CEDAR REALTY TRUST, INC.
10-Ks and 10-Qs
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
COMMISSION FILE NUMBER: 001-31817
CEDAR SHOPPING CENTERS, INC.
(Exact name of registrant as specified in its charter)
|
Maryland
(State or other jurisdiction of incorporation or organization) |
42-1241468
(I.R.S. Employer Identification Number) |
|
|
44 South Bayles Avenue, Port Washington, NY
(Address of principal executive offices) |
11050-3765
(Zip Code) |
Registrant’s telephone number, including area code: (516) 767-6492
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
| Name of each exchange on | ||
| Title of each class | which registered | |
| Common Stock, $0.06 par value | New York Stock Exchange | |
| 8-7/8% Series A Cumulative Redeemable | ||
| Preferred Stock, $25.00 Liquidation Value | New York Stock Exchange |
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
o
No
þ
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
o
No
þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
o
No
þ
Based on the closing sales price on June 30, 2009 of $4.52 per share, the aggregate market value of
the voting stock held by non-affiliates of the registrant was approximately $196,177,000.
The number of shares outstanding of the registrant’s Common Stock $.06 par value was 62,007,366 on
February 28, 2010.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant’s definitive proxy statement relating to its 2010 annual meeting of
shareholders are incorporated herein by reference.
CEDAR SHOPPING CENTERS, INC.
TABLE OF CONTENTS
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PART I
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PART II
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PART III
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PART IV
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| 101 | ||||||||
| EX-21.1 | ||||||||
| EX-23.1 | ||||||||
| EX-31.1 | ||||||||
| EX-31.2 | ||||||||
| EX-32.1 | ||||||||
| EX-32.2 | ||||||||
2
Table of Contents
Special Note Regarding Forward-Looking Statements
Certain statements contained in this Annual Report on Form 10-K constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements include, without limitation,
statements containing the words “anticipates”, “believes”, “expects”, “intends”, “future”, and
words of similar import which express the Company’s beliefs, expectations or intentions regarding
future performance or future events or trends. While forward-looking statements reflect good faith
beliefs, expectations or intentions, they are not guarantees of future performance and involve
known and unknown risks, uncertainties and other factors, which may cause actual results,
performance or achievements to differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking statements as a result of factors outside
of the Company’s control. Certain factors that might cause such differences include, but are not
limited to, the following: real estate investment considerations, such as the effect of economic
and other conditions in general and in the Company’s market areas in particular; the financial
viability of the Company’s tenants (including an inability to pay rent, filing for bankruptcy
protection, closing stores and/or vacating the premises); the continuing availability of
acquisition, development and redevelopment opportunities, on favorable terms; the availability of
equity and debt capital (including the availability of construction financing) in the public and
private markets; the availability of suitable joint venture partners and potential purchasers of
the Company’s properties if offered for sale; the ability of the Company’s joint venture partner to
fund its share of future property acquisitions; changes in interest rates; the fact that returns
from acquisition, development and redevelopment activities may not be at expected levels or at
expected times; risks inherent in ongoing development and redevelopment projects including, but not
limited to, cost overruns resulting from weather delays, changes in the nature and scope of
development and redevelopment efforts, changes in governmental regulations relating thereto, and
market factors involved in the pricing of material and labor; the need to renew leases or re-let
space upon the expiration or termination of current leases and incur applicable required
replacement costs; and the financial flexibility of ourselves and our joint venture partners to
repay or refinance debt obligations when due and to fund tenant improvements and capital
expenditures. The Company does not intend, and disclaims any duty or obligation, to update or
revise any forward-looking statements set forth in this report to reflect any change in
expectations, change in information, new information, future events or other circumstances on which
such information may have been based. See Item 1A. “Risk Factors” elsewhere herein.
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Table of Contents
Items 1 and 2. Business and Properties
General
Cedar Shopping Centers, Inc. (the “Company”), organized in 1984, is a fully-integrated real
estate investment trust which focuses primarily on ownership, operation, development and
redevelopment of supermarket-anchored shopping centers in mid-Atlantic and Northeast coastal
states. At December 31, 2009, the Company owned and managed (both wholly-owned and in joint
venture) a portfolio of 119 operating properties totaling approximately 13.0 million square feet of
gross leasable area (“GLA”), including 95 wholly-owned properties comprising approximately 9.5
million square feet, 13 properties owned in joint venture (consolidated) comprising approximately
1.7 million square feet, seven properties transferred or to be transferred to a managed joint
venture (unconsolidated) comprising approximately 1.2 million square feet, and four ground-up
developments comprising approximately 0.6 million square feet. Excluding the four ground-up
development properties, the 115 property portfolio was approximately 91% leased at December 31,
2009; the 101 property “stabilized” portfolio was approximately 95% leased at that date. The
Company also owned approximately 196 acres of land parcels, a significant portion of which is under
development. In addition, the Company has a 76.3% interest in another unconsolidated joint venture,
which it does not manage, which owns a single-tenant office property in Philadelphia, Pennsylvania.
The Company has elected to be taxed as a real estate investment trust (“REIT”) under
applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as
a REIT under those provisions, the Company must have a preponderant percentage of its assets
invested in, and income derived from, real estate and related sources. The Company’s objectives are
to provide to its shareholders a professionally-managed, diversified portfolio of commercial real
estate investments (primarily supermarket-anchored shopping centers), 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 Shopping Centers
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, 2009, the Company owned 96.3% of the Operating Partnership and is its
sole general partner. The approximately 2,006,000 limited Operating Partnership Units (“OP Units”)
are economically equivalent to the Company’s common stock and are convertible into the Company’s
common stock at the option of the holders on a one-to-one basis.
The Company derives substantially all of its revenues from rents and operating expense
reimbursements received pursuant to long-term leases. The Company’s operating results therefore
depend on the ability of its tenants to make the payments required by the terms of their leases.
The
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Table of Contents
Company focuses its investment activities on supermarket-anchored community shopping centers.
The Company believes that, because of the need of consumers to purchase food and other staple goods
and services generally available at such centers, its type of “necessities”-based properties should
provide relatively stable revenue flows even during difficult economic times.
In connection with the transactions with RioCan (more fully described below), the Company will
seek to acquire primarily stabilized supermarket-anchored properties in its primary market areas
during the next two years in a joint venture owned 20% by the Company. The Company has historically
sought opportunities to acquire properties suited for development and/or redevelopment, and, to a
lesser extent than in the past, stabilized properties, where it can utilize its experience in
shopping center construction, renovation, expansion, re-leasing and re-merchandising to achieve
long-term cash flow growth and favorable investment returns.
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 currently 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.cedarshoppingcenters.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.
Recent Developments and Significant Transactions
Public Offering of Common Stock
On February 5, 2010, the Company concluded a public offering of 7,500,000 shares of its
common stock at $6.60 per share, and realized net proceeds after offering expenses of approximately
$47.0 million. On March 3, 2010, the underwriters exercised their over-allotment option to the
extent of 697,800 shares, and the Company realized additional net proceeds of $4.4 million. In
connection with the offering, RioCan (see below) acquired 1,350,000 shares of the Company’s common
stock, including 100,000 shares acquired in connection with the exercise of the over-allotment
option, and the Company realized net proceeds of $8.9 million.
Reinstatement of Dividend
In December 2009, following a review of the state of the economy and the Company’s financial
position, the Company’s Board of Directors determined to resume payment of a quarterly cash
dividend in the amount of $0.09 per share ($0.36 per share on an annualized basis) on the Company’s
common stock, which was paid on January 20, 2010 to shareholders of record as of the close of
business on December 31, 2009.
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Table of Contents
RioCan
On October 26, 2009, the Company entered into definitive agreements with RioCan Real Estate
Investment Trust of Toronto, Canada, a publicly-traded Canadian real estate investment trust listed
on the Toronto Stock Exchange (“RioCan”), pursuant to which the Company (1) sold to RioCan
6,666,666 shares of the Company’s common stock at $6.00 per share in a private placement for an
aggregate of $40 million (RioCan agreeing that it would not sell any of such shares for a period of
one year), (2) issued to RioCan warrants to purchase 1,428,570 shares of the Company’s common stock
at an exercise price of $7.00 per share, exercisable over a two-year period, (3) entered into an
80% (RioCan) and 20% (Cedar) joint venture (i) initially for the purchase of seven
supermarket-anchored properties presently owned by the Company, and (ii) then to acquire additional
primarily supermarket-anchored properties in the Company’s primary market areas during the next two
years, in the same joint venture format, and (4) entered into a “standstill” agreement with respect
to increases in RioCan’s ownership of the Company’s common stock for a three-year period. In
addition, subject to certain exceptions, the Company has agreed that it will not issue any new
shares of common stock unless RioCan is offered the right to purchase an additional number of
shares that will maintain its pro rata percentage ownership, on a fully diluted basis. In
connection with the formation of the joint venture, the Company recorded an impairment charge of
$23.6 million relating to the seven properties transferred or to be transferred to the joint
venture.
The private placement investment by RioCan and the issuance of the warrants by the Company
were concluded on October 30, 2009. Two of the properties (Blue Mountain Commons located in
Harrisburg, Pennsylvania and Sunset Crossing located in Dickson City, Pennsylvania) were
transferred to the joint venture on December 10, 2009, resulting in proceeds to the Company of
approximately $33 million (in connection with the closing, a repayment of $25.9 million was
required under the Company’s secured revolving development property credit facility). The remaining
five properties are subject to mortgage loans payable aggregating approximately $94 million. Two of
the properties (Columbus
Crossing Shopping Center located in Philadelphia, Pennsylvania and Franklin Village Plaza
located in Franklin, Massachusetts) were transferred to the joint venture in January and February
2010, resulting in net proceeds to the Company of approximately $16 million. The remaining three
properties (Loyal Plaza Shopping Center located in Williamsport, Pennsylvania, Shaw’s Plaza located
in Raynham, Massachusetts, and Stop & Shop Plaza located in Bridgeport, Connecticut) are to be
transferred during the first half of 2010, resulting in net proceeds to the Company of an
additional approximately $16 million.
In connection with the transfers of the seven properties to the joint venture and the private
placement transactions, the Company will have received aggregate net proceeds of approximately $105
million, after estimated closing and transaction costs, which have been or will be used to
repay/reduce the outstanding balances under the Company’s secured revolving credit facilities.
Amended and Restated Credit Facility
On November 10, 2009, the Company closed an amended and restated secured revolving stabilized
property credit facility in the amount of $265 million (subsequently increased to $285 million),
with Bank of America, N.A. continuing as administrative agent, together with three other lead
lenders and other participating banks. The facility, as amended, is expandable to $400 million
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Table of Contents
subject to certain conditions, including acceptable collateral. This amended and restated facility
replaced the existing facility that was due to expire on January 30, 2010, and will continue to be
available to fund acquisitions, certain development and redevelopment activities, capital
expenditures, mortgage repayments, dividend distributions, working capital and other general
corporate purposes. The new facility has a maturity date of January 31, 2012, subject to a
one-year extension option. As a result of the application of the net proceeds from, among other
things, the transfers of two of the remaining properties to the RioCan joint venture and the sales
of shares of the Company’s common stock in February and March 2010, the Company’s availability
under this facility has increased to approximately $104 million as of March 3, 2010.
Joint Venture With PCP
On January 30, 2009, a newly-formed 40% Company-owned joint venture acquired the New London
Mall in New London, Connecticut, an approximate 259,000 square foot supermarket-anchored shopping
center, for a purchase price of approximately $40.7 million. The purchase price included the
assumption of an existing $27.4 million first mortgage bearing interest at 4.9% per annum and
maturing in 2015. The total joint venture partnership contribution was approximately $14.0 million,
of which the Company’s 40% share ($5.6 million) was funded from its secured revolving stabilized
property credit facility. The Company is the managing partner of the venture and receives certain
acquisition, property management, construction management and leasing fees. In addition, the
Company will be entitled to a “promote” fee structure, pursuant to which its profits participation
would be increased to 44% if the venture reaches certain income targets. The Company’s joint
venture partners are affiliates of Prime Commercial Properties PLC (“PCP”), a London-based real
estate/development company.
On February 10, 2009, a second newly-formed (also with affiliates of PCP) 40% Company-owned
joint venture acquired San Souci Plaza in California, Maryland, an approximate 264,000 square foot
supermarket-anchored shopping center, for a purchase price of approximately $31.8 million. The
purchase price included the assumption of an existing $27.2 million first mortgage bearing interest
at 6.2% per annum and maturing in 2016. The total joint venture partnership contribution was
approximately $5.8 million, of which the Company’s 40% share ($2.3 million) was funded from its
secured revolving stabilized property credit facility. The Company is the managing partner of the
venture and receives certain acquisition, property management, construction management and leasing
fees. In addition, the Company will be entitled to a “promote” fee structure, pursuant to which its
profits participation would be increased to 44% if the venture reaches certain income targets.
Discontinued Operations
During 2009, the Company sold, or has treated as “held for sale”, nine of its drug
store/convenience centers, located in Ohio and New York, aggregating 304,000 square feet of GLA,
including the 6,000 square foot McDonalds/Waffle House, located in Medina, Ohio, the 10,000 square
foot CVS property located in Westfield, New York, the 24,000 square foot Staples property located
in Oswego, New York, the 32,000 square foot Discount Drug Mart Plaza located in Hudson, Ohio, the
38,000 square foot Discount Drug Mart Plaza located in Dover, Ohio, the 84,000 square foot Gabriel
Brothers property located in Kent, Ohio, the 40,000 square foot Discount Drug Mart Plaza located in
Carrollton, Ohio, the 20,000 square foot Pondside Plaza located in Geneseo, New York, and the
50,000 square foot Discount Drug Mart Plaza located in Powell, Ohio. The aggregate of the sales
prices for the
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Table of Contents
nine properties is approximately $27.1 million, and the properties are subject to
property-specific mortgage loans payable of approximately $17.7 million. In connection with these
transactions, the Company recorded impairment charges aggregating $3.6 million, and has realized
gain on sales of $557,000. The carrying values of the assets and liabilities of these properties,
principally the net book values of the real estate and the related mortgage loans payable, have
been reclassified as “held for sale” on the Company’s consolidated balance sheets at December 31,
2009 and 2008. In addition, the properties’ results of operations have been classified as
“discontinued operations” for all periods presented.
The Company’s Properties
The following tables summarize information relating to the Company’s properties as of December
31, 2009:
| Unconsolidated | ||||||||||||||||||||||||||||||||||||
| joint venture | Real estate to | |||||||||||||||||||||||||||||||||||
| Number of | GLA | Building and | Accumulated | Net book | managed | be transferred | ||||||||||||||||||||||||||||||
| State | properties | (Sq. ft.) | Land | improvements | Total cost | depreciation | value | properties | to a joint venture | |||||||||||||||||||||||||||
|
Pennsylvania
|
52 | 6,645,891 | $ | 168,934,000 | $ | 682,691,000 | $ | 851,625,000 | $ | 87,970,000 | $ | 763,655,000 | $ | 8,638,000 | $ | 53,417,000 | ||||||||||||||||||||
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Massachusetts
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8 | 1,486,033 | 27,231,000 | 111,261,000 | 138,492,000 | 10,851,000 | 127,641,000 | — | 76,815,000 | |||||||||||||||||||||||||||
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Connecticut
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9 | 1,217,789 | 33,426,000 | 127,299,000 | 160,725,000 | 16,032,000 | 144,693,000 | — | 9,511,000 | |||||||||||||||||||||||||||
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Virginia
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13 | 815,969 | 28,878,000 | 101,903,000 | 130,781,000 | 15,249,000 | 115,532,000 | — | — | |||||||||||||||||||||||||||
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Ohio
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21 | 717,344 | 18,246,000 | 78,798,000 | 97,044,000 | 11,119,000 | 85,925,000 | — | — | |||||||||||||||||||||||||||
|
Maryland
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8 | 940,904 | 30,564,000 | 87,416,000 | 117,980,000 | 9,337,000 | 108,643,000 | — | — | |||||||||||||||||||||||||||
|
New Jersey
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4 | 825,276 | 13,764,000 | 74,865,000 | 88,629,000 | 9,615,000 | 79,014,000 | — | — | |||||||||||||||||||||||||||
|
New York
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3 | 226,043 | 13,809,000 | 37,652,000 | 51,461,000 | 3,147,000 | 48,314,000 | — | — | |||||||||||||||||||||||||||
|
Michigan
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1 | 77,688 | 2,443,000 | 9,813,000 | 12,256,000 | 1,295,000 | 10,961,000 | — | — | |||||||||||||||||||||||||||
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Total operarting portfolio
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119 | 12,952,937 | 337,295,000 | 1,311,698,000 | 1,648,993,000 | 164,615,000 | 1,484,378,000 | 8,638,000 | 139,743,000 | |||||||||||||||||||||||||||
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Projects under development
and land held for future
expansion and development
|
n/a | n/a | 20,873,000 | 5,456,000 | 26,329,000 | — | 26,329,000 | — | — | |||||||||||||||||||||||||||
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Total portfolio
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119 | 12,952,937 | $ | 358,168,000 | $ | 1,317,154,000 | $ | 1,675,322,000 | $ | 164,615,000 | $ | 1,510,707,000 | 8,638,000 | $ | 139,743,000 | |||||||||||||||||||||
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Unconsolidated joint venture — not managed
(a)
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5,475,000 | |||||||||||||||||||||||||||||||||||
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Total unconsolidated joint ventures
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$ | 14,113,000 | ||||||||||||||||||||||||||||||||||
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| (a) | The Company has a 76.3% interest in an unconsolidated joint venture, which it does not manage, which owns a single-tenant office property located in Philadelphia, PA. |
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| Number | Annualized | Percentage of | ||||||||||||||||||||||
| of | Percentage | Annualized | Base rent | annualized | ||||||||||||||||||||
| Tenant (a) | stores | GLA | of GLA | base rent | per sq. ft. | base rents | ||||||||||||||||||
|
Top ten tenants (b):
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Giant Foods (c)
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22 | 1,328,000 | 10.3 | % | 21,503,000 | $ | 16.19 | 16.0 | % | |||||||||||||||
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Discount Drug Mart
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6 | 364,000 | 2.8 | % | 3,880,000 | 10.66 | 2.9 | % | ||||||||||||||||
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Farm Fresh (c)
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5 | 325,000 | 2.5 | % | 3,494,000 | 10.75 | 2.6 | % | ||||||||||||||||
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Stop & Shop (c)
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14 | 346,000 | 2.7 | % | 3,280,000 | 9.48 | 2.4 | % | ||||||||||||||||
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CVS
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4 | 241,000 | 1.9 | % | 2,716,000 | 11.27 | 2.0 | % | ||||||||||||||||
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Shaw’s (c)
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4 | 168,000 | 1.3 | % | 2,496,000 | 14.86 | 1.9 | % | ||||||||||||||||
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L.A. Fitness
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10 | 113,000 | 0.9 | % | 2,335,000 | 20.66 | 1.7 | % | ||||||||||||||||
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Staples
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7 | 243,000 | 1.9 | % | 1,921,000 | 7.91 | 1.4 | % | ||||||||||||||||
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Food Lion (c)
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7 | 145,000 | 1.1 | % | 1,821,000 | 12.56 | 1.4 | % | ||||||||||||||||
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Burlington Coat Factory
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2 | 118,000 | 0.9 | % | 1,599,000 | 13.55 | 1.2 | % | ||||||||||||||||
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Sub-total top ten tenants (d)
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81 | 3,391,000 | 26.2 | % | 45,045,000 | 13.28 | 33.5 | % | ||||||||||||||||
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Remaining tenants
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1,195 | 8,282,000 | 63.9 | % | 89,510,000 | 10.81 | 66.5 | % | ||||||||||||||||
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Sub-total all tenants
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1,276 | 11,673,000 | 90.1 | % | 134,555,000 | 11.53 | 100.0 | % | ||||||||||||||||
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Vacant space (e)
|
n/a | 1,280,000 | 9.9 | % | n/a | n/a | n/a | |||||||||||||||||
|
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Total (including vacant
space)
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1,276 | 12,953,000 | 100.0 | % | 134,555,000 | 10.39 | n/a | |||||||||||||||||
|
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| (a) | Incudes unconsolidated managed joint venture properties. | |
| (b) | Based on annualized base rent. | |
| (c) | Several of the tenants listed above share common ownership with other tenants including, without limitation, (1) Giant Foods and Stop & Shop, (2) Farm Fresh, Shaw’s, Shop ‘n Save (GLA of 53,000; annualized base rent of $495,000), Shoppers Food Warehouse (GLA of 120,000; annualized base rent of $1,206,000) and Acme (GLA of 172,000; annualized base rent of $756,000), and (3) Food Lion and Hannaford (GLA of 43,000; annualized base rent of $405,000). | |
| (d) | Includes tenants at ground-up development properties. | |
| (e) | Includes vacant space at properties undergoing development and/or redevelopment activities. |
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| Percentage | ||||||||||||||||||||||||
| Tenants | Percentage | Annualized | Annualized | of annualized | ||||||||||||||||||||
| Year of lease | with leases | GLA | of GLA | expiring | expiring base | expiring | ||||||||||||||||||
| expiration (a) | expiring | expiring | expiring | base rents | rents per sq. ft. | base rents | ||||||||||||||||||
|
Month-to-Month
|
83 | 214,000 | 1.8 | % | $ | 2,823,000 | $ | 13.19 | 2.1 | % | ||||||||||||||
|
2010
|
166 | 804,000 | 6.9 | % | 9,833,000 | 12.23 | 7.3 | % | ||||||||||||||||
|
2011
|
180 | 1,016,000 | 8.7 | % | 11,571,000 | 11.39 | 8.6 | % | ||||||||||||||||
|
2012
|
177 | 846,000 | 7.2 | % | 9,808,000 | 11.59 | 7.3 | % | ||||||||||||||||
|
2013
|
143 | 755,000 | 6.5 | % | 9,268,000 | 12.28 | 6.9 | % | ||||||||||||||||
|
2014
|
150 | 1,357,000 | 11.6 | % | 12,903,000 | 9.51 | 9.6 | % | ||||||||||||||||
|
2015
|
104 | 1,052,000 | 9.0 | % | 9,796,000 | 9.31 | 7.3 | % | ||||||||||||||||
|
2016
|
49 | 607,000 | 5.2 | % | 5,873,000 | 9.68 | 4.4 | % | ||||||||||||||||
|
2017
|
37 | 487,000 | 4.2 | % | 6,191,000 | 12.71 | 4.6 | % | ||||||||||||||||
|
2018
|
42 | 778,000 | 6.7 | % | 8,878,000 | 11.41 | 6.6 | % | ||||||||||||||||
|
2019
|
37 | 562,000 | 4.8 | % | 6,127,000 | 10.90 | 4.6 | % | ||||||||||||||||
|
2020
|
29 | 932,000 | 8.0 | % | 7,621,000 | 8.18 | 5.7 | % | ||||||||||||||||
|
Thereafter
|
79 | 2,263,000 | 19.4 | % | 33,863,000 | 14.96 | 25.0 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
All tenants (b)
|
1,276 | 11,673,000 | 100.0 | % | 134,555,000 | 11.53 | 100.0 | % | ||||||||||||||||
|
Vacant space (c)
|
n/a | 1,280,000 | n/a | n/a | n/a | n/a | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total portfolio
|
1,276 | 12,953,000 | n/a | $ | 134,555,000 | $ | 10.39 | n/a | ||||||||||||||||
|
|
||||||||||||||||||||||||
| (a) | Incudes unconsolidated managed joint venture properties. | |
| (b) | Includes tenants at ground-up development properties. | |
| (c) | Includes vacant space at properties undergoing development and/or redevelopment activities. |
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 5-year terms. The longer terms of major
tenant leases serve to protect the Company against significant vacancies and to assure the presence
of strong tenants which draw consumers to its centers. The shorter terms of smaller store leases
allow the Company under appropriate circumstances to adjust rental rates periodically for non-major
store space and, where possible, to upgrade or adjust the overall tenant mix.
