost increases. To the extent that our tenants are impacted by future attacks, their ability to continue to honor obligations under their existing leases could be adversely affected.

If we fail to continue as a REIT, our distributions will not be deductible, and our income will be subject to taxation, thereby reducing earnings available for distribution.

If we do not continue to qualify as a REIT, our distributions will not be deductible, and our income will be subject to taxation, reducing earnings available for distribution. We have elected to be taxed as a REIT under the Code. A REIT will generally not be subject to federal income taxation on that portion of its income that qualifies as REIT taxable income, to the extent that it distributes at least 90% of its taxable income to its shareholders and complies with certain other requirements. In addition, if we did not continue to qualify as a REIT, we may also be

 

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subject to state and local income taxes in certain of the jurisdictions in which our properties are located.

We intend to make distributions to shareholders to comply with the requirements of the Code. However, differences in timing between the recognition of taxable income and the actual receipt of cash could require us to sell assets, borrow funds or pay a portion of the dividend in common stock to meet the 90% distribution requirement of the Code. Certain assets generate substantial differences between taxable income and income recognized in accordance with accounting principles generally accepted in the United States (“GAAP”). Such assets include, without limitation, operating real estate that was acquired through structures that may limit or completely eliminate the depreciation deduction that would otherwise be available for income tax purposes. As a result, the Code requirement to distribute a substantial portion of our otherwise net taxable income in order to maintain REIT status could cause us to (1) distribute amounts that could otherwise be used for future acquisitions, capital expenditures or repayment of debt, (2) borrow on unfavorable terms, (3) sell assets on unfavorable terms, or (4) pay a portion of our common dividend in common stock. If we fail to obtain debt or equity capital in the future, it could limit our operations and our ability to grow, which could have a material adverse effect on the value of our common stock.

Dividends payable by REITs do not qualify for the reduced tax rates under tax legislation which reduced the maximum tax rate for dividends payable to individuals from 35% to 15% (through 2012). For years beginning in 2013, the maximum tax rate for dividends payable to individuals is 39.6% and dividends from REITS do not qualify for the new reduced rate of 20%. In addition, certain high income individuals may be subject to an additional 3.8% tax on certain investment income, including dividends and capital gains. Although this legislation does not adversely affect the taxation of REITs or the dividends paid deduction for REITs, the more favorable rates applicable to regular corporate dividends could cause investors to perceive investments in REITs to be relatively less attractive than investments in the stock of corporations that pay dividends qualifying for reduced rates of tax which, in turn, could adversely affect the value of the stock of REITs.

We could incur significant costs related to government regulation and litigation over environmental matters and various other federal, state and local regulatory requirements.

We could incur significant costs related to government regulations and litigation over environmental matters. Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or other contaminants at property owned, leased, managed or otherwise operated by such person, and may be held liable to a governmental entity or to third parties for property damage, and for investigation and cleanup costs in connection with such contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such conditions, may adversely affect the owner’s, lessor’s or operator’s ability to sell or rent such property or to arrange financing using such property as collateral. In connection with the ownership, operation and management of real properties, we are potentially liable for removal or remediation costs, as well as certain other related costs and liabilities, including governmental fines, injuries to persons, and damage to property.

We may incur significant costs complying with the Americans with Disabilities Act of 1990, as amended, and similar laws, which require that all public accommodations meet federal

 

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requirements related to access and use by disabled persons, and with various other federal, state and local regulatory requirements, such as state and local fire and life safety requirements.

The Company believes environmental studies conducted at the time of acquisition with respect to all of our properties did not reveal any material environmental liabilities, and we are unaware of any subsequent environmental matters that would have created a material liability. We believe that our properties are currently in material compliance with applicable environmental, as well as non-environmental, statutory and regulatory requirements. If one or more of our properties were not in compliance with such federal, state and local laws, we could be required to incur additional costs to bring the property into compliance. If we incur substantial costs to comply with such requirements, our business and operations could be adversely affected. If we fail to comply with such requirements, we might incur governmental fines or private damage awards. We cannot presently determine whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures that will adversely impact our business and operations.

Our charter and Maryland law contain provisions that may delay, defer or prevent a change of control transaction and depress our stock price.

Our charter and Maryland law contain provisions that may delay, defer or prevent a change of control transaction and depress the price of our common stock. The charter, subject to certain exceptions, authorizes directors to take such actions as are necessary and desirable relating to qualification as a REIT, and to limit any person to beneficial ownership of no more than 9.9% of the outstanding shares of our common stock. Our Board of Directors, in its sole discretion, may exempt a proposed transferee from the ownership limit, but may not grant an exemption from the ownership limit to any proposed transferee whose direct or indirect ownership could jeopardize our status as a REIT. These restrictions on transferability and ownership will not apply if our Board of Directors determines that it is no longer in our best interests to continue to qualify as, or to be, a REIT. This ownership limit may delay or impede a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interests of shareholders. Our Board of Directors has waived the ownership limit to permit each of Inland American Real Estate Trust, Inc. (“Inland”), RioCan Real Estate Investment Trust (“RioCan”), and Cohen and Steers Capital Management, Inc. to acquire up to 14%, 16% and 15%, respectively, of our stock. Upon the sale by RioCan in February 2013 of all of its holdings, our waiver terminated. In addition, Inland has agreed to various voting restrictions and standstill provisions.

We may authorize and issue stock and OP Units without shareholder approval. Our charter authorizes the Board of Directors to issue additional shares of common or preferred stock, to issue additional OP Units, to classify or reclassify any unissued shares of common or preferred stock, and to set the preferences, rights and other terms of such classified or unclassified shares. In connection with obtaining shareholder approval to increase the number of authorized shares of preferred stock, we have agreed not to use our preferred stock for anti-takeover purposes or in connection with a shareholder rights plan unless we obtain shareholder approval. Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:

 

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  1. “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person or an affiliate thereof who beneficially owns 10% or more of the voting power of our shares) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and special stockholder voting requirements on these combinations; and

 

  2. “control share” provisions that provide that our “control shares” (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of control shares) have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

We have opted out of these provisions of the MGCL. However, the Board of Directors may, by resolution, elect to opt in to the business combination provisions of the MGCL, and we may, by amendment to our bylaws, opt in to the control share provisions of the MGCL.

Item 1B. Unresolved Staff Comments: None

Item 3. Legal Proceedings

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

Item 4. Mine Safety Disclosures: Not applicable

Directors and Executive Officers of the Company

Information regarding the Company’s directors and executive officers is set forth below:

 

Name

  

Age

    

Position

Bruce J. Schanzer                            44      Chief Executive Officer and President, Director
Roger M. Widmann    73      Chairman of the Board of Directors
James J. Burns    73      Director
Pamela N. Hootkin    65      Director
Paul G. Kirk Jr.    75      Director
Everett B. Miller III    67      Director
Philip R. Mays    45      Chief Financial Officer
Brenda J. Walker    60      Vice President—Chief Operating Officer

Bruce J. Schanzer has been President, Chief Executive Officer and a director of the Company since June 2011. Prior thereto and since 2007, Mr. Schanzer was employed by Goldman Sachs & Co., with his most recent position being a managing director in the real estate investment banking group. From 2001 to 2007, he was employed by Merrill Lynch, with his last position being vice president in their real estate investment banking group. Earlier in his career, Mr. Schanzer practiced real estate law for six years in New York. Mr. Schanzer received a B.A.

 

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from Yeshiva University, an M.B.A. from the University of Chicago, and a J.D. from the Benjamin N. Cardozo School of Law, where he was a member of the Law Review.

Roger M. Widmann, a director since October 2003, the non-executive Chairman of the Board since June 2011, and a member of the Compensation and Nominating/Corporate Governance Committees, is an investment banker. He was a principal of the investment banking firm of Tanner & Co., Inc. from 1997 to 2004. From 1986 to 1995, Mr. Widmann was a senior managing director of Chemical Securities, Inc., a subsidiary of Chemical Banking Corporation (now JPMorgan Chase Corporation). Prior to joining Chemical Securities, Inc., Mr. Widmann was a founder and managing director of First Reserve Corporation, the largest independent energy investing firm in the U.S. Previously, he was senior vice president with the investment banking firm of Donaldson, Lufkin & Jenrette, responsible for the firm’s domestic and international investment banking business. He had also been a vice president with New Court Securities (now Rothschild, Inc.). He was a director of Lydall, Inc. (listed on the New York Stock Exchange), a manufacturer of thermal, acoustical and filtration materials, from 1974 to 2004, and its chairman from 1998 to 2004. He is a director of Standard Motor Products, Inc. (listed on the New York Stock Exchange), a manufacturer of automobile replacement parts, is Chairman of Keystone National Group, a fund of private equity funds, and is Chairman and CEO of Cutwater Associates LLC, a corporate advisory firm. He is also a senior moderator of the Aspen Seminar at The Aspen Institute and Vice Chairman of Oxfam America. Mr. Widmann received an B.A. from Brown University and a J.D. from the Columbia University School of Law.

