UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

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

For the fiscal year ended December 31, 2019

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

Trading Symbol(s)

Common Stock, $0.06 par value

New York Stock Exchange

CDR

7-1/4% Series B Cumulative Redeemable Preferred Stock, $25.00 Liquidation Value

New York Stock Exchange

CDRpB

6-1/2% Series C Cumulative Redeemable Preferred Stock, $25.00 Liquidation Value

New York Stock Exchange

CDRpC

 

 

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  

 

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  

 

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 every Interactive Data File required to be submitted 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 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

  

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  

 

Based on the closing sales price on June 30, 2019 of $2.65 per share, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $225,311,000.

 

The number of shares outstanding of the registrant’s Common Stock $.06 par value was 89,352,996 on February 10, 2020.

 

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s definitive proxy statement relating to its 2020 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

 

 

 

 

 


 

CEDAR REALTY TRUST, INC.

TABLE OF CONTENTS

 

PART I

1 and 2.

 

Business and Properties

 

3

1A.

 

Risk Factors

 

10

1B.

 

Unresolved Staff Comments

 

23

3.

 

Legal Proceedings

 

23

4.

 

Mine Safety Disclosures

 

24

 

 

 

 

 

PART II

5.

 

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

 

24

6.

 

Selected Financial Data

 

25

7.

 

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

 

27

7A.

 

Quantitative and Qualitative Disclosures about Market Risk

 

38

8.

 

Financial Statements and Supplementary Data

 

40

9.

 

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

72

9A.

 

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

 

72

9B.

 

Other information

 

75

 

 

 

 

 

PART III

10.

 

Directors, Executive Officers and Corporate Governance

 

75

11.

 

Executive Compensation

 

75

12.

 

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

 

75

13.

 

Certain Relationships and Related Transactions, and Director Independence

 

75

14.

 

Principal Accountant Fees and Services

 

75

 

 

 

 

 

PART IV

15.

 

Exhibits and Financial Statement Schedules

 

76

16.

 

Form 10-K Summary

 

78

 

2


 

Part I.

Items 1 and 2. Business and Properties

Cedar Realty Trust, Inc. (the “Company”) is a real estate investment trust (“REIT”) that focuses primarily on ownership, operation and redevelopment of grocery-anchored shopping centers in high-density urban markets from Washington, D.C. to Boston. At December 31, 2019, the Company owned and managed a portfolio of 56 operating properties (excluding properties “held for sale”) totaling 8.3 million square feet of gross leasable area (“GLA”). The portfolio was 93.2% leased and 91.5% occupied at December 31, 2019.

The Company, organized in 1984, 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 from Washington, D.C. to Boston, 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, 2019, the Company owned a 99.4% general and limited partnership interest in, and was the sole general partner of, the Operating Partnership. The limited partners’ interest in the Operating Partnership (0.6% at December 31, 2019) 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 537,000 OP Units outstanding at December 31, 2019 are economically equivalent to shares of 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.

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 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. Information on the website is not part of this Form 10-K.

The Company’s Properties  

The following tables summarize information relating to the Company’s portfolio as of December 31, 2019:

 

 

 

Number of

 

 

 

 

 

 

Percentage

 

State

 

properties

 

 

GLA

 

 

of GLA

 

Pennsylvania

 

 

23

 

 

 

4,043,807

 

 

 

48.6

%

Connecticut

 

 

7

 

 

 

1,141,979

 

 

 

13.7

%

Massachusetts

 

 

7

 

 

 

1,122,616

 

 

 

13.5

%

Maryland / Washington, D.C.

 

 

8

 

 

 

972,525

 

 

 

11.7

%

Virginia

 

 

6

 

 

 

424,731

 

 

 

5.1

%

New Jersey

 

 

3

 

 

 

307,327

 

 

 

3.7

%

New York

 

 

1

 

 

 

195,485

 

 

 

2.3

%

Delaware

 

 

1

 

 

 

119,446

 

 

 

1.4

%

Total portfolio

 

 

56

 

 

 

8,327,916

 

 

 

100.0

%

3


 

Tenant Concentration

 

 

Number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized

 

 

Percentage

 

 

 

of

 

 

 

 

 

 

Percentage

 

 

Annualized

 

 

base rent

 

 

annualized

 

Tenant

 

stores

 

 

GLA

 

 

of GLA

 

 

base rent

 

 

per sq. ft.

 

 

base rents

 

Top twenty tenants (a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Giant Foods

 

 

8

 

 

 

538,000

 

 

 

6.5

%

 

$

9,007,000

 

 

$

16.74

 

 

 

8.4

%

Shop Rite

 

 

4

 

 

 

252,000

 

 

 

3.0

%

 

 

4,401,000

 

 

 

17.46

 

 

 

4.1

%

Stop & Shop

 

 

3

 

 

 

211,000

 

 

 

2.5

%

 

 

2,786,000

 

 

 

13.20

 

 

 

2.6

%

Dollar Tree

 

 

21

 

 

 

224,000

 

 

 

2.7

%

 

 

2,391,000

 

 

 

10.67

 

 

 

2.2

%

LA Fitness

 

 

4

 

 

 

158,000

 

 

 

1.9

%

 

 

2,110,000

 

 

 

13.35

 

 

 

2.0

%

Big Y

 

 

2

 

 

 

106,000

 

 

 

1.3

%

 

 

2,006,000

 

 

 

18.92

 

 

 

1.9

%

Home Depot

 

 

2

 

 

 

253,000

 

 

 

3.0

%

 

 

1,977,000

 

 

 

7.81

 

 

 

1.9

%

Staples

 

 

5

 

 

 

106,000

 

 

 

1.3

%

 

 

1,773,000

 

 

 

16.73

 

 

 

1.7

%

BJ's Wholesale Club

 

 

1

 

 

 

118,000

 

 

 

1.4

%

 

 

1,760,000

 

 

 

14.92

 

 

 

1.6

%

Marshalls

 

 

6

 

 

 

170,000

 

 

 

2.0

%

 

 

1,558,000

 

 

 

9.16

 

 

 

1.5

%

United Artists

 

 

1

 

 

 

78,000

 

 

 

0.9

%

 

 

1,538,000

 

 

 

19.72

 

 

 

1.4

%

Food Lion

 

 

4

 

 

 

163,000

 

 

 

2.0

%

 

 

1,530,000

 

 

 

9.39

 

 

 

1.4

%

Shoppers Food Warehouse

 

 

2

 

 

 

120,000

 

 

 

1.4

%

 

 

1,297,000

 

 

 

10.81

 

 

 

1.2

%

Planet Fitness

 

 

5

 

 

 

99,000

 

 

 

1.2

%

 

 

1,279,000

 

 

 

12.92

 

 

 

1.2

%

Walmart

 

 

3

 

 

 

192,000

 

 

 

2.3

%

 

 

1,193,000

 

 

 

6.21

 

 

 

1.1

%

Redner's

 

 

3

 

 

 

159,000

 

 

 

1.9

%

 

 

1,160,000

 

 

 

7.30

 

 

 

1.1

%

Kohl's

 

 

2

 

 

 

147,000

 

 

 

1.8

%

 

 

1,031,000

 

 

 

7.01

 

 

 

1.0

%

Home Goods

 

 

4

 

 

 

105,000

 

 

 

1.3

%

 

 

999,000

 

 

 

9.51

 

 

 

0.9

%

PetSmart

 

 

3

 

 

 

63,000

 

 

 

0.8

%

 

 

971,000

 

 

 

15.41

 

 

 

0.9

%

Shaw's

 

 

1

 

 

 

68,000

 

 

 

0.8

%

 

 

925,000

 

 

 

13.60

 

 

 

0.9

%

Sub-total top twenty tenants

 

 

84

 

 

 

3,330,000

 

 

 

40.0

%

 

 

41,692,000

 

 

 

12.52

 

 

 

39.0

%

Remaining tenants

 

 

732

 

 

 

4,289,000

 

 

 

51.5

%

 

 

65,151,000

 

 

 

15.19

 

 

 

61.0

%

Sub-total all tenants (b)

 

 

816

 

 

 

7,619,000

 

 

 

91.5

%

 

$

106,843,000

 

 

$

14.02

 

 

 

100.0

%

Vacant space

 

N/A

 

 

 

709,000

 

 

 

8.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

816

 

 

 

8,328,000

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Several of the tenants listed above share common ownership with other tenants:

(1) Giant Foods, Stop & Shop and Food Lion, and (2) Marshalls, Home Goods, and TJ Maxx (GLA of 30,000; annualized base rent of $315,000).

(b)

Comprised of large tenants (15,000 or more GLA) and small tenants as follows:

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Annualized

 

 

Percentage

 

 

 

Occupied

 

 

of occupied

 

 

Annualized

 

 

base rent

 

 

annualized

 

 

 

GLA

 

 

GLA

 

 

base rent

 

 

per sq. ft.

 

 

base rents

 

Large tenants

 

 

5,247,000

 

 

 

68.9

%

 

$

58,793,000

 

 

$

11.21

 

 

 

55.0

%

Small tenants

 

 

2,372,000

 

 

 

31.1

%

 

 

48,050,000

 

 

 

20.26

 

 

 

45.0

%

Total

 

 

7,619,000

 

 

 

100.0

%

 

$

106,843,000

 

 

$

14.02

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4


 

Lease Expirations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized

 

 

Percentage

 

 

 

Number

 

 

 

 

 

 

Percentage

 

 

Annualized

 

 

expiring

 

 

of annualized

 

Year of lease

 

of leases

 

 

GLA

 

 

of GLA

 

 

expiring

 

 

base rents

 

 

expiring

 

expiration

 

expiring

 

 

expiring

 

 

expiring

 

 

base rents

 

 

per sq. ft.

 

 

base rents

 

Month-To-Month

 

 

50

 

 

 

273,000

 

 

 

3.6

%

 

$

4,865,000

 

 

$

17.82

 

 

 

4.6

%

2020

 

 

90

 

 

 

548,000

 

 

 

7.2

%

 

 

8,786,000

 

 

 

16.03

 

 

 

8.2

%

2021

 

 

134

 

 

 

864,000

 

 

 

11.3

%

 

 

14,358,000

 

 

 

16.62

 

 

 

13.4

%

2022

 

 

105

 

 

 

593,000

 

 

 

7.8

%

 

 

9,705,000

 

 

 

16.37

 

 

 

9.1

%

2023

 

 

77

 

 

 

580,000

 

 

 

7.6

%

 

 

8,275,000

 

 

 

14.27

 

 

 

7.7

%

2024

 

 

92

 

 

 

874,000

 

 

 

11.5

%

 

 

11,526,000

 

 

 

13.19

 

 

 

10.8

%

2025

 

 

82

 

 

 

1,094,000

 

 

 

14.4

%

 

 

14,401,000

 

 

 

13.16

 

 

 

13.5

%

2026

 

 

34

 

 

 

283,000

 

 

 

3.7

%

 

 

4,571,000

 

 

 

16.15

 

 

 

4.3

%

2027

 

 

34

 

 

 

272,000

 

 

 

3.6

%

 

 

3,828,000

 

 

 

14.07

 

 

 

3.6

%

2028

 

 

36

 

 

 

377,000

 

 

 

4.9

%

 

 

4,542,000

 

 

 

12.05

 

 

 

4.3

%

2029

 

 

41

 

 

 

700,000

 

 

 

9.2

%

 

 

8,948,000

 

 

 

12.78

 

 

 

8.4

%

2030

 

 

18

 

 

 

513,000

 

 

 

6.7

%

 

 

4,935,000

 

 

 

9.62

 

 

 

4.6

%

Thereafter

 

 

23

 

 

 

648,000

 

 

 

8.5

%

 

 

8,103,000

 

 

 

12.50

 

 

 

7.6

%

All tenants

 

 

816

 

 

 

7,619,000

 

 

 

100.0

%

 

$

106,843,000

 

 

$

14.02

 

 

 

100.0

%

Vacant space

 

N/A

 

 

 

709,000

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

Total portfolio

 

 

816

 

 

 

8,328,000

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

Real Estate Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

Percent

 

 

base rent per

 

 

Major Tenants (a)

 

Property Description

 

acquired

 

 

GLA

 

 

occupied

 

 

leased sq. ft.

 

 

Name

 

GLA

 

Connecticut

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bethel Shopping Center

 

 

2013

 

 

 

101,105

 

 

 

95.1

%

 

$

23.39

 

 

Big Y

 

 

63,817

 

Brickyard Plaza

 

 

2004

 

 

 

227,598

 

 

 

99.2

%

 

 

8.75

 

 

Home Depot

 

 

103,003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kohl's

 

 

58,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michaels

 

 

21,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PetSmart

 

 

20,405

 

Groton Shopping Center

 

 

2007

 

 

 

130,264

 

 

 

100.0

%

 

 

12.42

 

 

TJ Maxx

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

21,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aldi

 

 

17,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Planet Fitness

 

 

17,500

 

Jordan Lane

 

 

2005

 

 

 

177,504

 

 

 

74.5

%

 

 

12.81

 

 

Stop & Shop

 

 

60,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crunch Fitness

 

 

20,283

 

New London Mall

 

 

2009

 

 

 

259,566

 

 

 

93.4

%

 

 

14.97

 

 

Shop Rite

 

 

64,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marshalls

 

 

30,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Goods

 

 

25,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PetSmart

 

 

23,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A.C. Moore

 

 

20,932

 

Oakland Commons

 

 

2007

 

 

 

90,100

 

 

 

100.0

%

 

 

6.37

 

 

Walmart

 

 

54,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bristol Ten Pin

 

 

35,189

 

Southington Center

 

 

2003

 

 

 

155,842

 

 

 

98.5

%

 

 

7.85

 

 

Walmart

 

 

95,482

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAMCO

 

 

20,000

 

Total Connecticut

 

 

 

 

 

 

1,141,979

 

 

 

93.7

%

 

 

12.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delaware

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christina Crossing

 

 

2017

 

 

 

119,446

 

 

 

90.7

%

 

 

19.36

 

 

Shop Rite

 

 

68,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maryland / Washington, D.C.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East River Park

 

 

2015

 

 

 

150,038

 

 

 

97.4

%

 

 

22.03

 

 

Safeway

 

 

40,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

District of Columbia

 

 

34,400

 

Metro Square

 

 

2008

 

 

 

71,896

 

 

 

100.0

%

 

 

18.66

 

 

Shoppers Food Warehouse

 

 

58,668

 

Oakland Mills

 

 

2005

 

 

 

59,308

 

 

 

89.3

%

 

 

11.68

 

 

LA Mart

 

 

39,279

 

San Souci Plaza (b)

 

 

2009

 

 

 

264,134

 

 

 

82.3

%

 

 

11.38

 

 

Shoppers Food Warehouse

 

 

61,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marshalls

 

 

27,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Goods

 

 

19,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

World Gym

 

 

15,612

 

Senator Square

 

 

2018

 

 

 

61,691

 

 

 

100.0

%

 

 

21.11

 

 

Unity Health Care

 

 

18,750

 

Shoppes at Arts District

 

 

2016

 

 

 

35,676

 

 

 

100.0

%

 

 

36.76

 

 

Busboys and Poets

 

 

9,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yes! Organic Market

 

 

7,169

 

Valley Plaza

 

 

2003

 

 

 

190,939

 

 

 

100.0

%

 

 

5.94

 

 

K-Mart

 

 

95,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ollie's Bargain Outlet

 

 

41,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tractor Supply

 

 

32,095

 

Yorktowne Plaza

 

 

2007

 

 

 

138,843

 

 

 

74.6

%

 

 

13.31

 

 

Food Lion

 

 

37,692

 

Total Maryland / Washington, D.C.

