UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

OR

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

COMMISSION FILE NUMBER: 001-31817

 

CEDAR REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

42-1241468

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

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

(Address of principal executive offices)     (Zip Code)

(516) 767-6492

(Registrant's telephone number, including area code)

 

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

Indicate by check mark whether the registrant has submitted electronically 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      No  

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

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

  (Do not check if a smaller reporting company)

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

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

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At April 28, 2017, there were 85,562,728 shares of Common Stock, $0.06 par value, outstanding.

 

 

 

 

 


 

CEDAR REALTY TRUST, INC.

INDEX

 

Forward-Looking Statements

3

 

 

Part I. Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

 

 

 

 

 

 

Consolidated Balance Sheets – March 31, 2017 and December 31, 2016

4

 

 

 

 

 

 

Consolidated Statements of Operations– Three months ended March 31, 2017 and 2016

5

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income – Three months ended March 31, 2017 and 2016

6

 

 

 

Consolidated Statement of Equity– Three months ended March 31, 2017

7

 

 

 

 

 

 

Consolidated Statements of Cash Flows– Three months ended March 31, 2017 and 2016

8

 

 

 

 

 

 

Notes to Consolidated Financial Statements –  March 31, 2017

9-16

 

 

 

 

Item 2.

 

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

17-22

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

22-23

 

 

 

 

Item 4.

 

Controls and Procedures

23

 

 

Part II. Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

24

 

 

 

 

Item 1A.

 

Risk Factors

24

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

24

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

24

 

 

 

 

Item 4.

 

Mine Safety Disclosures

24

 

 

 

 

Item 5.

 

Other Information

24

 

 

 

 

Item 6.

 

Exhibits

24

 

 

 

 

Signatures

25

 

 

 

2


 

Forward-Looking Statements

Certain statements made in this Form 10-Q or incorporated by reference herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “may”, “will”, “should”, “estimates”, “projects”, "anticipates", "believes", "expects", "intends", "future", and words of similar import, or the negative thereof. Factors which could cause actual results to differ materially from current expectations include, but are not limited to:  adverse general economic conditions in the United States and uncertainty in the credit and retail markets; financing risks, such as the inability to obtain new financing or refinancing on favorable terms as the result of market volatility or instability; risks related to the market for retail space generally, including reductions in consumer spending, variability in retailer demand for leased space, tenant bankruptcies, adverse impact of internet sales demand, ongoing consolidation in the retail sector and changes in economic conditions and consumer confidence; risks endemic to real estate and the real estate industry generally; the impact of the Company’s level of indebtedness on operating performance; inability of tenants to meet their rent and other lease obligations; adverse impact of new technology and e-commerce developments on the Company’s tenants; competitive risk; risks related to the geographic concentration of the Company’s properties in the Washington, D.C. to Boston corridor; the effects of natural and other disasters; the inability of the Company to realize anticipated returns from its redevelopment activities; and the risk factors discussed under Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

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

 

 

3


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

Land

 

$

305,268,000

 

 

$

301,299,000

 

Buildings and improvements

 

 

1,219,152,000

 

 

 

1,195,130,000

 

 

 

 

1,524,420,000

 

 

 

1,496,429,000

 

Less accumulated depreciation

 

 

(319,160,000

)

 

 

(313,070,000

)

Real estate, net

 

 

1,205,260,000

 

 

 

1,183,359,000

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

2,207,000

 

 

 

2,882,000

 

Restricted cash

 

 

1,986,000

 

 

 

2,880,000

 

Receivables

 

 

17,601,000

 

 

 

14,894,000

 

Other assets and deferred charges, net

 

 

30,887,000

 

 

 

29,506,000

 

TOTAL ASSETS

 

$

1,257,941,000

 

 

$

1,233,521,000

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Mortgage loans payable

 

$

137,432,000

 

 

$

138,243,000

 

Unsecured revolving credit facility

 

 

90,000,000

 

 

 

72,000,000

 

Unsecured term loans

 

 

397,668,000

 

 

 

397,502,000

 

Accounts payable and accrued liabilities

 

 