Most leases contain provisions requiring tenants to pay their pro rata share of real estate
taxes, insurance and certain operating costs. Some leases also provide that tenants pay percentage
rent based upon sales volume generally in excess of certain negotiated minimums.
Giant Food Stores, LLC (“Giant Foods”), which is owned by Ahold N.V., a Netherlands
corporation, leased approximately 10%, 9% and 9% of the Company’s GLA at December 31, 2009, 2008
and 2007, respectively, and accounted for approximately 12%, 12% and 13% of the Company’s total
revenues during 2009, 2008 and 2007, respectively. Giant Foods, in combination with Stop & Shop,
Inc., which is also owned by Ahold N.V., accounted for approximately
15%, 15% and 15% of the
Company’s total revenues during 2009, 2008 and 2007, respectively.
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Of these
amounts, 3%, respectively, were attributable to Giant Foods’ revenues at the seven properties transferred or to
be transferred to the RioCan joint venture, for each of the periods presented. No other tenant
leased more than 10% of GLA at December 31, 2009, 2008 or 2007, or contributed more than 10% of
total revenues during 2009, 2008 or 2007. No individual property had a net book value equal to more
than 10% of total assets at December 31, 2009, 2008 or 2007.
Depreciation on all of the Company’s properties is calculated using the straight-line method
over the estimated useful lives of the respective real properties and improvements, which range
from three to forty years.
The Company’s executive offices are located at 44 South Bayles Avenue, Port Washington, New
York, in which it presently occupies approximately 8,600 square feet leased from a partnership
owned 43.6% by the Company’s Chairman. Under the terms of the lease, as amended, which will expire
in February 2020, the Company will add an additional 6,400 square feet by the end of 2010. The
Company believes that the terms of its lease are at market.
Competition
The Company believes that competition for the acquisition and operation of retail shopping and
convenience centers is highly fragmented. It faces competition from institutional investors, public
and private REITs, owner-operators engaged in the acquisition, ownership and leasing of shopping
centers, as well as from numerous local, regional and national real estate developers and owners in
each of its markets. It also faces competition in leasing available space at its properties to
prospective tenants. Competition for tenants varies depending upon the characteristics of each
local market in which the Company owns and manages properties. The Company believes that the
principal competitive factors in attracting tenants in its market areas are location, price and
other lease terms, the presence of anchor tenants, the mix, quality and sales results of other
tenants, and maintenance, appearance, access and traffic patterns of its properties.
Environmental Matters
Under various federal, state, and local laws, ordinances and regulations, an owner or operator
of real estate may be required to investigate and clean up hazardous or toxic substances or other
contaminants at property owned, leased, managed or otherwise operated by such person, and may be
held liable to a governmental entity or to third parties for property damage, and for investigation
and
clean up costs in connection with such contamination. The cost of investigation, remediation or
removal of such substances may be substantial, and the presence of such substances, or the failure
to properly remediate such conditions, may adversely affect the owner’s, lessor’s or operator’s
ability to sell or rent such property or to arrange financing using such property as collateral. In
connection with the ownership, operation and management of real estate, the Company may potentially
become liable for removal or remediation costs, as well as certain other related costs and
liabilities, including governmental fines and injuries to persons and/or property.
The Company believes that environmental studies conducted at the time of acquisition with
respect to all of its properties have not revealed environmental liabilities that would have a
material adverse affect on its business, results of operations or liquidity. However, no assurances
can be given
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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, 2009, the Company had 102 employees (95 full-time and 7 part-time). The
Company believes that its relations with its employees are good.
Economic conditions in the U.S. economy, instability in the credit markets and the uncertain retail
environment could adversely affect our ability to continue to pay dividends or cause us to reduce
further the amount of our dividends
.
As a result of the current state of the U.S. economy, constrained capital markets, the
difficult retail environment and the need to renew the Company’s secured revolving stabilized
property line of credit facility, on January 29, 2009, our Board of Directors reduced our annual
dividend rate on our common stock from $.90 per share to $.45 per share and on April 2, 2009
suspended the payment of dividends. Although the Board recently reinstituted dividends at the
annual rate of $.36 per share, there can be no assurance that as a result of economic conditions
the Company will not be forced to reduce further, or once again suspend, the payment of dividends.
Volatility and instability in the credit markets could adversely affect our ability to obtain new
financing or to refinance existing indebtedness
.
There continues to be substantial volatility and instability in the credit markets. We have
recently witnessed the near-complete disappearance of commercial mortgage-backed securities
(“CMBS”) as a means of financing real estate. Such CMBS financings, generally at a fixed rate for
a period of 10 years, represent the preponderance of fixed-rate financing for the Company’s
existing stabilized portfolio. It is highly unlikely that a market for such securities and the
availability of such loans will be accessible by the Company for an indefinite period, or perhaps
ever. Continued uncertainty in the credit markets may negatively impact our ability to access
additional debt financing, to arrange property-specific financing or to refinance our existing debt
as it matures on favorable terms or at all. As a result, we may be forced to seek potentially less
attractive financings, including equity investments on terms that may not be favorable to us. In
doing so, the Company may be compelled to dilute the interests of existing shareholders that could
also adversely reduce the trading price of our common stock.
Our properties consist primarily of community shopping and convenience centers. Our performance
therefore is linked to economic conditions in the market for retail space generally
.
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Our properties consist primarily of supermarket-anchored community shopping centers, and our
performance therefore is linked to economic conditions in the market for retail space generally.
This also means that we are subject to the risks that affect the retail environment generally,
including the levels of consumer spending, the willingness of retailers to lease space in our
shopping centers, tenant bankruptcies, changes in economic conditions and consumer confidence. A
sustained 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 or the value of our
properties. Our ability to lease space and negotiate and maintain favorable rents could also be
negatively impacted by the current state of the U.S. economy. Moreover, the demand for leasing
space in our existing shopping centers as well as our development properties could also
significantly decline during a significant downturn in the U.S. economy that could result in a
decline in our occupancy percentage and reduction in rental revenues. The U.S. economy has
generally experienced during recent months, and is expected to continue to experience, substantial
unemployment at rates which approach their highest levels in the country’s history. Such levels of
reported unemployment may in fact mask more serious unemployment issues, such as persons who have
not sought to re-enter the labor force after having been unemployed for substantial periods of time
and, further, may not fairly reflect persons who are under-employed or temporarily employed. In
addition, the prospects of substantial decreases in the levels of unemployment in the near term do
not appear to be positive. Sustained levels of high unemployment can be expected to have a serious
negative impact on consumer spending in affected areas. While unemployment levels may vary
considerably in different areas of the country, and within the markets in which we presently
operate, sustained unemployment may have a continuing negative impact on sales by our tenants at
our various shopping centers.
A number of tenants in negotiating or renegotiating leases have sought to limit their payment
of base rent, allocable common area charges and real estate taxes. In fact, the Company’s
collection of common area charges has declined and may decline further as a result of vacancies,
default, and tenant resistance.
Our performance and value are subject to risks associated with real estate assets and with the real
estate industry.
Our performance and value are subject to risks associated with real estate assets and with the
real estate industry, including, among other things, risks related to adverse changes in national,
regional and local economic and market conditions. Our continued ability to make expected
distributions to our shareholders depends on our ability to generate sufficient revenues to meet
operating expenses, future debt service and capital expenditure requirements. Events and conditions
generally applicable to owners and operators of real property that are beyond our control may
decrease cash available for distribution and the value of our properties. These events and
conditions include, but may not be limited to, the following:
| 1. | local oversupply, increased competition or declining demand for real estate; |
| 2. | local economic conditions, which may be adversely impacted by plant closings, business layoffs, industry slow-downs, weather conditions, natural disasters and other factors; |
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| 3. | non-payment or deferred payment of rent or other charges by tenants, either as a result of tenant-specific financial ills, or general economic events or circumstances adversely affecting consumer disposable income or credit; |
| 4. | vacancies or an inability to rent space on acceptable terms; |
| 5. | inability to finance property development, tenant improvements and acquisitions on acceptable terms; |
| 6. | increased operating costs, including real estate taxes, insurance premiums, utilities, repairs and maintenance; |
| 7. | volatility and/or increases in interest rates, or the non-availability of funds in the credit markets in general; |
| 8. | increased costs of complying with current, new or expanded governmental regulations; |
| 9. | the relative illiquidity of real estate investments; |
| 10. | changing market demographics; |
| 11. | changing traffic patterns; |
| 12. | an inability to arrange property-specific replacement financing for maturing mortgage loans in acceptable amounts or on acceptable terms; |
Our substantial indebtedness and constraints on credit may impede our operating performance, as
well as our development, redevelopment and acquisition activities, and put us at a competitive
disadvantage.
We intend to incur additional debt in connection with the development and redevelopment of
properties owned by us and in connection with future acquisitions of real estate. We also may
borrow funds to make distributions to shareholders. If we are unable to obtain such financing, we
may be forced to delay or cancel such development, redevelopment and acquisition activities, which
might require us to record a loss, might impair our future growth, and which in turn may harm our
stock price. Our debt may harm our business and operating results by (i) 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 the amount available for distributions, (ii)
placing us at a competitive disadvantage compared to competitors that have less debt or debt at
more favorable terms, (iii) making us more vulnerable to economic and industry downturns and
reducing our flexibility in responding to changing business and economic conditions, and (iv)
limiting our ability to borrow more money for operations, capital expenditures, or to finance
development, redevelopment and acquisition activities in the future. Increases in interest rates
may impede our operating performance and put us at a competitive disadvantage. Payments of required
debt service or amounts due at maturity, or creation of additional reserves under loan agreements,
could adversely affect our liquidity.
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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, particularly with respect to anchor
tenants, 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, as provided in their respective leases.
We may be restricted from re-leasing space based on existing exclusivity lease provisions with
some of our tenants. In these cases, the leases contain provisions giving the tenant the exclusive
right to sell particular types of merchandise or provide specific types of services within the
particular retail center which limit 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.
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 collection of such sums. If a lease is affirmed by the tenant in bankruptcy, all
pre-bankruptcy balances due under the lease must generally be paid in full. However, if a lease is
disaffirmed by a tenant in bankruptcy, we would have only an unsecured claim for damages, which
would be paid normally only to the extent that funds are available, and only in the same percentage
as is paid to all other members of the same class of unsecured creditors. It is possible and indeed
likely that we would recover substantially less than the full value of any unsecured claims we
hold, which may in turn harm our financial condition.
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. The recent increase in
national retail chain bankruptcies has increased available retail space and has increased
competitive pressure to renew tenant leases upon expiration and find new tenants for vacant space
at our properties. In addition, any new competitive properties that are developed within the trade
areas of our existing properties may
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Table of Contents
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.
We face competition for the acquisition of real estate properties, which may impede our ability to
make future acquisitions or may increase the cost of these acquisitions.
We compete with many other entities engaged in real estate investment activities for
acquisitions of retail shopping centers, including institutional investors, other REITs and other
owner-operators of shopping centers. These competitors may drive up the price we must pay for real
estate properties, other assets or other companies we seek to acquire or may succeed in acquiring
those companies or assets themselves. In addition, our potential acquisition targets may find our
competitors to be more attractive suitors because they may have greater resources, may be willing
to pay more, or may have a more compatible operating philosophy. In addition, the number of
entities and the amount of funds competing for suitable investment properties may increase. This
will result in increased demand for these assets and therefore increased prices paid for them. If
we pay higher prices for properties, our profitability will be reduced.
Our current and future joint venture investments could be adversely affected by the lack of sole
decision-making authority, reliance on joint venture partners’ financial condition, and any
disputes that may arise between our joint venture partners and us.
We presently own a number of our properties in joint venture, and in the future we intend to
co-invest with third parties through joint ventures and/or contribute some of our properties to
joint ventures. In addition, we have a 76% interest in an unconsolidated joint venture that owns a
single-
tenant office property. We may not be in a position to exercise sole decision-making authority
regarding the properties owned through joint ventures. Investments in joint ventures may, under
certain circumstances, involve risks not present when a third party is not involved, including the
possibility that joint venture partners might file for bankruptcy protection or fail to fund their
share of required capital contributions. Joint venture partners may have business interests or
goals that are inconsistent with our business interests or goals, and may be in a position to take
actions contrary to our policies or objectives. Such investments also may have the potential risk
of impasses on decisions, such as a sale, because neither the joint venture partner nor we would
have full control over the joint venture. Any disputes that may arise between joint venture
partners and us may result in litigation or arbitration that would increase our expenses and
prevent our officers and/or directors from focusing their time and effort on our business.
Consequently, actions by or disputes with joint venture partners might result in subjecting
properties owned by the joint venture to additional risk. In addition, we may in certain
circumstances be liable for the actions of our third-party joint venture partners. Our joint
venture partner(s) or we may not be in a position to respond to capital calls, and such calls could
thus adversely affect our ownership or profits interest through subordination, dilution or super
priorities. Also, the triggering of buy/sell provisions in the respective joint venture agreements
could adversely affect our ownership interests.
16
Table of Contents
The financial covenants in our loan agreements may restrict our operating or acquisition
activities, which may harm our financial condition and operating results.
The financial covenants in our loan agreements may restrict our operating or acquisition
activities, which may harm our financial condition and operating results. The mortgages on our
properties contain customary negative covenants, such as those that limit our ability, without the
prior consent of the lender, to sell or otherwise transfer any ownership interest, to further
mortgage the applicable property, to enter into leases, or to discontinue insurance coverage. Our
ability to borrow under our secured revolving credit facilities is subject to compliance with these
financial and other covenants, including restrictions on property eligible for collateral, the
payment of dividends, and overall restrictions on the amount of indebtedness we can incur. If we
breach covenants in our debt agreements, the lenders could declare a default and require us to
repay the debt immediately and, if the debt is secured, could take possession of the property or
properties securing the loan.
A substantial portion of our properties are located in the mid-Atlantic and Northeast coastal
regions, which exposes us to greater economic risks than if our properties were owned in several
geographic regions.
Our properties are located largely in the mid-Atlantic and Northeast coastal regions, which
exposes us to greater economic risks than if we owned properties in more geographic regions. Any
adverse economic or real estate developments resulting from the regulatory environment, business
climate, fiscal problems or weather in such regions could have an adverse impact on our prospects.
In addition, the economic condition of each of our markets may be dependent on one or more
industries. An economic downturn in one of these industry sectors may result in an increase in
tenant vacancies, which may harm our performance in the affected markets. High barriers to entry in
the Northeast due to mature economies, road patterns, density of population, restrictions on
development, and high land costs, coupled with large numbers of often overlapping government
jurisdictions, may make it difficult for the Company to continue to grow in these areas.
Development and redevelopment activities may be delayed or otherwise may not achieve expected
results.
Development and/or redevelopment activities may be cancelled, terminated, abandoned, and/or
delayed, or otherwise may not achieve expected results due, among other things, to our inability to
achieve favorable leasing results, to obtain all required permits and approvals, and to finance
such development activities. We are in the process of developing/redeveloping several of our
properties and expect to continue such activities in the future. In this connection, we will bear
certain risks, including the risks of failure/lack of, or withdrawal of, expected entitlements,
construction delays or cost overruns
(including increases in materials and/or labor costs) that may increase project costs and make
such project uneconomical, the risk that occupancy or rental rates at a completed project will not
be sufficient to enable us to pay operating expenses or achieve targeted rates of return on
investment, and the risk of incurring acquisition and/or predevelopment costs in connection with
projects that are not pursued to completion. Development/redevelopment activities are also
generally subject to governmental permits and approvals, which may be delayed, may not be obtained,
or may be conditioned on terms unfavorable
17
Table of Contents
to us. In addition, consents may be required from
various tenants, lenders, and/or joint venture partners. In case of an unsuccessful project, our
loss could exceed our investment in the project.
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. Also, we have greatly reduced our acquisition and development operations
which could require a downsizing in staffing of those activities and related operations within the
Company. 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.
Potential losses may not be covered by insurance.
Potential losses may not be covered by insurance. We carry comprehensive liability, fire,
flood, extended coverage and rental loss insurance under a blanket policy covering all of our
properties. We believe the policy specifications and insured limits are appropriate and adequate
given the relative risk of loss, the cost of the coverage and industry practice. We do not carry
insurance for losses such as from war, nuclear accidents, and nuclear, biological and chemical
occurrences from terrorist’s acts. Some of the insurance, such as that covering losses due to
floods and earthquakes, is subject to limitations involving large deductibles or co-payments and
policy limits that may not be sufficient to cover losses. Additionally, certain tenants have
termination rights in respect of certain casualties. If we receive casualty proceeds, we may not be
able to reinvest such proceeds profitably or at all, and we may be forced to recognize taxable gain
on the affected property. If we experience losses that are uninsured or that exceed policy limits,
we could lose the capital invested in the damaged properties as well as the anticipated future cash
flows from those properties. In addition, if the damaged properties are subject to recourse
indebtedness, we would continue to be liable for the indebtedness, even if these properties were
irreparably damaged.
Future terrorist attacks could harm the demand for, and the value of, our properties.
Future terrorist attacks, such as the attacks that occurred in New York, Pennsylvania and
Washington, D.C. on September 11, 2001, and other acts of terrorism or war, could harm the demand
for, and the value of, our properties. Terrorist attacks could directly impact the value of our
properties through damage, destruction, loss or increased security costs, and the availability of
insurance for such acts may be limited or may be subject to substantial cost increases. To the
extent that our tenants are impacted by future attacks, their ability to continue to honor
obligations under their existing leases could be adversely affected.
If we fail to continue as a REIT, our distributions will not be deductible, and our income will be
subject to taxation, thereby reducing earnings available for distribution.
If we do not continue to qualify as a REIT, our distributions will not be deductible, and our
income will be subject to taxation, reducing earnings available for distribution. We have elected
since 1986 to be taxed as a REIT under the Code. A REIT will generally not be subject to federal
income
18
Table of Contents
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.
We intend to make distributions to shareholders to comply with the requirements of the Code.
However, differences in timing between the recognition of taxable income and the actual receipt of
cash could require us to sell assets, borrow funds or pay a portion of the dividend in common stock
to meet the 90% distribution requirement of the Code. Certain assets generate substantial
differences between taxable income and income recognized in accordance with accounting principles
generally accepted in the United States (“GAAP”). Such assets include, without limitation,
operating real estate that was acquired through structures that may limit or completely eliminate
the depreciation deduction that would otherwise be available for income tax purposes. As a result,
the Code requirement to distribute a substantial portion of our otherwise net taxable income in
order to maintain REIT status could cause us to (i) distribute amounts that could otherwise be used
for future acquisitions, capital expenditures or repayment of debt, (ii) borrow on unfavorable
terms, (iii) sell assets on unfavorable terms or (iv) pay a portion of our common dividend in
common stock. If we fail to obtain debt or equity capital in the future, it could limit our
operations and our ability to grow, which could have a material adverse effect on the value of our
common stock.
Dividends payable by REITs do not qualify for the reduced tax rates under tax legislation
which reduced the maximum tax rate for dividends payable to individuals from 35% to 15% (through
2010). Although this legislation does not adversely affect the taxation of REITs or dividends paid
by REITs, the more favorable rates applicable to regular corporate dividends could cause investors
to perceive investments in REITs to be relatively less attractive than investments in the stock of
corporations that pay dividends qualifying for reduced rates of tax, which in turn could adversely
affect the value of the stock of REITs.
We could incur significant costs related to government regulation and litigation over
environmental matters and various other federal, state and local regulatory requirements.
We could incur significant costs related to government regulations and litigation over
environmental matters. Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate may be required to investigate and clean up hazardous or toxic
substances or other contaminants at property owned, leased, managed or otherwise operated by such
person, and may be held liable to a governmental entity or to third parties for property damage,
and for investigation and clean up costs in connection with such contamination. The cost of
investigation, remediation or removal of such substances may be substantial, and the presence of
such substances, or the failure to properly remediate such conditions, may adversely affect the
owner’s, lessor’s or operator’s ability to sell or rent such property or to arrange financing using
such property as collateral. In connection with the ownership, operation and management of real
properties, we are potentially liable for removal or remediation costs, as well as certain other
related costs and liabilities, including governmental fines, injuries to persons, and damage to
property.
We may incur significant costs complying with the Americans with Disabilities Act of 1990 (the
“ADA”) and similar laws, which require that all public accommodations meet federal requirements
19
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related to access and use by disabled persons, and with various other federal, state and local
regulatory requirements, such as state and local fire and life safety requirements.
The Company believes environmental studies conducted at the time of acquisition with respect
to all of our properties did not reveal any material environmental liabilities, and we are unaware
of any subsequent environmental matters that would have created a material liability. We believe
that our properties are currently in material compliance with applicable environmental, as well as
non-environmental, statutory and regulatory requirements. If one or more of our properties were not
in compliance with such federal, state and local laws, we could be required to incur additional
costs to bring the property into compliance. If we incur substantial costs to comply with such
requirements, our business and operations could be adversely affected. If we fail to comply with
such requirements, we might incur governmental fines or private damage awards. We cannot presently
determine whether
existing requirements will change or whether future requirements will require us to make
significant unanticipated expenditures that will adversely impact our business and operations.
Our charter and Maryland law contain provisions that may delay, defer or prevent a change of
control transaction and depress our stock price.
Our charter and Maryland law contain provisions that may delay, defer or prevent a change of
control transaction and depress the price of our common stock. The charter, subject to certain
exceptions, authorizes directors to take such actions as are necessary and desirable relating to
qualification as a REIT, and to limit any person to beneficial ownership of no more than 9.9% of
the outstanding shares of our common stock. Our Board of Directors, in its sole discretion, may
exempt a proposed transferee from the ownership limit, but may not grant an exemption from the
ownership limit to any proposed transferee whose direct or indirect ownership could jeopardize our
status as a REIT. These restrictions on transferability and ownership will not apply if our Board
of Directors determines that it is no longer in our best interests to continue to qualify as, or to
be, a REIT. This ownership limit may delay or impede a transaction or a change of control that
might involve a premium price for our common stock or otherwise be in the best interests of
shareholders. Our Board of Directors has waived the ownership limit to permit each of Inland
American Real Estate Trust, Inc. and RioCan Real Estate Investment Trust to acquire up to 14% and
16%, respectively, of our stock; provided, however, that each of them has agreed to various voting
restrictions and standstill provisions.
We may authorize and issue stock and OP Units without shareholder approval. Our charter
authorizes the Board of Directors to issue additional shares of common or preferred stock, to issue
additional OP Units, to classify or reclassify any unissued shares of common or preferred stock,
and to set the preferences, rights and other terms of such classified or unclassified shares. In
connection with obtaining shareholder approval to increase the number of authorized shares of
preferred stock, we have agreed not to use our preferred stock for anti-takeover purposes or in
connection with a shareholder rights plan unless we obtain shareholder approval. Certain provisions
of the Maryland General Corporation Law (the “MGCL”) may have the effect of inhibiting a third
party from making a proposal to acquire us or of impeding a change of control under circumstances
that otherwise could provide the holders of shares of our common stock with the opportunity to
realize a premium over the then-prevailing market price of such shares, including:
20
Table of Contents
| 1. | “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person or an affiliate thereof who beneficially owns 10% or more of the voting power of our shares) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and special stockholder voting requirements on these combinations; and |
| 2. | “control share” provisions that provide that our “control shares” (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of control shares) have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. |
We have opted out of these provisions of the MGCL. However, the Board of Directors may, by
resolution, elect to opt in to the business combination provisions of the MGCL, and we may, by
amendment to our bylaws, opt in to the control share provisions of the MGCL.
|
|
||
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.