 

 

 

 

 

 

972,525

 

 

 

90.5

%

 

 

14.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Massachusetts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fieldstone Marketplace

 

2005/2012

 

 

 

150,123

 

 

 

78.8

%

 

 

12.32

 

 

Shaw's

 

 

68,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Work Out World

 

 

32,250

 

Franklin Village Plaza

 

2004/2012

 

 

 

303,524

 

 

 

90.1

%

 

 

21.12

 

 

Stop & Shop

 

 

75,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marshalls

 

 

26,890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boost Fitness

 

 

15,807

 

Kings Plaza

 

 

2007

 

 

 

168,243

 

 

 

81.0

%

 

 

8.63

 

 

Fun Z Trampoline Park

 

 

42,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ocean State Job Lot

 

 

20,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savers

 

 

19,339

 

Norwood Shopping Center

 

 

2006

 

 

 

97,756

 

 

 

96.1

%

 

 

10.10

 

 

Big Y

 

 

42,598

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Planet Fitness

 

 

18,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dollar Tree

 

 

16,798

 

The Shops at Suffolk Downs

 

 

2005

 

 

 

121,187

 

 

 

100.0

%

 

 

14.07

 

 

Stop & Shop

 

 

74,977

 

6


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

Percent

 

 

base rent per

 

 

Major Tenants (a)

 

Property Description

 

acquired

 

 

GLA

 

 

occupied

 

 

leased sq. ft.

 

 

Name

 

GLA

 

Massachusetts (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timpany Plaza

 

 

2007

 

 

 

182,799

 

 

 

67.4

%

 

 

9.96

 

 

Big Lots

 

 

28,027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gardner Theater

 

 

27,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tractor Supply

 

 

19,831

 

Webster Commons

 

 

2007

 

 

 

98,984

 

 

 

96.7

%

 

 

11.77

 

 

Big Lots

 

 

37,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Planet Fitness

 

 

18,681

 

Total Massachusetts

 

 

 

 

 

 

1,122,616

 

 

 

85.7

%

 

 

13.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pine Grove Plaza

 

 

2003

 

 

 

86,089

 

 

 

80.9

%

 

 

11.84

 

 

Peebles

 

 

24,963

 

The Shops at Bloomfield Station

 

 

2016

 

 

 

63,844

 

 

 

89.9

%

 

 

19.97

 

 

Super Foodtown

 

 

28,505

 

Washington Center Shoppes

 

 

2001

 

 

 

157,394

 

 

 

89.5

%

 

 

10.34

 

 

Acme Markets

 

 

66,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Planet Fitness

 

 

20,742

 

Total New Jersey

 

 

 

 

 

 

307,327

 

 

 

87.2

%

 

 

12.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carman's Plaza

 

 

2007

 

 

 

195,485

 

 

 

85.2

%

 

 

19.95

 

 

24 Hour Fitness

 

 

54,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Foods

 

 

32,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department of Motor Vehicle

 

 

19,310

 

Pennsylvania

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Academy Plaza

 

 

2001

 

 

 

137,415

 

 

 

90.3

%

 

 

15.68

 

 

Acme Markets

 

 

50,918

 

Camp Hill

 

 

2002

 

 

 

430,198

 

 

 

99.7

%

 

 

15.24

 

 

Boscov's

 

 

159,040

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Giant Foods

 

 

92,939

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LA Fitness

 

 

45,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Barnes & Noble

 

 

24,908

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Staples

 

 

20,000

 

Colonial Commons

 

 

2011

 

 

 

410,432

 

 

 

98.6

%

 

 

13.71

 

 

Giant Foods

 

 

67,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dick's Sporting Goods

 

 

56,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Goods

 

 

31,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ross Dress For Less

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marshalls

 

 

27,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JoAnn Fabrics

 

 

25,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David's Furniture

 

 

24,970

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Old Navy

 

 

15,500

 

Crossroads II (b)

 

 

2008

 

 

 

133,717

 

 

 

95.0

%

 

 

20.65

 

 

Giant Foods

 

 

78,815

 

Fairview Commons

 

 

2007

 

 

 

52,964

 

 

 

75.3

%

 

 

10.14

 

 

Grocery Outlet

 

 

16,650

 

Fishtown Crossing (f/k/a Port Richmond Village)

 

 

2001

 

 

 

120,375

 

 

 

91.8

%

 

 

14.82

 

 

IGA Supermarket

 

 

40,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pep Boys

 

 

20,615

 

Girard Plaza

 

 

2019

 

 

 

35,688

 

 

 

100.0

%

 

 

15.03

 

 

Save A Lot

 

 

17,228

 

Gold Star Plaza

 

 

2006

 

 

 

71,720

 

 

 

95.5

%

 

 

8.94

 

 

Redner's

 

 

48,920

 

Golden Triangle

 

 

2003

 

 

 

202,790

 

 

 

87.1

%

 

 

13.19

 

 

LA Fitness

 

 

44,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marshalls

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Staples

 

 

24,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Immunotek

 

 

15,242

 

Halifax Plaza

 

 

2003

 

 

 

51,510

 

 

 

100.0

%

 

 

13.54

 

 

Giant Foods

 

 

32,000

 

Hamburg Square

 

 

2004

 

 

 

102,058

 

 

 

96.7

%

 

 

6.49

 

 

Redner's

 

 

56,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chesaco RV

 

 

31,570

 

Lawndale Plaza

 

 

2015

 

 

 

92,773

 

 

 

100.0

%

 

 

18.65

 

 

Shop Rite

 

 

63,342

 

Meadows Marketplace

 

2004/2012

 

 

 

91,518

 

 

 

92.4

%

 

 

15.75

 

 

Giant Foods

 

 

67,907

 

Newport Plaza

 

 

2003

 

 

 

64,489

 

 

 

100.0

%

 

 

12.81

 

 

Giant Foods

 

 

43,400

 

Northside Commons

 

 

2008

 

 

 

69,136

 

 

 

100.0

%

 

 

10.20

 

 

Redner's

 

 

53,019

 

Palmyra Shopping Center

 

 

2005

 

 

 

111,051

 

 

 

89.7

%

 

 

7.73

 

 

Weis Markets

 

 

46,912

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

18,104

 

Quartermaster Plaza

 

 

2014

 

 

 

456,602

 

 

 

90.7

%

 

 

14.79

 

 

Home Depot

 

 

150,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BJ's Wholesale Club

 

 

117,718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Planet Fitness

 

 

23,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Staples

 

 

20,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PetSmart

 

 

19,089

 

 

7


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Year

 

 

 

 

 

 

Percent

 

 

base rent per

 

 

Major Tenants (a)

 

Property Description

 

acquired

 

 

GLA

 

 

occupied

 

 

leased sq. ft.

 

 

Name

 

GLA

 

Pennsylvania (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Riverview Plaza

 

 

2003

 

 

 

189,032

 

 

 

100.0

%

 

 

20.24

 

 

United Artists

 

 

77,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avalon Carpet

 

 

25,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pep Boys

 

 

22,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Staples

 

 

18,000

 

South Philadelphia

 

 

2003

 

 

 

194,435

 

 

 

93.8

%

 

 

13.63

 

 

Shop Rite

 

 

55,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ross Dress For Less

 

 

31,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LA Fitness

 

 

31,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Modell's

 

 

20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kid City

 

 

16,623

 

Swede Square

 

 

2003

 

 

 

100,816

 

 

 

85.0

%

 

 

18.31

 

 

LA Fitness

 

 

37,200

 

The Point

 

 

2000

 

 

 

262,620

 

 

 

85.6

%

 

 

14.87

 

 

Giant Foods

 

 

76,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Burlington Coat Factory

 

 

44,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A.C. Moore

 

 

24,890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Staples

 

 

24,000

 

Trexler Mall

 

 

2005

 

 

 

337,297

 

 

 

79.6

%

 

 

11.22

 

 

Kohl's

 

 

88,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lehigh Wellness Partners

 

 

33,227

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maxx Fitness

 

 

28,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marshalls

 

 

28,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Goods

 

 

28,181

 

Trexlertown Plaza

 

 

2006

 

 

 

325,171

 

 

 

94.5

%

 

 

14.09

 

 

Giant Foods

 

 

78,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hobby Lobby

 

 

57,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Burlington Coat Factory

 

 

40,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Big Lots

 

 

33,824

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tractor Supply

 

 

19,097

 

Total Pennsylvania

 

 

 

 

 

 

4,043,807

 

 

 

92.7

%

 

 

14.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Virginia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coliseum Marketplace

 

 

2005

 

 

 

106,648

 

 

 

100.0

%

 

 

17.13

 

 

Kroger

 

 

57,662

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michaels

 

 

23,981

 

Elmhurst Square

 

 

2006

 

 

 

66,254

 

 

 

93.1

%

 

 

10.53

 

 

Food Lion

 

 

38,272

 

General Booth Plaza

 

 

2005

 

 

 

71,639

 

 

 

100.0

%

 

 

15.19

 

 

Food Lion

 

 

53,758

 

Glen Allen Shopping Center

 

 

2005

 

 

 

63,328

 

 

 

100.0

%

 

 

7.14

 

 

Publix

 

 

63,328

 

Kempsville Crossing

 

 

2005

 

 

 

78,162

 

 

 

93.0

%

 

 

11.61

 

 

Walmart

 

 

41,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Iron Asylum

 

 

16,938

 

Oak Ridge Shopping Center

 

 

2006

 

 

 

38,700

 

 

 

100.0

%

 

 

11.03

 

 

Food Lion

 

 

33,000

 

Total Virginia

 

 

 

 

 

 

424,731

 

 

 

97.6

%

 

 

12.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total                     (93.2% leased at December 31, 2019)

 

 

 

8,327,916

 

 

 

91.5

%

 

$

14.02

 

(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Major tenants are determined as tenants with 15,000 or more sq.ft. of GLA, tenants at single-tenant properties, or the largest tenant at a property, based on GLA.

(b)

The Company has a 40% ownership interest in the San Souci Plaza joint venture and a 60% ownership interest in the Crossroads II joint venture. Based on partnership promotes, additional equity interests, and/or other terms of the related joint venture agreements, the Company currently recognizes the results of operations of these joint ventures in excess of its stated percentage ownership.

(c)

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, 2019. 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 $13.86 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 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.

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Excluding properties held for sale or sold, Giant Food Stores, LLC, Stop & Shop, Inc. and Food Lion, LLC, each of which is owned by Ahold N.V., a Netherlands corporation, leased an aggregate of approximately 11% of the Company’s GLA at December 31, 2019, and accounted for an aggregate of approximately 12% of the Company’s total revenues during 2019. No other tenant leased more than 10% of GLA at December 31, 2019, or contributed more than 10% of total revenues during 2019.

Executive Offices

The Company’s executive offices are located at 44 South Bayles Avenue, Port Washington, New York, pursuant to a lease which expires in February 2021, subject to a one year extension option.

Competition

The Company believes that competition for the acquisition and operation of grocery-anchored shopping centers is highly fragmented. It faces competition from institutional investors, public and private REITs, owner‑operators engaged in the acquisition, ownership, redevelopment 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 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, redevelopment 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 and/or indemnification, 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 did not reveal any material environmental liabilities for which the Company is responsible and 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.

Employees

As of December 31, 2019, the Company had 74 full-time employees and one part-time employee. The Company believes that its relations with its employees are good.

 


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Item 1A.

Risk Factors

Set forth below are the risk factors that we believe are material to our investors. Each of these risk factors could adversely affect our business operating results and/or financial condition, as well as adversely affect the value of our common stock and other securities. In addition to the following disclosures, please refer to the other information contained in this Annual Report on Form 10-K including the accompanying consolidated financial statements and the related notes. This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitation on forward-looking statements appearing elsewhere in this Annual Report on Form 10-K.

These risk factors are not exhaustive.  We operate in a competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may affect our business. Investors should also refer to our quarterly reports on Form 10-Q and current reports on Form 8-K for future periods for material updates to these risk factors.

Risks Related to Our Properties and Our Business

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

Our properties consist primarily of grocery-anchored 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, the impact of e-commerce on the demand for retail space, ongoing consolidation in the retail sector, and 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. Any sustained levels of high unemployment can be expected to have a serious negative impact on consumer spending and sales by tenants at our shopping centers.

The geographic concentration of our properties in the Washington, D.C. to Boston corridor exposes us to greater economic risks than if the distribution of our properties encompassed a broader region.

Our properties are located largely in the region that straddles the Washington, D.C. to Boston corridor, which exposes us to greater economic risks than if our properties were more diversely located (in particular, 23 of our 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.

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.


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These events and conditions include, but may not be limited to, the following:

 

 

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

 

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

 

weather conditions that may increase or decrease energy costs and other weather-related expenses;

 

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;

 

vacancies or an inability to rent space on acceptable terms;

 

increased operating costs, including real estate taxes, insurance premiums, utilities, costs associated with the need to periodically renovate and re-lease space, and repairs and maintenance;

 

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

 

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

 

the relative illiquidity of real estate investments;

 

changing market demographics;

 

changing traffic patterns; and

 

an inability to refinance maturing debt in acceptable amounts and/or on acceptable terms.

In addition, costs associated with our operations, such as real estate and personal property taxes, insurance, and mortgage payments, generally are not reduced even as occupancy or rental rates decrease, tenants fail to pay base and additional rent or other circumstances cause a reduction in income. As a result, our financial performance, cash flow from operations and our ability to make distributions to our shareholders may be adversely affected.

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. If one or more of our senior executives or key employees are unable to continue in their present positions or if their employment contracts are terminated or not renewed, we may not be able to replace them easily or at all. Competition for key personnel is intense, and such experienced individuals in our industry are in short supply. 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.

The level of our indebtedness and any constraints on credit may impede our operating performance, and put us at a competitive disadvantage.

The level of our indebtedness 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. Our organizational documents do not limit the level or amount of debt that we may incur, no do we have a policy limiting our debt to any particular level.

We may be adversely affected by changes in the London Interbank Offered Rate (“LIBOR”) reporting practices

As of December 31, 2019, we had (1) approximately $156.0 million of variable-rate debt outstanding, which consists of our unsecured revolving credit facility and a term loan, and (2) $425.0 million of term loans for which the Company has interest rate swap agreements which convert the LIBOR rates to fixed rates. In July 2017, the Financial Conduct Authority (“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee ("ARRC") which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition,

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uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

As a relatively small public REIT, our general and administrative expenses constitute a larger percentage of our total revenues than many of our peers.

Our revenues for the year ended December 31, 2019 were $144.1 million. Because our company is smaller than many other publicly-traded REITs, our general and administrative expenses are, and will continue to be, a larger percentage of our total revenues than many other publicly-traded REITs. If we are unable to successfully execute on our strategy and grow our business, our general and administrative expenses will continue to have a greater effect on our financial performance and will reduce the amount of cash flow available to distribute to our shareholders.

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

We paid dividends totaling $0.20 per share during each of 2019, 2018 and 2017. However, any downturn in the state of the U.S. economy, weakness in capital markets and/or difficult retail environment may cause us to reduce or suspend the payment of dividends.

Any volatility or 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, we may be compelled to dilute the interests of existing shareholders that could also adversely reduce the trading price of our common stock.

We may be exposed to additional risks through our hedging activities, including the risks that a counterparty will not perform and that the hedge will not yield the economic benefits we anticipate.

To manage our exposure to variable interest rate risk, we use derivative instruments that involve risk, such as the risk that counterparties may fail to honor their obligations under these arrangements, or that these arrangements may not be effective in reducing our exposure to interest rate changes. There can be no assurance that our hedging arrangements will qualify for hedge accounting or that our hedging activities will have the desired beneficial impact on our results of operations. If we decide to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our obligations under the hedging agreement. Failure to effectively hedge against interest rate changes may adversely affect our results of operations.

In addition, under the REIT qualification provisions of the Code, income we could receive from certain hedging transactions may be treated as non-qualifying income for purposes of the REIT gross income tests. As a result of these rules, we may need to limit or entirely avoid otherwise advantageous hedging techniques.