25,067,000

 

 

 

23,463,000

 

Unamortized intangible lease liabilities

 

 

19,668,000

 

 

 

20,316,000

 

Total liabilities

 

 

669,835,000

 

 

 

651,524,000

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Cedar Realty Trust, Inc. shareholders' equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Series B ($25.00 per share liquidation value, 10,000,000 shares authorized, 7,950,000 issued and outstanding)

 

 

190,661,000

 

 

 

190,661,000

 

Common stock  ($.06 par value, 150,000,000 shares authorized, 85,565,000 and 85,316,000 shares, issued and outstanding, respectively)

 

 

5,134,000

 

 

 

5,119,000

 

Treasury stock  (3,382,000 and 3,264,000 shares, respectively, at cost)

 

 

(18,692,000

)

 

 

(18,129,000

)

Additional paid-in capital

 

 

830,792,000

 

 

 

829,526,000

 

Cumulative distributions in excess of net income

 

 

(422,961,000

)

 

 

(426,864,000

)

Accumulated other comprehensive income

 

 

1,762,000

 

 

 

427,000

 

Total Cedar Realty Trust, Inc. shareholders' equity

 

 

586,696,000

 

 

 

580,740,000

 

Noncontrolling interests:

 

 

 

 

 

 

 

 

Minority interests in consolidated joint ventures

 

 

(995,000

)

 

 

(1,132,000

)

Limited partners'  OP Units

 

 

2,405,000

 

 

 

2,389,000

 

Total noncontrolling interests

 

 

1,410,000

 

 

 

1,257,000

 

Total equity

 

 

588,106,000

 

 

 

581,997,000

 

TOTAL LIABILITIES AND EQUITY

 

$

1,257,941,000

 

 

$

1,233,521,000

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

4


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

REVENUES

 

 

 

 

 

 

 

 

Rents

 

$

28,223,000

 

 

$

29,130,000

 

Expense recoveries

 

 

8,348,000

 

 

 

8,958,000

 

Other

 

 

203,000

 

 

 

163,000

 

Total revenues

 

 

36,774,000

 

 

 

38,251,000

 

EXPENSES

 

 

 

 

 

 

 

 

Operating, maintenance and management

 

 

7,044,000

 

 

 

7,155,000

 

Real estate and other property-related taxes

 

 

4,745,000

 

 

 

4,880,000

 

General and administrative

 

 

4,136,000

 

 

 

5,347,000

 

Acquisition pursuit costs

 

 

156,000

 

 

 

2,597,000

 

Depreciation and amortization

 

 

10,418,000

 

 

 

9,661,000

 

Total expenses

 

 

26,499,000

 

 

 

29,640,000

 

 

 

 

 

 

 

 

 

 

OTHER

 

 

 

 

 

 

 

 

Gain on sale

 

 

7,099,000

 

 

 

59,000

 

Total other

 

 

7,099,000

 

 

 

59,000

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

 

17,374,000

 

 

 

8,670,000

 

 

 

 

 

 

 

 

 

 

NON-OPERATING INCOME AND EXPENSES

 

 

 

 

 

 

 

 

Interest expense

 

 

(5,429,000

)

 

 

(7,005,000

)

Early extinguishment of debt costs

 

 

 

 

 

(89,000

)

Total non-operating income and expenses

 

 

(5,429,000

)

 

 

(7,094,000

)

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

11,945,000

 

 

 

1,576,000

 

 

 

 

 

 

 

 

 

 

Net (income) loss attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

Minority interests in consolidated joint ventures

 

 

(137,000

)

 

 

80,000

 

Limited partners' interest in Operating Partnership

 

 

(32,000

)

 

 

7,000

 

Total net (income) loss attributable to noncontrolling interests

 

 

(169,000

)

 

 

87,000

 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO CEDAR REALTY TRUST, INC.