James J. Burns, a director since 2001 and a member of the Audit (Chair) and Nominating/Corporate Governance Committees, was chief financial officer and senior vice president of Reis, Inc. (formerly Wellsford Real Properties, Inc.) from December 2000 until March 2006, and vice chairman from April 2006 until March 2009, when he entered into a consulting role at that company (where he continues to have the primary responsibility for income tax reporting and compliance). He joined Reis in October 1999 as chief accounting officer upon his retirement from Ernst & Young LLP in September 1999. At Ernst & Young LLP, Mr. Burns was a senior audit partner in the E&Y Kenneth Leventhal Real Estate Group for 22 years. Since 2000, Mr. Burns has also served as a director of One Liberty Properties, Inc., a real estate investment trust listed on the New York Stock Exchange. Mr. Burns is a certified public accountant and a member of the American Institute of Certified Public Accountants. Mr. Burns received a B.A. and M.B.A. from Baruch College of the City University of New York.

Pamela N. Hootkin, a director since June 2008 and a member of the Audit and Compensation Committees, retired at the end of April 2012 from her position as senior vice president at PVH Corp. (formerly Phillips-Van Heusen Corporation), a position she held since since May 2010. She joined PVH Corp. in 1988 as vice president, treasurer and corporate secretary; in 1999 she became vice president, treasurer and director of investor relations, and in June 2007 she became senior vice president, treasurer and director of investor relations. From 1986 to 1988, Ms. Hootkin was vice president and chief financial officer of Yves Saint Laurent Parfums, Inc. From 1975 to 1986, she was employed by Squibb Corporation in various capacities, with her last position being vice president and treasurer of a division of Squibb. Ms. Hootkin is a board member of Safe Horizon, New York (a not-for-profit organization) where she also serves on the executive, finance and audit committees. Ms. Hootkin received a B.A. from the State University of New York at Binghamton and a M.A. from Boston University.

Paul G. Kirk, Jr., a director from 2005 to September 2009, when he resigned as the result of his appointment as a United States Senator for Massachusetts to the seat previously held by

 

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the late Senator Edward M. Kennedy, and re-elected to the Board in June 2010, is a member of the Compensation and Nominating/Corporate Governance (Chair) Committees, and is a retired partner of the law firm of Sullivan & Worcester, LLP of Boston, MA. He was a member of the firm from 1977 through 1990. He also serves as Chairman and CEO of Kirk & Associates, Inc., a business advisory and consulting firm, and currently serves on the Board of Directors of the Hartford Financial Services Group, Inc. He has previously served on the Boards of Directors of Rayonier, Incorporated (a real estate investment trust listed on the New York Stock Exchange) (1994 to 2011), ITT Corporation (1989 to 1997) and Bradley Real Estate, Inc. (1991 to 2000), a real estate investment trust that was subsequently acquired by Heritage Property Investment Trust, Inc. Mr. Kirk was a founding Director of the John F. Kennedy Library Foundation and served as its Chairman from 1992 to 2009. He was a founding Director of the Commission on Presidential Debates and served as its Co-Chairman from 1987 to 2009. From 1985 to 1989, Mr. Kirk served as Chairman of the Democratic Party of the U.S., and from 1983 to 1985 as its Treasurer. A graduate of Harvard College and Harvard Law School, Mr. Kirk is past-Chairman of the Harvard Board of Overseers’ Nominating Committee and of the Harvard Board of Overseers’ Committee to Visit the Department of Athletics. He has received many awards for civic leadership and public service, including honorary doctors of law degrees from Stonehill College and the Southern New England School of Law.

Everett B. Miller, III, a director since 1998 and a member of the Audit and Compensation (Chair) Committees, has been since July 2012 the Director of the Real Estate Bureau of the New York State Common Retirement Fund. In July 2012, Mr. Miller resigned his position as a member of the Real Estate Advisory Committee of the New York State Common Retirement Fund, a position he held since March 2003, in order to accept his current position. He retired at the end of 2011 from his position as vice president of alternative investments at the YMCA Retirement Fund, a position he held since September 2003. Prior to his retirement in May 2002 from Commonfund Realty, Inc., a registered investment advisor, Mr. Miller was the chief operating officer of that company from 1997 until May 2002. From January 1995 through March 1997, Mr. Miller was the Principal Investment Officer for Real Estate and Alternative Investment at the Office of the Treasurer of the State of Connecticut. Prior thereto, Mr. Miller was employed for eighteen years at affiliates of Travelers Realty Investment Co., at which his last position was senior vice president. Mr. Miller received a B.S. from Yale University.

Philip R. Mays has been Chief Financial Officer of the Company since June 2011. From May 2005 until June 2011, Mr. Mays was employed by Federal Realty Investment Trust, a publicly-traded equity REIT specializing in shopping centers, where he initially served as Controller, was subsequently promoted to Chief Accounting Officer in September 2006, and again to Vice President, Chief Accounting Officer in February 2007. Prior to joining Federal Realty, he was Vice President of Finance and Corporate Controller for CRIIMI MAE, Inc. from June 2004 until May 2005. Earlier in his career, Mr. Mays held various accounting and finance positions, including seven years as an accountant at Ernst & Young, LLP, with his last position being senior manager, and where he supervised audits and assisted clients in the real estate, construction and hospitality industries, including publicly-traded REITs. Mr. Mays is a certified public accountant and a member of the American Institute of Certified Public Accountants. Mr. Mays received a B.S. degree from Jacksonville University, Florida.

Brenda J. Walker has been a vice president of the Company since 1998, was elected Chief Operating Officer in 2009, was a director from 1998 until June 2008, and was treasurer from April 1998 until November 1999. She was an executive officer since 1992 of the real estate management companies, and their respective predecessors and affiliates, which were merged into the Company in 2003. Ms. Walker has been involved in real estate-related finance, property and

 

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asset management for more than thirty-five years. Ms. Walker received a B.A. from Lincoln University, Pennsylvania.

Part II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Dividend Information

A corporation electing REIT status is required to distribute at least 90% of its “REIT taxable income”, as defined in the Code, to continue qualification as a REIT. In keeping with its stated goal of reducing overall leverage, and in order to maximize financial flexibility, the Company paid dividends totaling $0.20 per share during 2012, reduced from $0.36 per share during 2011. 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.

Market Information

The Company had 71,817,310 shares of common stock outstanding held by approximately 700 shareholders of record at December 31, 2012. The Company believes it has more than 5,000 beneficial holders of its common stock. The Company’s shares trade on the NYSE under the symbol “CDR”. The following table sets forth, for each quarter for the last two years, (1) the high, low, and closing prices of the Company’s common stock, and (2) dividends paid:

 

Quarter ended

   Market price range      Dividends  

2012

   High      Low      Close      paid  

March 31

   $ 5.30       $ 4.35       $ 5.12       $ 0.05   

June 30

     5.45         4.53         5.05         0.05   

September 30

     5.80         4.65         5.28         0.05   

December 31

     5.73         4.60         5.28         0.05   

2011

                           

March 31

   $ 6.58       $ 5.26       $ 6.03       $ 0.09   

June 30

     6.27         4.82         5.15         0.09   

September 30

     5.44         3.01         3.11         0.09   

December 31

     4.71         2.65         4.31         0.09   

 

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Stockholder Return Performance Presentation

The following line graph sets forth for the period January 1, 2008 through December 31, 2012 a comparison of the percentage change in the cumulative total stockholder return on the Company’s common stock compared to the cumulative total return of the Russell 2000 index and the National Association of Real Estate Investment Trusts Equity REIT Total Return Index. The graph assumes that the shares of the Company’s common stock were bought at the price of $100 per share and that the value of the investment in each of the Company’s common stock and the indices was $100 at the beginning of the period. The graph further assumes the reinvestment of dividends when paid.

 

LOGO

 

     Period Ending  

Index

   01/01/08      12/31/08      12/31/09      12/31/10      12/31/11      12/31/12  

Cedar Realty Trust, Inc.

     100.00         75.14         74.32         71.65         53.18         67.76   

Russell 2000

     100.00         66.21         84.20         106.82         102.36         119.09   

NAREIT All Equity REIT Index

     100.00         62.27         79.70         101.98         110.42         132.18   

 

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Item 6. Selected Financial Data (a)

 

    Years ended December 31,  
    2012     2011     2010     2009     2008  

Operations data:

         

Total revenues

  $ 140,583,000     $ 134,828,000     $ 130,998,000     $ 139,818,000     $ 126,551,000  

Expenses:

         

Property operating expenses

    40,551,000       44,035,000       41,599,000       40,283,000       34,860,000  

General and administrative

    14,277,000       10,740,000       9,537,000       10,158,000       8,586,000  

Management transition charges and employee termination costs

    1,172,000       6,875,000       —          —          —     

Impairment charges

    5,779,000       7,148,000       2,493,000       23,636,000       —     

Acquisition transaction costs and terminated projects

    116,000       1,436,000       3,958,000       4,367,000       855,000  

Depreciation and amortization

    44,540,000       43,105,000       34,735,000       42,715,000       36,969,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    106,435,000       113,339,000       92,322,000       121,159,000       81,270,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    34,148,000       21,489,000       38,676,000       18,659,000       45,281,000  

Non-operating income and expense:

         

Interest expense

    (41,966,000     (41,746,000     (45,559,000     (41,548,000     (36,557,000

Interest income

    191,000       349,000       21,000       63,000       271,000  

Equity in income of unconsolidated joint ventures

    1,481,000       1,671,000       484,000       1,098,000       956,000  

Gain (loss) on exit from unconsolidated joint ventures

    30,526,000       (7,961,000     —          —          —     

Gain on sales

    997,000       130,000       —          521,000       —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating income and expense

    (8,771,000     (47,557,000     (45,054,000     (39,866,000     (35,330,000
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before discontinued operations