21
Table of Contents
Directors and Executive Officers of the Company
Information regarding the Company’s directors and executive officers is set forth below:
| Name | Age | Position | ||||
|
Leo S. Ullman
|
70 | Chairman of the Board of Directors, Chief Executive Officer and President | ||||
|
James J. Burns
|
70 | Director | ||||
|
Raghunath Davloor
|
48 | Director | ||||
|
Richard Homburg
|
60 | Director | ||||
|
Pamela N. Hootkin
|
62 | Director | ||||
|
Everett B. Miller III
|
64 | Director | ||||
|
Roger M. Widmann
|
70 | Director | ||||
|
Lawrence E. Kreider, Jr.
|
62 | Chief Financial Officer | ||||
|
Nancy H. Mozzachio
|
45 | Vice President — Leasing | ||||
|
Thomas B. Richey
|
54 | President — Development and Construction Services | ||||
|
Brenda J. Walker
|
57 | Vice President — Chief Operating Officer | ||||
|
Stuart H. Widowski
|
49 | Secretary and General Counsel | ||||
|
Joel I. Yarmak
|
60 | Chief Administrative Officer | ||||
Leo S. Ullman
, chief executive officer, president and chairman of the Board of Directors, has
been involved in real estate property and asset management for more than thirty years. He was
chairman and president since 1978 of the real estate management companies, and their respective
predecessors and affiliates, which were merged into the Company in 2003. Mr. Ullman was first
elected as the Company’s chairman in April 1998 and served until November 1999. He was re-elected
in December 2000. Mr. Ullman also has been chief executive officer and president from April 1998 to
date. He has been a member of the New York Bar since 1966 and was in private legal practice until
1998. From 1984 until 1993, he was a partner in the New York law firm of Reid & Priest, and served
as initial director of its real estate group. Mr. Ullman received an A.B. from Harvard University,
an M.B.A. from the Columbia University Graduate School of Business and a J.D. from the Columbia
University School of Law where he was a Harlan Fiske Stone Scholar. He also served in the U.S.
Marine Corps. He has lectured and written books, monographs and articles on investment in US real
estate, and is a former adjunct professor of business at the NYU Graduate School of Business. Mr.
Ullman serves on the boards of several charities, is a member of the Development Committee of the
U.S. Holocaust Memorial Museum, and has received several awards for community service. Mr. Ullman
is a past regional winner and former national judge for the Ernst & Young LLP Entrepreneur of the
Year Award Program.
James J. Burns
, a director since 2001 and a member of the Audit (Chair), Compensation and
Nominating/Corporate Governance committees, was chief financial officer and senior vice president
of Reis, Inc. (formerly Wellsford Real Properties, Inc.) from December 2000 until March 2006 when
he became vice chairman. In March 2009, he entered into a consulting role at Reis. He joined Reis
in October 1999 as chief accounting officer upon his retirement from Ernst & Young LLP in September
1999. At Ernst & Young LLP, Mr. Burns was a senior audit partner in the E&Y Kenneth Leventhal Real
Estate Group for 22 years. Since 2000, Mr. Burns has also served as a director of One Liberty
Properties, Inc., a REIT listed on the New York Stock Exchange. Mr. Burns is a certified public
22
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accountant and a member of the American Institute of Certified Public Accountants. Mr. Burns
received a B.A. and M.B.A. from Baruch College of the City University of New York.
Raghunath Davloor
, a director since October 2009, has been, from February 2008 to the present,
Senior Vice President and Chief Financial Officer of RioCan Real Estate Investment Trust, Canada’s
largest real estate investment trust with an enterprise value of approximately $8.0 billion.
RioCan, headquartered in Toronto, Ontario, is involved in the ownership, development, management,
leasing, acquisition and redevelopment of retail properties across Canada. Currently, RioCan owns
or has an interest in 258 properties totaling more than 60 million square feet. RioCan owns a
direct investment in the Company and is a partner with the Company in several joint venture
properties in the U.S. From January 2006 until February 2008, he was Vice-President and Director of
Investment Banking at TD Securities, covering the real estate sector. For ten years prior thereto,
he was with O&Y Properties Corporation and O&Y REIT in a number of progressive positions,
ultimately becoming Chief Financial Officer. Prior to joining O&Y, Mr. Davloor was a Senior Tax
Manager at Arthur Andersen in the real estate advisory services group, specializing in real estate
and international taxation. He is a chartered accountant and a member of the Institute of Chartered
Accountants of Ontario. Mr. Davloor holds a Bachelor of Commerce degree from the University of
Manitoba.
Richard Homburg
, a director since 1999, and chairman from November 1999 to August 2000, was
born and educated in the Netherlands. Mr. Homburg is chairman and CEO of Homburg Invest Inc. and
president of Homburg Invest USA Inc. (a wholly-owned subsidiary of Homburg Invest Inc., a
publicly-traded Canadian corporation listed on the Toronto and Euronext Amsterdam Stock Exchanges).
Mr. Homburg was the president and CEO of Uni-Invest N.V., a publicly-listed Netherlands real estate
fund, from 1991 until 2000. In 2002, an investment group purchased 100% of the shares of Uni-Invest
N.V., taking it private, at which time it was one of the largest real estate funds in the
Netherlands with assets of approximately $2.5 billion. In addition to his varied business
interests, Mr. Homburg has served on many boards. He is a past director of Evangeline Trust, the
Urban Development Institute of Canada, and the World Trade Center in Eindhoven, the Netherlands,
and was co-founder, past president and director of the Investment Property Owners Association of
Nova Scotia. He is a director of the Fathers of Confederation Building Trust as well as director or
advisory board member of other large charitable organizations. In 2004 he was named Entrepreneur of
the Year for the Atlantic Provinces by Ernst & Young LLP. Mr. Homburg holds an honorary Doctorate
in Commerce from St. Mary’s University in Halifax, Nova Scotia, and an honorary Doctorate in Law
from the University of Prince Edward Island.
Pamela N. Hootkin,
a director since June 2008 and a member of the Audit and
Nominating/Corporate Governance committees, has been senior vice president, treasurer and director
of investor relations at Phillips-Van Heusen Corporation since June 2007. She joined Phillips-Van
Heusen in 1988 as vice president, treasurer and corporate secretary and in 1999 became vice
president, treasurer and director of investor relations. From 1986 to 1988, Ms. Hootkin was vice
president and chief financial officer of Yves Saint Laurent Parfums, Inc. From 1975 to 1986, she
was employed by Squibb Corporation in various capacities, with her last position being vice
president and treasurer of a division of Squibb. Ms. Hootkin is a board member of Safe Horizon, New
York (a not-for-profit organization) where she also serves on the executive and finance committees.
Ms. Hootkin received a B.A. from the State University of New York at Binghamton and a M.A. from
Boston University.
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Table of Contents
Everett B. Miller, III
, a director since 1998 and a member of the Nominating/Corporate
Governance (Chair), Audit and Compensation committees, is vice president of alternative investments
at the YMCA Retirement Fund. In March 2003, Mr. Miller was appointed to the Real Estate Advisory
Committee of the New York State Common Retirement Fund. Prior to his retirement in May 2002 from
Commonfund Realty, Inc., a registered investment advisor, Mr. Miller was the chief operating
officer of that company from 1997 until May 2002. From January 1995 through March 1997, Mr. Miller
was the Principal Investment Officer for Real Estate and Alternative Investment at the Office of
the Treasurer of the State of Connecticut. Prior thereto, Mr. Miller was employed for eighteen
years at affiliates of Travelers Realty Investment Co., at which his last position was senior vice
president. Mr. Miller received a B.S. from Yale University.
Roger M. Widmann,
a director since October 2003 and a member of the Compensation (Chair) and
Nominating/Corporate Governance committees, is an investment banker. He was a principal of the
investment banking firm of Tanner & Co., Inc. from 1997 to 2004. From 1986 to 1995, Mr. Widmann was
a senior managing director of Chemical Securities, Inc., a subsidiary of Chemical Banking
Corporation (now JPMorgan Chase Corporation). Prior to joining Chemical Securities, Inc., Mr.
Widmann was a founder and managing director of First Reserve Corporation, the largest independent
energy investing firm in the U.S. Previously, he was senior vice president with the investment
banking firm of Donaldson, Lufkin & Jenrette, responsible for the firm’s domestic and international
investment banking business. He had also been a vice president with New Court Securities (now
Rothschild, Inc.). He was a director of Lydall, Inc. (NYSE), a manufacturer of thermal, acoustical
and filtration materials, from 1974 to 2004, and its chairman from 1998 to 2004. He is a director
of Standard Motor Products, Inc. (NYSE), a manufacturer of automobile replacement parts, and
GigaBeam Corporation, a manufacturer of “last mile” wireless transmission systems. Mr. Widmann is
Chairman of Keystone National Group, a fund of private equity funds. He is also a senior moderator
of the Aspen Seminar at The Aspen Institute, and is a board member of the March of Dimes of Greater
New York and Vice Chairman of Oxfam America. Mr. Widmann received an A.B. from Brown University and
a J.D. from Columbia University School of Law.
Lawrence E. Kreider, Jr.
joined the Company in June 2007 as Chief Financial Officer and has
direct responsibility for all financial aspects of the Company’s operations. Prior to joining the
Company, Mr. Kreider was Senior Vice President, Chief Financial Officer, Chief Information Officer
and Chief Accounting Officer for Affordable Residential Communities, now named Hilltop Holdings
Inc., for substantial periods of time from 2001 to 2007. From 1999 to 2001, Mr. Kreider was Senior
Vice President of Finance for Warnaco Group Inc. and, in 2000 and 2001, President of Warnaco
Europe. From 1986 to 1999, Mr. Kreider served in several senior finance positions, including Senior
Vice President, Controller and Chief Accounting Officer, with Revlon, Inc. and MacAndrews & Forbes
Holdings. Prior to 1986, he served in senior finance positions with Zale Corporation, Johnson
Matthew Jewelry Corporation and Refinement International Company. Mr. Kreider began his career with
Coopers & Lybrand, now PricewaterhouseCoopers. Mr. Kreider holds a B.A. from Yale University and an
M.B.A. from the Stanford Graduate School of Business.
Nancy H. Mozzachio
joined the Company in 2003 as Vice President- Leasing and has been involved
in the shopping center industry for more than 22 years. Prior to joining the Company, Ms. Mozzachio
served as Vice President of Leasing and Development for American Continental Properties Group from
1988 to 2003 where she assisted in bringing the first Wal-Mart store to the State of New
24
Table of Contents
Jersey.
From 1986 to 1988, Ms. Mozzachio was a leasing and development manager for Kode Development Group
of Philadelphia, an active developer of supermarket-anchored shopping centers in the Pennsylvania
and New Jersey region. Ms. Mozzachio served on several Planning Boards in New Jersey and is a
current member of Commercial Real Estate Women (CREW), Urban Land Institute and Retail Network, as
well as an active member of the International Council of Shopping Centers and Zell-Lurie Real
Estate program at The University of Pennsylvania-Wharton School. Ms. Mozzachio received a B.A. from
Rutgers University.
Thomas B. Richey
joined the Company in 1998 as Vice President of Development and Construction
Services, and was elected President of Development and Construction Services in 2009. Mr. Richey
has been involved in the commercial real estate business for more than 25 years. He served as a
City Planner & Economic Development Director for the City of Williamsport, PA, from 1980 through
1983. From 1983 to 1986, he was a Project Manager for Lundy Construction Company, a large
commercial and industrial general contracting company, and Director of Acquisitions & Construction
for Shawnee Management, Inc., a major hotel management company. From 1988 to 1996, Mr. Richey was a
principal in two real estate companies specializing in the acquisition, development, redevelopment,
and operations of hotels and commercial office buildings. From 1996 to 1998, he worked for Grove
Associates, Inc., a Harrisburg, PA, area survey and engineering company, where he specialized in
the land development plan approval process. Mr. Richey has served as an Economic Development
consultant to the National Main Street Center, part of the National Trust for Historic
Preservation, a past Board Member of a regional YMCA, and presently serves as a member of the
Board of Trustees of the Harrisburg Area Community College and as a member of the Board of
Directors of WITF, Inc., a public radio and television station. He is also an active member of the
International Council of Shopping Centers (ICSC) and the Urban Land Institute. Mr. Richey received
a B.A from Lycoming College.
Brenda J. Walker
has been a vice president of the Company since 1998, was elected Chief
Operating Office in 2009, was a director from 1998 until June 2008, and was treasurer from April
1998 until November 1999. She was an executive officer since 1992 of the real estate management
companies, and their respective predecessors and affiliates, which were merged into the Company in
2003. Ms. Walker has been involved in real estate-related finance, property and asset management
for thirty years. Ms. Walker received a B.A. from Lincoln University, Pennsylvania.
Stuart H. Widowski
has been secretary and general counsel of the Company since 1998. He was in
private practice for seven years, including five years with the New York law firm of Reid & Priest.
From 1991 through 1996, Mr. Widowski served in the legal department of the Federal Deposit
Insurance Corporation. Mr. Widowski received a B.A. from Brandeis University and a J.D. from the
University of Michigan.
Joel I. Yarmak
joined the Company in September 2009 as Chief Administrative Officer. Prior to
joining the Company, Mr. Yarmak was Vice President of financial operations of Kimco Realty
Corporation from 2000 until his employment with the Company. Prior thereto, he served as a partner
at Deloitte LLP, and Chief Financial Officer of Solow Realty & Development Company. Mr. Yarmak
received an M.B.A. from the Stern School of Business of New York University and a B.A. from Yeshiva
University.
25
Table of Contents
Dividend Information
A corporation electing REIT status is required to distribute at least 90% of its “REIT taxable
income”, as defined in the Code, to continue qualification as a REIT. The Company paid dividends
totaling $0.1125 per share during 2009 and declared a dividend of $0.09 per share to shareholders
of record at December 31, 2009, which was paid on January 20, 2010. While the Company intends to
continue paying regular quarterly dividends, future dividend declarations will continue to be at
the discretion of the Board of Directors, and will depend on the cash flow and financial condition
of the Company, capital requirements, annual distribution requirements under the REIT provisions of
the Code, and such other factors as the Board of Directors may deem relevant. In April 2009, the
Company’s Board of Directors determined to suspend payment of cash dividends with respect to its
common stock and OP Units for the balance of 2009. This decision was in response to the state of
the economy, the difficult retail environment, the constrained capital markets and the need to
renew the Company’s secured revolving stabilized property credit facility. In December 2009,
following a review of the state of the economy and the Company’s financial position, the Company’s
Board of Directors determined to resume payment of a quarterly cash dividend in the amount $0.09
per share ($0.36 per share on an annualized basis) on the Company’s common stock, which was paid on
January 20, 2010 to shareholders of record as of the close of business on December 31, 2009.
Market Information
The Company had 52,139,000 shares of common stock outstanding held by approximately 400
shareholders of record at December 31, 2009. The Company believes it has more than 8,000 beneficial
holders of its common stock. The Company’s shares trade on the NYSE under the symbol “CDR”. The
following table sets forth, for each quarter for the last two years, (i) the high, low, and
closing prices of the Company’s common stock, and (ii) dividends paid:
26
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| Market price range | Dividends | |||||||||||||||
| Quarter ended | High | Low | Close | paid | ||||||||||||
|
2009
|
||||||||||||||||
|
March 31
|
$ | 7.47 | $ | 1.68 | $ | 1.74 | $ | 0.1125 | ||||||||
|
June 30
|
5.45 | 1.96 | 4.52 | — | ||||||||||||
|
September 30
|
6.72 | 4.10 | 6.45 | — | ||||||||||||
|
December 31
|
6.85 | 5.64 | 6.80 | 0.0900 | (a) | |||||||||||
|
|
||||||||||||||||
|
2008
|
||||||||||||||||
|
March 31
|
$ | 12.60 | $ | 9.42 | $ | 11.68 | $ | 0.2250 | ||||||||
|
June 30
|
13.12 | 11.60 | 11.72 | 0.2250 | ||||||||||||
|
September 30
|
14.02 | 10.44 | 13.22 | 0.2250 | ||||||||||||
|
December 31
|
13.58 | 3.66 | 7.08 | 0.2250 | ||||||||||||
| (a) | Dividend was paid in January of 2010 to shareholders of record at December 31, 2009. |
Stockholder Return Performance Presentation
The following line graph sets forth for the period January 1, 2005 through December 31, 2009 a
comparison of the percentage change in the cumulative total stockholder return on the Company’s
common stock compared to then cumulative total return of the Russell 2000 index and the National
Association of Real Estate Investment Trusts Equity REIT Total Return Index.
The graph assumes that the shares of the Company’s common stock were bought at the price of
$100 per share and that the value of the investment in each of the Company’s common stock and the
indices was $100 at the beginning of the period. The graph further assumes the reinvestment of
dividends when paid.
27
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Cedar Shopping Centers, Inc.
| Period Ending | ||||||||||||||||||||||||||||||||
| Index | 01/01/05 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | ||||||||||||||||||||||||||
|
Cedar Shopping Centers, Inc.
|
100.00 | 104.84 | 125.82 | 86.25 | 64.80 | 64.10 | ||||||||||||||||||||||||||
|
Russell 2000
|
100.00 | 104.55 | 123.76 | 121.82 | 80.66 | 102.58 | ||||||||||||||||||||||||||
|
NAREIT All Equity REIT Index
|
100.00 | 112.16 | 151.49 | 127.72 | 79.53 | 101.79 | ||||||||||||||||||||||||||
28
Table of Contents
| Years ended December 31, | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
|
Operations data:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Total revenues
|
$ | 181,711,000 | $ | 170,665,000 | $ | 150,604,000 | $ | 122,814,000 | $ | 76,980,000 | ||||||||||
|
|
||||||||||||||||||||
|
Expenses:
|
||||||||||||||||||||
|
Property operating expenses
|
55,455,000 | 48,468,000 | 40,029,000 | 34,195,000 | 21,876,000 | |||||||||||||||
|
General and administrative
|
10,166,000 | 8,586,000 | 9,041,000 | 6,086,000 | 5,132,000 | |||||||||||||||
|
Impairments
|
23,636,000 | — | — | — | — | |||||||||||||||
|
Terminated projects and acquisition transaction costs
|
4,367,000 | 855,000 | — | — | — | |||||||||||||||
|
Depreciation and amortization
|
54,257,000 | 48,741,000 | 41,004,000 | 33,646,000 | 19,859,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total expenses
|
147,881,000 | 106,650,000 | 90,074,000 | 73,927,000 | 46,867,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Operating income
|
33,830,000 | 64,015,000 | 60,530,000 | 48,887,000 | 30,113,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Non-operating income and expense:
|
||||||||||||||||||||
|
Interest expense and amortization of deferred
financing costs
|
(49,785,000 | ) | (44,934,000 | ) | (38,495,000 | ) | (33,602,000 | ) | (15,858,000 | ) | ||||||||||
|
Equity in income of unconsolidated joint ventures
|
1,098,000 | 956,000 | 634,000 | 70,000 | — | |||||||||||||||
|
Gain on sales of real estate
|
521,000 | — | — | 141,000 | — | |||||||||||||||
|
Interest income
|
63,000 | 284,000 | 788,000 | 641,000 | 91,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total non-operating income and expense
|
(48,103,000 | ) | (43,694,000 | ) | (37,073,000 | ) | (32,750,000 | ) | (15,767,000 | ) | ||||||||||
|
|
||||||||||||||||||||
|
(Loss) income before discontinued operations
|
(14,273,000 | ) | 20,321,000 | 23,457,000 | 16,137,000 | 14,346,000 | ||||||||||||||
|
|
||||||||||||||||||||
|
(Loss) income from discontinued operations
|
(3,083,000 | ) | 688,000 | 560,000 | 793,000 | 436,000 | ||||||||||||||
|
Gain on sales of discontinued operations
|
557,000 | — | — | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income
|
(16,799,000 | ) | 21,009,000 | 24,017,000 | 16,930,000 | 14,782,000 | ||||||||||||||
|
|
||||||||||||||||||||
|
Minority interests in consolidated joint ventures
|
(772,000 | ) | (2,157,000 | ) | (1,415,000 | ) | (1,202,000 | ) | (1,270,000 | ) | ||||||||||
|
Limited partners’ interest in Operating Partnership
|
904,000 | (477,000 | ) | (633,000 | ) | (393,000 | ) | (299,000 | ) | |||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income attributible to Cedar Shopping Centers, Inc.