 

 

11,776,000

 

 

 

1,663,000

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

(3,602,000

)

 

 

(3,602,000

)

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

8,174,000

 

 

$

(1,939,000

)

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS (BASIC AND DILUTED)

 

$

0.10

 

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

Weighted average number of common shares - basic and diluted

 

 

81,734,000

 

 

 

81,656,000

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

5


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

Net income

 

$

11,945,000

 

 

$

1,576,000

 

 

 

 

 

 

 

 

 

 

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

 

 

1,340,000

 

 

 

(4,970,000

)

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

13,285,000

 

 

 

(3,394,000

)

 

 

 

 

 

 

 

 

 

Comprehensive (income) loss attributable to noncontrolling interests

 

 

(174,000

)

 

 

108,000

 

 

 

 

 

 

 

 

 

 

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

 

$

13,111,000

 

 

$

(3,286,000

)

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

6


 

CEDAR REALTY TRUST, INC.

Consolidated Statement of Equity

Three months ended March 31, 2017

(unaudited)

 

 

 

Cedar Realty Trust, Inc. Shareholders

 

 

 

Preferred stock

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

Cumulative

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury

 

 

Additional

 

 

distributions

 

 

other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

stock,

 

 

paid-in

 

 

in excess of

 

 

comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

at cost

 

 

capital

 

 

net income

 

 

income

 

 

Total

 

Balance, December 31, 2016

 

 

7,950,000

 

 

$

190,661,000

 

 

 

85,316,000

 

 

$

5,119,000

 

 

$

(18,129,000

)

 

$

829,526,000

 

 

$

(426,864,000

)

 

$

427,000

 

 

$

580,740,000

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,776,000

 

 

 

 

 

 

11,776,000

 

Unrealized gain on change in fair value of flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,335,000

 

 

 

1,335,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

249,000

 

 

 

15,000

 

 

 

(563,000

)

 

 

1,260,000

 

 

 

 

 

 

 

 

 

712,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,000

 

 

 

 

 

 

 

 

 

3,000

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,602,000

)

 

 

 

 

 

(3,602,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,271,000

)

 

 

 

 

 

(4,271,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,000

 

 

 

 

 

 

 

 

 

3,000

 

Balance, March 31, 2017

 

 

7,950,000

 

 

$

190,661,000

 

 

 

85,565,000

 

 

$

5,134,000

 

 

$

(18,692,000

)

 

$

830,792,000

 

 

$

(422,961,000

)

 

$

1,762,000

 

 

$

586,696,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority

 

 

Limited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interest in

 

 

partners'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

consolidated

 

 

interest in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

joint

 

 

Operating

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ventures

 

 

Partnership

 

 

Total

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2016

 

$

(1,132,000

)

 

$

2,389,000

 

 

$

1,257,000

 

 

$

581,997,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

137,000

 

 

 

32,000

 

 

 

169,000

 

 

 

11,945,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on change in fair value of flow hedges

 

 

 

 

 

5,000

 

 

 

5,000

 

 

 

1,340,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

712,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

3,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

(3,602,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

(18,000

)

 

 

(18,000

)

 

 

(4,289,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reallocation adjustment of limited partners' interest

 

 

 

 

 

(3,000

)

 

 

(3,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2017

 

$

(995,000

)

 

$

2,405,000

 

 

$

1,410,000

 

 

$

588,106,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

7


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

11,945,000

 

 

$

1,576,000

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Gain on sales

 

 

(7,099,000

)

 

 

(59,000

)

Straight-line rents

 

 

(241,000

)

 

 

317,000

 

Provision for doubtful accounts

 

 

315,000

 

 

 

221,000

 

Depreciation and amortization

 

 

10,418,000

 

 

 

9,661,000

 

Amortization of intangible lease liabilities

 

 

(639,000

)

 

 

(685,000

)

Expense relating to share-based compensation, net

 

 

933,000

 

 

 

510,000

 

Amortization (including accelerated write-off) of deferred financing costs

 

 

359,000

 

 

 

397,000

 

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

 

 

 

 

 

 

 

 

Rents and other receivables

 

 

(3,048,000

)

 

 

(2,463,000

)

Prepaid expenses and other

 

 

(599,000

)

 

 

(814,000

)

Accounts payable and accrued liabilities

 

 

(1,077,000

)