    25,377,000       (26,068,000     (6,378,000     (21,207,000     9,951,000  

Income (loss) from discontinued operations

    8,638,000       (82,446,000     (37,806,000     4,196,000       10,847,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    34,015,000       (108,514,000     (44,184,000     (17,011,000     20,798,000  

Less, net loss (income) attributable to noncontrolling interests

         

Minority interests in consolidated joint ventures

    (4,335,000     2,507,000       1,613,000       (772,000     (2,157,000

Limited partners’ interest in Operating Partnership

    26,000       2,446,000       1,282,000       912,000       (468,000
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    29,706,000       (103,561,000     (41,289,000     (16,871,000     18,173,000  

Preferred stock dividends and redemption costs

    (19,817,000     (14,200,000     (10,196,000     (7,876,000     (7,877,000
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common shareholders

  $ 9,889,000     $ (117,761,000   $ (51,485,000   $ (24,747,000   $ 10,296,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per common share (basic and diluted) attributable to common shareholders:

         

Continuing operations

  $ 0.07     $ (0.61   $ (0.24   $ (0.60   $ (0.01

Discontinued operations

    0.06       (1.18     (0.57     0.06       0.24  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0.13     $ (1.79   $ (0.81   $ (0.54   $ 0.23  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amounts attributable to Cedar Realty Trust, Inc. common shareholders, net of limited partners’ interest

         

Income (loss) from continuing operations

  $ 5,935,000     $ (39,348,000   $ (15,623,000   $ (27,711,000   $ (85,000

Income (loss) from discontinued operations

    3,954,000       (78,413,000     (35,862,000     2,964,000       10,381,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 9,889,000     $ (117,761,000   $ (51,485,000   $ (24,747,000   $ 10,296,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dividends to common shareholders

  $ 14,402,000     $ 24,705,000     $ 17,749,000     $ 9,742,000     $ 40,027,000  

Per common share

  $ 0.2000     $ 0.3600     $ 0.2700     $ 0.2025     $ 0.9000  

Weighted average number of common shares—basic and diluted

    68,017,000       66,387,000       63,843,000       46,234,000       44,475,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Item 6. Selected Financial Data (a) (continued)

 

    Years ended December 31,  
    2012     2011     2010     2009     2008  

Balance sheet data:

         

Real estate, net

  $ 1,222,743,000     $ 1,167,275,000     $ 1,126,370,000     $ 1,140,876,000     $ 1,038,825,000  

Real estate to be transferred to a joint venture

    —          —          —          139,743,000        194,952,000   

Real estate held for sale/conveyance

    77,793,000        211,679,000        355,102,000        399,122,000        426,217,000   

Investment in unconsolidated joint ventures

    —          44,743,000        52,466,000        14,113,000        4,976,000   

Other assets

    69,367,000        88,466,000        88,549,000        91,264,000        70,058,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 1,369,903,000     $ 1,512,163,000     $ 1,622,487,000     $ 1,785,118,000     $ 1,735,028,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mortgages and loans payable

  $ 761,216,000     $ 753,060,000     $ 680,718,000     $ 797,146,000     $ 769,902,000  

Mortgage loans payable—real estate to be transferred to a joint venture

    —          —          —          94,018,000        77,307,000   

Mortgage loans payable—real estate held for sale/conveyance

    23,258,000        124,888,000        159,395,000        161,283,000        166,264,000   

Other liabilities

    63,679,000        73,827,000        76,850,000        106,269,000        116,361,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    848,153,000        951,775,000        916,963,000        1,158,716,000        1,129,834,000   

Noncontrolling interest—limited partners’ mezzanine OP Units

    623,000        4,616,000        7,053,000        12,638,000        14,257,000   

Equity:

         

Cedar Realty Trust, Inc. shareholders’ equity

    513,656,000        493,843,000        630,066,000        538,456,000        523,521,000   

Noncontrolling interests

    7,471,000        61,929,000        68,405,000        75,308,000        67,416,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    521,127,000        555,772,000        698,471,000        613,764,000        590,937,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  $ 1,369,903,000     $ 1,512,163,000     $ 1,622,487,000     $ 1,785,118,000     $ 1,735,028,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other data:

         

Funds From Operations (“FFO”) (b)

  $ 26,717,000     $ 26,520,000     $ 29,510,000     $ 51,776,000     $ 56,859,000  

Cash flows provided by (used in):

         

Operating activities

  $ 50,588,000     $ 39,246,000     $ 41,702,000     $ 51,942,000     $ 60,815,000  

Investing activities

  $ 50,114,000     $ (64,241,000   $ (29,834,000   $ (70,026,000   $ (151,390,000

Financing activities

  $ (105,250,000   $ 22,899,000     $ (14,866,000   $ 27,017,000     $ 75,517,000  

Square feet of GLA

    9,820,000        9,566,000        8,989,000        8,782,000        7,827,000   

Percent occupied

    91.9     91.6     90.5     91.2     92.4

Average annualized base rent per square foot

  $ 11.90     $ 11.52     $ 11.33     $ 10.90     $ 10.66  

 

(a) The data presented reflect certain reclassifications of prior period amounts to conform to the 2012 presentation, principally to reflect the sale and/or as “held for sale/conveyance” of certain operating properties and the treatment thereof as “discontinued operations”. The reclassifications had no impact on the previously-reported net income attributable to common shareholders or earnings per share.
(b) See Items 7—“Management Discussion and Analysis of Financial Condition and Results of Operations” for a reconciliation of FFO to net income(loss) attributable to common shareholders.

 

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Executive Summary

The Company is a fully-integrated real estate investment trust which focuses primarily on ownership and operation of grocery-anchored shopping centers straddling the Washington DC to Boston corridor. At December 31, 2012, the Company owned and managed a portfolio of 67 operating properties (excluding properties “held for sale/conveyance”) totaling approximately 9.8 million square feet of gross leasable area (“GLA”). The portfolio was 91.9% occupied at December 31, 2012.

In keeping with its stated goal of reducing overall leverage to an appropriate level by selling non-core assets, the Company determined in 2011 (1) to completely exit the Ohio market, principally the Discount Drug Mart portfolio of drugstore/convenience centers, and concentrate on the region that straddles the Washington DC to Boston corridor, (2) to concentrate on grocery-anchored strip centers, by disposing of its mall and single-tenant/triple-net-lease properties, (3) to focus on improving operations and performance at the Company’s remaining properties, and (4) to reduce development activities, by disposing of certain development projects, land acquired for development, and other non-core assets.

On October 10, 2012, the Company concluded definitive agreements with RioCan to exit the 20% Cedar / 80% RioCan joint venture that owned 22 retail properties. On October 12, 2012, the Company concluded definitive agreements with HII relating to the application of the buy/sell provisions of the joint venture agreements for each of the nine properties owned by the joint venture. See Significant Transactions below for additional information relating to these transactions.

The Company, organized as a Maryland corporation, has established an umbrella partnership structure through the contribution of substantially all of its assets to Cedar Realty Trust Partnership L.P. (the “Operating Partnership”), organized as a limited partnership under the laws of Delaware. The Company conducts substantially all of its business through the Operating Partnership. At December 31, 2012, the Company owned 99.6% of the Operating Partnership and is its sole general partner. The approximately 281,000 limited Operating Partnership Units (“OP Units”) are economically equivalent to the Company’s common stock and are convertible into the Company’s common stock at the option of the holders on a one-to-one basis.

The Company derives substantially all of its revenues from rents and operating expense reimbursements received pursuant to long-term 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 community 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.

 

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Significant Transactions

As discussed above, the Company developed a disposition plan with the stated goal of reducing overall leverage to an appropriate level by selling non-core assets. The carrying values of the assets and liabilities of these properties, principally the net book values of the real estate and the related mortgage loans payable to be assumed by the buyers (or conveyed to the mortgagee), have been reclassified as “held for sale/conveyance” on the Company’s consolidated balance sheets at December 31, 2012 and December 31, 2011. In addition, the properties’ results of operations have been classified as “discontinued operations” for all periods presented.

The following table details the acquisitions and dispositions of properties during 2012:

 

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Acquisitions of noncontrolling interests in consolidated properties

 

              Date     Purchase  

Property

  Location   GLA     Acquired     Price  

Meadows Marketplace (a)

  Hershey, PA     91,518       10/12/2012      $ 13,375,000  

Fieldstone Marketplace (a)

  New Bedford, MA     193,970       10/12/2012        13,955,000  
       

 

 

 
        $ 27,330,000  
       

 

 

 

Acquisition of unconsolidated joint venture property

 

              Date     Purchase  

Property

  Location   GLA     Acquired     Price  

Franklin Village Plaza (b)

  Franklin, MA     304,347       10/10/2012      $ 75,127,000  
       

 

 

 

Dispositions of consolidated properties

 

              Date     Sales  

Property

  Location   GLA     Sold     Price  

Hilliard Discount Drug Mart Plaza

  Hilliard, OH     40,988       2/7/2012      $ 1,434,000  

First Merit Bank at Akron

  Akron, OH     3,200       2/23/2012        633,000  

Grove City Discount Drug Mart Plaza

  Grove City, OH     40,848       3/12/2012        1,925,000  

CVS at Naugatuck (50% interest)