|
(16,667,000 | ) | 18,375,000 | 21,969,000 | 15,335,000 | 13,213,000 | ||||||||||||||
|
|
||||||||||||||||||||
|
Preferred distribution requirements
|
(7,876,000 | ) | (7,877,000 | ) | (7,877,000 | ) | (7,877,000 | ) | (7,186,000 | ) | ||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income attributable to common shareholders
|
$ | (24,543,000 | ) | $ | 10,498,000 | $ | 14,092,000 | $ | 7,458,000 | $ | 6,027,000 | |||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Per common share (basic and diluted) attributable to common shareholders:
|
||||||||||||||||||||
|
Continuing operations
|
$ | (0.48 | ) | $ | 0.23 | $ | 0.31 | $ | 0.21 | $ | 0.23 | |||||||||
|
Discontinued operations
|
(0.05 | ) | 0.01 | 0.01 | 0.02 | 0.02 | ||||||||||||||
|
|
||||||||||||||||||||
|
|
$ | (0.53 | ) | $ | 0.24 | $ | 0.32 | $ | 0.23 | $ | 0.25 | |||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Amounts attributable to Cedar Shopping Centers, Inc. common shareholders,
net of limited partners’ interest
|
||||||||||||||||||||
|
(Loss) income from continuing operations
|
$ | (22,107,000 | ) | $ | 9,840,000 | $ | 13,556,000 | $ | 6,705,000 | $ | 5,612,000 | |||||||||
|
(Loss) income from discontinued operations
|
(2,436,000 | ) | 658,000 | 536,000 | 753,000 | 415,000 | ||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income
|
$ | (24,543,000 | ) | $ | 10,498,000 | $ | 14,092,000 | $ | 7,458,000 | $ | 6,027,000 | |||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Dividends to common shareholders
|
$ | 9,742,000 | $ | 40,027,000 | $ | 39,775,000 | $ | 29,333,000 | $ | 20,844,000 | ||||||||||
|
Per common share
|
$ | 0.2025 | $ | 0.9000 | $ | 0.9000 | $ | 0.9000 | $ | 0.9000 | ||||||||||
|
|
||||||||||||||||||||
|
Weighted average number of common shares outstanding:
|
||||||||||||||||||||
|
Basic
|
46,234,000 | 44,475,000 | 44,193,000 | 32,926,000 | 23,988,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Diluted
|
46,234,000 | 44,475,000 | 44,197,000 | 33,055,000 | 24,031,000 | |||||||||||||||
|
|
||||||||||||||||||||
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Table of Contents
| Years ended December 31, | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
|
Balance sheet data:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Real estate, net
|
$ | 1,510,707,000 | $ | 1,414,826,000 | $ | 1,300,106,000 | $ | 981,303,000 | $ | 793,024,000 | ||||||||||
|
Real estate to be transferred to a joint venture
|
139,743,000 | 194,952,000 | 165,277,000 | 166,639,000 | 124,005,000 | |||||||||||||||
|
Real estate held for sale — discontinued operations
|
11,599,000 | 32,063,000 | 33,331,000 | 33,101,000 | 32,495,000 | |||||||||||||||
|
Investment in unconsolidated joint ventures
|
14,113,000 | 4,976,000 | 3,757,000 | 3,644,000 | — | |||||||||||||||
|
Other assets
|
101,268,000 | 80,311,000 | 92,513,000 | 67,032,000 | 46,732,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total assets
|
$ | 1,777,430,000 | $ | 1,727,128,000 | $ | 1,594,984,000 | $ | 1,251,719,000 | $ | 996,256,000 | ||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Mortgages and loans payable
|
$ | 950,664,000 | $ | 918,202,000 | $ | 762,827,000 | $ | 478,993,000 | $ | 460,506,000 | ||||||||||
|
Mortgage loans payable — real estate to be transferred to a joint venture
|
94,018,000 | 77,307,000 | 70,458,000 | 70,599,000 | 56,874,000 | |||||||||||||||
|
Mortgage loans payable — discontinued operations
|
7,765,000 | 17,964,000 | 18,229,000 | 18,481,000 | 10,411,000 | |||||||||||||||
|
Other liabilities
|
97,840,000 | 107,932,000 | 97,225,000 | 70,595,000 | 44,405,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total liabilities
|
1,150,287,000 | 1,121,405,000 | 948,739,000 | 638,668,000 | 572,196,000 | |||||||||||||||
|
Limited partners’ interest in Operating Partnership
|
12,656,000 | 14,271,000 | 15,578,000 | 19,613,000 | 16,660,000 | |||||||||||||||
|
Equity:
|
||||||||||||||||||||
|
Cedar Shopping Centers, Inc. shareholders’ equity
|
539,169,000 | 524,027,000 | 558,154,000 | 574,472,000 | 390,244,000 | |||||||||||||||
|
Noncontrolling interests
|
75,318,000 | 67,425,000 | 72,513,000 | 18,966,000 | 17,156,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total equity
|
614,487,000 | 591,452,000 | 630,667,000 | 593,438,000 | 407,400,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total liabilities and equity
|
$ | 1,777,430,000 | $ | 1,727,128,000 | $ | 1,594,984,000 | $ | 1,251,719,000 | $ | 996,256,000 | ||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Weighted average number of common shares:
|
||||||||||||||||||||
|
Shares used in determination of basic earnings per share
|
46,234,000 | 44,475,000 | 44,193,000 | 32,926,000 | 23,988,000 | |||||||||||||||
|
Additional shares assuming conversion of OP Units (basic)
|
2,014,000 | 2,024,000 | 1,985,000 | 1,737,000 | 1,202,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Shares used in determination of basic FFO per share
|
48,248,000 | 46,499,000 | 46,178,000 | 34,663,000 | 25,190,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Shares used in determination of diluted earnings per share
|
46,234,000 | 44,475,000 | 44,197,000 | 33,055,000 | 24,031,000 | |||||||||||||||
|
Additional shares assuming conversion of OP Units (diluted)
|
2,014,000 | 2,024,000 | 1,990,000 | 1,747,000 | 1,206,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
Shares used in determination of diluted FFO per share
|
48,248,000 | 46,499,000 | 46,187,000 | 34,802,000 | 25,237,000 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Other data:
|
||||||||||||||||||||
|
Funds From Operations (“FFO”) (b)
|
$ | 24,581,000 | $ | 56,859,000 | $ | 56,190,000 | $ | 41,954,000 | $ | 25,923,000 | ||||||||||
|
|
||||||||||||||||||||
|
Per common share (assuming conversion of OP Units) (basic and diluted):
|
$ | 0.51 | $ | 1.22 | $ | 1.22 | $ | 1.21 | $ | 1.03 | ||||||||||
|
|
||||||||||||||||||||
|
Cash flows provided by (used in):
|
||||||||||||||||||||
|
Operating activities
|
$ | 51,942,000 | $ | 60,815,000 | $ | 53,503,000 | $ | 40,858,000 | $ | 26,738,000 | ||||||||||
|
Investing activities
|
$ | (70,026,000 | ) | $ | (151,390,000 | ) | $ | (192,432,000 | ) | $ | (190,105,000 | ) | $ | (323,225,000 | ) | |||||
|
Financing activities
|
$ | 27,017,000 | $ | 75,517,000 | $ | 143,735,000 | $ | 158,011,000 | $ | 296,823,000 | ||||||||||
|
|
||||||||||||||||||||
|
Square feet of GLA
|
12,952,000 | 12,147,000 | 12,009,000 | 10,061,000 | 8,442,000 | |||||||||||||||
|
Percent leased (including development/redevelopment and
other non-stabilized properties)
|
91 | % | 92 | % | 93 | % | 93 | % | 91 | % | ||||||||||
|
Average annualized base rent per leased square foot
|
$ | 11.53 | $ | 11.03 | $ | 10.74 | $ | 10.53 | $ | 10.40 | ||||||||||
| (a) | The data presented reflect certain reclassifications of prior period amounts to comform to the 2009 presentation, principally (i) the retrospective reclassification, for all periods presented, of the balances related to minority interests in consolidated joint ventures and limited partners’ interest in the Operating Partnership into the consolidated equity accounts, as appropriate, (ii) to refelect the reclassifications of the assets and liabilities of the properties transferred and to be transferred to the RioCan joint venture as “real estate to be transferred to a joint venture”, and (iii) to reflect the sale and/or treatment as “held for sale” of certain operating properties and the treatment thereof as “discontinued operations”. The reclassifications had no impact on the previously-reported net income attributable to common shareholders or earnings per share. | |
| (b) | See Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a reconciliation of Funds From Operations (“FFO”) to net (loss) income attributable to common shareholders. |
30
Table of Contents
The following discussion should be read in conjunction with the Company’s consolidated
financial statements and related notes thereto included elsewhere in this report.
Executive Summary
The Company is a fully-integrated real estate investment trust which focuses primarily on
ownership, operation, development and redevelopment of supermarket-anchored shopping centers in
mid-Atlantic and Northeast coastal states. At December 31, 2009, the Company owned and managed
(both wholly-owned and in joint venture) a portfolio of 119 operating properties totaling
approximately 13.0 million square feet of gross leasable area (“GLA”), including 95 wholly-owned
properties comprising approximately 9.5 million square feet, 13 properties owned in joint venture
(consolidated) comprising approximately 1.7 million square feet, seven properties transferred or to
be transferred to a managed joint venture (unconsolidated) comprising approximately 1.2 million
square feet, and four ground-up developments comprising approximately 0.6 million square feet.
Excluding the four ground-up development properties, the 115 property portfolio was approximately
91% leased at December 31, 2009; the 101 property “stabilized” portfolio was approximately 95%
leased at that date. The Company also owned approximately 196 acres of land parcels, a significant
portion of which is under development. In addition, the Company has a 76.3% interest in another
unconsolidated joint venture, which it does not manage, which owns a single-tenant office property
in Philadelphia, Pennsylvania.
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, 2009, the Company owned
96.3% of the Operating Partnership and is its sole general partner. OP Units are economically
equivalent to the Company’s common stock and are convertible into the Company’s common stock at the
option of the holders on a one-to-one basis.
The Company derives substantially all of its revenues from rents and operating expense
reimbursements received pursuant to long-term leases. The Company’s operating results therefore
depend on the ability of its tenants to make the payments required by the terms of their leases.
The Company focuses its investment activities on supermarket-anchored community shopping centers.
The Company believes that, because of the need of consumers to purchase food and other staple goods
and services generally available at such centers, its type of “necessities”-based properties should
provide relatively stable revenue flows even during difficult economic times. In January 2009, the
Company’s Board of Directors reduced the quarterly dividend payable in February by one-half to an
annual rate of $0.45 per share and in April 2009 suspended the dividend for the balance of the year
for a projected annual saving of approximately $37 million. This decision was in response to the
then current state of the economy, the difficult retail environment, the constrained capital
markets and the need to renew the Company’s secured revolving stabilized property credit facility.
In December 2009, following a review of the state of the economy and the Company’s financial
position, the Company’s Board of Directors determined to resume payment of a cash dividend in the
amount $0.09 per share ($0.36 per share on an annualized basis) on the Company’s common stock,
which was paid on January 20, 2010 to shareholders of record as of the close of business on
December 31, 2009.
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Table of Contents
In connection with the RioCan transactions (more fully described below), the Company will seek
to acquire primarily stabilized supermarket-anchored properties in its primary market areas during
the next two years in a joint venture owned 20% by the Company. The Company has historically sought
opportunities to acquire properties suited for development and/or redevelopment, and, to a lesser
extent than in the past, stabilized properties, where it can utilize its experience in shopping
center construction, renovation, expansion, re-leasing and re-merchandising to achieve long-term
cash flow growth and favorable investment returns.
Significant Transactions
RioCan
On October 26, 2009, the Company entered into definitive agreements with RioCan Real Estate
Investment Trust of Toronto, Canada, a publicly-traded Canadian real estate investment trust listed
on the Toronto Stock Exchange (“RioCan”), pursuant to which the Company (1) sold to RioCan
6,666,666 shares of the Company’s common stock at $6.00 per share in a private placement for an
aggregate of $40 million (RioCan agreeing that it would not sell any of such shares for a period of
one year), (2) issued to RioCan warrants to purchase 1,428,570 shares of the Company’s common stock
at an exercise price of $7.00 per share, exercisable over a two-year period (valued at $1,643,000),
(3) entered into an 80% (RioCan) and 20% (Cedar) joint venture (i) initially for the purchase of
seven supermarket-anchored properties presently owned by the Company, and (ii) then to acquire
additional primarily supermarket-anchored properties in the Company’s primary market areas during
the next two years, in the same joint venture format, and (4) entered into a “standstill” agreement
with respect to increases in RioCan’s ownership of the Company’s common stock for a three-year
period. In addition, subject to certain exceptions, the Company has agreed that it will not issue
any new shares of common stock unless RioCan is offered the right to purchase that additional
number of shares that will maintain its pro rata percentage ownership, on a fully diluted basis. In
connection with the formation of the joint venture, the Company recorded an impairment charge of
$23.6 million relating to the seven properties transferred or to be transferred to the joint
venture.
The private placement investment by RioCan and the issuance of the warrants by the Company
were concluded on October 30, 2009. Two of the properties (Blue Mountain Commons located in
Harrisburg, Pennsylvania and Sunset Crossing located in Dickson City, Pennsylvania) were
transferred to the joint venture on December 10, 2009, resulting in proceeds to the Company of
approximately $33 million (in connection with the closing, a repayment of $25.9 million was
required under the Company’s secured revolving development property credit facility). The remaining
five properties are subject to mortgage loans payable aggregating approximately $94 million. Two of
the properties (Columbus Crossing Shopping Center located in Philadelphia, Pennsylvania and
Franklin Village Plaza located in Franklin, Massachusetts) were transferred to the joint venture in
January and February 2010, resulting in net proceeds to the Company of approximately $16 million.
The remaining three properties (Loyal Plaza Shopping Center located in Williamsport, Pennsylvania,
Shaw’s Plaza located in Raynham, Massachusetts, and Stop & Shop Plaza located in Bridgeport,
Connecticut) are to be transferred during the first half of 2010, resulting in net proceeds to the
Company of an additional approximately $16 million.
32
Table of Contents
In connection with the transfers of the seven properties to the joint venture and the private
placement transactions, the Company will have received aggregate net proceeds of approximately $105
million, after estimated closing and transaction costs, which have been or will be used to
repay/reduce the outstanding balances under the Company’s secured revolving credit facilities. In
connection with these transactions, the Company incurred costs and fees of approximately $6.0
million, including fees to the Company’s investment advisor ($3.5 million), the value assigned to
the warrants ($1.6 million), and other costs and expenses aggregating $0.9 million. In addition,
the Company agreed to pay to its investment advisor a fee of 1% of the gross cost of future
acquisitions made by the joint venture for a two-year period, up to a maximum of $3.0 million.
Amended and Restated Credit Facility
On November 10, 2009, the Company closed an amended and restated secured revolving stabilized
property credit facility in the amount of $265 million (subsequently increased to $285 million),
with Bank of America, N.A. continuing as administrative agent, together with three other lead
lenders and other participating banks. The facility, as amended, is expandable to $400 million,
subject to certain conditions, including acceptable collateral. This amended and restated facility
replaced the
existing facility that was due to expire on January 30, 2010, and will continue to be
available to fund acquisitions, certain development and redevelopment activities, capital
expenditures, mortgage repayments, dividend distributions, working capital and other general
corporate purposes. The new facility has a maturity date of January 31, 2012, subject to a
one-year extension option. As a result of the application of the net proceeds from, among other
things, the transfers of two of the remaining properties to the RioCan joint venture and the sales
of shares of the Company’s common stock in February and March 2010, the Company’s availability
under this facility has increased to approximately $104 million as of March 3, 2010.
Joint Venture With PCP
On January 30, 2009, a newly-formed 40% Company-owned joint venture acquired the New London
Mall in New London, Connecticut, an approximate 259,000 square foot supermarket-anchored shopping
center, for a purchase price of approximately $40.7 million. The purchase price included the
assumption of an existing $27.4 million first mortgage bearing interest at 4.9% per annum and
maturing in 2015. The total joint venture partnership contribution was approximately $14.0 million,
of which the Company’s 40% share ($5.6 million) was funded from its secured revolving stabilized
property credit facility. The Company is the managing partner of the venture and receives certain
acquisition, property management, construction management and leasing fees. In addition, the
Company will be entitled to a “promote” fee structure, pursuant to which its profits participation
would be increased to 44% if the venture reaches certain income targets. The Company’s joint
venture partners are affiliates of Prime Commercial Properties PLC (“PCP”), a London-based real
estate/development company.
On February 10, 2009, a second newly-formed (also with affiliates of PCP) 40% Company-owned
joint venture acquired San Souci Plaza in California, Maryland, an approximate 264,000 square foot
supermarket-anchored shopping center, for a purchase price of approximately $31.8 million. The
purchase price included the assumption of an existing $27.2 million first mortgage bearing interest
at 6.2% per annum and maturing in 2016. The total joint venture partnership contribution was
approximately $5.8 million, of which the Company’s 40% share ($2.3 million) was funded from its
33
Table of Contents
secured revolving stabilized property credit facility. The Company is the managing partner of the
venture and receives certain acquisition, property management, construction management and leasing
fees. In addition, the Company will be entitled to a “promote” fee structure, pursuant to which its
profits participation would be increased to 44% if the venture reaches certain income targets.
Discontinued Operations
During 2009, the Company sold, or has treated as “held for sale”, nine of its drug
store/convenience centers, located in Ohio and New York, aggregating 304,000 square feet of GLA,
including the 6,000 square foot McDonalds/Waffle House, located in Medina, Ohio, the 10,000 square
foot CVS property located in Westfield, New York, the 24,000 square foot Staples property located
in Oswego, New York, the 32,000 square foot Discount Drug Mart Plaza located in Hudson, Ohio, the
38,000 square foot Discount Drug Mart Plaza located in Dover, Ohio, the 84,000 square foot Gabriel
Brothers property located in Kent, Ohio, the 40,000 square foot Discount Drug Mart Plaza located in
Carrollton, Ohio, the 20,000 square foot Pondside Plaza located in Geneseo, New York, and the
50,000 square foot Discount Drug Mart Plaza located in Powell, Ohio. The aggregate sales prices for
the nine properties are approximately $27.1 million, and the properties are subject to
property-specific mortgage loans payable of approximately $17.7 million. In connection with these
transactions, the Company recorded impairment charges aggregating $3.6 million, and has realized
gain on sales of $557,000. The carrying values of the assets and liabilities of these properties,
principally the net book values of the real estate and the related mortgage loans payable, have
been reclassified as “held for sale” on the Company’s consolidated balance sheets at December 31,
2009 and 2008. In addition, the properties’ results of operations have been classified as
“discontinued operations” for all periods presented.
Summary of Critical Accounting Policies
The preparation of the consolidated financial statements in conformity with GAAP requires the
Company to make estimates and judgments that affect the reported amounts of assets and liabilities,
revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing
basis, management evaluates its estimates, including those related to revenue recognition and the
allowance for doubtful accounts receivable, real estate investments and purchase accounting
allocations related thereto, asset 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
34
Table of Contents
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 collectibility of its accounts receivable related to
base rent, straight-line rent, expense reimbursements and other revenues. Management analyzes
accounts receivable by considering tenant creditworthiness, current economic conditions, and
changes in tenants’ payment patterns when evaluating the adequacy of the allowance for doubtful
accounts receivable. These estimates have a direct impact on net income, because a higher bad debt
allowance would result in lower net income, whereas a lower bad debt allowance would result in
higher net income.
Real Estate Investments
Real estate investments are carried at cost less accumulated depreciation. The provision for
depreciation is calculated using the straight-line method based on estimated useful lives.
Expenditures for maintenance, repairs and betterments that do not materially prolong the normal
useful life of an asset are charged to operations as incurred. Expenditures for betterments that
substantially extend the useful lives of real estate assets are capitalized. Real estate
investments include costs of development and redevelopment activities, and construction in
progress. Capitalized costs, including interest and other carrying costs during the construction
and/or renovation periods, are included in the cost of the related asset and charged to operations
through depreciation over the asset’s estimated useful life. The Company is required to make
subjective estimates as to the useful lives of its real estate assets for purposes of determining
the amount of depreciation to reflect on an annual basis. These assessments have a 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 principal impact on the Company’s financial statements of the adoption
of recent updated
35
Table of Contents
accounting guidance related to business combinations, which became effective
January 1, 2009, is that the Company has expensed most transaction costs relating to its
acquisition activities.
The fair value of the tangible assets of an acquired property is determined by valuing the
property as if it were vacant, which value is then allocated to land, buildings and improvements
based on management’s determination of the relative fair values of such assets. In valuing an
acquired property’s intangibles, factors considered by management include an estimate of carrying
costs during the expected lease-up periods, such as real estate taxes, insurance, other operating
expenses, and estimates of lost rental revenue during the expected lease-up periods based on its
evaluation of current market demand. Management also estimates costs to execute similar leases,
including leasing commissions, tenant improvements, legal and other related costs.
The value of in-place leases is measured by the excess of (i) the purchase price paid for a
property after adjusting existing in-place leases to market rental rates, over (ii) the estimated
fair value of the property as if vacant. Above-market and below-market in-place lease values are
recorded based on the present value (using a discount rate which reflects the risks associated with
the leases acquired) of the difference 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 acquisition. The value of other intangibles is
amortized to expense, and the above-market and below-market lease values are amortized to rental
income, over the terms of the respective leases. If a lease were to be
terminated prior to its stated expiration, 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 (i) above-market
and below-market lease intangibles are amortized to rental income, and (ii) 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.
36
Table of Contents
Stock-Based Compensation
The Company’s 2004 Stock Incentive Plan (the “Incentive Plan”) establishes the procedures for
the granting of incentive stock options, stock appreciation rights, restricted shares, performance
units and performance shares. The maximum number of shares of the Company’s common stock that may
be issued pursuant to the Incentive Plan, as amended, is 2,750,000, and the maximum number of
shares that may be granted to a participant in any calendar year is 250,000. Substantially all
grants issued pursuant to the Incentive Plan are “restricted stock grants” which specify vesting
(i) upon the third anniversary of the date of grant for time-based grants, or (ii) upon the
completion of a designated period of performance for performance-based grants. Time—based grants
are valued according to the market price for the Company’s common stock at the date of grant. For
performance-based grants, the Company engages an independent appraisal company to determine the
value of the shares at the date of grant, taking into account the underlying contingency risks
associated with the performance criteria. These value estimates have a direct impact on net income,
because higher valuations would result in lower net income, whereas lower valuations would result
in higher net income. The value of such grants is being amortized on a straight-line basis over the
respective vesting periods, as adjusted for fluctuations in the market value of the Company’s
common stock.
Results of Operations
Differences in results of operations between 2009 and 2008, and between 2008 and 2007,
respectively, were primarily the result of the Company’s property acquisition/disposition program
and continuing development/redevelopment activities. During the period January 1, 2008 through
December 31, 2009, the Company acquired six shopping and convenience centers aggregating
approximately 790,000 square feet of GLA, purchased the joint venture minority interests in four
properties, and acquired approximately 181.7 acres of land for development, expansion and/or future
development, for a total cost of approximately $189.0 million. In addition, the Company placed into
service six ground-up developments having an aggregate cost of approximately $194.3 million. The
Company sold or held for sale nine primarily drug store anchored shopping centers aggregating
approximately 304,000 square feet of GLA for an aggregate sales price of approximately $27.1
million. In addition, in connection with the RioCan transactions, the Company has transferred or
will be transferring seven properties to a joint venture with RioCan, aggregating approximately
1,167,000 square feet of GLA, and in connection with which it will have realized approximately $65
million in proceeds. Net (loss) income was ($16.8) million, $21.0 million and $24.0 million for
2009, 2008 and 2007, respectively.
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Table of Contents
Comparison of 2009 to 2008
| Properties | ||||||||||||||||||||||||
| Increase | Percent | Acquisitions | held in | |||||||||||||||||||||
| 2009 | 2008 | (decrease) | change | and other (ii) | both years | |||||||||||||||||||
|
Total revenues
|
$ | 181,711,000 | $ | 170,665,000 | $ | 11,046,000 | 6 | % | $ | 11,467,000 | (421,000 | ) | ||||||||||||
|
Property operating expenses
|
55,455,000 | 48,468,000 | 6,987,000 | 14 | % | 4,254,000 | 2,733,000 | |||||||||||||||||
|
Depreciation and amortization
|
54,257,000 | 48,741,000 | 5,516,000 | 11 | % | 7,080,000 | (1,564,000 | ) | ||||||||||||||||
|
General and administrative
|
10,166,000 | 8,586,000 | 1,580,000 | 18 | % | n/a | n/a | |||||||||||||||||
|
Impairment charges
|
23,636,000 | — | 23,636,000 | n/a | n/a | n/a | ||||||||||||||||||
|
Terminated projects and acquisition
transaction costs
|
4,367,000 | 855,000 | 3,512,000 | n/a | n/a | n/a | ||||||||||||||||||
|
Non-operating income and
expense, net (i)
|
48,103,000 | 43,694,000 | 4,409,000 | 10 | % | n/a | n/a | |||||||||||||||||
|
Discontinued operations:
|
||||||||||||||||||||||||
|
Income from discontinued operations
|
476,000 | 688,000 | (212,000 | ) | n/a | n/a | n/a | |||||||||||||||||
|
Impairment charges
|
3,559,000 | — | 3,559,000 | n/a | n/a | n/a | ||||||||||||||||||
|
Gain on sales of discontinued operations
|
557,000 | — | 557,000 | n/a | n/a | n/a | ||||||||||||||||||
| (i) | Non-operating income and expense consists principally of interest expense (including amortization of deferred financing costs), equity in income of unconsolidated joint ventures, and gain on sales of land parcels. | |
| (ii) | Includes principally (a) the results of properties acquired after January 1, 2008, (b) unallocated property and construction management compensation and benefits (including stock-based compensation), (c) results of a property in Wyoming, Michigan where the then existing building improvements were demolished in the second quarter of 2008 as part of the redevelopment plans for the property and (d) results of ground-up development and re-development properties recently placed into service. |
Properties held in both periods.
The Company held 102 properties throughout 2009 and
2008.
Total revenues
decreased primarily as a result of (i) a decrease in non-cash straight-line
rents primarily as a result of early lease terminations ($1.1 million), (ii) a decrease in non-cash
amortization of intangible lease liabilities primarily as a result of the completion of scheduled
amortization at certain properties ($0.9 million) (which also resulted in a decrease in
depreciation and amortization expense), (iii) a decrease in percentage rent ($159,000), and (iv) a
decrease in base rents ($103,000), partially offset by (v) an increase in tenant recoveries ($1.2
million), predominately the result of an increase in billable property operating expenses, and (vi)
an increase in other income ($655,000), predominately the result of lease termination income of
$800,000 received in December 2009. In connection with the worsening economic climate beginning in
the latter part of 2008 and continuing into 2009, the Company received a number of requests from
tenants for rent relief. While the Company did in fact grant such relief in selected limited
circumstances, the aggregate amount of such relief granted had a limited impact on results of
operations. However, there can be no assurance that the amount of such relief will not become more
significant in future periods.
Property operating expenses
increased primarily as a result of (i) a net increase ($1.6
million) in expenses billable to tenants, primarily as a result of (a) an increase in real estate
taxes from
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Table of Contents
reassessments at recently-acquired or redeveloped properties ($1.4 million), (b) an
increase in snow removal costs ($1.4 million), partially offset by (c) a decrease in insurance
expense ($0.4 million), (d) a decrease in repairs and maintenance expenses ($0.2 million), (e) a
decrease in landscaping expense ($0.1 million), and (f) a decrease in a number of smaller operating
expense categories ($0.5 million), (ii) an increase in the provision for doubtful accounts
primarily as a result of the more challenging economic conditions in 2009 for a number of non-core
tenants ($1.6 million), and (iii) a decrease in expenses not billable to tenants ($0.3 million).
Depreciation and amortization expenses
included under “acquisitions and other” reflects the
acceleration of depreciation expense ($6.3 million) at two properties at which the Company
demolished portions of buildings as part of the redevelopment plans for those properties.