 

 

1,331,000

 

Net cash provided by operating activities

 

 

11,267,000

 

 

 

9,992,000

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Acquisitions of real estate

 

 

(28,836,000

)

 

 

(12,090,000

)

Expenditures for real estate improvements

 

 

(3,235,000

)

 

 

(2,128,000

)

Net proceeds from sales of real estate

 

 

10,372,000

 

 

 

14,494,000

 

Construction escrows and other

 

 

479,000

 

 

 

(257,000

)

Net cash (used in) / provided by investing activities

 

 

(21,220,000

)

 

 

19,000

 

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Repayments under revolving credit facility

 

 

(18,000,000

)

 

 

(18,000,000

)

Advances under revolving credit facility

 

 

36,000,000

 

 

 

19,000,000

 

Mortgage repayments

 

 

(834,000

)

 

 

(2,399,000

)

Payments of debt financing costs

 

 

 

 

 

(1,078,000

)

Noncontrolling interests:

 

 

 

 

 

 

 

 

Distributions to limited partners

 

 

(18,000

)

 

 

(18,000

)

Common stock sales less issuance expenses, net

 

 

3,000

 

 

 

9,000

 

Preferred stock dividends

 

 

(3,602,000

)

 

 

(3,602,000

)

Distributions to common shareholders

 

 

(4,271,000

)

 

 

(4,249,000

)

Net cash provided by / (used in) financing activities

 

 

9,278,000

 

 

 

(10,337,000

)

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(675,000

)

 

 

(326,000

)

Cash and cash equivalents at beginning of period

 

 

2,882,000

 

 

 

2,083,000

 

Cash and cash equivalents at end of period

 

$

2,207,000

 

 

$

1,757,000

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

8


 

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

March 31, 2017

(unaudited)

 

 

Note 1. Business and Organization

Cedar Realty Trust, Inc. (the “Company”) is a real estate investment trust (“REIT”) that focuses primarily on ownership and operation of grocery-anchored shopping centers straddling the Washington, D.C. to Boston corridor. At March 31, 2017, the Company owned and managed a portfolio of 62 operating properties (excluding properties “held for sale”).

Cedar Realty Trust Partnership, L.P. (the “Operating Partnership”) is the entity through which the Company conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. At March 31, 2017, the Company owned a 99.6% economic interest in, and was the sole general partner of, the Operating Partnership. The limited partners’ interest in the Operating Partnership (0.4% at March 31, 2017) is represented by Operating Partnership Units (“OP Units”). The carrying amount of such interest is adjusted at the end of each reporting period to an amount equal to the limited partners’ ownership percentage of the Operating Partnership’s net equity. The 351,000 OP Units outstanding at March 31, 2017 are economically equivalent to the Company’s common stock. The holders of OP Units have the right to exchange their OP Units for the same number of shares of the Company’s common stock or, at the Company’s option, for cash.

As used herein, the “Company” refers to Cedar Realty Trust, Inc. and its subsidiaries on a consolidated basis, including the Operating Partnership or, where the context so requires, Cedar Realty Trust, Inc. only. 

 

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation/Basis of Preparation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by U.S. Generally Accepted Accounting Principles (“GAAP”) for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statement disclosures. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring accruals) have been included. The financial statements are prepared on the accrual basis in accordance with GAAP, which requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements. Actual results could differ from these estimates. The prior period financial statements reflect certain reclassifications, such as the reclassification of unamortized debt issuance costs for mortgage loans payable and term loans, which had no impact on previously-reported net income attributable to common shareholders or earnings per share. The unaudited consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The unaudited consolidated financial statements include the accounts and operations of the Company, the Operating Partnership, its subsidiaries, and certain joint venture partnerships in which it participates. The Company consolidates all variable interest entities for which it is the primary beneficiary.