  Naugatuck, CT     13,225       3/20/2012        3,350,000  

CVS at Bradford

  Bradford, PA     10,722       3/30/2012        967,000  

CVS at Celina

  Celina, OH     10,195       3/30/2012        1,449,000  

CVS at Erie

  Erie, PA     10,125       3/30/2012        1,278,000  

CVS at Portage Trail

  Akron, OH     10,722       3/30/2012        1,061,000  

Rite Aid at Massillon

  Massillon, OH     10,125       3/30/2012        1,492,000  

Kingston Plaza

  Kingston, NY     5,324       4/12/2012        1,182,000  

Stadium Plaza

  East Lansing, MI     77,688       5/3/2012        5,400,000  

Blue Mountain Commons (land parcel)

  Harrisburg. PA     N/A        6/19/2012        102,000  

Oregon Pike (land parcel)

  Lancaster, PA     N/A        6/28/2012        1,100,000  

Trindle Springs (land parcel)

  Mechanicsburg, PA     N/A        7/20/2012        800,000  

Aston (land parcel)

  Aston, PA     N/A        7/27/2012        1,365,000  

Homburg Joint Venture (20 % interest in seven properties)

  Various     560,772       10/12/2012        23,642,000  

The Point at Carlisle

  Carlisle, PA     182,859       10/15/2012        7,350,000  

Wyoming (land parcel)

  Wyoming, MI     N/A        11/16/2012        1,000,000  
       

 

 

 

Total

        $ 55,530,000  
       

 

 

 

Dispositions of unconsolidated joint venture properties

 

              Date     Sales  

Property

  Location   GLA     Sold     Price  

Cedar/RioCan Joint Venture (20% interest in 21 properties)

  Various     3,406,927       10/10/2012      $ 119,521,000  
       

 

 

 

 

(a) As a result of acquiring the remaining 80% interest in these properties, the Company now owns a 100% interest.
(b) See below for information relating to the Company’s exit from the Cedar/RioCan joint venture.

 

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On October 10, 2012, the Company concluded definitive agreements with RioCan Real Estate Investment Trust (“RioCan”) to exit the 20% Cedar / 80% RioCan joint venture that owns 22 retail properties. Pursuant to the agreements, the Company exchanged its 20% interest in the joint venture for (1) a 100% ownership interest in Franklin Village Plaza, located in Franklin, Massachusetts, at an agreed-upon value of approximately $75.1 million, including the assumption of related in-place mortgage financing of approximately $43.1 million, and (2) approximately $41.6 million in cash, which was initially used to reduce the outstanding balance under the Company’s Credit Facility. The Company continued to manage the properties acquired by RioCan subject to a management agreement which was terminated effective January 31, 2013.

On October 12, 2012, the Company concluded definitive agreements with Homburg Invest Inc. (“HII”) relating to the application of the buy/sell provisions of the joint venture agreements for each of the nine properties owned by the joint venture. Pursuant to the agreements, the Company acquired HII’s 80% ownership in Meadows Marketplace, located in Hershey, Pennsylvania, and Fieldstone Marketplace, located in New Bedford, Massachusetts, for approximately $27.3 million, including the assumption of related in-place mortgage financing of $21.8 million, giving the Company a 100% ownership interest in these two properties. In addition, the Company sold to HII its 20% ownership interest in the remaining seven joint venture properties for approximately $23.6 million, including the assumption of related in-place mortgage financing of $14.5 million. The Company’s property management agreements for the sold properties terminated upon the closing of the sale.

Impairment charges and other write-offs are summarized as follows:

 

     Years ended December 31,  
     2012      2011      2010  

Impairment charges—Ohio property loan and land parcels (2012), land parcels (2011) and properties transferred to Cedar/RioCan joint venture (2010) (a)

   $ 5,779,000       $ 7,148,000       $ 2,493,000   
  

 

 

    

 

 

    

 

 

 

Loss on exit from unconsolidated joint venture (b)

   $ —         $ 7,961,000       $ —     
  

 

 

    

 

 

    

 

 

 

Impairment charges, net—properties held for sale/conveyance (c)

   $ 4,000       $ 88,458,000       $ 39,822,000   
  

 

 

    

 

 

    

 

 

 

 

(a) Included in operating income in the accompanying statements of operations.
(b) Represents the write-off of an investment in an unconsolidated joint venture, and is included in non-operating income and expense in the accompanying statements of operations.
(c) Included in discontinued operations in the accompanying statements of operations.

Credit Facility

On January 26, 2012, the Company entered into a $300 million secured credit facility (the “Credit Facility”). The Credit Facility amends, restates and consolidates the Company’s prior $185 million stabilized property revolving credit facility and its $150 million development property credit facility that were due to expire on January 31, 2012 and June 13, 2012, respectively. See “Liquidity” below for additional details.

 

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Summary of Critical Accounting Policies

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“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 impairment, 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 has identified the following critical accounting policies, the application of which requires significant judgments and estimates:

Revenue Recognition

Rental income with scheduled rent increases is recognized using the straight-line method over the respective terms of the leases. The aggregate excess of rental revenue recognized on a straight-line basis over base rents under applicable lease provisions is included in straight-line rents receivable 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; such income is recognized in the periods earned. In addition, certain operating leases contain contingent rent provisions under which tenants are required to pay a percentage of their sales in excess of a specified amount as additional rent. The Company defers recognition of contingent rental income until those specified targets are met.

The Company must make estimates as to the collectability of its accounts receivable related to base rent, straight-line rent, expense reimbursements and other revenues. Management analyzes accounts receivable by considering tenant creditworthiness, current economic conditions, and changes in tenants’ payment patterns when evaluating the adequacy of the allowance for doubtful accounts receivable. These estimates have a direct impact on net income, because a higher bad debt allowance would result in lower net income, whereas a lower bad debt allowance would result in higher net income.

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 on estimated useful lives. Expenditures for maintenance, repairs and betterments that do not materially prolong the normal useful life of an asset are charged to operations as incurred. Expenditures for betterments that substantially extend the useful lives of real estate assets are capitalized.

Real estate investments include costs of development and redevelopment activities, and construction in progress. Capitalized costs, including interest and other carrying costs during the construction and/or renovation periods, are included in the cost of the related asset and charged to operations through depreciation over the asset’s estimated useful life. The Company is required to make subjective estimates as to the useful lives of its real estate assets for purposes of determining the amount of depreciation to reflect on an annual basis. These assessments have a

 

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direct impact on net income. A shorter estimate of the useful life of an asset would have the effect of increasing depreciation expense and lowering net income, whereas a longer estimate of the useful life of an asset would have the effect of reducing depreciation expense and increasing net income.

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 construction. The Company considers a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but not later than one year from cessation of major development activity. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. The effect of a longer capitalization period would be to increase capitalized costs and would result in higher net income, whereas the effect of a shorter capitalization period would be to reduce capitalized costs and would result in lower net income.

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 such assets. In valuing an acquired property’s intangibles, factors considered by management include an estimate of carrying costs during the expected lease-up periods, such as real estate taxes, insurance, other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on its evaluation of current market demand. Management also estimates costs to execute similar leases, including leasing commissions, tenant improvements, legal and other related costs.

The values of acquired above-market and below-market leases are recorded based on the present values (using discount rates which reflect the risks associated with the leases acquired) of the differences between the contractual amounts to be received and management’s estimate of market lease rates, measured over the terms of the respective leases that management deemed appropriate at the time of the acquisitions. Such valuations include 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.

 

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Management is required to make subjective assessments in connection with its valuation of real estate acquisitions. These assessments have a direct impact on net income, because (1) above-market and below-market lease intangibles are amortized to rental income, and (2) the value of other intangibles is amortized to expense. Accordingly, higher allocations to below-market lease liability and other intangibles would result in higher rental income and amortization expense, whereas lower allocations to below-market lease liability and other intangibles would result in lower rental income and amortization expense.

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 estimates of 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. A real estate investment held for sale is carried at the lower of its carrying amount or estimated fair value, less the cost of a potential sale. Depreciation and amortization are suspended during the period the property is held for sale. Management is required to make subjective assessments as to whether there are impairments in the value of its real estate properties. These assessments have a direct impact on net income, because an impairment loss is recognized in the period that the assessment is made.

New Accounting Pronouncements

See Note 2 of Notes to Consolidated Financial Statements included in Item 8 below for information relating to new accounting pronouncements.

 

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Results of Operations

Comparison of 2012 to 2011

 

                 Change  
     2012     2011     Dollars     Percent  

Revenues

   $ 140,583,000     $ 134,828,000     $ 5,755,000       4.3

Property operating expenses

     40,551,000       44,035,000       (3,484,000     -7.9
  

 

 

   

 

 

   

 

 

   

Property operating income

     100,032,000       90,793,000       9,239,000       10.2

General and administrative

     (14,277,000     (10,740,000     (3,537,000     32.9

Management transition charges and employee termination costs

     (1,172,000     (6,875,000     5,703,000       n/a   

Impairment charges

     (5,779,000     (7,148,000     1,369,000       n/a   

Acquisition transaction costs and terminated projects

     (116,000     (1,436,000     1,320,000       n/a   

Depreciation and amortization

     (44,540,000     (43,105,000     (1,435,000     3.3

Interest expense

     (39,359,000     (41,746,000     2,387,000       -5.7

Accelerated write-off of deferred financing costs

     (2,607,000     —          (2,607,000     n/a   

Interest income

     191,000       349,000       (158,000     -45.3

Equity in income of unconsolidated joint ventures

     1,481,000       1,671,000       (190,000     -11.4

Gain (loss) on exit from unconsolidated joint ventures

     30,526,000       (7,961,000     38,487,000       n/a   

Gain on sales

     997,000       130,000       867,000       n/a   
  

 

 

   

 

 

   

 

 

   

Income (loss) from continuing operations

     25,377,000       (26,068,000     51,445,000    

Discontinued operations:

        

Income from operations

     3,963,000       5,128,000       (1,165,000     -22.7

Impairment charges, net

     (4,000     (88,458,000     88,454,000       n/a   

Gain on sales

     4,679,000       884,000       3,795,000       n/a   
  

 

 

   

 

 

   

 

 

   

Net income (loss)

     34,015,000       (108,514,000     142,529,000    

Net income (loss) attributable to noncontrolling interests

     4,309,000       (4,953,000     9,262,000    
  

 

 

   

 

 

   

 

 

   

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

   $ 29,706,000     $ (103,561,000   $ 133,267,000    
  

 

 

   

 

 

   

 

 

   

Properties held in both periods. The Company held 65 properties (excluding properties “held for sale/conveyance”) throughout 2012 and 2011.