General and administrative expenses
increased primarily as a result of increases in
stock-based compensation expense through increased amortization of an increased number of
restricted stock grants and mark-to-market adjustments relating to stock-based compensation.
Impairments
for 2009 relates to the net impairment charges recorded in connection with the
seven properties transferred or to be transferred to the RioCan joint venture, as more fully
discussed elsewhere in this report.
Terminated projects and acquisition transaction costs
for 2009 includes (i) the acquisition
transaction costs associated with the two acquisitions completed during 2009 ($1.3 million, of
which the noncontrolling interests’ share was $0.7 million), (ii) the decision to terminate
potential development opportunities in Milford, Delaware and Ephrata, Pennsylvania (an aggregate of
$2.8 million), and (iii) the costs primarily associated with a cancelled acquisition. Terminated
projects and acquisition transaction costs for 2008 include (i) the decision to terminate potential
development opportunities primarily in Ephrata, Pennsylvania and Roanoke, Virginia (an aggregate of
$652,000) and (ii) costs incurred related to a canceled potential joint venture ($203,000).
Non-operating income and expense, net
, increased primarily a result of (i) higher amortization
of deferred financing costs ($1.9 million) resulting from (a) extending the secured revolving
stabilized property credit facility, originally in January 2009 and again in November 2009, and (b)
the secured revolving development property credit facility and the property-specific construction
facility, having closed in June 2008 and September 2008, respectively, being outstanding throughout
all of 2009, (ii) higher loan balances outstanding principally to fund the equity portions of
acquisitions and development activities ($3.0 million), and
(iii) reduction in interest income ($0.2 million), partially offset by (iv) gain
on sales of land parcels ($0.5 million) and (v) an increase in equity
in income of unconsolidated joint venture ($0.2 million).
Discontinued operations
for 2009 and 2008 include the results of operations, and where
applicable, gain on sales ($557,000) and impairment charges ($3.6 million), for nine of the
Company’s drug store/convenience centers which its has sold or has treated as “held for sale”,
located in Ohio and New York, aggregating 304,000 square feet of GLA, as more fully discussed
elsewhere in this report.
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Table of Contents
Comparison of 2008 to 2007
| Properties | ||||||||||||||||||||||||
| Increase | Percent | Acquisitions | held in | |||||||||||||||||||||
| 2008 | 2007 | (decrease) | change | and other (ii) | both years | |||||||||||||||||||
|
Total revenues
|
$ | 170,665,000 | $ | 150,604,000 | $ | 20,061,000 | 13 | % | $ | 21,172,000 | (1,111,000 | ) | ||||||||||||
|
Property operating expenses
|
48,468,000 | 40,029,000 | 8,439,000 | 21 | % | 7,079,000 | 1,360,000 | |||||||||||||||||
|
Depreciation and amortization
|
48,741,000 | 41,004,000 | 7,737,000 | 19 | % | 7,886,000 | (149,000 | ) | ||||||||||||||||
|
General and administrative
|
8,586,000 | 9,041,000 | (455,000 | ) | -5 | % | n/a | n/a | ||||||||||||||||
|
Terminated projects and acquisition
transaction costs
|
855,000 | — | 855,000 | n/a | n/a | n/a | ||||||||||||||||||
|
Non-operating income and
expense, net (i)
|
43,694,000 | 37,073,000 | 6,621,000 | 18 | % | n/a | n/a | |||||||||||||||||
|
Discontinued operations:
|
||||||||||||||||||||||||
|
Income from discontinued operations
|
688,000 | 560,000 | 128,000 | n/a | n/a | n/a | ||||||||||||||||||
| (i) | Non-operating income and expense consists principally of interest expense (including amortization of deferred financing costs), equity in income of an unconsolidated joint venture. | |
| (ii) | Includes principally (a) the results of properties acquired after January 1, 2007, (b) unallocated property and construction management compensation and benefits (including stock-based compensation), (c) results of a property in Wyoming, Michigan where the then existing building improvements were demolished in the second quarter of 2008 as part of the redevelopment plans for the property and (d) results of ground-up development and re-development properties recently placed into service. |
Properties held in both periods.
The Company held 81 properties throughout 2008 and 2007.
Total revenues
decreased primarily as a result of (i) a decrease in tenant recoveries
primarily due to a higher collection rate in 2007 due to billing system improvements made in 2006
and 2007 ($648,000), (ii) a decrease in percentage rent ($596,000), (iii) a net decrease ($10,000)
in non-cash amortization of intangible lease liabilities (iv) a decrease in straight-line rental
income ($1,046,000), which is partially offset by an increase in base rent ($957,000), off-set by
(v) an increase in other income ($232,000). In connection with the worsening economic climate
beginning in the latter part of 2008 and continuing into 2009, the Company received a number of
requests from tenants for rent relief. While the Company did in fact grant such relief in selected
limited circumstances, the aggregate amount of such relief granted had a limited impact on results
of operations.
Property operating expenses
increased as a result of (i) an increase in real estate and other
property-related taxes, related principally to reassessments of properties previously acquired and
completed development and re-developed projects ($549,000), (ii) an increase in the provision for
doubtful accounts primarily due to a higher collection rate in 2007 due to billing system
improvements made in 2006 and 2007 ($689,000), (iii) an increase in non-billable expenses
($383,000), (iii) an increase in a number of other operating expenses ($198,000), which is
partially offset by (iv) a decrease in snow removal costs ($459,000).
General and administrative expenses
decreased primarily as a result of the retirement of a
senior executive in 2007 and the initial compensation/relocation costs of his replacement
($1,535,000 in
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the aggregate), off-set by increased compensation costs, increased professional fees
and the Company’s continued growth in 2008.
Terminated projects and acquisition transaction costs
for 2008 includes (i) the decision to
terminate potential development opportunities primarily in Ephrata, Pennsylvania and Roanoke,
Virginia (an aggregate of $652,000) and (ii) costs incurred related to a canceled potential joint
venture ($203,000).
Non-operating income and expense, net
, increased primarily as a result of (i) increased
interest costs from borrowings related to property acquisitions and acquisitions of a joint venture
partner’s interest ($5,880,000), (ii) higher amortization of deferred financing costs ($557,000),
(iii) lower interest income ($505,000) as a result of lower prevailing interest rates and a change
in the cash management plan, partially off-set by (iv) earnings from an unconsolidated joint
venture acquired in November 2006 and an additional investment in the unconsolidated joint venture
made in April 2008 ($321,000).
Discontinued operations
for 2008 and 2007 include the results of operations for nine of the
Company’s drug store/convenience centers which it has sold or has treated as “held for sale” during
2009, located in Ohio and New York, aggregating 304,000 square feet of GLA, as more fully discussed
elsewhere in this report.
Liquidity and Capital Resources
The Company funds operating expenses and other short-term liquidity requirements, including
debt service, tenant improvements, leasing commissions, collateralization of certain interest rate
swap obligations, preferred and common dividend distributions, if made, and distributions to
minority interest partners, primarily from operations. The Company has also used its secured
revolving stabilized property credit facility for these purposes. The Company expects to fund
long-term liquidity requirements for property acquisitions, development and/or redevelopment costs,
capital improvements, and maturing debt initially with its credit facilities and construction
financing, and ultimately through a combination of issuing and/or assuming additional mortgage
debt, the sale of equity securities, the issuance of additional OP Units, and the sale of
properties or interests therein (including joint venture arrangements).
Throughout most of 2009 there has been a fundamental contraction of the U.S. credit and
capital markets, whereby banks and other credit providers have tightened their lending standards
and severely restricted the availability of credit. Accordingly, for this and other reasons, there
can be no assurance that the Company will have the availability of mortgage financing on completed
development projects, additional construction financing, net proceeds from the contribution of
properties to joint ventures, or proceeds from the refinancing of existing debt.
In April 2009, the Company’s Board of Directors determined to suspend payment of cash
dividends with respect to its common stock and OP Units for the balance of 2009 (the quarterly
dividends paid in February had already been reduced by one-half). Based on the number of shares of
common stock and OP Units outstanding at the time, the cash savings throughout 2009 was estimated
to aggregate approximately $37 million. This decision was in response to the state of the economy,
the difficult retail environment, the constrained capital markets and the need to renew the
Company’s
41
Table of Contents
secured revolving stabilized property credit facility. In December 2009, following a
review of the state of the economy and the Company’s financial position, the Company’s Board of
Directors determined to resume payment of a cash dividend in the amount $0.09 per share ($0.36 per
share on an annualized basis) on the Company’s common stock, which was paid on January 20, 2010 to
shareholders of record as of the close of business on December 31, 2009.
In November 2009, the Company closed an amended and restated secured revolving stabilized
property credit facility with Bank of America, N.A., continuing as agent, together with three other
lead lenders and other participating banks, with commitments from participants of $265.0 million
(increased to $285.0 million in January 2010). The facility, as amended, is expandable to $400
million, subject to certain conditions, including acceptable collateral. The principal terms of the
new facility include (i) an availability based primarily on appraisals, with a 67.5% advance rate,
(ii) an interest rate based on LIBOR plus 350 bps, with a 200 bps LIBOR floor (under the prior
arrangement, the interest rate was based on LIBOR plus a bps spread depending upon the Company’s
leverage ratio, as defined, which had been 135 bps prior to the new facility), (iii) a leverage
ratio limited to 67.5%, (iv) an unused portion fee of 50 bps (previously 25 bps), and (v) a
maturity date of January 31, 2012, subject to a one-year extension option. In connection was the
new facility, the Company paid participating lender fees and closing and transaction costs of
approximately $9.0 million.
Borrowings outstanding under the facility aggregated $188.0 million at December 31, 2009, such
borrowings bore interest at an average rate of 5.5% per annum, and the Company had pledged 34 of
its shopping center properties as collateral for such borrowings.
The secured revolving stabilized property credit facility has been and will be used to fund
acquisitions, certain development and redevelopment activities, capital expenditures, mortgage
repayments, dividend distributions, working capital and other general corporate purposes. The
facility is subject to customary financial covenants, including limits on leverage as discussed
above and distributions (limited to 95% of funds from operations, as defined), and other financial
statement ratios. Based on covenant measurements and collateral in place as of December 31, 2009,
the Company was permitted to draw up to approximately $204.3 million, of which approximately $16.3
million remained available as of that date. As a result of the application of the net proceeds
from, among other things, the transfers of two of the remaining properties to the RioCan joint
venture (more fully described above) and the sales of shares of the Company’s common stock in
February and March 2010 (more fully described below), such availability has increased to
approximately $104 million as of March 3, 2010.. As of December 31, 2009, the Company was in
compliance with the financial covenants and financial statement ratios required by the terms of the
secured revolving stabilized property credit facility.
The Company has a $150 million secured revolving development property credit facility with
KeyBank, National Association (as agent) and several other banks, pursuant to which the Company has
pledged certain of its development projects and redevelopment properties as collateral for
borrowings thereunder. The facility, as amended, is expandable to $250 million, subject to certain
conditions, including acceptable collateral, and will expire in June 2011, subject to a one-year
extension option. Borrowings under the facility bear interest at the Company’s option at either
LIBOR or the agent bank’s prime rate, plus a spread of 225 bps or 75 bps, respectively. Advances
under the facility are calculated at the least of 70% of aggregate project costs, 70% of “as
stabilized” appraised values, or costs incurred in excess of a 30% equity requirement on the part
of the Company. The facility also requires an unused
42
Table of Contents
portion fee of 15 bps. This facility has been
and will be used to fund in part the Company’s and certain joint ventures’ development activities.
In order to draw funds under this construction facility, the Company must meet certain pre-leasing
and other conditions. Borrowings outstanding under the facility aggregated $69.7 million at
December 31, 2009, and such borrowings bore interest at a rate of 2.5% per annum. As of December
31, 2009, the Company was in compliance with the financial covenants and financial statement ratios
required by the terms of the secured revolving development property credit facility.
The Company has a $77.7 million construction facility with Manufacturers and Traders Trust
Company (as agent) and several other banks, pursuant to which the Company has guaranteed and
pledged its joint venture development project in Pottsgrove, Pennsylvania as collateral for
borrowings to be made thereunder. This facility will expire in September 2011, subject to a
one-year extension option. Borrowings outstanding under the facility aggregated $61.2 million at
December 31, 2009, and such borrowings bore interest at an average rate of 2.5% per annum.
Borrowings under the facility bear interest at the Company’s option at either LIBOR plus a spread
of 225 bps, or the agent bank’s prime rate. As of December 31, 2009, the Company was in compliance
with the financial covenants and financial statement ratios required by the terms of the
construction facility.
Mortgage loans payable at December 31, 2009 consisted of fixed-rate notes totaling $610.8
million, with a weighted average interest rate of 5.8%, and variable-rate debt totaling $82.2
million, with a weighted average interest rate of 3.4%. Total mortgage loans payable and secured
revolving credit facilities have an overall weighted average interest rate of 5.3% and mature at
various dates through 2029. For 2010, the Company has approximately $8.0 million of scheduled debt
principal amortization payments and $12.3 million of balloon payments.
The terms of several of the Company’s mortgage loans payable require the Company to deposit
certain replacement and other reserves with its lenders. Such “restricted cash” is generally
available only for property-level requirements for which the reserves have been established, and is
not available to fund other property-level or Company-level obligations.
On October 26, 2009, the Company entered into definitive agreements with RioCan Real Estate
Investment Trust of Toronto, Canada, a publicly-traded Canadian real estate investment trust listed
on the Toronto Stock Exchange (“RioCan”), pursuant to which the Company (1) sold to RioCan
approximately 6,667,000 shares of the Company’s common stock at $6.00 per share in a private
placement (RioCan agreeing that it would not sell any of such shares for a period of one year), (2)
issued to RioCan warrants to purchase approximately 1,429,000 shares of the Company’s common stock
at an exercise price of $7.00 per share, exercisable over a two-year period (valued at $1,643,000),
(3) entered into an 80% (RioCan) and 20% (Cedar) joint venture (i) initially for the purchase of
seven supermarket-anchored properties presently owned by the Company, and (ii) then to acquire
additional primarily supermarket-anchored properties in the Company’s primary market areas during
the next two years, in the same joint venture format, and (4) entered into a “standstill” agreement
with respect to increases in RioCan’s ownership of the Company’s common stock for a three-year
period. In addition, subject to certain exceptions, the Company has agreed that it will not issue
any new shares of common stock unless RioCan is offered the right to purchase that additional
number of shares that will maintain its pro rata percentage ownership, on a fully diluted basis. In
connection with the formation of the joint venture,
43
Table of Contents
the Company recorded an impairment charge of
$23.6 million relating to the seven properties transferred or to be transferred to the joint
venture.
The private placement investment by RioCan and the issuance of the warrants by the Company
were concluded on October 30, 2009. Two of the properties (Blue Mountain Commons located in
Harrisburg, Pennsylvania and Sunset Crossing located in Dickson City, Pennsylvania) were
transferred to the joint venture on December 10, 2009, resulting in proceeds to the Company of
approximately $33 million (in connection with the closing, a repayment of $25.9 million was
required under the Company’s secured revolving development property credit facility). The remaining
five properties are subject to mortgage loans payable aggregating approximately $94 million. Two of
the properties (Columbus Crossing Shopping Center located in Philadelphia, Pennsylvania and
Franklin Village Plaza located in Franklin, Massachusetts) were transferred to the joint venture in
January and February 2010, resulting in net proceeds to the Company of approximately $16 million.
The remaining three properties (Loyal Plaza Shopping Center located in Williamsport, Pennsylvania,
Shaw’s Plaza located in Raynham, Massachusetts, and Stop & Shop Plaza located in Bridgeport,
Connecticut) are to be transferred during the first half of 2010, resulting in net proceeds to the
Company of an additional approximately $16 million. In connection with the transfers of the seven
properties to the joint venture and the private placement transactions, the Company will have
received aggregate net proceeds of approximately $105 million, after estimated closing and
transaction costs, which have been or will be used to repay/reduce the outstanding balances under
the Company’s secured revolving credit facilities. In connection with these transactions, the
Company incurred costs and fees of approximately $6.0 million, including fees to the Company’s
investment advisor ($3.5 million), the value assigned to the warrants (approximately $1.6 million),
and other costs and expenses aggregating $0.9 million. In addition, the Company agreed to pay to
its investment advisor a fee of 1% of the gross cost of future acquisitions made by the joint
venture for a two-year period, up to a maximum of $3.0 million.
On February 5, 2010, the Company concluded a public offering of 7,500,000 shares of its common
stock at $6.60 per share, and realized net proceeds after offering expenses of approximately $47.0
million. On March 3, 2010, the underwriters exercised their over-allotment option to the extent of
697,800 shares, and the Company realized additional net proceeds of $4.4 million. In connection
with the offering, RioCan acquired 1,350,000 shares of the Company’s common stock, including
100,000 shares acquired in connection with the exercise of the over-allotment option, and the
Company realized net proceeds of $8.9 million.
In September 2009, the Company entered into a Standby Equity Purchase Agreement (the “SEPA
Agreement”) with an investment company for sales of its shares of common stock aggregating up to
$30 million over a two-year commitment period; the commitment is expandable at the Company’s option
to $45 million. Through December 31, 2009, 422,000 shares had been sold pursuant to the SEPA
Agreement, at an average price of $5.93 per share, and the Company realized net proceeds, after
allocation of other issuance expenses, of approximately $2.3 million. In January and February 2010,
an additional 718,000 shares of the Company’s common stock had been sold pursuant to the SEPA
Agreement at an average selling price of $6.97 per share, and the Company had realized net proceeds
of approximately $5.0 million.
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Table of Contents
The Company expects to have sufficient liquidity to effectively manage its business. Such
liquidity sources include, amongst others (i) cash on hand, (ii) operating cash flows, (iii)
availability under its secured revolving credit facilities, (iv) property-specific financings, (v)
sales of properties and (vi) proceeds from contributions of properties to joint ventures, and/or
issuances of shares of common or preferred stock.
Contractual obligations and commercial commitments
The following table sets forth the Company’s significant debt repayment, interest and
operating lease obligations at December 31, 2009 (in thousands):
| Maturity Date | ||||||||||||||||||||||||||||
| 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||||||
|
Debt:
|
||||||||||||||||||||||||||||
|
Mortgage loans payable (i) (ii)
|
$ | 20,421,000 | $ | 91,053,000 | $ | 39,629,000 | $ | 64,194,000 | $ | 123,771,000 | $ | 353,911,000 | $ | 692,979,000 | ||||||||||||||
|
Stabilized property credit facility (iii)
|
— | — | 187,985,000 | — | — | — | 187,985,000 | |||||||||||||||||||||
|
Development property credit facility (iii)
|
— | 69,700,000 | — | — | — | — | 69,700,000 | |||||||||||||||||||||
|
Interest payments (iv)
|
48,767,000 | 47,560,000 | 44,473,000 | 28,961,000 | 22,950,000 | 23,016,000 | 215,727,000 | |||||||||||||||||||||
|
Operating lease obligations
|
1,150,000 | 1,213,000 | 1,219,000 | 1,234,000 | 1,250,000 | 21,519,000 | 27,585,000 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total
|
$ | 70,338,000 | $ | 209,526,000 | $ | 273,306,000 | $ | 94,389,000 | $ | 147,971,000 | $ | 398,446,000 | $ | 1,193,976,000 | ||||||||||||||
|
|
||||||||||||||||||||||||||||
| (i) | Does not include: (a) the $15.3 million mortgage loan payable by the Company’s 76.3% owned unconsolidated joint venture, which is due in May 2011, (b) mortgage loans payable applicable to the seven properties transferred or to be transferred to the RioCan joint venture, or (c) mortgage loans payable applicable to discontinued operations. | |
| (ii) | Mortgage loans payable for 2011 includes $61.2 million applicable to property-specific structured financing which is subject to a one-year extension option. | |
| (iii) | Subject to a one-year extension option. | |
| (iv) | Represents interest payments expected to be incurred on the Company’s consolidated debt obligation as of December 31, 2009 inclusive of capitalized interest. For variable rate debt, the rate in effect at December 31, 2009 is assumed to remain in effect until the maturities of the respective obligations. Does not include interest payments to be incurred on debt obligations applicable to unconsolidated joint ventures or discontinued operations. |
In addition, the Company plans to spend between $30 million and $35 million during 2010
in connection with development and redevelopment activities in process as of December 31, 2009.
Net Cash Flows
Operating Activities
Net cash flows provided by operating activities amounted to $51.9 million during 2009,
compared to $60.8 million during 2008 and $53.5 million during 2007. The changes in operating cash
flows during 2009, 2008 and 2007 were primarily the result of the Company’s development and
redevelopment activities, and property acquisitions or dispositions.
Investing Activities
Net cash flows used in investing activities were $70.0 million in 2009, $151.4 million in 2008
and $192.4 million in 2007, and were primarily the result of the Company’s acquisition/disposition
activities. During 2009, the Company acquired two shopping and convenience centers and incurred
expenditures for property improvements, an aggregate of $108.3 million. The Company realized
proceeds from the transfers of two properties to the RioCan joint venture ($32.1 million) and from
the
45
Table of Contents
sales of properties treated as discontinued operations ($6.8 million). During 2008, the Company
acquired four shopping and convenience centers, acquired land for development, expansion and/or
future development and incurred expenditures for property improvements, an aggregate of $131.9
million. The Company also purchased the joint venture minority interests in four properties for
$17.5 million. During 2007, the Company acquired 20 shopping and convenience centers and land for
development, expansion and/or future development, and incurred expenditures for property
improvements, an aggregate of $187.5 million.
Financing Activities
Net cash flows provided by financing activities were $27.0 million in 2009, $75.5 million in
2008 and $143.7 million in 2007. During 2009, the Company received proceeds of mortgage financings
of $60.9 million, proceeds from sales of common stock of $40.9 million, $12.2 million in
contributions from noncontrolling interests (minority interest partners) $5.0 million in proceeds
from a standby equity advance (not settled as of December 31, 2009), offset by net repayments to
its revolving credit facilities of $46.8 million, repayment of mortgage obligations of $18.2
million (including $8.9 million of mortgage balloon payments), preferred and common stock
distributions of $12.9 million, the payment of financing costs of $10.0 million, and distributions
paid to noncontrolling interests (minority and limited partner interests) of $4.1 million. During
2008, the Company received net advance proceeds of $114.1 million from its revolving credit
facilities, $106.7 million in net proceeds from mortgage financings, and $6.3 million in
contributions from noncontrolling interests (minority interest partners), offset by the repayment
of mortgage obligations of $93.3 million (including $84.8 million of mortgage balloon payments),
preferred and common stock distributions of $47.9 million, distributions paid to noncontrolling
interests (minority and limited partner interests) of $5.2 million, the payment of financing costs
of $5.1 million, and the redemption of noncontrolling interests (a limited partner’s OP Units) of
$0.1 million. During 2007, the Company received net advance proceeds of $122.0 million from its
stabilized property credit facility, $53.2 million in contributions from noncontrolling interests
(minority interest partners), $34.5 million in net proceeds from mortgage financings, and $3.9
million in net proceeds from public offerings, offset by preferred and common stock distributions
of $47.6 million, the repayment of mortgage obligations of $16.2 million (including $7.6 million of
mortgage balloon payments), the payment of financing costs of $3.2 million, and distributions paid
to noncontrolling interests (minority and limited partner interests) of $2.9 million.
Funds From Operations
Funds From Operations (“FFO”) is a widely-recognized non-GAAP financial measure for REITs that
the Company believes, when considered with financial statements determined in accordance with GAAP,
is useful to investors in understanding financial performance and providing a relevant basis for
comparison among REITs. In addition, FFO is useful to investors as it captures features particular
to real estate performance by recognizing that real estate generally appreciates over time or
maintains residual value to a much greater extent than do other depreciable assets. Investors
should review FFO, along with GAAP net income, when trying to understand an equity REIT’s operating
performance. The Company presents FFO because the Company considers it an important supplemental
measure of its operating performance and believes that it is frequently used by securities
analysts, investors and other interested parties in the evaluation of REITs. Among other things,
the Company uses FFO or an adjusted FFO-based measure (i) as a criterion to determine
performance-based bonuses for members of senior
46
Table of Contents
management, (ii) in performance comparisons with
other shopping center REITs, and (iii) to measure compliance with certain financial covenants under
the terms of the Loan Agreements relating to the Company’s credit facilities.