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. Excluding properties held for sale or sold, no tenant leased more than 10% of GLA at December 31, 2019 or contributed more than 10% of total revenues during 2019, except for Giant Food Stores, LLC, Stop & Shop, Inc. and Food Lion, LLC, each of which is owned by Ahold N.V., a Netherlands corporation, which leased an aggregate of approximately 11% of our GLA at December 31, 2019, and accounted for an aggregate of approximately 12% of our total revenues, during 2019.

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

We face potential material adverse effects from tenant bankruptcies.

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. In addition, we may be unable to replace the tenant at current rental rates. 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, and would be required to write off any straight-line rent receivable recorded for such tenant, which may in turn harm our financial condition.

Our development and redevelopment activities may not yield anticipated returns, which would harm our operating results and reduce funds available for distributions to shareholders.

We have limited experience in substantially developing and redeveloping properties in our markets. Development and redevelopment projects entail considerable risks, including:

 

 

time lag between commencement and completion, leaving us exposed to higher-than-estimated construction costs, including labor and material costs, as well as changes in the overall rental markets;

 

failure or inability to obtain construction or permanent financing on favorable terms;

 

inability to sell properties we identify for sale as part of a capital recycling strategy;

 

expenditure of money and time on projects that may never be completed;

 

inability to secure key anchor or other tenants;

 

inability to achieve projected rental rates or anticipated pace of lease-up;

 

inability to obtain various government and other approvals;

 

delays in completion relating to weather, labor disruptions, construction or zoning delays; and

 

higher costs incurred than originally estimated.

 

In addition, the entitlement and development of real estate entails extensive approval processes, sometimes involving multiple regulatory jurisdictions. It is common for a project to require multiple approvals, permits and consents from U.S. federal, state and local governing and regulatory bodies. Compliance with these and other regulations and standards is time intensive and costly and may require additional long range infrastructure review and approvals which can add to project cost. In addition, development of properties containing delineated wetlands may require one or more permits from the U.S. federal government and/or state and local governmental agencies. Any of these issues can materially affect the cost, timing and economic viability of our development and redevelopment projects.

Moreover, properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project, within the time frames we project, at the time we make the decision to invest, which may result in the properties’ failure to achieve the returns we projected.  Our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs until after the property is acquired, which could significantly increase our total acquisition costs or decrease cash flow from the property.  In addition, our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller of such building or property, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.

At times, we may also be required to use unionized construction workers or to pay the prevailing wage in a jurisdiction to unionized workers. Due to the highly labor intensive and price competitive nature of the construction business, the cost of unionization and/or prevailing wage requirements for new developments or redevelopments could be substantial. Unionization and prevailing wage requirements could adversely affect a project’s profitability. In addition, union activity or a union workforce could

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increase the risk of a strike, which would adversely affect our ability to meet our construction timetables, which could adversely affect our reputation and our results of operations.

 

Additionally, new real estate under development activities typically require substantial time and attention from management, and the time frame required for development, construction and lease-up of these properties could require several years to realize any significant cash return. The foregoing risks could cause the development of properties to hinder the Company’s growth and have an adverse effect on its results of operations and cash flows.

 

Developing and redeveloping properties will require significant capital investment, which may be funded through debt and equity financing, implementing a capital recycling strategy, entering into a joint venture arrangement with respect to one or more properties, or suspending or reducing distributions to our stockholders.

“New Technology” developments may negatively impact our tenants and our business.

We may be adversely affected by developments in 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, among other things, the overall effects of e-commerce.

Recent annual increases in online sales have also caused many retailers to sell products online on their websites with pick-ups at a store or warehouse or through deliveries, which may have the effect of decreasing the reported amount of their in-store sales and the amount of rent we are able to collect from them. With respect to grocer tenants, on-line grocery orders have become increasingly available, particularly in urban areas, but have not yet become a major factor affecting grocers in our portfolio.  We cannot predict with certainty how growth in e-commerce, including same-day grocery delivery services, will impact the demand for space at our properties or how much revenue will be generated at “bricks and mortar” store locations in the future. If we are unable to anticipate and respond promptly to trends in retailer and consumer behavior, our occupancy levels and financial results could suffer.

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 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. Our unsecured credit facilities and 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 unsecured revolving credit facility is subject to compliance with these financial and other covenants, including restrictions on the maximum availability, which is based on the adjusted net operating income of designated unencumbered properties, 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, take possession of the property or properties securing the loan.

Mortgage debt obligations could expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.

If a property or group of properties is mortgaged to secure payment of debt and we are unable to meet mortgage payments, the holder of the mortgage or lender could foreclose on the property, resulting in a loss of our investment. Alternatively, if we decide to sell assets in the current market to raise funds to repay matured debt, it is possible that these properties will be disposed of at a loss.

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Our properties may be subject to impairment charges.

On a periodic basis, we assess whether there are any indicators that the value of our held-for-use real estate assets and other investments may be impaired.  Held-for-use real estate assets are impaired only if the estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property.  The estimate of cash flows considers factors such as expected future operating income, capital expenditures, trends and prospects, the effects of demand, tenant-operator performance, competition and other factors.  If we are evaluating the potential sale of an asset or development alternatives, the future cash flow considerations include the most likely course of action at the balance sheet date based on current plans, intended holding periods and available market information including a market discount rate applied to the estimated future proceeds.  We are required to make subjective assessments as to whether there are impairments in the value of our real estate assets and other investments.  These assessments have a direct impact on our earnings because recording an impairment charge results in an immediate negative adjustment to earnings.  There can be no assurance that we will not take additional charges in the future related to the impairment of our assets.  Any future impairment could have a material adverse effect on our results of operations in the period in which the charge is taken. 

Our capital migration strategy entails various risks.

We intend to sell properties and reinvest those proceeds in the acquisition of higher quality properties in our target markets, the development and redevelopment of our properties, or use the proceeds to pay down debt. While we hope to minimize the dilutive effect of these sales on our earnings, in the near term the returns on the disposed assets are likely to exceed the returns we are able to achieve through the reinvestment of those proceeds. Also, in the event we are unable to sell these assets for amounts equal to or in excess of their current carrying values, we would be required to recognize an impairment charge. Any such impairment charges or earnings dilution could materially and adversely affect our business, financial condition, operating results and cash flows and the market price of our publicly traded securities.

Competition and saturation in our existing markets may limit our ability for further growth in these geographic regions.

Numerous commercial developers and real estate companies compete with us seeking properties for acquisition within our existing target markets. While we continue to evaluate the market for available properties, our ability to acquire properties on favorable terms is subject to a number of risks. We may be unable to acquire a desired property because of competition from other well-capitalized real estate investors, including other REITs and institutional investment funds. This competition may operate to reduce the properties available for acquisition in these markets, reduce the rate of return on these properties, and interfere with our ability to attract and retain tenants.

High barriers to entry in the Washington, D.C. 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 us to continue to grow in these areas.

Future acquisitions may result in disruptions to our business, may strain management resources and may result in earnings per share and shareholder dilution.

If we acquire a business involving multiple properties, we will be required to integrate the operations, personnel and accounting and information systems of the acquired business and train, retain and motivate any key personnel from the acquired business. In addition, acquisitions of or investments in companies may cause disruptions in our operations and divert management’s attention away from day-to-day operations, which could impair our relationships with our current tenants and employees. The issuance of equity or debt securities in connection with any acquisition or investment could be substantially dilutive to our shareholders.

Commercial real estate investments are relatively illiquid.

Real estate investments are relatively illiquid. Our ability to promptly sell one or more properties in our portfolio in response to changing economic, financial and investment conditions is limited.  The real estate market is affected by many factors, such as general economic conditions, supply and demand, availability of financing, interest rates and other factors that are beyond our control.  We cannot be certain that we will be able to sell any property for the price and other terms we seek, or that any price or other terms offered by a prospective purchaser would be acceptable to us.  We also cannot estimate with certainty the length of time needed to find a willing purchaser and to complete the sale of a property.  We may be required to expend funds to correct defects or to make improvements before a property can be sold.  Factors that impede our ability to dispose of properties could adversely affect our financial condition and operating results.

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Our business could be negatively affected by shareholder activism, which could impact the trading price and volatility of our common stock.

In recent years, proxy contests and other forms of shareholder activism have been directed against numerous public companies, including us. If a proxy contest or an unsolicited takeover proposal was made with respect to us, we could incur significant costs in defending the Company, which would have an adverse effect on our financial results. Shareholder activists may also seek to involve themselves in the governance, strategic direction and operations of the Company. If individuals are elected to our board of directors with a specific agenda, even though less than a majority, our ability to effectively and timely implement our current initiatives and execute on our long-term strategy may be adversely affected. While we continually and actively engage with shareholders and consider their views on business and strategy, shareholder activism consumes a significant amount of management’s attention and other company resources and diverts the attention of management and our employees from our business.

Any perceived uncertainties as to our future direction resulting from such shareholder activism or proxy contest could result in the loss of potential business opportunities, be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners, all of which could adversely affect our business. Furthermore, actions of activist shareholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

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.

Property ownership through joint ventures could limit our control of those investments and reduce their expected return.

As of December 31, 2019, we owned two of our operating properties through consolidated joint ventures. Our joint ventures, and joint ventures we may enter into in the future, may involve risks not present with respect to our wholly owned properties, including the following:

 

 

we may share decision-making authority with our joint venture partners regarding certain major decisions affecting the ownership or operation of the joint venture and the joint venture property, such as, but not limited to, (1) additional capital contribution requirements, (2) signing of major leases, (3) obtaining debt financing, and (4) obtaining consent prior to the sale or transfer of our interest in the joint venture to a third party, which may prevent us from taking actions that are opposed by our joint venture partners;

 

our joint venture partners might become bankrupt or fail to fund their share of required capital contributions, which may increase our financial commitment to the joint venture;

 

our joint venture partners may have business interests or goals with respect to the property that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of the property;

 

disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration that would increase our expenses and distract our officers and/or trustees from focusing their time and effort on our business, and possibly disrupt the day-to-day operations of the property such as by delaying the implementation of important decisions until the conflict is resolved; and

 

the activities of a joint venture could adversely affect our ability to qualify as a REIT.

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 related to war, nuclear accidents, and nuclear, biological and chemical occurrences from terrorist’s acts. Some of the insurance, such as those 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. The availability of insurance coverage may decrease and the prices for

16


 

insurance may increase as a consequence of significant losses incurred by the insurance industry and other factors outside our control. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. 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. Tenants may not properly maintain their insurance policies or have the ability to pay the deductibles associated with such policies. 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.

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

All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations relating to hazardous materials, environmental protection and human health and safety.  Accordingly, we or our tenants may be required to investigate and clean up certain hazardous or toxic substances released on properties we own or operate, and also may be required to pay other related costs.  Our leases typically impose obligations on our tenants to indemnify us for any compliance costs we may incur as a result of environmental conditions on the property caused by the tenant.  If a tenant fails to or is unable to comply, we could be forced to pay these costs.  If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future, result in lower sales prices or rent payments, and restrict our ability to borrow funds using the affected properties as collateral.

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, remediation 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. We may be liable without regard to whether we knew of, or were responsible for, the environmental contamination and with respect to properties we have acquired, whether the contamination occurred before or after the acquisition.  

We believe environmental studies conducted at the time of acquisition with respect to all of our properties did not reveal any material environmental liabilities for which the Company is responsible, and we are unaware of any subsequent environmental matters that would have created a material liability. If one or more of our properties were not in compliance with federal, state and local laws, including environmental 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 additionally incur governmental fines or private damage awards. There can be no assurance that existing requirements will not change or that future requirements will not require us to make significant unanticipated expenditures that will adversely impact our business and operations.

The Americans with Disabilities Act of 1990 (the “ADA”) could require us to take remedial steps with respect to our properties.

Our existing properties, as well as properties we may acquire, may be required to comply with Title III of the ADA. We may incur significant costs to comply with the ADA, as amended, and similar laws, which require that all public accommodations meet federal 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.

We face risks relating to cybersecurity attacks, loss of confidential information and other business disruptions.

We rely extensively on computer systems to manage our business and process transactions. Our business is at risk from and may be impacted by cybersecurity attacks, including attempts to gain unauthorized access to our confidential data and other electronic security breaches. Such cyber-attacks can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. While we employ a number of measures to prevent, detect and mitigate these threats including password protection, backup servers and annual penetration testing, there is no guarantee such efforts will be successful in preventing a cyber-attack. Cybersecurity incidents, depending on their nature and scope, could potentially lead to the compromise of confidential information, improper use of our systems and networks, manipulation and destruction of data, system downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations. In the event a

17


 

security breach or failure results in the disclosure of sensitive tenant or other third-party data, or the transmission of harmful/malicious code to third parties, we could be subject to liability or claims.

Furthermore, it is possible that our computer systems, including our back-up systems, could be subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, catastrophic events such as fires, hurricanes, earthquakes and tornadoes, and intentional and inadvertent acts and errors by our employees. If our computer systems cease to function properly or are damaged, we may have to make a significant investment to repair or replace them, and we may suffer interruptions in our operations in the interim. Any material interruption in our computer systems or issues with the ongoing implementation of newly adopted IT solutions may have a material adverse effect on our business or results of operations or on our ability to timely and accurately report the results of our operations.

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

Future terrorist attacks, such as the number of highly publicized terrorists acts and shootings that have occurred at domestic and international retail properties, 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. If such an incident were to occur at one of our properties, we may be subject to significant liability claims. While we attempt to mitigate this risk through insurance coverage and the employment of third party security services where we feel conditions warrant, we cannot guarantee that losses would not exceed applicable insurance coverages, thereby adversely affecting our results of operations and our ability to meet our obligations, including distributions to our shareholders. 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.

We could be subject to litigation that may negatively impact our cash flows, financial condition and results of operations.

From time to time, we may be a defendant in lawsuits and regulatory proceedings relating to our business. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such litigation or proceedings. We could experience a negative impact to our cash flows, financial condition and results of operations due to an unfavorable outcome.

Changes in accounting standards may adversely impact our financial condition and results of operations.

The Financial Accounting Standards Board ("FASB"), in conjunction with the SEC, has several key projects on its agenda, some of which have already been adopted, that could impact how we currently account for our material transactions, including, but not limited to, lease accounting, revenue recognition, and other accounting pronouncements disclosed in Note 2 of Notes to Consolidated Financial Statements included in Item 8 below. New accounting standards or pronouncements that will become applicable to us, or changes in the interpretation of existing standards and pronouncements, could have a significant adverse effect on our financial position or results of operations.

Risks Related to Our Qualification as a REIT and other Tax Matters

If we fail to continue to qualify 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 and substantially all state and local 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, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior years. If we cease to qualify as a REIT, we will also be subject to state and local income taxes in certain of the jurisdictions in which our properties are located. In addition, tax laws would no longer require us to pay any distributions to our shareholders.  Unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT again for the four taxable years following the year during which we were disqualified. Even if we qualify as a REIT for federal income tax purposes, we may be subject to certain state and local income and franchise taxes and to federal income and excise taxes on our undistributed taxable income.

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

18


 

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) if necessary, 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.  

Complying with REIT requirements may cause us to forego otherwise attractive opportunities and limit our growth opportunities.

In order to qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, our sources of income, the nature of our investments in commercial real estate and related assets, the amounts we distribute to shareholders and the ownership of our stock. We may also be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

Frequent asset sales could trigger adverse tax consequences.

Tax laws applicable to REITs require that we hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties that otherwise would be in our best interest. Therefore, we may be unable to adjust our portfolio mix promptly in response to market conditions, which may adversely affect our financial position.