Revenues were higher primarily as a result of increases in (1) lease termination income ($3.0 million), (2) rental revenues and expense recoveries at properties acquired in the fourth quarter of 2012 and first quarter of 2011 ($1.8 million), and (3) rental revenues and expense recoveries at ground-up development properties ($1.7 million), offset by a decrease in expense recoveries at the Company’s other operating properties ($1.0 million), due to lower property operating expenses.

Property operating expenses were lower primarily as a result of decreases in (1) payroll and related benefits and costs ($1.9 million), (2) snow removal costs ($1.8 million), and (3) administrative costs ($0.6 million), offset by an increase in real estate taxes ($0.9 million).

General and administrative expenses were higher primarily as a result of (1) increases in payroll and related benefits and costs ($2.5 million), and (2) costs related to share-based compensation ($1.0 million).

 

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Management transition charges and employee termination costs in 2012 reflect separation arrangements and terminations of employment agreements relating primarily to employee headcount reductions instituted in connection with recent property dispositions and the exit from the Cedar/RioCan joint venture. Such costs consist of (1) severance and benefits ($0.7 million), (2) accelerated vesting of share-based compensation grants ($0.4 million), and (3) other costs ($0.1 million). Management transition charges and employee termination costs in 2011 relate to the retirement of the Company’s then Chairman of the Board, Chief Executive Officer and President, and the end of the employment of the Company’s then Chief Financial Officer, and include (1) an aggregate of approximately $3.7 million in cash severance payments (including the cost of related payroll taxes and benefits), (2) the write off of all amounts related to the vesting of restricted share-based compensation grants (an aggregate of approximately $2.0 million), and (3) approximately $1.2 million of other non-recurring costs, primarily professional fees and expenses related to the hiring of a new President/Chief Executive Officer and Chief Financial Officer.

Impairment charges in 2012 relate to (1) the write-off of the Ohio property loan receivable ($4.4 million), and (2) certain land parcels treated as “held for sale/conveyance” ($1.3 million). Impairment charges in 2011 relate to certain land parcels treated as “held for sale/conveyance”.

Acquisition transaction costs and terminated projects in 2012 include costs incurred related to property acquisitions. Acquisition transaction costs and terminated projects in 2011 include (1) costs incurred related to a property acquisition, and (2) the termination of several redevelopment projects that the Company determined would not go forward.

Depreciation and amortization expenses were higher primarily as a result of (1) the acquisition of a property in October 2012 ($0.7 million), (2) improvements being placed in service at ground-up development and redevelopment properties ($0.7 million), and (3) the write-off of tenant improvements for a tenant who vacated during 2012 ($0.3 million), offset by the completion of scheduled depreciation and amortization. ($0.2 million)

Interest expense decreased primarily as a result of (1) lower amortization of deferred financing costs related to the new credit facility entered into during the first quarter of 2012 ($2.2 million), (2) a decrease in the overall outstanding principal balance of debt ($1.0 million), and (3) a decrease in the overall weighted average interest rate ($0.5 million), offset by a decrease in capitalized interest ($1.3 million).

Accelerated write-off of deferred financing costs in 2012 relates to the write-off of unamortized fees associated with the Company’s terminated stabilized property and development property credit facilities.

Equity in income of unconsolidated joint ventures was lower in 2012 as a result of lost revenues from the tenant at the then redevelopment joint venture in Philadelphia, Pennsylvania vacating the premises in April 2011 ($0.3 million), offset by an increase in operating results from the Cedar/RioCan joint venture through the date the Company concluded exit agreements, as more fully discussed elsewhere in this report ($0.1 million).

Gain (loss) on exit from unconsolidated joint ventures in 2012 relates to the exit from the Cedar/RioCan joint venture, as more fully discussed elsewhere in this report. Gain (loss) on exit from unconsolidated joint ventures in 2011 represents the write-off of an investment in an unconsolidated joint venture relating to the Company’s decision not to go forward with the

 

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development of two adjacent properties in Philadelphia, Pennsylvania. The impairment loss for the wholly-owned property is included in loss from discontinued operations.

Gain on sales in 2012 and 2011 relate principally to sales of land parcels treated as “held for sale/conveyance” as part of the Company’s 2011 business plan, as more fully discussed elsewhere in this report.

Discontinued operations for 2012 and 2011 include the results of operations, net impairment charges and gain on sales for certain properties sold or treated as “held for sale/conveyance”, as part of the Company’s 2011 business plan, as more fully discussed elsewhere in this report.

Comparison of 2011 to 2010

 

                 Change  
     2011     2010     Dollars     Percent  

Revenues

   $ 134,828,000     $ 130,998,000     $ 3,830,000       2.9

Property operating expenses

     44,035,000       41,599,000       2,436,000       5.9
  

 

 

   

 

 

   

 

 

   

Property operating income

     90,793,000       89,399,000       1,394,000       1.6

General and administrative

     (10,740,000     (9,537,000     (1,203,000     12.6

Management transition charges and employee termination costs

     (6,875,000     —          (6,875,000     n/a   

Impairment charges

     (7,148,000     (2,493,000     (4,655,000     n/a   

Acquisition transaction costs and terminated projects

     (1,436,000     (3,958,000     2,522,000       n/a   

Depreciation and amortization

     (43,105,000     (34,735,000     (8,370,000     24.1

Interest expense

     (41,746,000     (43,007,000     1,261,000       -2.9

Accelerated write-off of deferred financing costs

     —          (2,552,000     2,552,000       n/a   

Interest income

     349,000       21,000       328,000       1561.9

Equity in income of unconsolidated joint ventures

     1,671,000       484,000       1,187,000       245.2

Loss on exit from unconsolidated joint venture

     (7,961,000     —          (7,961,000     n/a   

Gain on sales

     130,000       —          130,000       n/a   
  

 

 

   

 

 

   

 

 

   

(Loss) from continuing operations

     (26,068,000     (6,378,000     (19,690,000  

Discontinued operations:

        

Income from operations

     5,128,000       1,846,000       3,282,000       177.8

Impairment charges

     (88,458,000     (39,822,000     (48,636,000     n/a   

Gain on sales

     884,000       170,000       714,000       n/a   
  

 

 

   

 

 

   

 

 

   

Net (loss)

     (108,514,000     (44,184,000     (64,330,000  

Net (loss) attributable to noncontrolling interests

     (4,953,000     (2,895,000     (2,058,000  
  

 

 

   

 

 

   

 

 

   

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

   $ (103,561,000   $ (41,289,000   $ (62,272,000  
  

 

 

   

 

 

   

 

 

   

Properties held in both periods. The Company held 65 properties (excluding properties “held for sale/conveyance”) throughout 2011 and 2010.

Revenues were higher primarily as a result of increases in (1) revenues from a property acquired in 2011 ($5.9 million), (2) base rent and tenant recoveries at ground-up development properties ($1.3 million), (3) base rent and tenant recoveries at other operating properties ($1.2 million), and (4) base rent and tenant recoveries at redevelopment properties ($1.0 million), off-

 

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set by decreases in (5) revenues from properties transferred to the Cedar/RioCan joint venture in 2010 ($3.3 million), (6) amortization of intangible lease liabilities ($1.2 million), (7) fees earned from unconsolidated joint ventures ($0.8 million), and (8) straight-line rents ($0.4 million).

Property operating expenses were higher primarily as a result of increases in (1) expenses at a property acquired in 2011 ($1.9 million), (2) payroll and related expenses ($0.7 million), (3) snow removal costs ($0.3 million), (4) real estate taxes ($0.2 million), and (5) other operating expenses ($0.2 million), off-set by decreases in (6) expenses at properties transferred to the Cedar/RioCan joint venture in 2010 ($0.8 million), and (7) the provision for doubtful accounts ($0.2 million).

General and administrative expenses were higher primarily as a result of increases in (1) payroll and payroll related expenses ($0.3 million), (2) a legal settlement received in the Company’s favor in 2010 in excess of a legal settlement received in the Company’s favor in 2011 ($0.5 million), (3) accounting and other professional fees ($0.2 million), (4) information technology costs ($0.2 million), (5) rent expense ($0.1 million), and (6) other costs ($0.2 million).

Management transition charges and employee termination costs in 2011 relate to the retirement of the Company’s then Chairman of the Board, Chief Executive Officer and President, and the end of the employment of the Company’s then Chief Financial Officer, and include (1) an aggregate of approximately $3.7 million in cash severance payments (including the cost of related payroll taxes and benefits), (2) the write off of all amounts related to the vesting of share-based compensation grants (an aggregate of approximately $2.0 million), and (3) approximately $1.2 million of other non-recurring costs, primarily professional fees and expenses related to the hiring of a new President/Chief Executive Officer and Chief Financial Officer.