The Company computes FFO in accordance with the “White Paper” on FFO published by the National
Association of Real Estate Investment Trusts (“NAREIT”), which defines FFO as net income applicable
to common shareholders (determined in accordance with GAAP), excluding gains or losses from debt
restructurings and sales of properties, plus real estate-related depreciation and amortization, and
after adjustments for partnerships and joint ventures (which are computed to reflect FFO on the
same basis).
FFO does not represent cash generated from operating activities and should not be considered
as an alternative to net income applicable to common shareholders or to cash flow from operating
activities. FFO is not indicative of cash available to fund ongoing cash needs, including the
ability to make cash distributions. Although FFO is a measure used for comparability in assessing
the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the
computation of FFO may vary from one company to another. The following table sets forth the
Company’s calculations of FFO for 2009, 2008 and 2007:
| 2009 | 2008 | 2007 | ||||||||||
|
Net (loss) income attributable to common shareholders
|
$ | (24,543,000 | ) | $ | 10,498,000 | $ | 14,092,000 | |||||
|
Add (deduct):
|
||||||||||||
|
Real estate depreciation and amortization
|
55,179,000 | 49,521,000 | 41,918,000 | |||||||||
|
Noncontrolling interests:
|
||||||||||||
|
Limited partners’ interest
|
(904,000 | ) | 477,000 | 633,000 | ||||||||
|
Minority interests in consolidated joint ventures
|
772,000 | 2,157,000 | 1,415,000 | |||||||||
|
Minority interests’ share of FFO applicable to
consolidated joint ventures
|
(5,787,000 | ) | (6,134,000 | ) | (2,139,000 | ) | ||||||
|
Equity in income of unconsolidated joint ventures
|
(1,098,000 | ) | (956,000 | ) | (634,000 | ) | ||||||
|
FFO from unconsolidated joint ventures
|
1,519,000 | 1,296,000 | 905,000 | |||||||||
|
Gain on sales of discontinued operations
|
(557,000 | ) | — | — | ||||||||
|
|
||||||||||||
|
Funds From Operations
|
$ | 24,581,000 | $ | 56,859,000 | $ | 56,190,000 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
FFO per common share (assuming conversion of OP Units)
|
||||||||||||
|
Basic and diluted
|
$ | 0.51 | $ | 1.22 | $ | 1.22 | ||||||
|
|
||||||||||||
|
Weighted average number of common shares:
|
||||||||||||
|
Shares used in determination of basic earnings per share
|
46,234,000 | 44,475,000 | 44,193,000 | |||||||||
|
Additional shares assuming conversion of OP Units (basic)
|
2,014,000 | 2,024,000 | 1,985,000 | |||||||||
|
|
||||||||||||
|
Shares used in determination of basic FFO per share
|
48,248,000 | 46,499,000 | 46,178,000 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Shares used in determination of diluted earnings per share
|
46,234,000 | 44,475,000 | 44,197,000 | |||||||||
|
Additional shares assuming conversion of OP Units (diluted)
|
2,014,000 | 2,024,000 | 1,990,000 | |||||||||
|
|
||||||||||||
|
Shares used in determination of diluted FFO per share
|
48,248,000 | 46,499,000 | 46,187,000 | |||||||||
|
|
||||||||||||
47
Table of Contents
Inflation
Low to moderate levels of inflation during the past several years have favorably impacted the
Company’s operations by stabilizing operating expenses. However, the Company’s properties have
tenants whose leases include expense reimbursements and other provisions to minimize the effect of
inflation. At the same time, low inflation has had the indirect effect of reducing the Company’s
ability to increase tenant rents upon the signing of new leases and/or lease renewals.
One of the principal market risks facing the Company is interest rate risk on its credit
facilities. The Company may, when advantageous, hedge its interest rate risk using derivative
financial instruments. The Company is not subject to foreign currency risk.
The Company is exposed to interest rate changes primarily through (i) the variable-rate
creditfacilities used to maintain liquidity, fund capital expenditures, development/redevelopment
activities, and expand its real estate investment portfolio, (ii) property-specific variable-rate
construction financing, and (iii) other property-specific variable-rate mortgages. The Company’s
objectives with respect to interest rate risk are to limit the impact of interest rate changes on
operations and cash flows, and to lower its overall borrowing costs. To achieve these objectives,
the Company may borrow at fixed rates and may enter into derivative financial instruments such as
interest rate swaps, caps, etc., in order to mitigate its interest rate risk on a related
variable-rate financial instrument. The Company does not enter into derivative or interest rate
transactions for speculative purposes. At December 31, 2009, the Company had approximately $28.9
million of mortgage loans payable and $23.9 million of secured revolving stabilized property credit facility subject to interest rate swaps which converted LIBOR-based
variable rates to fixed annual rates ranging from 5.2% to 6.8% per annum. In addition, the Company
had an interest rate swap applicable to anticipated permanent financing of $28.0 million for its
development joint venture project in Stroudsburg, Pennsylvania. On January 20, 2010, the Company
paid approximately $5.5 million to terminate interest rate swaps applicable to approximately $23.9
million of secured revolving stabilized property credit facility as well as the interest rate swap
applicable to anticipated permanent financing for its development joint venture project in
Stroudsburg, Pennsylvania.
At December 31, 2009, long-term debt consisted of fixed-rate mortgage loans payable and
variable-rate debt (principally the Company’s variable-rate credit facilities). The average
interest rate on the $610.8 million of fixed-rate indebtedness outstanding was 5.8%, with
maturities at various dates through 2029. The average interest rate on the $339.9 million of
variable-rate debt (including $257.7 million in advances under the Company’s revolving credit
facilities) was 4.4%. The secured revolving stabilized property credit facility matures in January
2012, subject to a one-year extension option. The secured revolving development property credit
facility matures in June 2011, subject to a one-year extension option. With respect to $151.9
million of variable-rate debt outstanding at December 31, 2009, if interest rates either increase
or decrease by 1%, the Company’s interest cost would increase or decrease respectively by
approximately $1.5 million per annum. With respect to the remaining $188.0 of variable-rate debt
outstanding at December 31, 2009, represented by the Company’s secured revolving stabilized
property credit facility, interest is based on LIBOR with a 200 bps LIBOR floor. Accordingly, if
interest rates either increase or decrease by 1%, the Company’s interest cost applicable on this
line would increase by approximately $1.9 million per annum only if LIBOR was in excess of 2.0% per
annum.
48
Table of Contents
| 50 | ||||
|
|
||||
| 51 | ||||
|
|
||||
| 52 | ||||
|
|
||||
| 53 | ||||
|
|
||||
| 55 | ||||
|
|
||||
| 56-91 | ||||
|
|
||||
|
Schedule Filed As Part Of This Report
|
||||
| 92-98 |
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.
49
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Cedar Shopping Centers, Inc.
Cedar Shopping Centers, Inc.
We have audited the accompanying consolidated balance sheets of Cedar Shopping Centers, Inc. (the
“Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations,
equity, and cash flows for each of the three years in the period ended December 31, 2009. Our
audits also included the financial statement schedule listed in the Index at Item 8. These
financial statements and schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Cedar Shopping Centers, Inc. at December 31, 2009
and 2008, and the consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Cedar Shopping Centers, Inc.’s internal control over financial reporting as
of December 31, 2009, based on criteria established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
March 15, 2010 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
New York, New York
March 15, 2010
March 15, 2010
50
Table of Contents
CEDAR SHOPPING CENTERS, INC.
| December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Assets
|
||||||||
|
Real estate:
|
||||||||
|
Land
|
$ | 358,168,000 | $ | 328,425,000 | ||||
|
Buildings and improvements
|
1,317,154,000 | 1,210,788,000 | ||||||
|
|
||||||||
|
|
1,675,322,000 | 1,539,213,000 | ||||||
|
Less accumulated depreciation
|
(164,615,000 | ) | (124,387,000 | ) | ||||
|
|
||||||||
|
Real estate, net
|
1,510,707,000 | 1,414,826,000 | ||||||
|
Real estate to be transferred to a joint venture
|
139,743,000 | 194,952,000 | ||||||
|
Real estate held for sale — discontinued operations
|
11,599,000 | 32,063,000 | ||||||
|
Investment in unconsolidated joint ventures
|
14,113,000 | 4,976,000 | ||||||
|
|
||||||||
|
Cash and cash equivalents
|
17,164,000 | 8,231,000 | ||||||
|
Restricted cash
|
14,075,000 | 14,004,000 | ||||||
|
Rents and other receivables, net
|
9,745,000 | 5,818,000 | ||||||
|
Straight-line rents
|
14,602,000 | 12,327,000 | ||||||
|
Other assets
|
8,809,000 | 9,403,000 | ||||||
|
Deferred charges, net
|
36,873,000 | 30,528,000 | ||||||
|
|
||||||||
|
Total assets
|
$ | 1,777,430,000 | $ | 1,727,128,000 | ||||
|
|
||||||||
|
|
||||||||
|
Liabilities and equity
|
||||||||
|
Mortgage loans payable
|
$ | 692,979,000 | $ | 613,712,000 | ||||
|
Mortgage loans payable — real estate to be transferred to a joint venture
|
94,018,000 | 77,307,000 | ||||||
|
Mortgage loans payable — real estate held for sale — discontinued operations
|
7,765,000 | 17,964,000 | ||||||
|
Secured revolving credit facilities
|
257,685,000 | 304,490,000 | ||||||
|
Accounts payable and accrued liabilities
|
46,902,000 | 46,548,000 | ||||||
|
Unamortized intangible lease liabilities
|
46,643,000 | 56,122,000 | ||||||
|
Liabilities — real estate held for sale and real estate to be
transferred to a joint venture
|
4,295,000 | 5,262,000 | ||||||
|
|
||||||||
|
Total liabilities
|
1,150,287,000 | 1,121,405,000 | ||||||
|
|
||||||||
|
|
||||||||
|
Limited partners’ interest in Operating Partnership
|
12,656,000 | 14,271,000 | ||||||
|
|
||||||||
|
Commitments and contingencies
|
— | — | ||||||
|
|
||||||||
|
Equity:
|
||||||||
|
Cedar Shopping Centers, Inc. shareholders’ equity:
|
||||||||
|
Preferred stock ($.01 par value, $25.00 per share
liquidation value, 12,500,000 shares authorized, 3,550,000
shares issued and outstanding)
|
88,750,000 | 88,750,000 | ||||||
|
Common stock ($.06 par value, 150,000,000 shares authorized
52,139,000 and 44,468,000 shares, respectively, issued and
outstanding)
|
3,128,000 | 2,668,000 | ||||||
|
Treasury
stock (981,000 and 713,000 shares,
respectively, at cost)
|
(9,688,000 | ) | (9,175,000 | ) | ||||
|
Additional paid-in capital
|
621,299,000 | 576,083,000 | ||||||
|
Cumulative distributions in excess of net income
|
(161,328,000 | ) | (127,043,000 | ) | ||||
|
Accumulated other comprehensive loss
|
(2,992,000 | ) | (7,256,000 | ) | ||||
|
|
||||||||
|
Total Cedar Shopping Centers, Inc. shareholders’ equity
|
539,169,000 | 524,027,000 | ||||||
|
|
||||||||
|
Noncontrolling interests:
|
||||||||
|
Minority interests in consolidated joint ventures
|
67,229,000 | 58,150,000 | ||||||
|
Limited partners’ interest in Operating Partnership
|
8,089,000 | 9,275,000 | ||||||
|
|
||||||||
|
Total noncontrolling interests
|
75,318,000 | 67,425,000 | ||||||
|
|
||||||||
|
Total equity
|
614,487,000 | 591,452,000 | ||||||
|
|
||||||||
|
Total liabilities and equity
|
$ | 1,777,430,000 | $ | 1,727,128,000 | ||||
|
|
||||||||
See accompanying notes to consolidated financial statements.
51
Table of Contents
CEDAR SHOPPING CENTERS, INC.
| Years ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Revenues:
|
||||||||||||
|
Rents
|
$ | 145,439,000 | $ | 137,524,000 | $ | 120,606,000 | ||||||
|
Expense recoveries
|
34,837,000 | 31,934,000 | 28,223,000 | |||||||||
|
Other
|
1,435,000 | 1,207,000 | 1,775,000 | |||||||||
|
|
||||||||||||
|
Total revenues
|
181,711,000 | 170,665,000 | 150,604,000 | |||||||||
|
|
||||||||||||
|
Expenses:
|
||||||||||||
|
Operating, maintenance and management
|
34,478,000 | 29,477,000 | 24,652,000 | |||||||||
|
Real estate and other property-related taxes
|
20,977,000 | 18,991,000 | 15,377,000 | |||||||||
|
General and administrative
|
10,166,000 | 8,586,000 | 9,041,000 | |||||||||
|
Impairments
|
23,636,000 | — | — | |||||||||
|
Terminated projects and acquisition transaction costs
|
4,367,000 | 855,000 | — | |||||||||
|
Depreciation and amortization
|
54,257,000 | 48,741,000 | 41,004,000 | |||||||||
|
|
||||||||||||
|
Total expenses
|
147,881,000 | 106,650,000 | 90,074,000 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Operating income
|
33,830,000 | 64,015,000 | 60,530,000 | |||||||||
|
Non-operating income and expense:
|
||||||||||||
|
Interest expense, including amortization of
deferred financing costs
|
(49,785,000 | ) | (44,934,000 | ) | (38,495,000 | ) | ||||||
|
Interest income
|
63,000 | 284,000 | 788,000 | |||||||||
|
Equity in income of unconsolidated joint ventures
|
1,098,000 | 956,000 | 634,000 | |||||||||
|
Gain on sales of land parcels
|
521,000 | — | — | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total non-operating income and expense
|
(48,103,000 | ) | (43,694,000 | ) | (37,073,000 | ) | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
(Loss) income before discontinued operations
|
(14,273,000 | ) | 20,321,000 | 23,457,000 | ||||||||
|
|
||||||||||||
|
(Loss) income from discontinued operations
|
(3,083,000 | ) | 688,000 | 560,000 | ||||||||
|
Gain on sales of discontinued operations
|
557,000 | — | — | |||||||||
|
|
||||||||||||
|
Total discontinued operations
|
(2,526,000 | ) | 688,000 | 560,000 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net (loss) income
|
(16,799,000 | ) | 21,009,000 | 24,017,000 | ||||||||
|
|
||||||||||||
|
Less, net (income) loss attributable to noncontrolling interests:
|
||||||||||||
|
Minority interests in consolidated joint ventures
|
(772,000 | ) | (2,157,000 | ) | (1,415,000 | ) | ||||||
|
Limited partners’ interest in Operating Partnership
|
904,000 | (477,000 | ) | (633,000 | ) | |||||||
|
|
||||||||||||
|
Total net (income) loss attributable to noncontrolling interests
|
132,000 | (2,634,000 | ) | (2,048,000 | ) | |||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net (loss) income attributable to Cedar Shopping Centers, Inc.
|
(16,667,000 | ) | 18,375,000 | 21,969,000 | ||||||||
|
|
||||||||||||
|
Preferred distribution requirements
|
(7,876,000 | ) | (7,877,000 | ) | (7,877,000 | ) | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net (loss) income attributable to common shareholders
|
$ | (24,543,000 | ) | $ | 10,498,000 | $ | 14,092,000 | |||||
|
|
||||||||||||
|
|
||||||||||||
|
Per common share attributable to common sharehoders (basic
and diluted):
|
||||||||||||
|
Continuing operations
|
$ | (0.48 | ) | $ | 0.23 | $ | 0.31 | |||||
|
Discontinued operations
|
(0.05 | ) | 0.01 | 0.01 | ||||||||
|
|
||||||||||||
|
|
$ | (0.53 | ) | $ | 0.24 | $ | 0.32 | |||||
|
|
||||||||||||
|
|
||||||||||||
|
Amounts attributable to Cedar Shopping Centers, Inc.
common shareholders, net of limited partners’ interest:
|
||||||||||||
|
(Loss) income from continuing operations
|
$ | (22,107,000 | ) | $ | 9,840,000 | $ | 13,556,000 | |||||
|
(Loss) income from discontinued operations
|
(2,973,000 | ) | 658,000 | 536,000 | ||||||||
|
Gain on sales of discontinued operations
|
537,000 | — | — | |||||||||
|
|
||||||||||||
|
Net (loss) income
|
$ | (24,543,000 | ) | $ | 10,498,000 | $ | 14,092,000 | |||||
|
|
||||||||||||
|
|
||||||||||||
|
Dividends to common shareholders
|
$ | 9,742,000 | $ | 40,027,000 | $ | 39,775,000 | ||||||
|
Per common share
|
$ | 0.2025 | $ | 0.9000 | $ | 0.9000 | ||||||
|
|
||||||||||||
|
Weighted average number of common shares outstanding
|
46,234,000 | 44,475,000 | 44,193,000 | |||||||||
|
|
||||||||||||
See accompanying notes to consolidated financial statements.
52
Table of Contents
CEDAR SHOPPING CENTERS, INC.
Consolidated Statements of Equity
Years ended December 31, 2009, 2008 and 2007
| Cedar Shopping Centers, Inc. Shareholders | ||||||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | Cumulative | Accumulated | |||||||||||||||||||||||||||||||||
| $25.00 | Treasury | Additional | distributions | other | ||||||||||||||||||||||||||||||||
| Liquidation | $0.06 | stock, | paid-in | in excess of | comprehensive | |||||||||||||||||||||||||||||||
| Shares | value | Shares | Par value | at cost | capital | net income | (loss) income | Total | ||||||||||||||||||||||||||||
|
Balance, December 31, 2006
|
3,550,000 | 88,750,000 | 43,773,000 | 2,626,000 | $ | (6,378,000 | ) | $ | 564,637,000 | $ | (75,309,000 | ) | $ | 146,000 | $ | 574,472,000 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Net income
|
21,969,000 | 21,969,000 | ||||||||||||||||||||||||||||||||||
|
Unrealized loss on change in fair
value
of cash flow hedges
|
(82,000 | ) | (82,000 | ) | ||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total other comprehensive income
|
21,887,000 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Deferred compensation activity, net
|
186,000 | 11,000 | (1,814,000 | ) | 3,949,000 | 2,146,000 | ||||||||||||||||||||||||||||||
|
Net proceeds from sale of common
stock
|
275,000 | 17,000 | 4,115,000 | 4,132,000 | ||||||||||||||||||||||||||||||||
|
Conversion of OP units into common
stock
|
4,000 | — | 45,000 | 45,000 | ||||||||||||||||||||||||||||||||
|
Preferred distribution requirements
|
(7,877,000 | ) | (7,877,000 | ) | ||||||||||||||||||||||||||||||||
|
Distributions to common
shareholders/
noncontrolling interests
|
(39,775,000 | ) | (39,775,000 | ) | ||||||||||||||||||||||||||||||||
|
Additional
noncontrolling interests’ shares
|
— | |||||||||||||||||||||||||||||||||||
|
Reallocation adjustment of limited
partners’ interest
|
(354,000 | ) | (354,000 | ) | ||||||||||||||||||||||||||||||||
|
Adjustment of Mezz OP Units to
redemption value
|
3,478,000 | 3,478,000 | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2007
|
3,550,000 | 88,750,000 | 44,238,000 | 2,654,000 | (8,192,000 | ) | 572,392,000 | (97,514,000 | ) | 64,000 | 558,154,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Net income
|
18,375,000 | 18,375,000 | ||||||||||||||||||||||||||||||||||
|
Unrealized loss on change in fair
value
of cash flow hedges
|
(7,320,000 | ) | (7,320,000 | ) | ||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total other comprehensive income
|
11,055,000 | |||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Deferred compensation activity, net
|
225,000 | 13,000 | (983,000 | ) | 3,342,000 | 2,372,000 | ||||||||||||||||||||||||||||||
|
Conversion of OP units into common
stock
|
5,000 | 1,000 | 67,000 | 68,000 | ||||||||||||||||||||||||||||||||
|
Preferred distribution requirements
|
(7,877,000 | ) | (7,877,000 | ) | ||||||||||||||||||||||||||||||||
|
Distributions to common
shareholders/
noncontrolling interests
|
(40,027,000 | ) | (40,027,000 | ) | ||||||||||||||||||||||||||||||||
|
Additional noncontrolling
interests’ shares
|
— | |||||||||||||||||||||||||||||||||||
|
Purchase/redemption of
noncontrolling
interests’ shares
|
— | |||||||||||||||||||||||||||||||||||
|
Reallocation adjustment of limited
partners’ interest
|
282,000 | 282,000 | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2008
|
3,550,000 | 88,750,000 | 44,468,000 | 2,668,000 | (9,175,000 | ) | 576,083,000 | (127,043,000 | ) | (7,256,000 | ) | 524,027,000 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Net loss
|
(16,667,000 | ) | (16,667,000 | ) | ||||||||||||||||||||||||||||||||
|
Unrealized gain on change in fair
value
of cash flow hedges
|
4,264,000 | 4,264,000 | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total other comprehensive loss
|
(12,403,000 | ) | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Deferred compensation activity, net
|
570,000 | 34,000 | (513,000 | ) | 3,070,000 | 2,591,000 | ||||||||||||||||||||||||||||||
|
Net proceeds from the sales of
common stock
and issuance of warrants
|
7,089,000 | 425,000 | 40,465,000 | 40,890,000 | ||||||||||||||||||||||||||||||||
|
Conversion of OP units into common
stock
|
12,000 | 1,000 | 130,000 | 131,000 | ||||||||||||||||||||||||||||||||
|
Preferred distribution requirements
|
(7,876,000 | ) | (7,876,000 | ) | ||||||||||||||||||||||||||||||||
|
Distributions to common
shareholders/
noncontrolling interests
|
(9,742,000 | ) | (9,742,000 | ) | ||||||||||||||||||||||||||||||||
|
Reallocation adjustment of limited
partners’ interest
|
1,551,000 | 1,551,000 | ||||||||||||||||||||||||||||||||||
|
Additional noncontrolling
interests’ shares
|
||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2009
|
3,550,000 | 88,750,000 | 52,139,000 | 3,128,000 | $ | (9,688,000 | ) | $ | 621,299,000 | $ | (161,328,000 | ) | $ | (2,992,000 | ) | $ | 539,169,000 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
53
Table of Contents
CEDAR SHOPPING CENTERS, INC.