To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. We may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

In addition, the sale of our properties may generate gains for tax purposes which, if not adequately deferred through “like kind exchanges” under Section 1031 of the Code or other tax deference strategies, could require us to pay income taxes or make additional distributions to our shareholders, thus reducing our capital available for investment in other properties, or if the proceeds of such sales are already invested in other properties, require us to obtain additional funds to pay such taxes or make such distributions, in either such case to permit us to maintain our status as a REIT.

Failure to qualify as a domestically-controlled REIT could subject our non-U.S. shareholders to adverse federal income tax consequences.

We will be a domestically-controlled REIT if, at all times during a specified testing period, less than 50% in value of its shares are held directly or indirectly by non-U.S. shareholders. Because our shares are publicly traded, we cannot guarantee that we will, in fact, be a domestically-controlled REIT. If we fail to qualify as a domestically-controlled REIT, our non-U.S. shareholders that otherwise would not be subject to federal income tax on the gain attributable to a sale of our shares would be subject to taxation upon such a sale if either (a) the shares were not considered to be “regularly traded” under applicable Treasury regulations on an established securities market, such as the NYSE, or (b) the shares were considered to be “regularly traded” on an established securities market and the selling non-U.S. shareholder owned, actually or constructively, more than 10% in value of the outstanding shares at any time during specified testing periods. If gain on the sale or exchange of our shares was subject to taxation for these reasons, the non-U.S. shareholder would be subject to federal income tax with respect to any gain on a net basis in a manner similar to the taxation of a taxable U.S. shareholder, subject to any applicable alternative minimum tax and special alternative minimum tax in the case of nonresident alien individuals, and corporate non-U.S. shareholders may be subject to an additional branch profits tax.

We may choose to make distributions in our own stock, in which case you may be required to pay income taxes without receiving any cash dividends.

In connection with our qualification as a REIT, we are required to annually distribute to our shareholders at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain. In order to satisfy this requirement, we may make distributions that are payable in cash and/or shares of our stock (which could account for up to 90% of the aggregate amount of such distributions) at the election of each shareholder. Taxable shareholders receiving such distributions will be required to include the full amount of such distributions as ordinary dividend income to the extent of our current or accumulated earnings and profits, as determined for U.S.

19


 

federal income tax purposes. As a result, U.S. shareholders may be required to pay income taxes with respect to such distributions in excess of the cash portion of the distribution received. Accordingly, U.S. shareholders receiving a distribution of our shares may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution. If a U.S. shareholder sells the stock that it receives as part of the distribution in order to pay this tax, the sales proceeds may be less than the amount it must include in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to certain non-U.S. shareholders, we may be required to withhold U.S. tax with respect to such distribution, including in respect of all or a portion of such distribution that is payable in stock, by withholding or disposing of part of the shares included in such distribution and using the proceeds of such disposition to satisfy the withholding tax imposed. In addition, if a significant number of our shareholders determine to sell shares of our stock in order to pay taxes owed on dividend income, such sale may put downward pressure on the market price of our stock.

Various tax aspects of such a taxable cash/stock distribution are uncertain and have not yet been addressed by the Internal Revenue Service (“IRS”). No assurance can be given that the IRS will not impose requirements in the future with respect to taxable cash/stock distributions, including on a retroactive basis, or assert that the requirements for such taxable cash/stock distributions have not been met.

Dividends paid by REITs generally do not qualify for reduced tax rates.

Generally, dividends payable by REITs do not qualify for reduced tax rates under the Code.  For the calendar year 2018, the maximum federal individual tax rate for nonqualified dividends payable is 37.0%; qualified dividends from most C corporations received by individuals are subject to a reduced maximum federal rate of 20%.  In addition to these rates, certain high income individuals may be subject to an additional 3.8% tax on certain investment income, including dividends and capital gains. As a REIT, our distributions to individual shareholders generally are not eligible for the reduced rates and are, consequently, taxed at ordinary income rates. Effective for taxable years beginning after December 31, 2017 and before January 1, 2026, those U.S. shareholders that are individuals, trusts or estates may deduct 20% of their dividends from REITs (excluding qualified dividend income and capital gains dividends). For those U.S. shareholders in the top marginal tax bracket of 37%, the deduction for REIT dividends yields an effective income tax rate of 29.6% (exclusive of the net investment income tax) on REIT dividends. The more favorable federal tax rates applicable to regular corporate dividends may result in the stock of REITs being perceived to be less attractive than the stock of corporations that pay dividends qualifying for reduced rates of tax, which may adversely affect the value of the stock of REITs.

 

Changes to the federal, state and municipality tax laws could have a significant negative impact on the overall economy, our tenants, and our business.

 

At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. A shortfall in tax revenues for states and municipalities in which we operate may lead to changes in state and municipalities tax laws. We and our shareholders could be adversely affected by any such change in, or any new, federal income tax law, regulation, or administrative interpretation.

 

In December 2017 the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. The provisions of the TCJA  are far-reaching and generally applied to taxable years beginning after December 31, 2017, while many provisions, in particular those affecting individual taxpayers, expire at the end of 2025. As a result of the changes implemented by the TCJA, our taxable income and the amount of distributions to our shareholders required in order to maintain our REIT status, and our relative tax advantage as a REIT, may significantly change. As a REIT, we are required to distribute at least 90% of our taxable income to our shareholders annually. Among other things, the TCJA:

 

 

reduced the corporate income tax rate from 35% to 21% (including taxable REIT subsidiaries of which ours currently do not have significant taxable income);

 

reduced the rate of U.S. federal withholding tax on distributions made to non-U.S. shareholders by a REIT that are attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;

 

limited the deduction for net interest expense incurred by a business to 30% of the “adjusted taxable income” of the taxpayer, except, among others, certain real property businesses electing to not be subject to the limitation. Making this election requires the electing real property trade or business to depreciate non-residential real property, residential rental

20


 

 

property, and qualified improvement property over a longer period using the alternative depreciation system. We have not yet determined whether to make any such available elections;

 

mandated the use of the less favorable alternative depreciation system to depreciate real property in the event a real property business elects to avoid the interest deduction restriction above;

 

reduced the benefits of like-kind exchanges that defer capital gains for tax purposes to only exchanges of real property;

 

reduced the highest marginal income tax rate for individuals to 37.0% from 39.6% (excluding, in each case, the 3.8% Medicare tax on net investment income);

 

reduced the net operating loss deduction to 80% of taxable income (where taxable income is determined without regard to the net operating loss deduction itself), generally eliminated net operating loss carrybacks and allows unused net operating losses to be carried forward;

 

generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income), generally resulting in a maximum effective federal income tax rate applicable to such dividends of 29.6% compared to 37.0% (excluding, in each case, the 3.8% Medicare tax on net investment income); and

 

established limits on certain deductions for individuals, including deductions for state and local income taxes, and eliminates deductions for miscellaneous itemized deductions (including certain investment expenses).

 

The TCJA is a complex revision to the U.S. federal income tax laws with contrasting impacts on different categories of taxpayers and industries, and will require subsequent rulemaking and interpretation in a number of areas. The long-term impact of the TCJA on the overall economy and the real estate industry cannot be predicted at this early stage. Furthermore, the TCJA may negatively impact certain of our tenants’ operating results, financial condition, and future business plans. There can be no assurance that the TCJA will not negatively impact our operating results, financial condition, and future business operations.

 

Shareholders are urged to consult with their own tax advisors with respect to the impact that the TCJA and other legislation may have on their investment and the status of legislative, regulatory or administrative developments and proposals and their potential effect on their investment in our shares.

Risks Related to Our Organization and Structure

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. 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, in its sole discretion, may exempt a proposed transferee from the ownership limit, but 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. Our Board of Directors has waived the ownership limit to permit certain institutional investors to own common stock in excess of the ownership limit and may grant additional waivers in the future as long as the Company is able to maintain its REIT status.  This concentration of ownership could deprive other shareholders of an opportunity to receive a premium for their shares of common stock as part of a sale of our Company and ultimately might affect the market price of our common stock.

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. 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:

 

“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

21


 

 

stockholder, and thereafter imposes special appraisal rights and special stockholder voting requirements on these combinations; and

 

“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.

Our ability to pay dividends is limited by the requirements of Maryland law.

Our ability to pay dividends on our common stock is limited by the laws of the State of Maryland. Under applicable Maryland law, a Maryland corporation generally may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or the value of the corporation’s total assets would be less than the sum of its total liabilities plus, unless the corporation’s charter provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Accordingly, we generally may not make a distribution on our common stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred stock then outstanding, if any, with preferences senior to those of our common stock.

Our Board of Directors may change our strategy without shareholder approval.

Our Board of Directors may change our strategy with respect to capitalization, investment, distributions and/or operations. Our Board of Directors may establish investment criteria or limitations as it deems appropriate, but currently does not limit the number or types of properties in which we may seek to invest or the concentration of investments in any one geographic region or the amount of development or redevelopment activity occurring across our portfolio. Although our Board of Directors has no present intention to revise or amend our strategies and policies, it may do so at any time without a vote by our shareholders. Accordingly, the results of decisions made by our Board of Directors and implemented by management could adversely affect our financial condition or results of operations, including our ability to distribute cash to shareholders or qualify as a REIT.

The rights of shareholders to take action against our directors and officers are limited.

Maryland law provides that a director or officer has no liability in that capacity if he or she satisfies his or her duties to us and our shareholders. As permitted by the MGCL, our charter limits the liability of our directors and officers to us and our shareholders for monetary damages, except for liability resulting from actual receipt of an improper benefit or profit in money, property or service, or a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.

In addition, our charter and bylaws, as well as indemnification agreements that we have entered into with certain of our officers require us to indemnify our directors and officers, among others, for actions taken by them in those capacities to the maximum extent permitted by Maryland law. As a result, we and our shareholders may have more limited rights against our directors and officers than might otherwise exist for companies organized in other jurisdictions. Accordingly, in the event that actions taken in good faith by any of our directors or officers impede the performance of our company, your ability to recover damages from such director or officer will be limited. In addition, we will be obligated to advance the defense costs incurred by our directors and officers with indemnification agreements, and may, at the discretion of our Board of Directors, advance the defense costs incurred by our employees and other agents, in connection with legal proceedings.


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Risks Related to Ownership of Our Common Stock

The market value of our debt and equity securities is subject to various factors that may cause significant fluctuations or volatility.

As with other publicly traded securities, the market price of our publicly traded securities depends on various factors which may change from time-to time and are often out of our control. Among the conditions that may affect the market price of our publicly traded securities are the following:

 

 

the extent of institutional investor interest in us;

 

the market perception of our business compared to other REITS;

 

the market perception of retail REITs, in general, compared to other investment alternatives;

 

our financial condition and performance, including changes in our funds from operations, operating funds from operations,  or earnings estimates;

 

the market’s perception of our growth potential and potential future cash dividends;

 

publication of research reports about us or our industry by securities analysts;

 

speculation in the press or investment community;

 

the passage of legislation or other regulatory developments that adversely affect us, our tax status, or our industry;

 

our credit or analyst ratings;

 

any future issuances of equity or debt securities;

 

any future repurchases of equity securities;

 

our failure to satisfy the listing requirements of the NYSE

 

our failure to comply with the requirements of the Sarbanes-Oxley Act;

 

additions or departures of key management personnel;

 

strategic actions by us or our competitors, such as acquisitions or restructurings;

 

an increase in market interest rates;

 

our ability to access the capital markets to raise additional capital; and

 

general economic and financial market conditions.

These factors may cause the market price of our common stock to decline, in some cases regardless of our financial condition, results of operations, business or prospects. It is impossible to ensure that the market price of our common stock will not fall in the future. A decrease in the market price of our common stock could reduce our ability to raise additional equity in the public markets. Selling common stock at a decreased market price would have a dilutive impact on existing shareholders.

Future offerings of debt securities, which would be senior to our common and preferred stock, or equity securities, which would dilute the interests of our existing shareholders and may be senior to our existing common stock, may adversely affect the market prices of our common and preferred stock.

In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities, including senior or subordinated notes and classes of preferred or common stock. Holders of debt securities or shares of preferred stock will generally be entitled to receive interest payments or distributions, both current and in connection with any liquidation or sale, prior to the holders of our common stock. Furthermore, offerings of common stock or other equity securities may dilute the holdings of our existing shareholders. We are not required to offer any such equity securities to existing shareholders on a preemptive basis, and future offerings of debt or equity securities, or perceptions that such offerings may occur, may reduce the market prices of our common and preferred stock or the distributions that we pay with respect to our common stock. Because we may generally issue any such debt or equity securities in the future without obtaining the consent of our shareholders, our shareholders bear the risk of our future offerings reducing the market prices of our common and preferred stock and diluting their proportionate ownership.

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.

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Item 4.

Mine Safety Disclosures: Not applicable

 

Part II.

Item 5.

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

Market Information

The Company had 89,020,062 shares of common stock outstanding held by approximately 600 shareholders of record at December 31, 2019. The Company believes it has more than approximately 5,000 beneficial holders of its common stock. The Company’s shares trade on the NYSE under the symbol “CDR”.

 

Stockholder Return Performance Presentation

The following line graph sets forth for the period January 1, 2015 through December 31, 2019, 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 All Equity REIT Index (“NAREIT All Equity REIT 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.

 

 

 

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Item 6.

Selected Financial Data

 

 

 

Years ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

Operations data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

144,083,000

 

 

$

152,020,000

 

 

$

146,008,000

 

 

$

151,086,000

 

 

$

149,207,000

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

48,347,000

 

 

 

47,894,000

 

 

 

44,329,000

 

 

 

44,515,000

 

 

 

44,590,000

 

General and administrative

 

 

18,804,000

 

 

 

16,915,000

 

 

 

16,907,000

 

 

 

18,154,000

 

 

 

15,004,000

 

Acquisition pursuit costs

 

 

-

 

 

 

-

 

 

 

156,000

 

 

 

3,426,000

 

 

 

1,238,000

 

Depreciation and amortization

 

 

45,861,000

 

 

 

40,053,000

 

 

 

40,115,000

 

 

 

40,787,000

 

 

 

38,594,000

 

Total expenses

 

 

113,012,000

 

 

 

104,862,000

 

 

 

101,507,000

 

 

 

106,882,000

 

 

 

99,426,000

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sales

 

 

2,942,000

 

 

 

4,864,000

 

 

 

7,099,000

 

 

 

59,000

 

 

 

-

 

Impairment (charges) / reversals

 

 

(8,938,000

)

 

 

(20,689,000

)

 

 

(9,538,000

)

 

 

(6,347,000

)

 

 

212,000

 

Total other

 

 

(5,996,000

)

 

 

(15,825,000

)

 

 

(2,439,000

)

 

 

(6,288,000

)

 

 

212,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

25,075,000

 

 

 

31,333,000

 

 

 

42,062,000

 

 

 

37,916,000

 

 

 

49,993,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating income and expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(23,509,000

)

 

 

(22,146,000

)

 

 

(22,199,000

)

 

 

(26,529,000

)

 

 

(28,272,000

)

Early extinguishment of debt costs

 

 

-

 

 

 

(4,829,000

)

 

 

(210,000

)

 

 

(2,623,000

)

 

 

(105,000

)

Total non-operating income and expense

 

 

(23,509,000

)

 

 

(26,975,000

)

 

 

(22,409,000

)

 

 

(29,152,000

)

 

 

(28,377,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

1,566,000

 

 

 

4,358,000

 

 

 

19,653,000

 

 

 

8,764,000

 

 

 

21,616,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

165,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

1,566,000

 

 

 

4,358,000

 

 

 

19,653,000

 

 

 

8,764,000

 

 

 

21,781,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (income) loss attributable to noncontrolling interests

 

 

(490,000

)

 

 

(469,000

)

 

 

(510,000

)

 

 

179,000

 

 

 

365,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cedar Realty Trust, Inc.