 

Supplemental Consolidated Statements of Cash Flows Information

 

 

 

Three months ended March 31,

 

 

 

2017

 

 

2016

 

Supplemental disclosure of cash activities:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

5,121,000

 

 

$

6,879,000

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

 

Capitalization of interest and financing costs

 

 

175,000

 

 

 

171,000

 

Mortgage loan payable assumed upon acquisition

 

 

 

 

 

(8,501,000

)

 

Recently-Issued Accounting Pronouncements

In May 2014, the FASB issued guidance which amends the accounting for revenue recognition. Under the amended guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled and receive in exchange for those goods or services. Leases are specifically excluded from

9


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

March 31, 2017

(unaudited)

 

this guidance and will be governed by the applicable lease codification; however, this update may have implications with respect to certain variable payment terms included in lease agreements. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption not permitted. The Company is currently in the process of evaluating the guidance; however, based on its initial assessment, the Company does not believe it will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued guidance which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less will be accounted for pursuant to existing guidance for operating leases. The guidance is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease and executive office lease agreements for which the Company is the lessee. Additionally, the guidance will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for operating and other leases. The new lease accounting guidance requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption being permitted.  The Company is currently in the process of evaluating the impact the adoption of the guidance will have on its consolidated financial statements.

In March 2016, the FASB issued guidance which amends the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and the policy election with respect to accounting for forfeitures either as they occur or by estimating forfeitures. The guidance was adopted on January 1, 2017. The Company has elected to account for forfeitures as they occur, and the guidance did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued guidance which enhances the methodology of measuring expected credit losses to include the use of forward-looking information to better calculate credit loss estimates. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including accounts receivable, straight-line rent receivables, loans, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures. The guidance will require that the Company estimate the lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. The Company will also be required to disclose information about how it developed the allowances, including changes in the factors that influenced the Company’s estimate of expected credit losses and the reasons for those changes. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently in the process of evaluating the impact the adoption of the guidance will have on its consolidated financial statements.

 

In August 2016, the FASB issued guidance that clarifies how an entity should classify certain cash receipts and cash payments on its statement of cash flows. The guidance established that an entity will classify cash payments for debt prepayment or extinguishment costs as financing cash flows. In addition, the guidance provides entities with an alternative to consider regarding the nature of the source of distributions that an investor receives from an equity method investment when classifying distributions received in its cash flow statement (the nature of the distribution approach). Alternatively, entities can elect to classify the distributions received from equity method investees based on the cumulative earnings approach. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption being permitted. The Company has evaluated the guidance and does not believe it will have a material impact on the Company’s consolidated financial statements.

 

In November 2016, the FASB issued guidance that will require entities to show the changes in the total of cash, cash equivalents and restricted cash in the statement of cash flows. When cash, cash equivalents and restricted cash are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions on the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2017,

10


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

March 31, 2017

(unaudited)

 

with early adoption being permitted. The Company has evaluated the guidance and does not believe it will have a material impact on the Company’s consolidated financial statements.

 

In January 2017, the FASB issued guidance which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in the guidance on revenue from contracts with customers. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption being permitted. The Company has elected to early adopt this guidance effective January 1, 2017. The Company believes that most of its typical acquisitions of real estate will not meet the new definition of a business, and accordingly, will result in the capitalization of associated acquisition pursuit costs, as is the case in the acquisition of Christina Crossing (see Note 3 - “Real Estate”).

 

Note 3. Real Estate

 

Acquisition

On February 22, 2017, the Company acquired Christina Crossing, located in Wilmington, Delaware. The purchase price for the property, which was unencumbered, was $27.9 million. In addition, the Company incurred transaction costs of $0.9 million. The purchase price has been allocated to real estate assets acquired and liabilities assumed.

Disposition

On February 1, 2017, the Company sold an outparcel building adjacent to Camp Hill, located in Camp Hill, Pennsylvania, for $10.7 million, resulting in a $7.1 million gain which is included in continuing operations in the accompanying consolidated statement of operations.