Impairment charges for 2011 relate principally to certain land parcels treated as “held for sale”, as more fully discussed elsewhere in this report. Impairment charges for 2010 relate principally to certain of the properties initially transferred to the Cedar/RioCan joint venture.

Acquisition transaction costs and terminated projects were lower in 2011 primarily due to fees to the Company’s advisor accrued in 2010 related to Cedar/RioCan joint venture transactions.

Depreciation and amortization expenses increased primarily as a result of the change in use of a building, at a redevelopment project, which was scheduled to be demolished in 2012. Other factors contributing to the increase included (1) additional depreciation expense at ground-up and redevelopment properties as improvements have been placed into service, and (2) increases related to capital improvements at other operating properties.

Interest expense decreased primarily as a result of (1) lower amortization of deferred financing costs, principally related to the accelerated write-off of deferred financing costs in September 2010 ($1.4 million), (2) lower outstanding borrowings under the Company’s credit facilities ($1.1 million), and (3) higher capitalized interest ($0.3 million), off-set by (4) an increase in mortgage interest expense as a result of property acquisitions and property-specific financings ($1.5 million).

Accelerated write-off of deferred financing costs in 2010 resulted from the Company, at its option, reducing the commitments under the stabilized property credit facility from $285.0 million to $185.0 million.

 

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Equity in income of unconsolidated joint ventures was higher in 2011 primarily as a result of an increase in operating results from the Cedar/RioCan joint venture, due principally to lower acquisition transaction costs in 2011 compared to those incurred in 2010, offset by nominal operating results in 2011 as compared with 2010 from the joint venture redevelopment property in Philadelphia (as more fully discussed elsewhere in this report).

Loss on exit from unconsolidated joint venture in 2011 represents the write-off of an investment in an unconsolidated joint venture relating to the Company’s decision not to go forward with the development of two adjacent properties in Philadelphia, Pennsylvania. The impairment loss for the wholly-owned property is included in loss from discontinued operations.

Discontinued operations for 2011 and 2010 include the results of operations, impairment charges and gain on sales for certain properties sold or treated as “held for sale/conveyance”, as more fully discussed elsewhere in this report.

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/conveyance”. 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.

Same-property NOI should not be considered as an alternative to net 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 between REITs. The following table reconciles same-property NOI to the Company’s consolidated operating income.

 

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     Years ended December 31,  
     2012     2011  

Consolidated operating income

   $ 34,148,000      $ 21,489,000   

Add:

    

General and administrative

     14,277,000        10,740,000   

Management transition charges and employee termination costs

     1,172,000        6,875,000   

Impairment charges

     5,779,000        7,148,000   

Acquisition transaction costs and terminated projects

     116,000        1,436,000   

Depreciation and amortization

     44,540,000        43,105,000   

Corporate costs included in property expenses

     6,990,000        9,434,000   

Less:

    

Management fee income

     (2,754,000     (2,755,000

Straight-line rents

     (986,000     (1,199,000

Amortization of intangible lease liabilities

     (5,364,000     (5,736,000

Internal management fees charged to properties

     (3,056,000     (3,034,000

Other (a)

     (2,761,000     —     
  

 

 

   

 

 

 

Consolidated NOI

     92,101,000        87,503,000   

Less NOI related to properties not defined as same-property

     (20,867,000     (17,021,000
  

 

 

   

 

 

 

Same-property NOI

   $ 71,234,000      $ 70,482,000   
  

 

 

   

 

 

 

Number of same properties

     59   

Same-property occupancy, end of period

     93.6     93.2

Same-property average base rent, end of period

   $ 11.28      $ 11.23   

 

(a) Primarily lease termination income.

Same-property NOI for 2012 increased approximately 1.1% over 2011 as a result, principally, of (1) a 40 bps increase in occupancy, and (2) a modest increase in average base rent at the properties. The comparative results were negatively impacted by replacing the dark anchor at Oakland Commons, located in Bristol, Connecticut. By excluding the down time impact prior to Wal-Mart taking possession of the space, same-property NOI would have increased to 1.8%.

 

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Leasing Activity

The following is a summary of the Company’s leasing activity during the year ended December 31, 2012 for the consolidated portfolio:

 

                                       Tenant  
     Leases             New rent      Prior rent      Cash basis     improvement  
     signed      GLA      per sq.ft. ($)      per sq.ft. ($)      % change     per sq.ft. ($) (a)  

Renewals

     111         486,000         13.14         12.20         7.7     0.00   

New Leases

     48         229,000         14.48         n/a         n/a        9.23   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total (b)

     159         715,000         13.57         n/a         n/a        2.95   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(a) Includes tenant allowance and landlord work. Excludes first generation space.
(b) For 2012, combined legal fees and lease commissions averaged $2.49 per square foot.

Liquidity and Capital Resources

The Company funds operating expenses and other short-term liquidity requirements, including debt service, tenant improvements, leasing commissions, preferred and common dividend distributions and distributions to minority interest partners, if made, primarily from its operations. The Company may also use its revolving credit facility for these purposes. The Company expects to fund long-term liquidity requirements for property acquisitions, redevelopment costs, remaining development costs, capital improvements, joint venture contributions, and maturing debt initially with its credit facility, and ultimately through a combination of issuing and/or assuming additional mortgage debt, the sale of equity securities, the issuance of additional OP Units, and the sale of properties. Although the Company believes it has access to secured financing, there can be no assurance that the Company will have the availability of mortgage financing on completed development projects, additional construction financing, or proceeds from the refinancing of existing debt.

Debt is comprised of the following at December 31, 2012:

 

            Interest rates
     Balance      Weighted -       

Description

   outstanding      average      Range

Fixed-rate mortgages (a)

   $ 544,799,000         5.6%       3.1% - 7.5%

Variable-rate mortgage

     60,417,000         3.0%      
  

 

 

    

 

 

    

Total property-specific mortgages

     605,216,000         5.3%      

Corporate Credit Facility:

        

Revolving facility

     81,000,000         2.8%      

Term loan

     75,000,000         2.8%      
  

 

 

    

 

 

    
   $ 761,216,000         4.8%      
  

 

 

    

 

 

    

 

(a) At December 31, 2012, the Company had approximately $31.4 million of mortgage loans payable subject to interest rate swaps which converted LIBOR-based variable rates to fixed annual rates ranging from 5.2% to 6.5% per annum.

As noted above, in January 2012, the Company entered into a new $300 million Credit Facility, comprised of a four-year $75 million term loan and a three-year $225 million revolving

 

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credit facility, subject to collateral in place. Subject to customary conditions, the term loan and the revolving credit facility may both be extended for one additional year at the Company’s option. Under an accordion feature, the Credit Facility can be increased to $500 million, subject to customary conditions, collateral in place and lending commitments from participating banks. The Credit Facility contains financial covenants including, but not limited to, maximum debt leverage, minimum interest coverage, minimum fixed charge coverage, and minimum net worth. In addition, the Credit Facility contains restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. The Credit Facility is available to fund acquisitions, redevelopment and remaining development activities, capital expenditures, mortgage repayments, dividend distributions, working capital and other general corporate purposes. Borrowings under the Credit Facility are priced at LIBOR plus 250 bps (a weighted-average of 2.8% per annum at December 31, 2012) and can range from LIBOR plus 200 to 300 bps based on the Company’s leverage ratio. As of December 31, 2012, the Company has $81.0 million outstanding under the revolving credit portion of the Credit Facility, and had $81.8 million available for additional borrowings as of that date.

Property-specific mortgage loans payable at December 31, 2012 consisted of fixed-rate notes totaling $544.8 million, with a weighted average interest rate of 5.6%, and a LIBOR-based variable-rate note totaling $60.4 million, with an effective interest rate of 3.0% per annum at that date. For 2013, the Company has approximately $4.4 million of scheduled debt principal amortization payments and $114.6 million of scheduled balloon payments.

Total mortgage loans payable and secured credit facilities have an overall weighted average interest rate of 4.8% and mature at various dates through 2029. 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.

In February 2013, the Company concluded a public offering of 2.3 million shares of its Series B Preferred Stock (including 0.3 million shares relating to the exercise by the underwriters of their over-allotment option) and realized net proceeds, after offering expenses, of approximately $54.7 million. At the same time, the Company announced that it would redeem all the remaining 1.4 million shares of its Series A Preferred Stock, requiring a total cash outlay of approximately $35.4 million.

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 dividends totaling $0.20 per share during 2012, reduced from $0.36 per share during 2011. 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.

 

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Contractual obligations and commercial commitments

The following table sets forth the Company’s significant debt repayment, interest and operating lease obligations at December 31, 2012:

 

    Maturity Date  
    2013     2014     2015     2016     2017     Thereafter     Total  

Debt: (a)

             

Mortgage loans payable (b)

  $ 119,050,000     $ 107,786,000     $ 73,766,000     $ 139,939,000     $ 63,384,000     $ 101,291,000     $ 605,216,000  

Credit Facility (c)

    —          —          81,000,000        75,000,000        —          —          156,000,000   

Interest payments (d)

    34,032,000        27,668,000        20,641,000        14,619,000        5,620,000        20,379,000        122,959,000   

Operating lease obligations

    1,501,000        1,515,000        1,530,000        1,539,000        1,057,000        10,020,000        17,162,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 154,583,000     $ 136,969,000     $ 176,937,000     $ 231,097,000     $ 70,061,000     $ 131,690,000     $ 901,337,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Does not include approximately $23.3 million applicable to discontinued operations (See Note 4 of notes to Consolidated Financial Statements).
(b) Mortgage loans payable for 2013 includes $59.7 million applicable to property-specific financing which is subject to a one-year extension option.
(c) The revolving facility and the term loan are each subject to a one-year extension option.
(d) Represents interest payments expected to be incurred on the Company’s consolidated debt obligations as of December 31, 2012, including capitalized interest.