 

 

1,076,000

 

 

 

3,889,000

 

 

 

19,143,000

 

 

 

8,943,000

 

 

 

22,146,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends and redemption costs

 

 

(10,752,000

)

 

 

(14,370,000

)

 

 

(21,542,000

)

 

 

(14,408,000

)

 

 

(14,408,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to common shareholders

 

$

(9,676,000

)

 

$

(10,481,000

)

 

$

(2,399,000

)

 

$

(5,465,000

)

 

$

7,738,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share attributable to common shareholders (basic and diluted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.12

)

 

$

(0.13

)

 

$

(0.04

)

 

$

(0.08

)

 

$

0.09

 

Discontinued operations

 

$

0.00

 

 

$

0.00

 

 

$

0.00

 

 

$

0.00

 

 

$

0.00

 

 

 

$

(0.12

)

 

$

(0.13

)

 

$

(0.04

)

 

$

(0.08

)

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends to common shareholders

 

$

17,808,000

 

 

$

18,301,000

 

 

$

17,681,000

 

 

$

17,049,000

 

 

$

17,001,000

 

Per common share

 

$

0.20

 

 

$

0.20

 

 

$

0.20

 

 

$

0.20

 

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares - basic and diluted

 

 

86,341,000

 

 

 

88,420,000

 

 

 

84,168,000

 

 

 

81,672,000

 

 

 

81,356,000

 

25


 

Item 6.

Selected Financial Data (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

Balance sheet data:

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate, net

 

$

1,125,345,000

 

 

$

1,146,713,000

 

 

$

1,192,656,000

 

 

$

1,183,359,000

 

 

$

1,249,195,000

 

Real estate held for sale/conveyance

 

 

13,230,000

 

 

 

11,592,000

 

 

 

-

 

 

 

-

 

 

 

14,402,000

 

Other assets

 

 

67,050,000

 

 

 

64,596,000

 

 

 

59,762,000

 

 

 

50,162,000

 

 

 

54,783,000

 

Total assets

 

$

1,205,625,000

 

 

$

1,222,901,000

 

 

$

1,252,418,000

 

 

$

1,233,521,000

 

 

$

1,318,380,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt obligations

 

$

630,575,000

 

 

$

624,834,000

 

 

$

580,125,000

 

 

$

607,745,000

 

 

$

673,820,000

 

Other liabilities

 

 

60,975,000

 

 

 

39,351,000

 

 

 

42,182,000

 

 

 

43,779,000

 

 

 

47,018,000

 

Total liabilities

 

 

691,550,000

 

 

 

664,185,000

 

 

 

622,307,000

 

 

 

651,524,000

 

 

 

720,838,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cedar Realty Trust, Inc. shareholders' equity

 

 

510,561,000

 

 

 

555,425,000

 

 

 

628,336,000

 

 

 

580,740,000

 

 

 

596,050,000

 

Noncontrolling interests

 

 

3,514,000

 

 

 

3,291,000

 

 

 

1,775,000

 

 

 

1,257,000

 

 

 

1,492,000

 

Total equity

 

 

514,075,000

 

 

 

558,716,000

 

 

 

630,111,000

 

 

 

581,997,000

 

 

 

597,542,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

$

1,205,625,000

 

 

$

1,222,901,000

 

 

$

1,252,418,000

 

 

$

1,233,521,000

 

 

$

1,318,380,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations ("FFO") (a)

 

$

42,073,000

 

 

$

45,241,000

 

 

$

40,032,000

 

 

$

41,067,000

 

 

$

45,104,000

 

Operating Funds From Operations  ("Operating FFO") (a)

 

$

40,769,000

 

 

$

53,577,000

 

 

$

48,325,000

 

 

$

49,241,000

 

 

$

46,447,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

53,675,000

 

 

$

57,900,000

 

 

$

57,093,000

 

 

$

59,247,000

 

 

$

59,136,000

 

Investing activities

 

$

(22,342,000

)

 

$

(14,938,000

)

 

$

(45,497,000

)

 

$

48,763,000

 

 

$

(47,876,000

)

Financing activities

 

$

(30,563,000

)

 

$

(48,204,000

)

 

$

(10,139,000

)

 

$

(109,923,000

)

 

$

(12,676,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Square feet of GLA

 

 

8,328,000

 

 

 

8,729,000

 

 

 

9,010,000

 

 

 

9,128,000

 

 

 

9,459,000

 

Percent occupied

 

 

91.5

%

 

 

90.7

%

 

 

91.3

%

 

 

89.9

%

 

 

90.5

%

Average annualized base rent per square foot

 

$

14.02

 

 

$

13.78

 

 

$

13.51

 

 

$

13.50

 

 

$

13.35

 

 

 

(a)

See Item 7 - "Management Discussion and Analysis of Financial Condition and Results of Operations" for a reconciliation of FFO and Operating FFO to net (loss) income attributable to common shareholders.

 

 

26


 

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 that focuses primarily on ownership, operation and redevelopment of grocery-anchored shopping centers in high- density urban markets from Washington, D.C. to Boston. At December 31, 2019, the Company owned and managed a portfolio of 56 operating properties (excluding properties “held for sale”) totaling 8.3 million square feet of GLA. The portfolio was 93.2% leased and 91.5% occupied at December 31, 2019.

The Company, organized as a Maryland corporation, has established an umbrella partnership structure through the contribution of substantially all of its assets to 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, 2019, the Company owned a 99.4% general and limited partnership interest in, and was the sole general partner of, the Operating Partnership. The limited partners’ interest in the Operating Partnership (0.6% at December 31, 2019) 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 537,000 OP Units outstanding at December 31, 2019 are economically equivalent to shares of 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.

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 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.

2019 Significant Transactions

Acquisition

On June 19, 2019, the Company purchased Girard Plaza, a shopping center adjacent to its South Philadelphia property, located in Philadelphia, Pennsylvania. The purchase price for the property was $8.5 million, which has been allocated to real estate assets and liabilities.

Dispositions

On February 15, 2019, the Company sold Maxatawny Marketplace, located in Maxatawny, Pennsylvania. The sales price for the property was $10.3 million, which resulted in a gain on sale of $0.1 million, which has been included in continuing operations in the accompanying consolidated statement of operations.

On June 26, 2019, the Company sold Fort Washington Center, located in Fort Washington, Pennsylvania. The sales price for the property was $9.0 million, which resulted in a gain on sale of $2.8 million, which has been included in continuing operations in the accompanying consolidated statement of operations.

Real Estate Held for Sale

 

As of December 31, 2019, Carll’s Corner, located in Bridgeton, New Jersey, Suffolk Plaza, located in Suffolk, Virginia and The Commons, located in Dubois, Pennsylvania, have been classified as “real estate held for sale” on the accompanying consolidated balance sheet. During 2019, an impairment charge of $8.9 million has been recorded in connection with a property held for sale, which has been included in continuing operations in the accompanying consolidated statements of operations.

 

Equity

 

On December 18, 2018, the Company’s Board of Directors approved a stock repurchase program, which authorized the Company to purchase up to $30.0 million of the Company’s common stock in the open market or through private transactions, subject to market conditions. The stock repurchase program expired on December 18, 2019. During 2019, the Company repurchased

27


 

approximately 2,050,000 shares at a weighted average price per share of $3.34. Since approval of the plan on December 18, 2018, the Company has repurchased a total of 2,823,000 shares at a weighted average price per share of $3.25.

2018 Significant Transactions

 

Land Parcel Acquisition

 

On August 8, 2018, the Company purchased a land parcel adjacent to its Riverview Plaza property, located in Philadelphia, Pennsylvania. The purchase price for the land parcel was $1.0 million, which was comprised of $25,000 in cash and approximately 208,000 OP Units (based on the market price of the Company’s common stock).

 

Shopping Center Acquisition

 

On August 21, 2018, the Company entered into a deed of lease for Senator Square, a shopping center located in Washington, D.C. The deed of lease conveys fee title in the buildings to the Company and contains future options to acquire fee title in the land at its then fair-value. This lease was originally presented in the Company’s financial statements as two separate components as follows: (1) a $5.7 million capital lease obligation for the fee interest in the buildings, and (2) an operating lease for the land. The capital lease obligation was computed through the date of the Company’s first purchase option, as discussed below, and reflects an interest rate of 5.3%. Effective January 1, 2019, based upon the adoption of the new lease accounting standard, the component of the lease that was originally recorded as a capital lease obligation is now classified as a finance lease obligation.

 

The lease initially requires monthly payments of $75,000 through maturity in August 2117 unless the Company exercises one of its options to acquire the land. The first such option will be available between the 25th and 33rd anniversaries of the lease, depending on certain property benchmarks, with additional purchase options every 10 years thereafter during the lease term. The lease also provides for 1.5% annual increases which begin on approximately the 8th anniversary of the lease, depending on the aforementioned property benchmarks. In addition, at the time the Company’s first purchase option becomes available, the lease payments will be adjusted to the greater of then fair-value or the current payment amount. The lease payments are subject to similar adjustments at the

25th and 50th anniversaries of such first purchase option.

 

The Company has also issued a $3.5 million interest only mortgage note receivable to the lessor of Senator Square, which bears interest at 4.5% per annum. The maturity date of this mortgage note can range from 26.5 years to 34.5 years from the date of issuance, based on the aforementioned property benchmarks.

 

Dispositions

 

On August 28, 2018, the Company sold Mechanicsburg Center, located in Mechanicsburg, Pennsylvania. The sales price for the property was $16.1 million, which resulted in a gain on sale of $4.9 million, which has been included in continuing operations in the accompanying consolidated statements of operations.

 

On September 28, 2018, the Company sold West Bridgewater Plaza, located in West Bridgewater, Massachusetts. The sales price for the property was $3.5 million. An impairment charge of $9.4 million has been recorded in connection with the property during 2018, which has been included in continuing operations in the accompanying consolidated statements of operations.

 

Mortgage Loans Payable

 

During 2018, the Company repaid the following mortgage loans payable:

 

 

 

 

Principal payoff

 

Property

 

Repayment date

 

amount

 

East River Park

 

August 10, 2018

 

$

18,772,000

 

Colonial Commons

 

August 24, 2018

 

$

24,108,000

 

Shoppes at Arts District

 

August 24, 2018

 

$

8,114,000

 

The Point

 

September 6, 2018

 

$

27,003,000

 

 

Term Loan

 

On July 24, 2018, the Company closed a new $75.0 million unsecured term loan maturing on July 24, 2025 (all of which was borrowed on September 28, 2018). Interest on borrowings under the term loan can range from LIBOR plus 170 to 225 basis points (“bps”) (170 bps at December 31, 2018) based on the Company’s leverage ratio. Additionally, the Company entered into forward interest rate swap agreements which convert the LIBOR rate to a fixed rate through its maturity.

28


 

Equity

 

On January 12, 2018, the Company redeemed 2,000,000 shares of Series B Preferred Stock at a price of $25.00 per share for an aggregate of $50.0 million, plus all accrued and unpaid dividends up to (but excluding) the redemption date.

 

On December 18, 2018, the Company’s Board of Directors approved a stock repurchase program, which authorized the Company to purchase up to $30.0 million of the Company’s common stock in the open market or through private transactions, subject to market conditions. The stock repurchase program expired on December 18, 2019. During 2018, the Company repurchased approximately 772,000 shares at a weighted average price per share of $3.02.

 

Revenues

 

In April 2018, the Company accepted a cash payment of $4.3 million in consideration for permitting a dark anchor tenant to terminate its lease prior to the contractual expiration. At the time of the transaction, this anchor tenant was located at a property held for sale, and while paying its contractual rent prior to lease termination, it had closed and ceased retail operations at the property. As a result of this termination, revenues for 2018 includes $5.4 million, consisting of (1) $3.8 million of other income (the $4.3 million cash payment reduced by $0.5 million straight-line rent receivable) and (2) $1.5 million accelerated intangible lease liability amortization.

 

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

29


 

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 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 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.

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.

30


 

New Accounting Pronouncements

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

Results of Operations

 

Comparison of 2019 to 2018

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

2019

 

 

2018

 

 

Dollars

 

 

Percent

 

Revenues

 

$

144,083,000

 

 

$

152,020,000

 

 

$

(7,937,000

)

 

-5.2%

 

Property operating expenses

 

 

(48,347,000

)

 

 

(47,894,000

)

 

 

(453,000

)

 

0.9%

 

Property operating income

 

 

95,736,000

 

 

 

104,126,000

 

 

 

(8,390,000

)

 

 

 

 

General and administrative

 

 

(18,804,000

)

 

 

(16,915,000

)

 

 

(1,889,000

)

 

11.2%

 

Depreciation and amortization

 

 

(45,861,000

)

 

 

(40,053,000

)

 

 

(5,808,000

)

 

14.5%

 

Gain on sales

 

 

2,942,000

 

 

 

4,864,000

 

 

 

(1,922,000

)

 

n/a

 

Impairment charges

 

 

(8,938,000

)

 

 

(20,689,000

)

 

 

11,751,000

 

 

n/a

 

Interest expense

 

 

(23,509,000

)

 

 

(22,146,000

)

 

 

(1,363,000

)

 

6.2%

 

Early extinguishment of debt costs

 

 

 

 

 

(4,829,000

)

 

 

4,829,000

 

 

n/a

 

Net income

 

 

1,566,000

 

 

 

4,358,000

 

 

 

(2,792,000

)

 

 

 

 

Net (income) attributable to noncontrolling interests

 

 

(490,000

)

 

 

(469,000

)

 

 

(21,000

)

 

 

 

 

Net income attributable to Cedar Realty Trust, Inc.

 

$

1,076,000

 

 

$

3,889,000

 

 

$

(2,813,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues were lower primarily as a result of (1) $5.4 million relating to a dark anchor tenant terminating its lease prior to the contractual expiration in 2018 at West Bridgewater Plaza, (2) a decrease of $3.4 million in rental revenues and expense recoveries attributable to properties that were sold or held for sale in 2019 and 2018, (3) a decrease of $0.8 million in rental revenues and expense recoveries attributable to same-center properties which was driven by the adoption of the new lease accounting standard (see Note 2 – “Recently-Adopted Accounting Pronouncements”), and (4) a decrease of $0.1 million in rental revenues and expense recoveries attributable to redevelopment properties, partially offset by (1) an increase of $1.7 million in rental revenues and expense recoveries attributable to properties acquired in 2019 and 2018, and (2) an increase of other income of $0.4 million.

Property operating expenses were higher primarily as a result of (1) an increase of $1.1 million in property operating expenses attributable to properties acquired in 2019 and 2018, and (2) an increase of $0.6 million in property operating expenses attributable to the Company’s redevelopment properties, partially offset by (1) a decrease of $0.8 million in property operating expenses attributable to properties that were sold or held for sale in 2019 and 2018, and (2) a decrease of $0.7 million in property operating expenses attributable to same-center properties which was driven by the adoption of the new lease accounting standard (see Note 2 – “Recently-Adopted Accounting Pronouncements”).

General and administrative costs were higher primarily as a result of (1) an increase in payroll expense of $2.8 million predominantly relating to the adoption of the new lease accounting standard in 2019 which no longer permits the capitalization of initial direct leasing costs, and (2) an increase in legal and professional fees of $0.6 million, partially offset by the reversal of $1.5 million of accrued expenses related to the termination of the prior Chief Operating Officer.

Depreciation and amortization expenses were higher primarily as a result (1) accelerated depreciation of $4.3 million in 2019 relating to the demolition of certain existing buildings at redevelopment properties, (2) an increase of $1.5 million attributable to same-center properties, (3) an increase of $1.2 million attributable to redevelopment properties, and (4) an increase of $0.5 million attributable to properties acquired in 2019 and 2018, partially offset by a decrease of $1.6 million attributable to properties that were sold or held for sale in 2019 and 2018.