Real Estate Held for Sale

The Company, when applicable, conducts a continuing review of the values for all properties “held for sale based on final sales prices and sales contracts entered into. Impairment charges/reversals, if applicable, are based on a comparison of the carrying values of the properties with either (1) actual sales prices less costs to sell for properties sold, or contract amounts for properties in the process of being sold, (2) estimated sales prices, less costs to sell, based on discounted cash flow analyses, if no contract amounts were as yet being negotiated (see Note 4 - “Fair Value Measurements”), or (3) with respect to land parcels, estimated sales prices, less costs to sell, based on comparable sales completed in the selected market areas. Prior to the Company’s determination to dispose of properties, which are subsequently reclassified to “held for sale”, the Company performed recoverability analyses based on the estimated undiscounted cash flows that were expected to result from the real estate investments’ use and eventual disposal. The projected undiscounted cash flows of each property reflects that the carrying value of each real estate investment would be recovered. However, as a result of the properties’ meeting the “held for sale” criteria, such properties were written down to the lower of their carrying value and estimated fair values less costs to sell.

 

Note 4. Fair Value Measurements

The carrying amounts of cash and cash equivalents, restricted cash, rents and other receivables, certain other assets, accounts payable and accrued liabilities, and variable-rate debt approximate their fair value due to their terms and/or short-term nature. The fair value of the Company’s investments and liabilities related to share-based compensation were determined to be Level 1 within the valuation hierarchy, and were based on independent values provided by financial institutions.

The fair value of the Company’s fixed rate mortgage loans were estimated using available market information and discounted cash flow analyses based on borrowing rates the Company believes it could obtain with similar terms and maturities.  As of March 31, 2017 and December 31, 2016, the aggregate fair values of the Company’s fixed rate mortgage loans payable, which were determined to be Level 3 within the valuation hierarchy, were $139.1 million and $143.2 million, respectively; the carrying values of such loans were $137.4 million and $138.2 million, respectively. As of March 31, 2017 and December 31, 2016, respectively, the aggregate fair values of the Company’s unsecured revolving credit facility and term loans approximated the carrying values.

11


Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

March 31, 2017

(unaudited)

 

The valuation of the assets and liabilities for the Company’s interest rate swaps, which are measured on a recurring basis, were determined to be Level 2 within the valuation hierarchy, and were based on independent values provided by financial institutions. Such valuations were determined using widely accepted valuation techniques, including discounted cash flow analyses, on the expected cash flows of each derivative. The analyses reflect the contractual terms of the swaps, including the period to maturity, and user-observable market-based inputs, including interest rate curves (“significant other observable inputs”). The fair value calculation also includes an amount for risk of non-performance using “significant unobservable inputs” such as estimates of current credit spreads to evaluate the likelihood of default. The Company has concluded that, as of March 31, 2017, the fair value associated with the “significant unobservable inputs” relating to the Company’s risk of non-performance was insignificant to the overall fair value of the interest rate swap agreements and, as a result, that the relevant inputs for purposes of calculating the fair value of the interest rate swap agreements, in their entirety, were based upon “significant other observable inputs”.

Nonfinancial assets and liabilities measured at fair value in the consolidated financial statements consist of real estate held for sale, which, if applicable, are measured on a nonrecurring basis, have been determined to be (1) Level 2 within the valuation hierarchy, where applicable, based on the respective contracts of sale, adjusted for closing costs and expenses, or (2) Level 3 within the valuation hierarchy, where applicable, based on estimated sales prices, adjusted for closing costs and expenses, determined by discounted cash flow analyses, direct capitalization analyses or a sales comparison approach if no contracts had been concluded. The discounted cash flow and direct capitalization analyses include all estimated cash inflows and outflows over a specific holding period and, where applicable, any estimated debt premiums. These cash flows were composed of unobservable inputs which included forecasted rental revenues and expenses based upon existing in-place leases, market conditions and expectations for growth. Capitalization rates and discount rates utilized in these analyses were based upon observable rates that the Company believed to be within a reasonable range of current market rates for the respective properties. The sales comparison approach is utilized for certain land values and includes comparable sales that were completed in the selected market areas. The comparable sales utilized in these analyses were based upon observable per acre rates that the Company believes to be within a reasonable range of current market rates for the respective properties.

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

The following tables show the hierarchy for those assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016, respectively:

 

 

 

March 31, 2017

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Investments related to deferred