Consolidated Statements of Equity
Years ended December 31, 2009, 2008 and 2007
(continued)
Consolidated Statements of Equity
Years ended December 31, 2009, 2008 and 2007
(continued)
| Noncontrolling Interests | ||||||||||||||||
| Limited | ||||||||||||||||
| Minority | partners’ | |||||||||||||||
| interests in | interest in | |||||||||||||||
| consolidated | Operating | Total | ||||||||||||||
| joint ventures | Partnership | Total | equity | |||||||||||||
|
Balance, December 31, 2006
|
$ | 9,132,000 | $ | 9,834,000 | $ | 18,966,000 | $ | 593,438,000 | ||||||||
|
|
||||||||||||||||
|
Net income
|
1,415,000 | 240,000 | 1,655,000 | 23,624,000 | ||||||||||||
|
Unrealized loss on change in fair value
of cash flow hedges
|
(200,000 | ) | (2,000 | ) | (202,000 | ) | (284,000 | ) | ||||||||
|
|
||||||||||||||||
|
Total other comprehensive income
|
1,215,000 | 238,000 | 1,453,000 | 23,340,000 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Deferred compensation activity, net
|
— | — | — | 2,146,000 | ||||||||||||
|
Net proceeds from sale of common stock
|
— | — | — | 4,132,000 | ||||||||||||
|
Conversion of OP units into common stock
|
(45,000 | ) | (45,000 | ) | — | |||||||||||
|
Preferred distribution requirements
|
— | — | — | (7,877,000 | ) | |||||||||||
|
Distributions to common shareholders/
noncontrolling interests
|
(1,063,000 | ) | (681,000 | ) | (1,744,000 | ) | (41,519,000 | ) | ||||||||
|
Additional noncontrolling interests’ shares
|
53,118,000 | 570,000 | 53,688,000 | 53,688,000 | ||||||||||||
|
Reallocation adjustment of limited
partners’ interest
|
— | 195,000 | 195,000 | (159,000 | ) | |||||||||||
|
Adjustment of Mezz OP Units to
redemption value
|
— | — | — | 3,478,000 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Balance, December 31, 2007
|
62,402,000 | 10,111,000 | 72,513,000 | 630,667,000 | ||||||||||||
|
|
||||||||||||||||
|
Net income
|
2,157,000 | 187,000 | 2,344,000 | 20,719,000 | ||||||||||||
|
Unrealized loss on change in fair value
of cash flow hedges
|
(336,000 | ) | (129,000 | ) | (465,000 | ) | (7,785,000 | ) | ||||||||
|
|
||||||||||||||||
|
Total other comprehensive income
|
1,821,000 | 58,000 | 1,879,000 | 12,934,000 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Deferred compensation activity, net
|
— | — | — | 2,372,000 | ||||||||||||
|
Conversion of OP units into common stock
|
— | (68,000 | ) | (68,000 | ) | — | ||||||||||
|
Preferred distribution requirements
|
— | — | — | (7,877,000 | ) | |||||||||||
|
Distributions to common shareholders/
noncontrolling interests
|
(3,427,000 | ) | (717,000 | ) | (4,144,000 | ) | (44,171,000 | ) | ||||||||
|
Additional noncontrolling interests’ shares
|
6,364,000 | 6,364,000 | 6,364,000 | |||||||||||||
|
Purchase/redemption of noncontrolling
interests’ shares
|
(9,010,000 | ) | (9,010,000 | ) | (9,010,000 | ) | ||||||||||
|
Reallocation adjustment of limited
partners’ interest
|
— | (109,000 | ) | (109,000 | ) | 173,000 | ||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Balance, December 31, 2008
|
58,150,000 | 9,275,000 | 67,425,000 | 591,452,000 | ||||||||||||
|
|
||||||||||||||||
|
Net loss
|
772,000 | (358,000 | ) | 414,000 | (16,253,000 | ) | ||||||||||
|
Unrealized gain on change in fair value
of cash flow hedges
|
— | 79,000 | 79,000 | 4,343,000 | ||||||||||||
|
|
||||||||||||||||
|
Total other comprehensive loss
|
772,000 | (279,000 | ) | 493,000 | (11,910,000 | ) | ||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Deferred compensation activity, net
|
— | — | — | 2,591,000 | ||||||||||||
|
Net proceeds from the sales of common stock
and issuance of warrants
|
— | — | — | 40,890,000 | ||||||||||||
|
Conversion of OP units into common stock
|
— | (131,000 | ) | (131,000 | ) | — | ||||||||||
|
Preferred distribution requirements
|
— | — | — | (7,876,000 | ) | |||||||||||
|
Distributions to common shareholders/
noncontrolling interests
|
(3,905,000 | ) | (167,000 | ) | (4,072,000 | ) | (13,814,000 | ) | ||||||||
|
Reallocation adjustment of limited
partners’ interest
|
— | (609,000 | ) | (609,000 | ) | 942,000 | ||||||||||
|
Additional noncontrolling interests’ shares
|
12,212,000 | — | 12,212,000 | 12,212,000 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Balance, December 31, 2009
|
$ | 67,229,000 | $ | 8,089,000 | $ | 75,318,000 | $ | 614,487,000 | ||||||||
|
|
||||||||||||||||
See accompanying notes to consolidated financial statements.
54
Table of Contents
CEDAR SHOPPING CENTERS, INC.
| Years ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Cash flow from operating activities:
|
||||||||||||
|
Net (loss) income
|
$ | (16,799,000 | ) | $ | 21,009,000 | $ | 24,017,000 | |||||
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
||||||||||||
|
Non-cash provisions:
|
||||||||||||
|
Equity in income of unconsolidated joint ventures
|
(1,098,000 | ) | (956,000 | ) | (634,000 | ) | ||||||
|
Distributions from unconsolidated joint ventures
|
921,000 | 834,000 | 529,000 | |||||||||
|
Impairments
|
23,636,000 | — | — | |||||||||
|
Terminated projects
|
3,094,000 | 463,000 | — | |||||||||
|
Impairment — discontinued operations
|
3,559,000 | — | — | |||||||||
|
Gain on sales of real estate
|
(1,078,000 | ) | — | — | ||||||||
|
Straight-line rents
|
(2,874,000 | ) | (2,876,000 | ) | (3,451,000 | ) | ||||||
|
Depreciation and amortization
|
55,179,000 | 49,802,000 | 42,160,000 | |||||||||
|
Amortization of intangible lease liabilities
|
(13,522,000 | ) | (14,409,000 | ) | (10,892,000 | ) | ||||||
|
Amortization/market price adjustments relating to stock-based compensation
|
2,433,000 | 1,099,000 | 1,306,000 | |||||||||
|
Amortization of deferred financing costs
|
3,648,000 | 1,790,000 | 1,233,000 | |||||||||
|
Increases/decreases in operating assets and liabilities:
|
||||||||||||
|
Rents and other receivables, net
|
(2,555,000 | ) | 1,822,000 | (2,548,000 | ) | |||||||
|
Prepaid expenses and other
|
(5,168,000 | ) | 153,000 | (4,265,000 | ) | |||||||
|
Accounts payable and accrued liabilities
|
2,566,000 | 2,084,000 | 6,048,000 | |||||||||
|
|
||||||||||||
|
Net cash provided by operating activities
|
51,942,000 | 60,815,000 | 53,503,000 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Cash flow from investing activities:
|
||||||||||||
|
Expenditures for real estate and improvements
|
(108,300,000 | ) | (131,874,000 | ) | (187,497,000 | ) | ||||||
|
Proceeds from transfers to unconsolidated joint venture
|
32,089,000 | — | — | |||||||||
|
Net proceeds from sales of real estate
|
6,752,000 | — | — | |||||||||
|
Purchase of consolidated joint venture minority interests
|
— | (17,454,000 | ) | — | ||||||||
|
Investment in unconsolidated joint venture
|
(350,000 | ) | (1,097,000 | ) | (8,000 | ) | ||||||
|
Construction escrows and other
|
(217,000 | ) | (965,000 | ) | (4,927,000 | ) | ||||||
|
|
||||||||||||
|
Net cash used in investing activities
|
(70,026,000 | ) | (151,390,000 | ) | (192,432,000 | ) | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Cash flow from financing activities:
|
||||||||||||
|
Net (repayments)/advances (to)/from revolving credit facilities
|
(46,805,000 | ) | 114,050,000 | 121,970,000 | ||||||||
|
Proceeds from mortgage financings
|
60,950,000 | 106,738,000 | 34,493,000 | |||||||||
|
Mortgage repayments
|
(18,203,000 | ) | (93,317,000 | ) | (16,177,000 | ) | ||||||
|
Payments of debt financing costs
|
(9,973,000 | ) | (5,062,000 | ) | (3,187,000 | ) | ||||||
|
Noncontrolling interests:
|
||||||||||||
|
Contributions from consolidated joint venture minority interests, net
|
12,212,000 | 6,383,000 | 53,229,000 | |||||||||
|
Distributions to consolidated joint venture minority interests
|
(3,905,000 | ) | (3,427,000 | ) | (1,063,000 | ) | ||||||
|
Redemption of Operating Partnership Units
|
— | (122,000 | ) | — | ||||||||
|
Distributions to limited partners
|
(227,000 | ) | (1,822,000 | ) | (1,788,000 | ) | ||||||
|
Proceeds from the sales of common stock
|
40,890,000 | — | 3,910,000 | |||||||||
|
Proceeds from standby equity advance not settled
|
5,000,000 | — | — | |||||||||
|
Preferred stock distributions
|
(7,876,000 | ) | (7,877,000 | ) | (7,877,000 | ) | ||||||
|
Distributions to common shareholders
|
(5,046,000 | ) | (40,027,000 | ) | (39,775,000 | ) | ||||||
|
|
||||||||||||
|
Net cash provided by financing activities
|
27,017,000 | 75,517,000 | 143,735,000 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net increase (decrease) in cash and cash equivalents
|
8,933,000 | (15,058,000 | ) | 4,806,000 | ||||||||
|
Cash and cash equivalents at beginning of period
|
8,231,000 | 23,289,000 | 18,483,000 | |||||||||
|
|
||||||||||||
|
Cash and cash equivalents at end of period
|
$ | 17,164,000 | $ | 8,231,000 | $ | 23,289,000 | ||||||
|
|
||||||||||||
See accompanying notes to consolidated financial statements.
55
Table of Contents
Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Cedar Shopping Centers, Inc. (the “Company”) was organized in 1984 and elected to be taxed as
a real estate investment trust (“REIT”) in 1986. The Company focuses primarily on ownership,
operation, development and redevelopment of supermarket-anchored shopping centers predominately in
coastal mid-Atlantic and New England states. At December 31, 2009, the Company owned and managed
119 operating properties.
Cedar Shopping Centers Partnership, L.P. (the “Operating Partnership”) is the entity through
which the Company conducts substantially all of its business and owns (either directly or through
subsidiaries) substantially all of its assets. At December 31, 2009, the Company owned a 96.3%
economic interest in, and was the sole general partner of, the Operating Partnership. The limited
partners’ interest in the Operating Partnership (3.7% at December 31, 2009) 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 approximately 2,006,000 OP Units outstanding at
December 31, 2009 are economically equivalent to the Company’s common stock and are convertible
into the Company’s common stock at the option of the respective holders on a one-to-one basis.
As used herein, the “Company” refers to Cedar Shopping Centers, Inc. and its subsidiaries on a
consolidated basis, including the Operating Partnership or, where the context so requires, Cedar
Shopping Centers, Inc. only.
In July 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standard No. 168, “The FASB Accounting Standards Codification and Hierarchy of Generally
Accepted Accounting Principles”, also known as the FASB Accounting Standards Codification (the
“Codification”), which establishes the exclusive authoritative reference for accounting principles
generally accepted in the United States (“GAAP”) for use in financial statements. The Codification
supersedes all existing non-Securities and Exchange Commission (“SEC”) accounting and reporting
standards, although SEC rules and interpretive releases remain as additional authoritative GAAP for
U.S. registrants. The Codification does not change GAAP, but is intended to simplify user access by
providing all the authoritative literature related to a particular topic in one place. The
Codification, which became effective for financial statements issued after September 15, 2009, did
not have an effect on the Company’s financial statements. Although the Company has continued to
provide a general description of the relevant accounting literature applicable to its significant
accounting policies, it has ceased including the specific FASB pronouncement references in its
financial statement footnotes.
56
Table of Contents
Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
The consolidated financial statements include the accounts and operations of the Company, the
Operating Partnership, its subsidiaries, and certain joint venture partnerships in which it
participates. The Company consolidates all variable interest entities (“VIEs”) for which it is the
primary beneficiary. Generally, a VIE is an entity with one or more of the following
characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to
finance its activities without additional subordinated financial support, (b) as a group, the
holders of the equity investment at risk (i) lack the ability to make decisions about an entity’s
activities through voting or similar rights, (ii) have no obligation to absorb the expected losses
of the entity, or (iii) have the right to receive the expected residual returns of the entity, or
(c) the equity investors have voting rights that are not proportional to their economic interests,
and substantially all of the entity’s activities either involve, or are conducted on behalf of, an
investor that has disproportionately few voting rights. The current accounting guidance requires a
VIE to be consolidated in the financial statements of the entity that is determined to be the
primary beneficiary of the VIE, i.e., the entity that will receive a majority of the VIE’s expected
losses, expected residual returns, or both. In determining whether the Company is the primary
beneficiary of a VIE, it considers qualitative and quantitative factors including, but not limited
to: (i) the amount and characteristics of the Company’s investment, (ii) the obligation or
likelihood for the Company or other investors to provide financial support, (iii) the Company’s and
the other investors’ ability to control or significantly influence key decisions for the VIE, and
(iv) the similarity with, and significance to, the business activities of the Company and the other
investors. Significant judgments related to these determinations include estimates about the
current and future fair values and performance of real estate held by these VIEs and general market
conditions.
With respect to its 13 consolidated operating joint ventures, the Company has general
partnership interests of 20% in nine properties, 40% in two properties, 50% in one property and 75%
in one property. As (i) such entities are not VIEs, and (ii) the Company is the sole general
partner and exercises substantial operating control over these entities, the Company has determined
that such entities should be consolidated for financial statement purposes. Current accounting
guidance provides a framework for determining whether a general partner controls, and should
consolidate, a limited partnership or similar entity in which it owns a minority interest.
The Company’s three 60%-owned joint ventures for development projects in Limerick, Pottsgrove
and Stroudsburg, Pennsylvania, are consolidated as they are deemed to be VIEs and the Company is
the primary income or loss beneficiary in each case. At December 31, 2009, these VIEs owned real
estate with a carrying value of $134.9 million. At that date, two of the VIEs had property-specific
mortgage loans payable aggregating $62.5 million, and the real estate owned by one of the VIEs
collateralized the secured revolving development property credit facility in the amount of $7.7
million.
57
Table of Contents
Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
With respect to its unconsolidated joint ventures, the Company has a 20% interest in a joint
venture with RioCan (more fully described below) formed initially for the acquisition of seven
shopping center properties owned by the Company. Two of the properties were transferred to the
joint venture prior to December 31, 2009, two of the properties were transferred in January and
February 2010 and the three remaining properties are expected to be transferred during the first
half of 2010. In addition, the Company has a 76.3% interest in a joint venture which owns a
single-tenant office property in Philadelphia, Pennsylvania. Although the Company exercises
influence over these joint ventures, it does not have operating control. In the case of the RioCan
joint venture, although the Company provides management and other services, RioCan has significant
management participation rights. The Company has determined that these joint ventures are not VIEs.
The Company accounts for its investment in these joint ventures under the equity method.
At December 31, 2009, the Company had deposits of $0.9 million on three land parcels to be
purchased for future development. Although each of the deposits is considered a VIE, the Company
has not consolidated any of them as the Company is not the primary income or loss beneficiary in
each case.
The accompanying financial statements are prepared on the accrual basis in accordance with
GAAP, which requires management to make estimates and assumptions that affect the disclosure of
contingent assets and liabilities, the reported amounts of assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses during the periods
covered by the financial statements. Actual results could differ from these estimates.
The consolidated financial statements reflect certain reclassifications of prior period
amounts to conform to the 2009 presentation, principally (i) the retrospective reclassification,
for all periods presented, of the balances related to minority interests in consolidated joint
ventures and limited partners’ interest in the Operating Partnership into the consolidated equity
accounts, as appropriate (certain non-controlling interests of the Company will continue to be
classified in the mezzanine section of the balance sheet as these redeemable OP Units (“Mezz OP
Units”) do not meet the requirements for equity classification), (ii) to reflect the
reclassifications of the assets and liabilities of the properties transferred and to be transferred
to the RioCan joint venture as “real estate to be transferred to a joint venture”, and (iii) to
reflect the sale and/or treatment as “held for sale” of certain operating properties and the
treatment thereof as “discontinued operations”. The reclassifications had no impact on
previously-reported net income attributable to common shareholders or earnings per share.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
Real Estate Investments and Discontinued Operations
Real estate investments are carried at cost less accumulated depreciation. The provision for
depreciation is calculated using the straight-line method based upon the estimated useful lives of
the respective assets of between 3 and 40 years. Depreciation expense amounted to $50.3 million,
$44.7 million and $37.7 million for 2009, 2008 and 2007, respectively. Expenditures for
betterments that substantially extend the useful lives of the assets are capitalized. Expenditures
for maintenance, repairs, and betterments that do not substantially prolong the normal useful life
of an asset are charged to operations as incurred, and amounted to $2.2 million, $2.2 million and
$1.7 million for 2009, 2008 and 2007, respectively.
Upon the sale or other disposition of assets, the cost and related accumulated depreciation
and amortization are removed from the accounts and the resulting gain or impairment loss, if any,
is reflected as discontinued operations. In addition, prior periods’ financial statements would be
reclassified to reflect the sold properties’ operations as discontinued.
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. Interest and financing
costs capitalized amounted to $6.3 million, $6.7 million and $4.1 million for 2009, 2008 and 2007,
respectively. A variety of costs are incurred in the acquisition, development and leasing of a
property, such as pre-construction costs essential to the development of the property, development
costs, construction costs, interest costs, real estate taxes, salaries and related costs, and other
costs incurred during the period of development. After a determination is made to capitalize a
cost, it is allocated to the specific component of a project that is benefited. The Company ceases
capitalization on the portions substantially completed and occupied, or held available for
occupancy, and capitalizes only those costs associated with the portions under development. The
Company considers a construction project to be substantially completed and held available for
occupancy upon the completion of tenant improvements, but not later than one year from cessation of
major construction activity.
Management reviews each real estate investment for impairment whenever events or circumstances
indicate that the carrying value of a real estate investment may not be recoverable. The review of
recoverability is based on an estimate of the future cash flows that are expected to result from
the real estate investment’s use and eventual disposition. These cash flows consider factors such
as expected future operating income, trends and prospects, as well as the effects of leasing
demand, competition and other factors. If an impairment event exists due to the projected inability
to recover the carrying value of a real estate investment, an impairment loss is recorded to the
extent that the carrying value exceeds estimated fair value. Real estate investments held for sale
are carried at the lower of their respective carrying amounts or estimated fair values, less costs
to sell. Depreciation and amortization are suspended during the periods held for sale.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
In October 2009, the Company entered into the RioCan transactions (more fully described
below), and recorded a net impairment charge aggregating $23.6 million based on the indicated
values and costs of the contract of sale of an 80% interest in seven properties transferred or to
be transferred to the RioCan joint venture. Insofar as the Company has and will have a continued
involvement with these properties (it exercises significant influence
through its 20% interest retained and provides property management and
other services), the accounting treatment presentation on the accompanying consolidated balance
sheet is to reflect the Company’s applicable carrying values as “real estate to be transferred to
a joint venture” retroactively for all periods presented, whereas the accounting treatment
presentation on the accompanying consolidated statements of operations is to reflect the results of
the properties’ operations prospectively following their transfer to the joint venture as “equity
in income of unconsolidated joint ventures” with no
reclassification adjustments for discontinued operations. Revenues included in the accompanying statement of
operations for the seven properties transferred or to be transferred to the RioCan joint venture
aggregated $18.6 million, $17.7 million and $16.6 million, respectively, for 2009, 2008 and 2007.
During 2009, the Company wrote-off costs incurred in prior years for (i) potential development
opportunities in Milford, Delaware and Ephrata, Pennsylvania that the Company determined would not
go forward (an aggregate of $2.8 million) and (ii) costs incurred related to the acquisitions of
San Souci Plaza and New London Mall (net of minority interest share) and the costs primarily
associated with a cancelled acquisition (an aggregate of $1.5 million).
During 2009, the Company sold, or has treated as “held for sale”, nine of its drug
store/convenience centers, located in Ohio and New York. In
connection with these transactions, the Company recorded impairment charges aggregating $3.6
million.
Conditional asset retirement obligation
A conditional asset retirement obligation is a legal obligation to perform an asset retirement
activity in which the timing and/or method of settlement is conditional on a future event that may
or may not be within the control of the Company. The Company would record a liability for a
conditional asset retirement obligation if the fair value of the obligation can be reasonably
estimated. Environmental studies conducted at the time of acquisition with respect to all of the
Company’s properties did not reveal any material environmental liabilities, and the Company is
unaware of any subsequent environmental matters that would have created a material liability. The
Company believes that its properties are currently in material compliance with applicable
environmental, as well as non-environmental, statutory and regulatory requirements. There were no
conditional asset retirement obligation liabilities recorded by the Company during the three years
ended December 31, 2009.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
Intangible Lease Asset/Liability
The Company allocates the fair value of real estate acquired to land, buildings and
improvements. In addition, the fair value of in-place leases is allocated to intangible lease
assets and liabilities.
The fair value of the tangible assets of an acquired property is determined by valuing the
property as if it were vacant, which value is then allocated to land, buildings and improvements
based on management’s determination of the relative fair values of these assets. In valuing an
acquired property’s intangibles, factors considered by management include an estimate of carrying
costs during the expected lease-up periods, such as real estate taxes, insurance, other operating
expenses, and estimates of lost rental revenue during the expected lease-up periods based on its
evaluation of current market demand. Management also estimates costs to execute similar leases,
including leasing commissions, tenant improvements, legal and other related costs.
The value of in-place leases is measured by the excess of (i) the purchase price paid for a
property after adjusting existing in-place leases to market rental rates, over (ii) the estimated
fair value of the property as if vacant. Above-market and below-market in-place lease values are
recorded based on the present value (using a discount rate which reflects the risks associated with
the leases acquired) of the difference 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 acquisition. The value of other intangibles is
amortized to expense, and the above-market and below-market lease values are amortized to rental
income, over the terms of the respective leases. If a lease were to be terminated prior to its
stated expiration, all unamortized amounts relating to that lease would be recognized in operations
at that time.
With respect to the Company’s 2009 acquisitions, the fair values of in-place leases and other
intangibles have been allocated to the intangible asset and liability accounts. Such allocations
are preliminary and are based on information and estimates available as of the respective dates of
acquisition. As final information becomes available and is refined, appropriate adjustments are
made to the purchase price allocations, which are finalized within twelve months of the respective
dates of acquisition. Unamortized intangible lease liabilities relate primarily to below-market
leases, and amounted to $46.6 million and $56.1 million at December 31, 2009 and 2008,
respectively.
As a result of recording the intangible lease assets and liabilities, (i) revenues were
increased by $13.4 million, $14.3 million and $10.8 million for 2009, 2008 and 2007, respectively,
relating to the amortization of intangible lease liabilities, and (ii) depreciation and
amortization expense was increased correspondingly by $13.9 million, $14.5 million and $12.9
million for 2009, 2008 and 2007, respectively.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
The unamortized balance of intangible lease liabilities of $46.6 million at December 31, 2009
is net of accumulated amortization of $52.5 million, and will be credited to future operations
through 2043 as follows:
|
2010
|
$ | 7,811,000 | ||
|
2011
|
6,279,000 | |||
|
2012
|
5,576,000 | |||
|
2013
|
5,060,000 | |||
|
2014
|
4,314,000 | |||
|
Thereafter
|
17,603,000 | |||
|
|
||||
|
|
$ | 46,643,000 | ||
|
|
||||
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks and short-term investments with original
maturities of less than ninety days, and include cash at consolidated joint ventures of $7.4
million and $1.9 million at December 31, 2009 and 2008, respectively.
Restricted Cash
The terms of several of the Company’s mortgage loans payable require the Company to deposit
certain replacement and other reserves with its lenders. Such “restricted cash” is generally
available only for property-level requirements for which the reserves have been established, is not
available to fund other property-level or Company-level obligations, and amounted to $14.1 million
and $14.0 million at December 31, 2009 and 2008, respectively.
Rents and Other Receivables
Management has determined that all of the Company’s leases with its various tenants are
operating leases. Rental income with scheduled rent increases is recognized using the straight-line
method over the respective terms of the leases. The aggregate excess of rental revenue recognized
on a straight-line basis over the contractual base rents is included in straight-line rents on the
consolidated balance sheet. Leases also generally contain provisions under which the tenants
reimburse the Company for a portion of property operating expenses and real estate taxes incurred;
such income is recognized in the periods earned. In addition, certain operating leases contain
contingent rent provisions under which tenants are required to pay, as additional rent, a
percentage of their sales in excess of a specified amount. The Company defers recognition of
contingent rental income until those specified sales targets are met.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
The Company must make estimates as to the collectibility of its accounts receivable related to
base rent, straight-line rent, percentage rent, expense reimbursements and other revenues. When
management analyzes accounts receivable and evaluates the adequacy of the allowance for doubtful
accounts, it considers such things as historical bad debts, tenant creditworthiness, current
economic trends, and changes in tenants’ payment patterns. The allowance for doubtful accounts was
$5.3 million and $3.0 million at December 31, 2009 and 2008, respectively. The provision for
doubtful accounts (included in operating, maintenance and management expenses) was $3.9 million,
$1.9 million and $0.8 million in 2009, 2008 and 2007, respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk
consist primarily of cash and cash equivalents in excess of insured amounts and tenant receivables.