Gain on sales in 2019 relates to the sale of Maxatawny Marketplace, located in Maxatawny, Pennsylvania and Fort Washington Center, located in Fort Washington, Pennsylvania. Gain on sale in 2018 relates to the sale of Mechanicsburg Center, located in Mechanicsburg, Pennsylvania.

Impairment charges in 2019 relate to The Commons, located in Dubois, Pennsylvania. Impairment charges in 2018 relate to (1) West Bridgewater Plaza, located in West Bridgewater, Pennsylvania totaling $9.4 million, and (2) Carll’s Corner, located in Bridgeton, New Jersey totaling $11.3 million

Interest expense was higher as a result of an increase in the overall weighted average interest rate.  

31


 

Early extinguishment of debt costs in 2018 relates to defeasement fees and the accelerated write-off of unamortized costs associated with the prepayment of certain mortgage loans payable.

 

Comparison of 2018 to 2017

 

 

 

 

 

 

 

 

 

 

Change

 

 

 

2018

 

 

2017

 

 

Dollars

 

 

Percent

 

Revenues

 

$

152,020,000

 

 

$

146,008,000

 

 

$

6,012,000

 

 

4.1%

 

Property operating expenses

 

 

(47,894,000

)

 

 

(44,329,000

)

 

 

(3,565,000

)

 

8.0%

 

Property operating income

 

 

104,126,000

 

 

 

101,679,000

 

 

 

2,447,000

 

 

 

 

 

General and administrative

 

 

(16,915,000

)

 

 

(16,907,000

)

 

 

(8,000

)

 

0.0%

 

Acquisition pursuit costs

 

 

-

 

 

 

(156,000

)

 

 

156,000

 

 

n/a

 

Depreciation and amortization

 

 

(40,053,000

)

 

 

(40,115,000

)

 

 

62,000

 

 

-0.2%

 

Gain on sales

 

 

4,864,000

 

 

 

7,099,000

 

 

 

(2,235,000

)

 

n/a

 

Impairment charges

 

 

(20,689,000

)

 

 

(9,538,000

)

 

 

(11,151,000

)

 

n/a

 

Interest expense

 

 

(22,146,000

)

 

 

(22,199,000

)

 

 

53,000

 

 

-0.2%

 

Early extinguishment of debt costs

 

 

(4,829,000

)

 

 

(210,000

)

 

 

(4,619,000

)

 

n/a

 

Net income

 

 

4,358,000

 

 

 

19,653,000

 

 

 

(15,295,000

)

 

 

 

 

Net (income) attributable to noncontrolling interests

 

 

(469,000

)

 

 

(510,000

)

 

 

41,000

 

 

 

 

 

Net income attributable to Cedar Realty Trust, Inc.

 

$

3,889,000

 

 

$

19,143,000

 

 

$

(15,254,000

)

 

 

 

 

 

Revenues were higher primarily as a result of (1) $5.4 million relating to a dark anchor tenant terminating its lease prior to the contractual expiration at a property held for sale, (2) an increase of $1.4 million in rental revenues and expense recoveries attributable to redevelopment properties, (3) an increase of $1.2 million in rental revenues and expense recoveries attributable to properties acquired in 2018 and 2017, and (4) an increase of $0.9 million in rental revenues and expense recoveries attributable to same-center properties, partially offset by (1) a decrease of $2.3 million in rental revenues and expense recoveries attributable to properties that were sold or held for sale in 2018 and 2017, and (2) a decrease in other income of $0.6 million.

 

Property operating expenses were higher primarily as a result of (1) an increase of $1.4 million in property operating expenses attributable to same-center properties (consisting primarily of increases in (a) real estate taxes of $0.6 million, (b) snow removal costs of $0.3 million, and (c) insurance expense of $0.2 million), (2) an increase of $1.2 million in property operating expenses attributable to redevelopment properties, and (3) an increase of $0.8 million in property operating expenses attributable to properties acquired in 2018 and 2017.

General and administrative costs remained consistent as a result of an increase in legal fees of $0.8 million, offset by nominal decrease in various other general and administrative expenses.

Acquisition pursuit costs in 2017 relate to acquisitions the Company chose not to continue to pursue.

 

Depreciation and amortization expenses remained consistent as a result of (1) a $0.8 million write-off arising from a lease termination for permitting a dark anchor tenant to terminate its lease prior to the contractual expiration, (2) an increase of $0.7 million attributable to same-center properties, and (3) an increase of $0.3 million attributable to properties acquired in 2018 and 2017, partially offset by (1) a decrease of $1.2 million attributable to properties that were sold or held for sale in 2018 and 2017, and (2) a decrease of $0.7 million attributable to redevelopment properties.

Gain on sale in 2018 relates to the sale of Mechanicsburg Center, located in Mechanicsburg, Pennsylvania. Gain on sale in 2017 relates to the sale of an outparcel building adjacent to Camp Hill, located in Camp Hill, Pennsylvania.

 

Impairment charges in 2018 relate to (1) West Bridgewater Plaza, located in West Bridgewater, Pennsylvania totaling $9.4 million, and (2) Carll’s Corner, located in Bridgeton, New Jersey totaling $11.3 million.  Impairment charges in 2017 relate to Fredericksburg Way, located in Fredericksburg, Virginia.

 

Interest expense remained consistent as a result of (1) an increase in capitalized interest of $0.8 million, and (2) a decrease of $0.2 million in amortization of deferred financing costs, partially offset by (1) an increase of $0.8 million as a result of an increase in the overall weighted average interest rate, and (2) an increase of $0.2 million as a result of an increase in the overall outstanding principal balance of debt.

 

32


 

Early extinguishment of debt costs in 2018 relates to defeasement fees and the accelerated write-off of unamortized fees associated with the prepayment of certain mortgage loans payable. Early extinguishment of debt costs in 2017 relates to the accelerated write-off of unamortized fees associated with an amended and restated credit facility, and the accelerated write-off of unamortized fees associated with the prepayment of a mortgage loan payable.

Same-Property Net Operating Income

Same-property net operating income (“same-property NOI”) is a widely-used non-GAAP financial measure for REITs that the Company believes, when considered with financial statements prepared in accordance with GAAP, is useful to investors as it provides an indication of the recurring cash generated by the Company’s properties by excluding certain non-cash revenues and expenses, as well as other infrequent items such as lease termination income which tends to fluctuate more than rents from year to year. Properties are included in same-property NOI if they are owned and operated for the entirety of both periods being compared, except for properties undergoing significant redevelopment and expansion until such properties have stabilized, and properties classified as held for sale. Consistent with the capital treatment of such costs under GAAP, tenant improvements, leasing commissions and other direct leasing costs are excluded from same-property NOI.

The most directly comparable GAAP financial measure is consolidated operating income. Same-property NOI should not be considered as an alternative to consolidated operating income prepared in accordance with GAAP or as a measure of liquidity. Further, same-property NOI is a measure for which there is no standard industry definition and, as such, it is not consistently defined or reported on among the Company’s peers, and thus may not provide an adequate basis for comparison among REITs. The following table reconciles same-property NOI to the Company’s consolidated operating income:

 

 

 

Years ended December 31,

 

 

 

2019

 

 

2018

 

Operating income

 

$

25,075,000

 

 

$

31,333,000

 

Add (deduct):

 

 

 

 

 

 

 

 

General and administrative

 

 

18,804,000

 

 

 

16,915,000

 

Gain on sales

 

 

(2,942,000

)

 

 

(4,864,000

)

Impairment charges

 

 

8,938,000

 

 

 

20,689,000

 

Depreciation and amortization

 

 

45,861,000

 

 

 

40,053,000

 

Straight-line rents

 

 

(405,000

)

 

 

(1,142,000

)

Amortization of intangible lease liabilities

 

 

(2,827,000

)

 

 

(4,361,000

)

Other adjustments

 

 

(89,000

)

 

 

(87,000

)

NOI related to properties not defined as same-property

 

 

(16,263,000

)

 

 

(22,612,000

)

Same-property NOI

 

$

76,152,000

 

 

$

75,924,000

 

 

 

 

 

 

 

 

 

 

Number of same properties

 

 

47

 

 

 

47

 

Same-property occupancy, end of period

 

 

91.3

%

 

 

91.8

%

Same-property leased, end of period

 

 

93.2

%

 

 

92.0

%

Same-property average base rent, end of period

 

$

13.48

 

 

$

13.26

 

 

Same-property NOI for the comparative years increased by 0.3%. The results are driven primarily by an increase in average base rent of $0.22 per square foot, partially offset by a decrease in occupancy of 50 bps.


33


 

Leasing Activity

The following is a summary of the Company’s retail leasing activity during 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tenant

 

 

 

 

 

 

 

 

 

 

 

 

New rent

 

 

Prior rent

 

 

Cash basis

 

 

improvements

 

 

 

 

Leases

 

 

 

 

 

 

per

 

 

per

 

 

%

 

 

per

 

 

 

 

signed

 

 

GLA

 

 

sq.ft. ($)

 

 

sq.ft. ($)

 

 

change

 

 

sq.ft. ($)

 

 

Renewals

 

 

113

 

 

 

1,388,700

 

 

 

12.35

 

 

 

12.28

 

 

 

0.5

%

 

 

0.99

 

 

New Leases - Comparable

 

 

42

 

 

 

327,600

 

 

 

11.67

 

 

 

10.61

 

 

 

10.1

%

 

 

48.96

 

(a)

New Leases - Non-Comparable (b)

 

 

7

 

 

 

25,800

 

 

 

33.06

 

 

n/a

 

 

n/a

 

 

 

31.20

 

(a)

Total (c)

 

 

162

 

 

 

1,742,100

 

 

 

12.53

 

 

n/a

 

 

n/a

 

 

 

10.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Includes both tenant allowance and landlord work. Excludes first generation space.

 

(b)

Includes leases signed at first generation and expansion spaces.

 

(c)

Legal fees and leasing commissions averaged a combined total of $1.44 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, capital improvements, and maturing debt initially with its revolving credit facility, and ultimately through a combination of issuing and/or assuming additional debt, the sale of equity securities, the issuance of additional OP Units, and/or the sale of properties. Although the Company believes it has access to secured and unsecured financing, there can be no assurance that the Company will have the availability of financing on completed development projects, additional construction financing, or proceeds from the refinancing of existing debt.

As of December 31, 2019, the Company had $95.6 million available for additional borrowings under its revolving credit facility. The Company has a $300 million unsecured credit facility which, as amended and restated on September 8, 2017, consisting of (1) a $250 million revolving credit facility, and (2) a $50 million term loan. Under an accordion feature, the facility can be increased to $750 million, subject to customary conditions and lending commitments.

 

On December 18, 2018, the Company’s Board of Directors approved a stock repurchase program, which authorized the Company to purchase up to $30.0 million of the Company’s common stock in the open market or through private transactions, subject to market conditions. The stock repurchase program expired on December 18, 2019. During 2019, the Company repurchased approximately 2,050,000 shares at a weighted average price per share of $3.34. Since approval of the plan on December 18, 2018, the Company has repurchased a total of 2,823,000 shares at a weighted average price per share of $3.25.

 

The Company’s unsecured credit facility and term loans contain financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum fixed charge coverage, and minimum net worth. In addition, the facilities contain restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. Although the credit facilities are unsecured, borrowing availability is based on unencumbered property adjusted net operating income, as defined in the agreements. The Company’s failure to comply with the covenants or the occurrence of an event of default under the facilities could result in the acceleration of the related debt and exercise of other lender remedies. As of December 31, 2019, the Company is in compliance with all financial covenants. Interest on borrowings under the unsecured credit facility and term loans are based on the Company’s leverage ratio.


34


 

Debt and finance lease obligations are composed of the following at December 31, 2019:

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

Contractual

 

 

 

Maturity

 

Balance

 

 

interest rates

 

Description

 

dates

 

outstanding

 

 

weighted-average

 

Fixed-rate mortgage

 

Jun 2026

 

$

46,679,000

 

 

3.9%

 

Finance lease obligation

 

Sep 2050

 

 

5,665,000

 

 

5.3%

 

Unsecured credit facilities (a):

 

 

 

 

 

 

 

 

 

 

Variable-rate:

 

 

 

 

 

 

 

 

 

 

Revolving credit facility

 

Sep 2021

(b)

 

106,000,000

 

 

3.2%

 

Term loan

 

Sep 2022

 

 

50,000,000

 

 

3.3%

 

Fixed-rate (c):

 

 

 

 

 

 

 

 

 

 

Term loan

 

Feb 2021

 

 

75,000,000

 

 

3.6%

 

Term loan

 

Feb 2022

 

 

50,000,000

 

 

3.0%

 

Term loan

 

Sep 2022

(d)

 

50,000,000

 

 

2.8%

 

Term loan

 

Apr 2023

 

 

100,000,000

 

 

3.2%

 

Term loan

 

Sep 2024

 

 

75,000,000

 

 

3.7%

 

Term loan

 

Jul 2025

 

 

75,000,000

 

 

4.6%

 

 

 

 

 

 

633,344,000

 

 

3.5%

 

Unamortized issuance costs

 

 

 

 

(2,769,000

)

 

 

 

 

 

 

 

 

$

630,575,000

 

 

 

 

 

 

 

(a)

During the first quarter of 2020, the weighted average interest rate for the Company’s unsecured credit facilities increased 14 bps (ranging from an increase of 10 bps to 15 bps for each individual borrowing) as a result of a slight increase in the Company’s leverage ratio.

 

(b)

The revolving credit facility is subject to a one-year extension at the Company’s option.

 

(c)

The interest rates on these term loans consist of LIBOR plus a credit spread based on the Company’s leverage ratio, for which the Company has interest rate swap agreements which convert the LIBOR rates to fixed rates. Accordingly, these term loans are presented as fixed-rate debt. 

 

(d)

The current interest rate swap agreement expires in February 2020 at which time a new interest rate swap agreement will begin resulting in an effective interest rate of 3.2%, based on the Company’s leverage ratio at December 31, 2019.

 

The following table details the Company’s debt and finance lease obligation maturities at December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage Loan

 

 

Finance Lease

 

 

Revolving

 

 

Term

 

 

 

 

 

 

Unamortized

 

 

 

 

 

Year

 

Payable

 

 

Obligation

 

 

Credit Facility

 

 

Loans

 

 

Total

 

 

Issuance Costs

 

 

Total

 

2020

 

$

1,034,000

 

 

$

33,000

 

 

$

-

 

 

$

-

 

 

$

1,067,000

 

 

$

(767,000

)

 

$

300,000

 

2021

 

 

1,074,000

 

 

 

35,000

 

 

 

106,000,000

 

(a)

 

75,000,000

 

 

 

182,109,000

 

 

 

(648,000

)

 

 

181,461,000

 

2022

 

 

1,116,000

 

 

 

37,000

 

 

 

-

 

 

 

150,000,000

 

 

 

151,153,000

 

 

 

(499,000

)

 

 

150,654,000

 

2023

 

 

1,160,000

 

 

 

39,000

 

 

 

-

 

 

 

100,000,000

 

 

 

101,199,000

 

 

 

(274,000

)

 

 

100,925,000

 

2024

 

 

1,206,000

 

 

 

41,000

 

 

 

-

 

 

 

75,000,000

 

 

 

76,247,000

 

 

 

(207,000

)

 

 

76,040,000

 

Thereafter

 

 

41,089,000

 

 

 

5,480,000

 

 

 

-

 

 

 

75,000,000

 

 

 

121,569,000

 

 

 

(374,000

)

 

 

121,195,000

 

 

 

$

46,679,000

 

 

$

5,665,000

 

 

$

106,000,000

 

 

$

475,000,000

 

 

$

633,344,000

 

 

$

(2,769,000

)

 

$

630,575,000

 

 

 

(a)

The revolving credit facility is subject to a one-year extension at the Company's option.