For variable-rate debt, the rate in effect at December 31, 2012 is assumed to remain in effect until the maturities of the respective obligations.

Net Cash Flows

 

     2012     2011     2010  

Cash flows provided by (used in):

      

Operating activities

   $ 50,588,000     $ 39,246,000     $ 41,702,000  

Investing activities

   $ 50,114,000     $ (64,241,000   $ (29,834,000

Financing activities

   $ (105,250,000   $ 22,899,000     $ (14,866,000

Operating Activities

Net cash provided by operating activities, before net changes in operating assets and liabilities was $53.6 million, $48.0 million and $49.8 million for the years ended December 31, 2012, 2011 and 2010, respectively. The amounts for 2012 include $3.0 million of lease termination income and $0.6 million for management transition charges and employee termination costs. The amounts for 2011 include $4.5 million for management transition charges and employee termination costs. The net changes in operating assets and liabilities (($3.1) million in 2012, ($8.7) million in 2011, and ($8.1) million in 2010) were primarily the result of collections of receivables and the timing of payments of accounts payable and accrued liabilities.

Investing Activities

During 2012, the Company had net proceeds from the exit from the Cedar/RioCan unconsolidated joint venture ($41.6 million), proceeds from sales of properties treated as discontinued operations ($34.9 million), distributions of capital from the Cedar/RioCan joint venture ($2.8 million), and a decrease in constructions escrows and other ($2.4 million), offset by expenditures for property improvements ($31.5 million). During 2011, the Company acquired a grocery-anchored shopping center and incurred expenditures for property improvements (an

 

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aggregate of $92.2 million), had an increase in construction escrows and other ($6.2 million) and made investments in the Cedar/RioCan joint venture ($4.3 million), offset by proceeds from sales of properties treated as discontinued operations ($30.6 million), net proceeds relating to the properties transferred to the Cedar/RioCan joint venture ($3.5 million) and distribution of capital from the Cedar/RioCan joint venture ($4.3 million). During 2010, the Company made investments in the Cedar/RioCan joint venture ($51.4 million), acquired a single-tenant office property and incurred expenditures for property improvements (an aggregate of $30.2 million), and had an increase in construction escrows and other ($3.4 million), offset by proceeds from the transfers of five properties to the Cedar/RioCan joint venture ($31.0 million), distributions of capital from the Cedar/RioCan joint venture ($21.5 million), and the sales of properties treated as discontinued operations ($2.7 million).

Financing Activities

During 2012, the Company had redemptions and repurchases of the 8.875% Series A cumulative Redeemable Preferred Stock ($124.9 million), repayments of mortgage obligations ($79.6 million), preferred and common stock distributions ($29.2 million), net repayments under its credit facilities ($10.3 million), the purchase of joint venture minority interests share ($6.1 million), the payment of debt financing costs ($4.9 million) and distributions to noncontrolling interests (minority interest and limited partners—$4.3 million), offset by net proceeds from the sale of the 7.25% Series B Cumulative Redeemable Preferred Stock ($124.4 million) and proceeds from mortgage financings ($30.0 million). During 2011, the Company received proceeds from mortgage refinancings ($45.8 million), net advances from its revolving credit facilities ($33.7 million), proceeds from the sale of common stock ($4.3 million), and had a contribution from a consolidated joint venture minority interest ($0.3 million), offset by preferred and common stock distributions ($38.9 million), repayment of mortgage obligations ($17.4 million), distributions to noncontrolling interest (minority interest and limited partners—$3.8 million), and the payment of debt financing costs ($1.1 million). During 2010, the Company had net repayments to its revolving credit facilities ($125.1 million), preferred and common stock distributions ($31.9 million), repayment of mortgage obligations ($20.9 million), termination payments relating to interest rate swaps ($5.5 million), distributions paid to noncontrolling interests (minority interest and limited partners—$4.2 million), redemptions of OP Units ($3.4 million), and the payment of debt financing costs ($2.0 million), offset by the proceeds from sales of preferred and common stock ($141.2 million), the proceeds of mortgage financings ($27.0 million), and the proceeds from the exercise of the RioCan warrant ($10.0 million).

Funds From Operations

Funds From Operations “FFO” is a widely-recognized non-GAAP financial measure for REITs that the Company believes, when considered with financial statements prepared in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs. In addition, FFO is useful to investors as 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 do other depreciable assets. Investors should review FFO, along with GAAP net income, when trying to understand a REIT’s operating performance. The Company considers FFO an important supplemental measure of its operating performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs.

 

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The Company computes FFO in accordance with the “White Paper” published by the National Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income applicable to common shareholders (determined in accordance with GAAP), excluding impairment charges, gains or losses from debt restructurings and sales of properties, plus real estate-related depreciation and amortization, and after adjustments for partnerships and joint ventures (which are computed to reflect FFO on the same basis). FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income applicable to common shareholders or to cash flow from operating activities. FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another. The following table sets forth the Company’s calculations of FFO for 2012, 2011 and 2010:

 

     2012     2011     2010  

Net income (loss) attributable to common shareholders

   $ 9,889,000     $ (117,761,000   $ (51,485,000

Add (deduct):

      

Real estate depreciation and amortization

     44,335,000       48,156,000       46,279,000  

Limited partners’ interest

     (26,000     (2,446,000     (1,282,000

Impairment charges, net

     5,783,000       95,606,000       42,315,000  

(Gain) loss on exit from unconsolidated joint ventures

     (30,526,000     7,961,000       —     

(Gain) on sales

     (5,676,000     (884,000     (170,000

Consolidated minority interests:

      

Share of income

     4,335,000       (2,507,000     (1,613,000

Share of FFO

     (4,562,000     (5,918,000     (6,846,000

Unconsolidated joint ventures:

      

Share of income

     (1,481,000     (1,671,000     (484,000

Share of FFO

     4,646,000       5,984,000       2,796,000  
  

 

 

   

 

 

   

 

 

 

FFO

   $ 26,717,000     $ 26,520,000     $ 29,510,000  
  

 

 

   

 

 

   

 

 

 

Inflation

Inflation has been relatively low in recent years and has not had a significant detrimental impact on the Company’s results of operations. Should inflation rates increase in the future, 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 real estate taxes and many of the operating expenses it incurs. Significant inflation rate increases over a prolonged period of time may have a material adverse impact on the Company’s business.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

One of the principal market risks facing the Company is interest rate risk on its credit facilities. The Company may, when advantageous, hedge its interest rate risk by using derivative financial instruments. The Company is not subject to foreign currency risk.

 

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The Company is exposed to interest rate changes primarily through (1) the variable-rate credit facilities used to maintain liquidity, fund capital expenditures and ground-up development/redevelopment activities, and expand its real estate investment portfolio, (2) property-specific variable-rate construction financing, and (3) other property-specific variable-rate mortgages. The Company’s objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows, and to lower its overall borrowing costs. To achieve these objectives, the Company may borrow at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps, etc., in order to mitigate its interest rate risk on a related variable-rate financial instrument. The Company does not enter into derivative or interest rate transactions for speculative purposes. At December 31, 2012, the Company had approximately $31.4 million of mortgage loans payable subject to interest rate swaps which converted LIBOR-based variable rates to fixed annual rates ranging from 5.2% to 6.5% per annum. At that date, the Company had accrued liabilities of $1.6 million (included in accounts payable and accrued liabilities on the consolidated balance sheet) relating to the fair value of interest rate swaps applicable to these mortgage loans payable.

At December 31, 2012, long-term debt consisted of fixed-rate mortgage loans payable and variable-rate debt (including the Company’s variable-rate Credit Facility). The average interest rate on the $544.8 million of fixed-rate indebtedness outstanding was 5.6%, with maturities at various dates through 2029. The average interest rate on the $216.4 million of variable-rate debt (including $156.0 million in advances under the Company’s Credit Facility) was 2.9%. The $81.0 million revolving credit segment of the new facility matures in January 2015, and the $75.0 million term loan segment matures in January 2016, each subject to a one-year extension option. With respect to the $216.4 million of variable-rate debt outstanding at December 31, 2012, if interest rates either increase or decrease by 1%, the Company’s interest cost would increase or decrease respectively by approximately $2.2 million per annum.

 

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Item 8. Financial Statements and Supplementary Data

 

Report of Independent Registered Public Accounting Firm

     48   

Consolidated Balance Sheets, December 31, 2012 and 2011

     49   

Consolidated Statements of Operations, years ended December 31, 2012, 2011 and 2010

     50   

Consolidated Statements of Comprehensive Income (Loss), years ended December 31, 2012, 2011 and 2010

     51   

Consolidated Statements of Equity, years ended December 31, 2012, 2011 and 2010

     52-53   

Consolidated Statements of Cash Flows, years ended December 31, 2012, 2011 and 2010

     54   

Notes to Consolidated Financial Statements

     55-94   

Schedule Filed As Part Of This Report Schedule III – Real Estate and Accumulated Depreciation, December 31, 2012

     95-99   

All other schedules have been omitted because the required information is not present, is not present in amounts sufficient to require submission of the schedule, or is included in the consolidated financial statements or notes thereto.