The remaining property-specific mortgage loan payable matures in 2026. Mortgage loans payable may require the Company to deposit certain replacement and other reserves with its lenders. Such “restricted cash” is generally available only for property-level requirements for which the reserves have been established, and is not available to fund other property-level or Company-level obligations.

In order to continue qualifying as a REIT, the Company is required to distribute at least 90% of its “REIT taxable income”, as defined in the Internal Revenue Code of 1986, as amended (the “Code”). The Company paid common and preferred stock dividends during 2019 and 2018. 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

35


 

Directors may deem relevant. Additionally, the Company may reduce or suspend payment of dividends to retain cash and reduce debt obligations and/or to fund redevelopments and other capital needs.

Contractual Obligations and Commercial Commitments

The following table sets forth the Company’s significant debt repayment, interest, finance and operating lease obligations at December 31, 2019:

 

Maturity Date

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

Thereafter

 

 

Total

 

Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loan payable

$

1,034,000

 

 

$

1,074,000

 

 

$

1,116,000

 

 

$

1,160,000

 

 

$

1,206,000

 

 

$

41,089,000

 

 

$

46,679,000

 

Unsecured revolving credit facility (a)

 

-

 

 

 

106,000,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

106,000,000

 

Unsecured term loans

 

-

 

 

 

75,000,000

 

 

 

150,000,000

 

 

 

100,000,000

 

 

 

75,000,000

 

 

 

75,000,000

 

 

 

475,000,000

 

Interest payments (b)

 

21,913,000

 

 

 

18,468,000

 

 

 

13,438,000

 

 

 

8,856,000

 

 

 

6,934,000

 

 

 

4,014,000

 

 

 

73,623,000

 

Finance lease obligation (principal and interest)

 

333,000

 

 

 

333,000

 

 

 

333,000

 

 

 

333,000

 

 

 

333,000

 

 

 

10,729,000

 

 

 

12,394,000

 

Operating lease obligations

 

1,657,000

 

 

 

1,202,000

 

 

 

1,112,000

 

 

 

1,114,000

 

 

 

1,114,000

 

 

 

29,704,000

 

 

 

35,903,000

 

Total

$

24,937,000

 

 

$

202,077,000

 

 

$

165,999,000

 

 

$

111,463,000

 

 

$

84,587,000

 

 

$

160,536,000

 

 

$

749,599,000

 

 

(a)

The revolving credit facility is subject to a one-year extension at the Company's option.

(b)

Represents interest payments expected to be incurred on the Company's debt obligations as of December 31, 2019, including interest that may subsequently be capitalized. The interest rates used in this calculation in regards to the unsecured revolving credit facility and term loan not subject to interest rate swap agreements consist of LIBOR plus a credit spread based on the Company’s leverage ratio as of December 31, 2019, with the rate in effect at December 31, 2019 being assumed to remain in effect until their maturities. The interest rates used in this calculation in regards to the unsecured term loans subject to interest rate swap agreements consists of LIBOR plus a credit spread based on the Company’s leverage ratio as of December 31, 2019, for which the Company has converted the LIBOR rates to fixed rates.

 

In addition, the Company has outstanding construction commitments totaling approximately $13.6 million at December 31, 2019.

Off-Balance Sheet Arrangements

 

Other than the items disclosed in the Contractual Obligations and Commercial Commitments section above, the Company had no off-balance sheet arrangements as of December 31, 2019 that are reasonably likely to have a current or future material effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Net Cash Flows

 

 

Year ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

Cash flows provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

53,675,000

 

 

$

57,900,000

 

 

$

57,093,000

 

Investing activities

 

$

(22,342,000

)

 

$

(14,938,000

)

 

$

(45,497,000

)

Financing activities

 

$

(30,563,000

)

 

$

(48,204,000

)

 

$

(10,139,000

)

 

Operating Activities

Net cash provided by operating activities, before net changes in operating assets and liabilities, was $56.1 million, $66.7 million, and $65.5 million for 2019, 2018 and 2017, respectively.  The decrease between 2019 and 2018 was primarily a result of (1) the Company accepting a payment of $4.3 million in consideration for permitting a dark anchor tenant to terminate its lease prior to the contractual expiration in 2018, (2) an increase in cash paid for interest, and (3) property dispositions in 2019 and 2018. The increase between 2018 and 2017 was primarily a result of the Company accepting a payment of $4.3 million in consideration for permitting a dark anchor tenant to terminate its lease prior to the contractual expiration in 2018, partially offset by an increase in cash paid for interest.

Investing Activities

 

Net cash flows used in investing activities were primarily the result of the Company’s property disposition activities, property acquisitions and expenditures for property improvements. During 2019 the Company incurred expenditures of $31.9 million for property improvements, and acquired a property for $9.1 million, which was partially offset by $18.7 million in proceeds from the sales of properties. During 2018, the Company incurred expenditures of $30.4 million for property improvements and issued a $3.5 million mortgage note receivable, which was partially offset by $19.1 million in proceeds from the sale of properties. During 2017, the

36


 

Company acquired shopping centers for $32.4 million, and incurred expenditures of $25.6 million for property improvements, which was offset by $12.5 million in proceeds from the sale of an outparcel building.

Financing Activities

 

During 2019, the Company paid $28.6 million of preferred and common stock distributions, had $6.8 million of common stock repurchases, and had $1.0 million of mortgage repayments, which was partially offset by net borrowings of $6.0 million under the revolving credit facility. During 2018, the Company had $80.3 million of repayments of mortgage obligations, paid $50.0 million to partially redeem shares of its Series B Preferred Stock, had $29.6 million of preferred and common stock distributions, had $5.2 million of payment for early extinguishment of debt costs, had $2.3 million of common stock repurchases, and $0.7 million of payments for debt financing costs, which was partially offset by a $75.0 million borrowing under a new term loan, and net borrowings of $45.0 million under the revolving credit facility. During 2017, the Company paid $112.5 million to partially redeem shares of its Series B Preferred Stock, had $31.3 million of preferred and common stock distributions, net repayments of $17.0 million under the revolving credit facility, $10.3 million of repayments of mortgage obligations, and $2.5 million of payments for debt financing costs, which was partially offset by net proceeds of $120.4 million from the sale of shares of its Series C Preferred Stock, and net proceeds of $43.2 million from the sales of its common stock.

Funds From Operations

Funds From Operations (“FFO”) is a widely recognized supplemental non-GAAP measure utilized to evaluate the financial performance of a REIT. The Company presents FFO in accordance with the definition adopted by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT generally defines FFO as net income attributable to common shareholders (determined in accordance with GAAP), excluding gains (losses) from sales of real estate properties, impairment provisions on real estate properties, plus real estate related depreciation and amortization, and adjustments for partnerships and joint ventures to reflect FFO on the same basis. The Company considers FFO to be an appropriate measure of its financial performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than other depreciable assets.

The Company also considers Operating Funds From Operations (“Operating FFO”) to be an additional meaningful financial measure of financial performance because it excludes items the Company does not believe are indicative of its core operating performance, such as non-capitalized acquisition pursuit costs, amounts relating to early extinguishment of debt and preferred stock redemption costs, management transition costs and certain redevelopment costs. The Company believes Operating FFO further assists in comparing the Company’s performance across reporting periods on a consistent basis by excluding such items.

FFO and Operating FFO should be reviewed with net income attributable to common shareholders, the most directly comparable GAAP financial measure, when trying to understand the Company’s operating performance. FFO and Operating FFO do not represent cash generated from operating activities and should not be considered as an alternative to net income attributable to common shareholders or to cash flow from operating activities. The Company’s computations of FFO and Operating FFO may differ from the computations utilized by other REITs and, accordingly, may not by comparable to such REITs.

37


 

A reconciliation of net (loss) attributable to common shareholders to FFO and Operating FFO for the years ended December 31, 2019, 2018 and 2017 is as follows:

 

 

Years ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

Net (loss) attributable to common shareholders

 

$

(9,676,000

)

 

$

(10,481,000

)

 

$

(2,399,000

)

Real estate depreciation and amortization

 

 

45,677,000

 

 

 

39,858,000

 

 

 

39,922,000

 

Limited partners' interest

 

 

(57,000

)

 

 

(28,000

)

 

 

(13,000

)

Gain on sales

 

 

(2,942,000

)

 

 

(4,864,000

)

 

 

(7,099,000

)

Impairment charges

 

 

8,938,000

 

 

 

20,689,000

 

 

 

9,538,000

 

Consolidated minority interests:

 

 

 

 

 

 

 

 

 

 

 

 

Share of income

 

 

547,000

 

 

 

497,000

 

 

 

523,000

 

Share of FFO

 

 

(414,000

)

 

 

(430,000

)

 

 

(440,000

)

FFO applicable to diluted common shares

 

 

42,073,000

 

 

 

45,241,000

 

 

 

40,032,000

 

Reversal of management transition costs (a)

 

 

(1,500,000

)

 

 

 

 

 

 

Redevelopment costs (b)

 

 

196,000

 

 

 

 

 

 

37,000

 

Preferred stock redemption costs

 

 

 

 

 

3,507,000

 

 

 

7,890,000

 

Financing costs (c)

 

 

 

 

 

4,829,000

 

 

 

210,000

 

Acquisition pursuit costs (d)

 

 

 

 

 

 

 

 

156,000

 

Operating FFO applicable to diluted common shares

 

$

40,769,000

 

 

$

53,577,000

 

 

$

48,325,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per diluted common share

 

$

0.46

 

 

$

0.49

 

 

$

0.45

 

Operating FFO per diluted common share

 

$

0.45

 

 

$

0.58

 

 

$

0.55

 

Weighted average number of diluted common shares (e):

 

 

 

 

 

 

 

 

 

 

 

 

Common shares and equivalents

 

 

90,607,000

 

 

 

92,361,000

 

 

 

87,948,000

 

OP Units

 

 

547,000

 

 

 

429,000

 

 

 

350,000

 

 

 

 

91,154,000

 

 

 

92,790,000

 

 

 

88,298,000

 

 

 

(a)

General and administrative expenses were reduced as a result of the reversal of previously accrued expenses associated with the termination of the prior Chief Operating Officer. As original estimated expenses were added back to operating FFO when recorded in 2016, the reversal of such expenses have been deducted from Operating FFO.

 

(b)

Includes redevelopment project costs expensed pursuant to GAAP such as certain demolition and lease termination costs.

 

(c)

Represents extinguishment of debt costs.

 

(d)

Represents costs directly associated with acquiring properties that are expensed pursuant to GAAP such as transfer taxes, brokerage fees and legal expenses.

 

(e)

The weighted average number of diluted common shares used to compute FFO and Operating FFO applicable to diluted common shares includes OP Units, unvested restricted stock units and unvested restricted shares that are excluded from the computation of diluted EPS.

 

Inflation

Inflation has been relatively low in recent years (including our three most recent fiscal years) and has not had a significant detrimental impact on the Company’s results of operations. There have been mixed indications of an increase in inflation in the U.S. economy.  If inflation rates increase, substantially all of the Company’s tenant leases contain provisions designed to partially mitigate the negative impact of inflation in the near term. Such lease provisions include clauses that require tenants to reimburse the Company for inflation-sensitive costs such as real estate taxes and many of the operating expenses it incurs. Significant inflation rate increases over a prolonged period of time may have a material adverse impact on the Company’s business.

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

One of the principal market risks facing the Company is the risk of interest rate changes, primarily through its variable-rate revolving credit facility and term loans. 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 either fixed rates or at variable rates and enter into derivative financial instruments, such as interest rate swaps, to mitigate its interest rate risk. The Company does not enter into derivative or interest rate transactions for speculative purposes. The Company is not directly subject to foreign currency risk.


38


 

The Company has entered into forward interest rate swap agreements which convert the LIBOR rates to fixed rates for certain unsecured term loans. At December 31, 2019, the Company had $0.1 million included in deferred charges and other assets, net, in addition to $7.2 million included in accounts payable and accrued liabilities on the consolidated balance sheet relating to the fair value of the interest rate swaps applicable to certain unsecured term loans.

 

At December 31, 2019, long-term debt consisted of a fixed-rate mortgage loan payable, a finance lease obligation, unsecured term loans, and the Company’s unsecured variable-rate credit facility. Excluding unamortized premiums and debt issuance costs, the average interest rate on the $477.3 million of fixed-rate debt outstanding was 3.6%, with maturities at various dates through 2050. The average interest rate on the $156.0 million of variable-rate debt outstanding, which consists of the unsecured revolving credit facility and a term loan, was 3.2%. With respect to the $156.0 million of variable-rate debt, if contractual interest rates either increase or decrease by 100 bps, the Company’s interest cost would increase or decrease respectively by approximately $1.6 million per annum.

With respect to the Company’s fixed rate mortgage note and unsecured term loans with rates fixed through the use of derivative financial instruments, changes in interest rates generally do not affect the Company’s interest expense as these notes are at fixed rates for extended terms. Because the Company intends to hold its existing fixed-rate debt either to maturity or until the sale of the associated property, these fixed-rate notes pose an interest rate risk to the Company’s results of operations and its working capital position only upon the refinancing of that indebtedness. The Company’s possible risk is from increases in long-term interest rates that may occur as this may increase the cost of refinancing maturing fixed-rate debt. In addition, the Company may incur prepayment penalties or defeasance costs when prepaying or defeasing debt.

 

 

39


 

Item 8.

Financial Statements and Supplementary Data

 

Report of Independent Registered Public Accounting Firm

 

41

 

 

 

Consolidated Balance Sheets, December 31, 2019 and 2018

 

42

 

 

 

Consolidated Statements of Operations, years ended December 31, 2019, 2018, and 2017

 

43

 

 

 

Consolidated Statements of Comprehensive Income, years ended December 31, 2019, 2018 and 2017

 

44

 

 

 

Consolidated Statements of Equity, years ended December 31, 2019, 2018 and 2017

 

45-46

 

 

 

Consolidated Statements of Cash Flows, years ended December 31, 2019, 2018 and 2017

 

47

 

 

 

Notes to Consolidated Financial Statements

 

48-68

 

 

 

 

Schedule Filed As Part Of This Report

 

 

Schedule III – Real Estate and Accumulated Depreciation, December 31, 2019

 

69-71

 

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.

 

 

40


 

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Cedar Realty Trust, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cedar Realty Trust, Inc. as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and schedule listed in the index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 13, 2020 expressed an unqualified opinion thereon.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

/s/ ERNST & YOUNG LLP

 

We have served as the Company’s auditor since 1984.

 

New York, New York

February 13, 2020

 

 

 

41


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

 

Land

 

$

293,456,000

 

 

$

295,734,000

 

Buildings and improvements

 

 

1,221,750,000

 

 

 

1,212,948,000

 

 

 

 

1,515,206,000

 

 

 

1,508,682,000

 

Less accumulated depreciation

 

 

(389,861,000

)

 

 

(361,969,000

)

Real estate, net

 

 

1,125,345,000

 

 

 

1,146,713,000

 

 

 

 

 

 

 

 

 

 

Real estate held for sale

 

 

13,230,000

 

 

 

11,592,000

 

Cash and cash equivalents

 

 

2,747,000

 

 

 

1,977,000

 

Receivables

 

 

22,164,000

 

 

 

21,977,000

 

Other assets and deferred charges, net

 

 

42,139,000

 

 

 

40,642,000

 

TOTAL ASSETS

 

$

1,205,625,000

 

 

$

1,222,901,000

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Mortgage loan payable

 

$

46,370,000

 

 

$

47,315,000

 

Finance lease obligation

 

 

5,364,000

 

 

 

5,387,000

 

Unsecured revolving credit facility

 

 

106,000,000

 

 

 

100,000,000

 

Unsecured term loans

 

 

472,841,000

 

 

 

472,132,000

 

Accounts payable and accrued liabilities

 

 

50,502,000

 

 

 

26,142,000

 

Unamortized intangible lease liabilities

 

 

10,473,000

 

 

 

13,209,000

 

Total liabilities

 

 

691,550,000

 

 

 

664,185,000

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Cedar Realty Trust, Inc. shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

159,541,000

 

 

 

159,541,000

 

Common stock  ($0.06 par value, 150,000,000 shares authorized, 89,020,000 and 90,436,000 shares, issued and outstanding, respectively)

 

 

5,341,000

 

 

 

5,426,000

 

Treasury stock  (3,068,000 and 2,971,000 shares, respectively, at cost)

 

 

(16,311,000

)

 

 

(16,572,000

)

Additional paid-in capital

 

 

872,724,000

 

 

 

875,565,000

 

Cumulative distributions in excess of net income

 

 

(503,725,000

)

 

 

(475,726,000

)

Accumulated other comprehensive (loss) income

 

 

(7,009,000

)

 

 

7,191,000

 

Total Cedar Realty Trust, Inc. shareholders' equity

 

 

510,561,000

 

 

 

555,425,000

 

Noncontrolling interests:

 

 

 

 

 

 

 

 

Minority interests in consolidated joint ventures

 

 

435,000

 

 

 

(112,000

)

Limited partners'  OP Units

 

 

3,079,000

 

 

 

3,403,000

 

Total noncontrolling interests

 

 

3,514,000

 

 

 

3,291,000

 

Total equity

 

 

514,075,000

 

 

 

558,716,000

 

TOTAL LIABILITIES AND EQUITY

 

$

1,205,625,000

 

 

$

1,222,901,000

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

42


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Years ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

142,719,000

 

 

$

147,236,000

 

 

$

144,496,000

 

Other

 

 

1,364,000

 

 

 

4,784,000

 

 

 

1,512,000

 

Total revenues

 

 

144,083,000

 

 

 

152,020,000

 

 

 

146,008,000

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Operating, maintenance and management

 

 

27,593,000

 

 

 

27,771,000

 

 

 

24,752,000

 

Real estate and other property-related taxes

 

 

20,754,000

 

 

 

20,123,000

 

 

 

19,577,000

 

General and administrative

 

 

18,804,000

 

 

 

16,915,000

 

 

 

16,907,000

 

Acquisition pursuit costs

 

 

-

 

 

 

-

 

 

 

156,000

 

Depreciation and amortization

 

 

45,861,000

 

 

 

40,053,000

 

 

 

40,115,000

 

Total expenses

 

 

113,012,000

 

 

 

104,862,000

 

 

 

101,507,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sales

 

 

2,942,000

 

 

 

4,864,000

 

 

 

7,099,000

 

Impairment charges

 

 

(8,938,000

)

 

 

(20,689,000

)

 

 

(9,538,000

)

Total other

 

 

(5,996,000

)

 

 

(15,825,000

)

 

 

(2,439,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

 

25,075,000

 

 

 

31,333,000

 

 

 

42,062,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-OPERATING INCOME AND EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(23,509,000

)

 

 

(22,146,000

)

 

 

(22,199,000

)

Early extinguishment of debt costs

 

 

-

 

 

 

(4,829,000

)

 

 

(210,000

)

Total non-operating income and expenses

 

 

(23,509,000

)

 

 

(26,975,000

)

 

 

(22,409,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

1,566,000

 

 

 

4,358,000

 

 

 

19,653,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (income) loss attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

Minority interests in consolidated joint ventures

 

 

(547,000

)

 

 

(497,000

)

 

 

(523,000

)

Limited partners' interest in Operating Partnership

 

 

57,000

 

 

 

28,000

 

 

 

13,000

 

Total net (income) attributable to noncontrolling interests

 

 

(490,000

)

 

 

(469,000

)

 

 

(510,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO CEDAR REALTY TRUST, INC.

 

 

1,076,000

 

 

 

3,889,000

 

 

 

19,143,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

(10,752,000

)

 

 

(10,863,000

)

 

 

(13,652,000

)

Preferred stock redemption costs

 

 

-

 

 

 

(3,507,000

)

 

 

(7,890,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(9,676,000

)

 

$

(10,481,000

)

 

$

(2,399,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

(0.12

)

 

$

(0.13

)

 

$

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares - basic and diluted

 

 

86,341,000

 

 

 

88,420,000

 

 

 

84,168,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

43


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

Years ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,566,000

 

 

$

4,358,000

 

 

$

19,653,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(14,286,000

)

 

 

1,518,000

 

 

 

5,287,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income

 

 

(12,720,000

)

 

 

5,876,000

 

 

 

24,940,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (income) attributable to noncontrolling interests

 

 

(404,000

)

 

 

(490,000

)

 

 

(530,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

(13,124,000

)

 

$

5,386,000

 

 

$

24,410,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements

 

 

44


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENT OF EQUITY

Years ended December 31, 2019, 2018 and 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury

 

 

Additional

 

 

distributions

 

 

other

 

 

 

 

 

 

 

Preferred stock

 

 

Common stock

 

 

stock,

 

 

paid-in

 

 

in excess of

 

 

comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

at cost

 

 

capital

 

 

net income

 

 

income (loss)

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,143,000

 

 

 

 

 

 

19,143,000

 

Unrealized gain on change in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,267,000

 

 

 

5,267,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

249,000

 

 

 

15,000

 

 

 

(334,000

)

 

 

3,832,000

 

 

 

 

 

 

 

 

 

3,513,000

 

Net proceeds from sales of Series C Shares

 

 

5,000,000

 

 

 

124,774,000

 

 

 

 

 

 

 

 

 

 

 

 

(4,342,000

)

 

 

 

 

 

 

 

 

120,432,000

 

Redemptions of Series B Shares

 

 

(4,500,000

)

 

 

(107,927,000

)

 

 

 

 

 

 

 

 

 

 

 

3,307,000

 

 

 

(7,890,000

)

 

 

 

 

 

(112,510,000

)

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

5,752,000

 

 

 

345,000

 

 

 

 

 

 

42,821,000

 

 

 

 

 

 

 

 

 

43,166,000

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,652,000

)

 

 

 

 

 

(13,652,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,681,000

)

 

 

 

 

 

(17,681,000

)

Redemption of OP Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reallocation adjustment of limited partners' interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(82,000

)

 

 

 

 

 

 

 

 

(82,000

)

BALANCE, DECEMBER 31, 2017

 

 

8,450,000

 

 

 

207,508,000

 

 

 

91,317,000

 

 

 

5,479,000

 

 

 

(18,463,000

)

 

 

875,062,000

 

 

 

(446,944,000

)

 

 

5,694,000

 

 

 

628,336,000

 

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,889,000

 

 

 

 

 

 

3,889,000

 

Unrealized gain on change in fair value of cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,497,000

 

 

 

1,497,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

(111,000

)

 

 

(7,000

)

 

 

1,891,000

 

 

 

1,467,000

 

 

 

 

 

 

 

 

 

3,351,000

 

Redemptions of Series B Shares

 

 

(2,000,000

)

 

 

(47,967,000

)

 

 

 

 

 

 

 

 

 

 

 

1,458,000

 

 

 

(3,507,000

)

 

 

 

 

 

(50,016,000

)

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

2,000

 

 

 

 

 

 

 

 

 

9,000

 

 

 

 

 

 

 

 

 

9,000

 

Common stock repurchases

 

 

 

 

 

 

 

 

(772,000

)

 

 

(46,000

)

 

 

 

 

 

(2,283,000

)

 

 

 

 

 

 

 

 

(2,329,000

)

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,863,000

)

 

 

 

 

 

(10,863,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,301,000

)

 

 

 

 

 

(18,301,000

)

Redemption of OP Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of OP Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reallocation adjustment of limited partners' interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(148,000

)

 

 

 

 

 

 

 

 

(148,000

)

BALANCE, DECEMBER 31, 2018

 

 

6,450,000

 

 

 

159,541,000

 

 

 

90,436,000

 

 

 

5,426,000

 

 

 

(16,572,000

)

 

 

875,565,000

 

 

 

(475,726,000

)

 

 

7,191,000

 

 

 

555,425,000

 

Prior period adjustment - adoption of lease accounting standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(515,000

)

 

 

 

 

 

(515,000

)

BALANCE, DECEMBER 31, 2018, RESTATED

 

 

6,450,000

 

 

 

159,541,000

 

 

 

90,436,000

 

 

 

5,426,000

 

 

 

(16,572,000

)

 

 

875,565,000

 

 

 

(476,241,000

)

 

 

7,191,000

 

 

 

554,910,000

 

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,076,000

 

 

 

 

 

 

1,076,000

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,200,000

)

 

 

(14,200,000

)

Share-based compensation, net

 

 

 

 

 

 

 

 

626,000

 

 

 

38,000

 

 

 

261,000

 

 

 

3,830,000

 

 

 

 

 

 

 

 

 

4,129,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

8,000

 

 

 

 

 

 

 

 

 

23,000

 

 

 

 

 

 

 

 

 

23,000

 

Common stock repurchases

 

 

 

 

 

 

 

 

(2,050,000

)

 

 

(123,000

)

 

 

 

 

 

(6,721,000

)

 

 

 

 

 

 

 

 

(6,844,000

)

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,752,000

)

 

 

 

 

 

(10,752,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,808,000

)

 

 

 

 

 

(17,808,000

)

Redemption of OP Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reallocation adjustment of limited partners' interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,000

 

 

 

 

 

 

 

 

 

27,000

 

BALANCE, DECEMBER 31, 2019

 

 

6,450,000

 

 

 

159,541,000

 

 

 

89,020,000

 

 

 

5,341,000

 

 

 

(16,311,000

)

 

 

872,724,000

 

 

 

(503,725,000

)

 

 

(7,009,000

)

 

 

510,561,000

 

 

 

 

 

45


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENT OF EQUITY

Years ended December 31, 2019, 2018 and 2017

Continued

 

 

 

Noncontrolling Interests

 

 

 

 

 

 

 

Minority

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interests in

 

 

Limited

 

 

 

 

 

 

 

 

 

 

 

consolidated

 

 

partners'

 

 

 

 

 

 

Total

 

 

 

joint ventures

 

 

OP Units

 

 

Total

 

 

equity

 

BALANCE, DECEMBER 31, 2016

 

$

(1,132,000

)

 

$

2,389,000

 

 

$

1,257,000

 

 

$

581,997,000

 

Net income

 

 

523,000

 

 

 

(13,000

)

 

 

510,000

 

 

 

19,653,000

 

Unrealized gain on change in fair value of cash flow hedges

 

 

 

 

 

20,000

 

 

 

20,000

 

 

 

5,287,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

3,513,000

 

Net proceeds from sales of Series C Shares

 

 

 

 

 

 

 

 

 

 

 

120,432,000

 

Redemptions of Series B Shares

 

 

 

 

 

 

 

 

 

 

 

(112,510,000

)

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

43,166,000

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

(13,652,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

(70,000

)

 

 

(70,000

)

 

 

(17,751,000

)

Redemption of OP Units

 

 

 

 

 

(24,000

)

 

 

(24,000

)

 

 

(24,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

82,000

 

 

 

82,000

 

 

 

 

BALANCE, DECEMBER 31, 2017

 

 

(609,000

)

 

 

2,384,000

 

 

 

1,775,000

 

 

 

630,111,000

 

Net (loss) income

 

 

497,000

 

 

 

(28,000

)

 

 

469,000

 

 

 

4,358,000

 

Unrealized gain on change in fair value of cash flow hedges

 

 

 

 

 

21,000

 

 

 

21,000

 

 

 

1,518,000

 

Share-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

3,351,000

 

Redemptions of Series B Shares

 

 

 

 

 

 

 

 

 

 

 

(50,016,000

)

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

9,000

 

Common stock repurchases

 

 

 

 

 

 

 

 

 

 

 

(2,329,000

)

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

(10,863,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

(90,000

)

 

 

(90,000

)

 

 

(18,391,000

)

Redemption of OP Units

 

 

 

 

 

(7,000

)

 

 

(7,000

)

 

 

(7,000

)

Issuance of OP Units

 

 

 

 

 

975,000

 

 

 

975,000

 

 

 

975,000

 

Reallocation adjustment of limited partners' interest

 

 

 

 

 

148,000

 

 

 

148,000

 

 

 

 

BALANCE, DECEMBER 31, 2018

 

 

(112,000

)

 

 

3,403,000

 

 

 

3,291,000

 

 

 

558,716,000

 

Prior period adjustment - adoption of lease accounting standard

 

 

 

 

 

 

 

 

 

 

 

(515,000

)

BALANCE, DECEMBER 31, 2018, RESTATED

 

 

(112,000

)

 

 

3,403,000

 

 

 

3,291,000

 

 

 

558,201,000

 

Net (loss) income

 

 

547,000

 

 

 

(57,000

)

 

 

490,000

 

 

 

1,566,000

 

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

 

 

 

 

 

(86,000

)

 

 

(86,000

)

 

 

(14,286,000

)

Share-based compensation, net

 

 

 

 

 

 

 

 

 

 

 

4,129,000

 

Common stock sales, net of issuance expenses

 

 

 

 

 

 

 

 

 

 

 

23,000

 

Common stock repurchases

 

 

 

 

 

 

 

 

 

 

 

(6,844,000

)

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

(10,752,000

)

Distributions to common shareholders/noncontrolling interests

 

 

 

 

 

(111,000

)

 

 

(111,000

)

 

 

(17,919,000

)

Redemption of OP Units

 

 

 

 

 

(43,000

)

 

 

(43,000

)

 

 

(43,000

)

Reallocation adjustment of limited partners' interest

 

 

 

 

 

(27,000

)

 

 

(27,000

)

 

 

 

BALANCE, DECEMBER 31, 2019

 

$

435,000

 

 

$

3,079,000

 

 

$

3,514,000

 

 

$

514,075,000

 

 

See accompanying notes to consolidated financial statements

 

 

46


 

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Years ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,566,000

 

 

$

4,358,000

 

 

$

19,653,000

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sales

 

 

(2,942,000

)

 

 

(4,864,000

)

 

 

(7,099,000

)

Impairment charges

 

 

8,938,000

 

 

 

20,689,000

 

 

 

9,538,000

 

Early extinguishment of debt costs

 

 

 

 

 

4,829,000

 

 

 

210,000

 

Straight-line rents and expenses, net

 

 

(265,000

)

 

 

(1,142,000

)

 

 

(864,000

)

Provision for doubtful accounts

 

 

412,000

 

 

 

2,273,000

 

 

 

1,715,000

 

Depreciation and amortization

 

 

45,861,000

 

 

 

40,053,000

 

 

 

40,115,000

 

Amortization of intangible lease liabilities, net

 

 

(2,827,000

)

 

 

(4,361,000

)

 

 

(2,518,000

)

Expense relating to share-based compensation, net

 

 

4,117,000

 

 

 

3,763,000

 

 

 

3,552,000

 

Amortization of premium on mortgage loan payable

 

 

 

 

 

(80,000

)

 

 

(130,000

)

Amortization of deferred financing costs

 

 

1,286,000

 

 

 

1,224,000

 

 

 

1,325,000

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Rents and other receivables

 

 

(812,000

)

 

 

(3,902,000

)

 

 

(3,467,000

)

Prepaid expenses and other

 

 

(3,037,000

)

 

 

(6,591,000

)

 

 

(4,600,000

)

Accounts payable and accrued liabilities

 

 

1,378,000

 

 

 

1,651,000

 

 

 

(337,000

)

Net cash provided by operating activities

 

 

53,675,000

 

 

 

57,900,000

 

 

 

57,093,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of real estate

 

 

(9,083,000

)

 

 

(179,000

)

 

 

(32,442,000

)

Expenditures for real estate improvements

 

 

(31,910,000

)

 

 

(30,377,000

)

 

 

(25,561,000

)

Net proceeds from sales of real estate

 

 

18,651,000

 

 

 

19,118,000

 

 

 

12,506,000