 

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Cedar Realty Trust, Inc.

We have audited the accompanying consolidated balance sheets of Cedar Realty Trust, Inc. (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cedar Realty Trust, Inc. at December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Cedar Realty Trust, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 7, 2013 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP        

New York, New York

March 7, 2013

 

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CEDAR REALTY TRUST, INC.

Consolidated Balance Sheets

 

     December 31,  
     2012     2011  

Assets

    

Real estate:

    

Land

   $ 282,383,000     $ 268,182,000  

Buildings and improvements

     1,178,111,000       1,095,754,000  
  

 

 

   

 

 

 
     1,460,494,000       1,363,936,000  

Less accumulated depreciation

     (237,751,000     (196,661,000
  

 

 

   

 

 

 

Real estate, net

     1,222,743,000       1,167,275,000  

Real estate held for sale/conveyance

     77,793,000       211,679,000  

Investment in unconsolidated joint venture

     —          44,743,000  

Cash and cash equivalents

     7,522,000       12,070,000  

Restricted cash

     13,752,000       14,707,000  

Receivables

     18,289,000       25,660,000  

Other assets

     7,310,000       12,358,000  

Other assets—real estate held for sale/conveyance

     —          2,299,000  

Deferred charges, net

     22,494,000       21,372,000  
  

 

 

   

 

 

 

Total assets

   $ 1,369,903,000     $ 1,512,163,000  
  

 

 

   

 

 

 

Liabilities and equity

    

Mortgage loans payable

   $ 605,216,000     $ 586,743,000  

Mortgage loans payable—real estate held for sale/conveyance

     23,258,000       124,888,000  

Secured credit facilities

     156,000,000       166,317,000  

Accounts payable and accrued liabilities

     28,179,000       32,404,000  

Unamortized intangible lease liabilities

     30,508,000       35,017,000  

Unamortized intangible lease liabilities—real estate held for sale/conveyance

     4,992,000       6,406,000  
  

 

 

   

 

 

 

Total liabilities

     848,153,000       951,775,000  
  

 

 

   

 

 

 

Noncontrolling interest—limited partners’ mezzanine OP Units

     623,000       4,616,000  

Commitments and contingencies

     —          —     

Equity:

    

Cedar Realty Trust, Inc. shareholders’ equity:

    

Preferred stock ($.01 par value, 12,500,000 shares authorized):

    

Series A ($25.00 per share liquidation value, 1,410,000 and 6,400,000, shares authorized, respectively, 1,408,000 and 6,400,000 shares, issued and outstanding, respectively)

     34,882,000       158,575,000  

Series B ($25.00 per share liquidation value, 7,500,000 and 0 shares authorized, respectively, 5,429,000 and 0 shares, issued and, outstanding, respectively)

     128,787,000       —     

Common stock ($.06 par value, 150,000,000 shares authorized, 71,817,000 and 67,928,000 shares, issued and outstanding, respectively)

     4,309,000       4,076,000  

Treasury stock (3,822,000 and 1,313,000 shares, respectively, at cost)

     (21,702,000     (10,528,000

Additional paid-in capital

     748,194,000       718,974,000  

Cumulative distributions in excess of net income

     (378,254,000     (373,741,000

Accumulated other comprehensive loss

     (2,560,000     (3,513,000
  

 

 

   

 

 

 

Total Cedar Realty Trust, Inc. shareholders’ equity

     513,656,000       493,843,000  
  

 

 

   

 

 

 

Noncontrolling interests:

    

Minority interests in consolidated joint ventures

     6,081,000       56,511,000  

Limited partners’ OP Units

     1,390,000       5,418,000  
  

 

 

   

 

 

 

Total noncontrolling interests

     7,471,000       61,929,000  
  

 

 

   

 

 

 

Total equity

     521,127,000       555,772,000  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,369,903,000     $ 1,512,163,000  
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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CEDAR REALTY TRUST, INC.

Consolidated Statements of Operations

 

     Years ended December 31,  
     2012     2011     2010  

Revenues:

      

Rents

   $ 108,260,000     $ 105,008,000     $ 101,624,000  

Expense recoveries

     26,302,000       26,810,000       25,588,000  

Other

     6,021,000       3,010,000       3,786,000  
  

 

 

   

 

 

   

 

 

 

Total revenues

     140,583,000       134,828,000       130,998,000  
  

 

 

   

 

 

   

 

 

 

Expenses:

      

Operating, maintenance and management

     23,037,000       27,457,000       25,499,000  

Real estate and other property-related taxes

     17,514,000       16,578,000       16,100,000  

General and administrative

     14,277,000       10,740,000       9,537,000  

Management transition charges and employee termination costs

     1,172,000       6,875,000       —     

Impairment charges

     5,779,000       7,148,000       2,493,000  

Acquisition transaction costs and terminated projects

     116,000       1,436,000       3,958,000  

Depreciation and amortization

     44,540,000       43,105,000       34,735,000  
  

 

 

   

 

 

   

 

 

 

Total expenses

     106,435,000       113,339,000       92,322,000  
  

 

 

   

 

 

   

 

 

 

Operating income

     34,148,000       21,489,000       38,676,000  

Non-operating income and expense:

      

Interest expense

     (39,359,000     (41,746,000     (43,007,000

Accelerated write-off of deferred financing costs

     (2,607,000     —          (2,552,000

Interest income

     191,000       349,000       21,000  

Equity in income of unconsolidated joint ventures

     1,481,000       1,671,000       484,000  

Gain (loss) on exit from unconsolidated joint ventures

     30,526,000       (7,961,000     —     

Gain on sales

     997,000       130,000       —     
  

 

 

   

 

 

   

 

 

 

Total non-operating income and expense

     (8,771,000     (47,557,000     (45,054,000
  

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     25,377,000       (26,068,000     (6,378,000

Discontinued operations:

      

Income from operations

     3,963,000       5,128,000       1,846,000  

Impairment charges, net

     (4,000     (88,458,000     (39,822,000

Gain on sales

     4,679,000       884,000       170,000  
  

 

 

   

 

 

   

 

 

 

Total discontinued operations

     8,638,000       (82,446,000     (37,806,000
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     34,015,000       (108,514,000     (44,184,000

Less, net (income) loss attributable to noncontrolling interests:

      

Minority interests in consolidated joint ventures

     (4,335,000     2,507,000       1,613,000  

Limited partners’ interest in Operating Partnership

     26,000       2,446,000       1,282,000  
  

 

 

   

 

 

   

 

 

 

Total net (income) loss attributable to noncontrolling interests

     (4,309,000     4,953,000       2,895,000  
  

 

 

   

 

 

   

 

 

 

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

     29,706,000       (103,561,000     (41,289,000

Preferred stock dividends

     (14,819,000     (14,200,000     (10,196,000

Preferred stock redemption costs

     (4,998,000     —          —     
  

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common shareholders

   $ 9,889,000     $ (117,761,000   $ (51,485,000
  

 

 

   

 

 

   

 

 

 

Per common share attributable to common shareholders (basic and diluted):

      

Continuing operations

   $ 0.07     $ (0.61   $ (0.24

Discontinued operations

     0.06       (1.18     (0.57
  

 

 

   

 

 

   

 

 

 
   $ 0.13     $ (1.79   $ (0.81
  

 

 

   

 

 

   

 

 

 

Amounts attributable to Cedar Realty Trust, Inc. common shareholders, net of noncontrolling interests:

      

Income (loss) from continuing operations

   $ 5,935,000     $ (39,348,000   $ (15,623,000

Income (loss) from discontinued operations

     3,954,000       (78,413,000     (35,862,000
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 9,889,000     $ (117,761,000   $ (51,485,000
  

 

 

   

 

 

   

 

 

 

Weighted average number of common shares—basic and diluted

     68,017,000       66,387,000       63,843,000  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

     Years ended December 31,  
     2012     2011     2010  

Net income (loss)

   $ 34,015,000     $ (108,514,000   $ (44,184,000
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss):

      

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

      

Consolidated

     836,000       3,000       (454,000

Unconsolidated

     118,000       (118,000     —     
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     954,000       (115,000     (454,000
  

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     34,969,000       (108,629,000     (44,638,000

Comprehensive (income)/loss attributable to noncontrolling interests

     (4,309,000     4,961,000       2,935,000  
  

 

 

   

 

 

   

 

 

 

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

   $ 30,660,000     $ (103,668,000   $ (41,703,000
  

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

CEDAR REALTY TRUST, INC.

Consolidated Statement of Equity

Years ended December 31, 2012, 2011 and 2010

 

    Cedar Realty Trust, Inc. Shareholders  
    Preferred stock     Common stock                 Cumulative     Accumulated        
    Shares     $25.00
Liquidation
value
    Shares     $0.06
Par value
    Treasury
stock, at
cost
    Additional
paid-in

capital
    distributions
in excess of
net income
    other
comprehensive
(loss)
    Total  

Balance, December 31, 2009

    3,550,000      $ 88,750,000        52,139,000      $ 3,128,000      $ (9,688,000   $ 621,299,000      $ (162,041,000   $ (2,992,000   $ 538,456,000   

Net (loss)

    —          —          —          —          —          —          (41,289,000     —          (41,289,000

Unrealized loss on change in fair value of cash flow hedges

    —          —          —