The Company places its cash and cash equivalents with high quality financial institutions.
Management performs ongoing credit evaluations of its tenants and requires certain tenants to
provide security deposits.
Giant Food Stores, LLC (“Giant Foods”), which is owned by Ahold N.V., a Netherlands
corporation, accounted for approximately 12%, 12% and 13% of the Company’s total revenues in 2009,
2008 and 2007, respectively. Giant Foods, in combination with Stop & Shop, Inc., which is also
owned by Ahold N.V., accounted for approximately 15%, 15% and 15% of the Company’s total revenues
in 2009, 2008 and 2007, respectively. Of these amounts, 3%, respectively, were attributable to
Giant Foods revenues at the seven properties transferred or to be transferred to the RioCan joint
venture, for each of the periods presented.
Total
revenues from properties located in Pennsylvania, Massachusetts and
Connecticut amounted to 46.6%, 13.2%, 11.5%, 48.5%, 13.9%, 8.7% and
53.3%, 11.2%, 8.1%, of consolidated total revenues in 2009, 2008 and 2007, respectively.
Other Assets
Other assets at December 31, 2009 and 2008 are comprised of the following:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Cumulative mark-to-market adjustments
related to stock-based compensation
|
$ | 2,100,000 | $ | 1,965,000 | ||||
|
Prepaid expenses
|
5,279,000 | 4,643,000 | ||||||
|
Deposits
|
1,430,000 | 2,795,000 | ||||||
|
|
||||||||
|
|
$ | 8,809,000 | $ | 9,403,000 | ||||
|
|
||||||||
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
Deferred Charges, Net
Deferred charges at December 31, 2009 and 2008 are net of accumulated amortization and are
comprised of the following:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Lease origination costs (i)
|
$ | 17,787,000 | $ | 17,084,000 | ||||
|
Financing costs (ii)
|
16,873,000 | 10,822,000 | ||||||
|
Other
|
2,213,000 | 2,622,000 | ||||||
|
|
||||||||
|
|
$ | 36,873,000 | $ | 30,528,000 | ||||
|
|
||||||||
| (i) | Lease origination costs include the amortized balance of intangible lease assets resulting from purchase accounting allocations of $10,067,000 and $11,492,000, respectively. | |
| (ii) | Financing costs are incurred in connection with the Company’s credit facilities and other long-term debt. |
Deferred charges are amortized over the terms of the related agreements. Amortization expense
related to deferred charges (including amortization of deferred financing costs included in
non-operating income and expense) amounted to $7.6 million, $5.8 million and $4.5 million for 2009,
2008 and 2007, respectively. The unamortized balances of deferred lease origination costs and
deferred financing costs are net of accumulated amortization of $13.9 million and $12.3 million,
respectively, and will be charged to future operations as follows (lease origination costs through
2033, and financing costs through 2029):
| Lease | ||||||||
| origination | Financing | |||||||
| costs | costs | |||||||
|
Non-amortizing (i)
|
$ | 397,000 | $ | 174,000 | ||||
|
2010
|
2,609,000 | 5,274,000 | ||||||
|
2011
|
2,271,000 | 5,053,000 | ||||||
|
2012
|
2,000,000 | 4,164,000 | ||||||
|
2013
|
1,759,000 | 927,000 | ||||||
|
2014
|
1,442,000 | 499,000 | ||||||
|
Thereafter
|
7,309,000 | 782,000 | ||||||
|
|
||||||||
|
|
$ | 17,787,000 | $ | 16,873,000 | ||||
|
|
||||||||
| (i) | Represents (a) lease origination costs applicable to leases with commencement dates beginning after December 31, 2009 and (b) financing costs applicable to commitment fees/deposits relating to mortgage loans concluded after December 31, 2009. |
64
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
Income Taxes
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended (the “Code”). A REIT will generally not be subject to federal income taxation on that
portion of its income that qualifies as REIT taxable income, to the extent that it distributes at
least 90% of such REIT taxable income to its shareholders and complies with certain other
requirements. As of December 31, 2009, the Company was in compliance with all REIT requirements.
The Company follows a two-step approach for evaluating uncertain tax positions. Recognition
(step one) occurs when an enterprise concludes that a tax position, based solely on its technical
merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines
the amount of benefit that more-likely-than-not will be realized upon settlement. Derecognition of
a tax position that was previously recognized would occur when a company subsequently determines
that a tax position no longer meets the more-likely-than-not threshold of being sustained. The use
of a valuation allowance as a substitute for derecognition of tax positions is prohibited. The
Company has not identified any uncertain tax positions requiring accrual.
Derivative Financial Instruments
The Company occasionally utilizes derivative financial instruments, principally interest rate
swaps, to manage its exposure to fluctuations in interest rates. The Company has established
policies and procedures for risk assessment, and the approval, reporting and monitoring of
derivative financial instrument activities. Derivative financial instruments must be effective in
reducing the Company’s interest rate risk exposure in order to qualify for hedge accounting. When
the terms of an underlying transaction are modified, or when the underlying hedged item ceases to
exist, all changes in the fair value of the instrument are marked-to-market with changes in value
included in net income for each period until the derivative instrument matures or is settled. Any
derivative instrument used for risk management that does not meet the hedging criteria is
marked-to-market with the changes in value included in net income. The Company has not entered
into, and does not plan to enter into, derivative financial instruments for trading or speculative
purposes. Additionally, the Company has a policy of entering into derivative contracts only with
major financial institutions. As of December 31, 2009, the Company believes it has no significant
risk associated with non-performance of the financial institutions which are the counterparties to
its derivative contracts. Additionally, based on the rates in effect as of December 31, 2009, if a
counterparty were to default, the Company would receive a net interest benefit. At December 31,
2009, the Company had approximately $28.9 million of mortgage loans
payable and $23.9 million of secured revolving stabilized property
credit facility subject to interest rate swaps which converted
LIBOR-based variable rates to fixed annual rates ranging from 5.2% to 6.8% per annum. At that date,
the Company had accrued liabilities (included in accounts payable and accrued expenses on the
consolidated balance sheet) for (i) $2.8 million relating to the fair value of interest rate swaps
applicable to existing mortgage loans payable of $28.9 million
and secured revolving stabilized property credit facility of $23.9
million, and (ii) $3.1 million relating to
an interest rate swap applicable to anticipated
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
permanent financing of $28.0 million for its development joint venture project in Stroudsburg,
Pennsylvania, bearing an effective date of June 1, 2010, a termination date of June 1, 2020, and a
fixed rate of 5.56%. Charges and/or credits relating to the changes in fair values of such interest
rate swaps are made to accumulated other comprehensive (loss) income, noncontrolling interests
(minority interests in consolidated joint ventures and limited partners’ interest), or operations
(included in interest expense), as appropriate. Currently, all but one of the Company’s derivative
instruments are designated as effective hedging instruments.
The following is a summary of the derivative financial instruments held by the Company at
December 31, 2009 and 2008:
| Notional values | Balance | Fair value | ||||||||||||||||||||||||||
| Designation/ | December 31, | Expiration | sheet | December 31, | ||||||||||||||||||||||||
| Cash flow | Derivative | Count | 2009 | 2008 | dates | location | 2009 | 2008 | ||||||||||||||||||||
|
|
Accounts payable | |||||||||||||||||||||||||||
| Non-qualifying (1) | Interest | 1 | $ | 23,891,000 | $ | — | 2011 | and | $ | 1,297,000 | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Qualifying (1) | rate swaps | 8 | $ | 56,925,000 | $ | 61,796,000 | 2010 - 2020 | accrued expenses | $ | 4,655,000 | $ | 10,590,000 | ||||||||||||||||
|
|
||||||||||||||||||||||||||||
| (1) | The notional values and fair values for December 31, 2008 includes all nine of the Company’s interest rate swaps as qualifying. |
These interest rate swaps are used to hedge the variable cash flows associated with existing
variable-rate debt. Amounts reported in accumulated other comprehensive loss related to derivatives
will be reclassified to interest expense as interest payments are made on the Company’s
variable-rate debt and totaled approximately $1.6 million and $0.4
million for the years ended December 31, 2009 and 2008, respectively.
The following presents the effect of the Company’s derivative financial instruments on the
consolidated statements of operations and the consolidated statements of equity for 2009, 2008 and
2007, respectively:
| Amount of gain (loss) recognized in other | ||||||||||||||
| comprehensive (loss) income (effective portion) | ||||||||||||||
| Designation/ | Years ended December 31, | |||||||||||||
| Cash flow | Derivative | 2009 | 2008 | 2007 | ||||||||||
| Non-qualifying | Interest rate | $ | 106,000 | $ | — | $ | — | |||||||
|
|
||||||||||||||
| Qualifying | swaps | $ | 4,237,000 | $ | (7,785,000 | ) | $ | (284,000 | ) | |||||
|
|
||||||||||||||
| Amount of gain (loss) recognized in interest expense | ||||||||||||||
| (ineffectve portion) | ||||||||||||||
| Non-qualifying | Interest rate | $ | 107,000 | $ | — | $ | — | |||||||
|
|
||||||||||||||
| Qualifying | swaps | $ | 67,000 | $ | (223,000 | ) | $ | — | ||||||
|
|
||||||||||||||
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income attributable to the
Company’s common shareholders by the weighted average number of common shares outstanding for the
period (including restricted shares and shares held by Rabbi Trusts). Fully-diluted EPS reflects
the potential dilution that could occur if securities or other contracts to issue common stock were
exercised or converted into shares of common stock. The calculation of the number of such
additional shares was anti-dilutive for 2009 and 2008; such additional shares amounted to 4,000 for
2007. Accordingly, fully-dilutive EPS was the same as basic EPS for those years.
Stock-Based Compensation
The Company’s 2004 Stock Incentive Plan (the “Incentive Plan”) establishes the procedures for
the granting of incentive stock options, stock appreciation rights, restricted shares, performance
units and performance shares. The maximum number of shares of the Company’s common stock that may
be issued pursuant to the Incentive Plan is 2,750,000, and the maximum number of shares that may be
granted to a participant in any calendar year may not exceed 250,000. Substantially all grants
issued pursuant to the Incentive Plan are “restricted stock grants” which specify vesting (i) upon
the third anniversary of the date of grant for time-based grants, or (ii) upon the completion of a
designated period of performance for performance-based grants. Time—based grants are valued
according to the market price for the Company’s common stock at the date of grant. For
performance-based grants, the Company generally engages an independent appraisal company to
determine the value of the shares at the date of grant, taking into account the underlying
contingency risks associated with the performance criteria.
In October 2006, the Company issued 35,000 shares of common stock as performance-based grants,
which were to vest if the total annual return on an investment in the Company’s common stock
(“TSR”) over the three-year period ending December 31, 2008 was equal to, or greater than, an
average of 8% per year. The independent appraisal determined the value of the performance-based
shares to be $12.07 per share, compared to a market price at the date of grant of $16.49 per share.
With respect to the awards granted in 2006, the Company did not attain an average 8% TSR for such
three-year period as provided by the Incentive Plan for vesting. However, the Compensation
Committee of the Company’s Board of Directors took into account (1) that factors outside of the
Company’s control resulted in the failure to achieve the requisite return, and (2) that the Company
had outperformed its peer group during such three-year period. Accordingly, the Committee believed
that it was appropriate to vest some of the awards and allowed 40% of the awards, or an aggregate
of 14,000 shares, to vest. The decision had no impact on the Company’s results of operations.
In February 2007, the Company issued 37,000 shares of common stock as performance-based
grants, which were to vest if the total annual return on an investment in the Company’s common
stock over the three-year period ending December 31, 2009 was equal to, or greater
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
than, an average of 8% per year. The independent appraisal determined the value of the
performance-based shares to be $10.09 per share, compared to a market price at the date of grant of
$16.45 per share. With respect to the awards granted in 2007, the Company did not attain an average
8% TSR for such three-year period as provided by the Incentive Plan for vesting and, accordingly,
none of these shares vested.
In January 2008 and June 2008, the Company issued 53,000 shares and 7,000 shares of common
stock, respectively, as performance-based grants, which will vest if the total annual return on an
investment in the Company’s common stock over the three-year period ending December 31, 2010 is
equal to, or greater than, an average of 8% per year. The independent appraisal determined the
value of the January 2008 performance-based shares to be $6.05 per share, compared to a market
price at the date of grant of $10.07 per share; similar methodology determined the value of the
June 2008 performance-based shares to be $10.31 per share, compared to a market price at the date
of grant of $12.13 per share.
In January 2009, the Company issued 218,000 shares of common stock as performance-based
grants, which will vest if the total annual return on an investment in the Company’s common stock
over the three-year period ending December 31, 2011 is equal to, or greater than, a blended measure
of (i) an average of 6% TSR per year on the Company’s common stock, and (ii) the median TSR per
year of the Company’s peer group. The independent appraisal determined the value of the
performance-based shares to be $5.96 per share, compared to a market price at the date of grant of
$7.02 per share.
The additional restricted shares issued during 2009, 2008 and 2007 were time-based grants, and
amounted to 397,000 shares, 187,000 shares and 149,000 shares, respectively. The value of all
grants is being amortized on a straight-line basis over the respective vesting periods
(irrespective of achievement of the performance grants) adjusted, as applicable, for fluctuations
in the market value of the Company’s common stock. Those grants of restricted shares that are
transferred to Rabbi Trusts are classified as treasury stock on the Company’s consolidated balance
sheet. The following table sets forth certain stock-based compensation information for 2009, 2008
and 2007, respectively:
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
| Years ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Restricted share grants
|
615,000 | 247,000 | 186,000 | |||||||||
|
Average per-share grant price
|
$ | 4.95 | $ | 9.39 | $ | 14.44 | ||||||
|
Recorded as deferred compensation, net
|
$ | 3,032,000 | $ | 2,306,000 | $ | 2,694,000 | ||||||
|
|
||||||||||||
|
Charged to operations:
|
||||||||||||
|
Amortization relating to stock-based compensation
|
$ | 2,921,000 | $ | 2,389,000 | $ | 2,154,000 | ||||||
|
Adjustments to reflect changes in market price of
Company’s common stock
|
(488,000 | ) | (1,290,000 | ) | (848,000 | ) | ||||||
|
|
||||||||||||
|
Total charged to operations
|
$ | 2,433,000 | $ | 1,099,000 | $ | 1,306,000 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Non-vested shares:
|
||||||||||||
|
Non-vested, beginning of period
|
508,000 | 380,000 | 203,000 | |||||||||
|
Grants
|
615,000 | 247,000 | 186,000 | |||||||||
|
Vested during period
|
(104,000 | ) | (97,000 | ) | (9,000 | ) | ||||||
|
Forfeitures/cancellations
|
(39,000 | ) | (22,000 | ) | — | |||||||
|
|
||||||||||||
|
Non-vested, end of period
|
980,000 | 508,000 | 380,000 | |||||||||
|
|
||||||||||||
|
Average value of non-vested shares (based on
grant price)
|
$ | 7.54 | $ | 12.27 | $ | 14.59 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Value of shares vested during the
period (based on grant price)
|
$ | 1,496,000 | $ | 1,365,000 | $ | 120,000 | ||||||
|
|
||||||||||||
At December 31, 2009, 1,547,000 shares remained available for grants pursuant to the Incentive
Plan, and $2,876,000 remained as deferred compensation, to be amortized over various periods ending
in October 2012.
During 2001, pursuant to the 1998 Stock Option Plan (the “Option Plan”), the Company granted
to the then directors options to purchase an aggregate of approximately 13,000 shares of common
stock at $10.50 per share, the market value of the Company’s common stock on the date of the grant.
The options are fully exercisable and expire in 2011. In connection with the adoption of the
Incentive Plan, the Company agreed that it would not grant any more options under the Option Plan.
In connection with an acquisition of a shopping center in 2002, the Operating Partnership
issued warrants to purchase approximately 83,000 OP Units to a then minority interest partner in
the property. Such warrants have an exercise price of $13.50 per unit, subject to certain
anti-dilution adjustments, are fully vested, and expire in 2012.
In connection with the RioCan transactions (more fully described below), the Company issued to
RioCan warrants to purchase 1,428,570 shares of the Company’s common stock, at an exercise price of
$7.00 per share, exercisable over a two-year period.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
401(k) Retirement Plan
The Company has a 401(k) retirement plan (the “Plan”), which permits all eligible employees to
defer a portion of their compensation under the Code. Pursuant to the provisions of the Plan, the
Company may make discretionary contributions on behalf of eligible employees. The Company made
contributions to the Plan of $248,000, $243,000 and $219,000 in 2009, 2008 and 2007, respectively.
Supplemental consolidated statement of cash flows information
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
| Years ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Supplemental disclosure of cash activities:
|
||||||||||||
|
Interest paid
|
$ | 50,413,000 | $ | 49,006,000 | $ | 41,023,000 | ||||||
|
|
||||||||||||
|
Supplemental disclosure of non-cash activities:
|
||||||||||||
|
Additions to deferred compensation plans
|
3,032,000 | 2,306,000 | 2,694,000 | |||||||||
|
Issuance of non-interest-bearing purchase money mortgage (a)
|
— | (13,851,000 | ) | — | ||||||||
|
Assumption of mortgage loans payable — acquisitions
|
(54,565,000 | ) | (34,631,000 | ) | (143,346,000 | ) | ||||||
|
Assumption of mortgage loans payable — disposition
|
9,932,000 | — | — | |||||||||
|
Assumption of interest rate swap liabilities
|
— | (2,288,000 | ) | — | ||||||||
|
Issuance of warrants
|
1,643,000 | — | — | |||||||||
|
Issuance of OP Units
|
— | — | (570,000 | ) | ||||||||
|
Conversion of OP Units into common stock
|
131,000 | 68,000 | 45,000 | |||||||||
|
Adjustment of Mezz OP Units into common stock
|
— | — | 3,478,000 | |||||||||
|
Purchase accounting allocations:
|
||||||||||||
|
Intangible lease assets
|
7,057,000 | 10,301,000 | 34,781,000 | |||||||||
|
Intangible lease liabilities
|
(3,215,000 | ) | (4,636,000 | ) | (28,889,000 | ) | ||||||
|
Net valuation decrease in assumed mortgage loan
payable (b)
|
1,649,000 | 143,000 | 191,000 | |||||||||
|
Other non-cash investing and financing activities:
|
||||||||||||
|
Accrued interest rate swap liabilities
|
4,638,000 | (8,206,000 | ) | (286,000 | ) | |||||||
|
Accrued real estate improvement costs
|
(7,868,000 | ) | 8,407,000 | 1,806,000 | ||||||||
|
Accrued construction escrows
|
(1,006,000 | ) | (479,000 | ) | 1,024,000 | |||||||
|
Accrued financing costs and other
|
(22,000 | ) | (26,000 | ) | — | |||||||
|
Capitalization of deferred financing costs
|
1,486,000 | 988,000 | 393,000 | |||||||||
|
|
||||||||||||
|
Deconsolidation of properties transferred to joint venture:
|
||||||||||||
|
Real estate, net
|
42,829,000 | — | — | |||||||||
|
Other assets/liabilties, net
|
1,277,000 | — | — | |||||||||
|
Investment in and advances to unconsolidated joint venture
|
8,610,000 | — | — | |||||||||
| (a) | A $14,575,000 non-interest-bearing mortgage was issued in connection with a purchase of land, and was valued at a net amount of $13,851,000. This reflected a valuation decrease of $724,000 to a market rate of 9.25% per annum | |
| (b) | The net valuation decrease in an assumed mortgage loan payable resulted from adjusting the contract rate of interest (4.9% per annum) to a market rate of interest (6.1% per annum). |
Fair Value Measurements
In September 2006, the accounting guidance relating to fair value measurements and disclosures
was updated. The updated guidance defines fair value, establishes a framework for measuring fair
value in accordance with GAAP, and expands disclosures about fair value measurements. The updated
guidance was effective on January 1, 2008 for financial assets, financial liabilities, and all
nonfinancial assets and liabilities that are recognized or disclosed at fair value in financial
statements on a recurring basis at least annually. The updated guidance was effective for all
other nonfinancial assets and liabilities on January 1, 2009, and its adoption did not have a
material effect on the Company’s consolidated financial statements. These
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
standards did not materially affect how the Company determines fair value, but resulted in certain
additional disclosures.
The guidance establishes a fair value hierarchy that prioritizes observable and unobservable
inputs used to measure fair value into three levels:
| • | Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | ||
| • | Level 2 — Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | ||
| • | Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority
to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that
maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible while also considering counterparty credit risk in the assessment of fair value. Financial
assets and liabilities measured at fair value in the consolidated financial statements consist of
interest rate swaps. The fair values of interest rate swaps are determined using widely accepted
valuation techniques, including discounted cash flow analysis, on the expected cash flows of each
derivative. The analysis reflects the contractual terms of the swaps, including the period to
maturity, and uses observable market-based inputs, including interest rate curves (“significant
other observable inputs”). The fair value calculation also includes an amount for risk of
non-performance using “significant unobservable inputs” such as estimates of current credit spreads
to evaluate the likelihood of default. The Company has concluded, as of December 31, 2009, that
the fair value associated with the “significant unobservable inputs” relating to the Company’s risk
of non-performance was insignificant to the overall fair value of the interest rate swap agreements
and, as a result, the Company has determined that the relevant inputs for purposes of calculating
the fair value of the interest rate swap agreements, in their entirety, were based upon
“significant other observable inputs”. Nonfinancial assets and liabilities measured at fair value
in the consolidated financial statements consist of real estate to be transferred to a joint
venture and real estate held for sale- discontinued operations.
The carrying amounts of cash and cash equivalents, restricted cash, rents and other
receivables, other assets, accounts payable and accrued expenses approximate fair value. The
valuation of the liability for the Company’s interest rate swaps ($5.9 million at December 31,
2009), which is measured on a recurring basis, was determined to be a Level 2 within the valuation
hierarchy, and was based on independent values provided by financial institutions. The valuation of
the assets for the Company’s real estate to be transferred to a joint venture and real estate held
for sale — discontinued operations ($139.7 million and $11.6 million, respectively, at December
31, 2009), which is measured on a nonrecurring basis, have been determined to be a
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
Level 2 within the valuation hierarchy, and were based on the respective contracts of transfer
and/or sale.
The fair value of the Company’s fixed rate mortgage loans was estimated using “significant
other observable inputs” such as available market information and discounted cash flows analyses
based on borrowing rates the Company believes it could obtain with similar terms and maturities.
As of December 31, 2009 and 2008, the aggregate fair values of the Company’s fixed rate mortgage
loans were approximately $583.8 million and $517.8 million, respectively; the carrying values of
such loans were $610.8 million and $560.4 million, respectively, at those dates.
Recently-Issued Accounting Pronouncements
In January 2009, the Company adopted the updated accounting guidance related to business
combinations, which (i) establishes the acquisition-date fair value as the measurement objective
for all assets acquired, liabilities assumed, and any contingent consideration, (ii) requires
expensing of most transaction costs that were previously capitalized, and (iii) requires the
acquiror to disclose the information needed to evaluate and understand the nature and financial
effect of the business combination to investors and other users. The principal impact of the
adoption of this guidance on the Company’s financial statements, which is being applied
prospectively, is that the Company has expensed most transaction costs relating to its acquisition
activities ($1,273,000 for the year ended December 31, 2009 of which the noncontrolling interests’
share was $764,000).
In January 2009, the Company adopted the updated accounting guidance related to noncontrolling
interests in consolidated financial statements, which clarifies that a noncontrolling interest in a
subsidiary (minority interests or certain limited partners’ interest, in the case of the Company),
subject to the classification and measurement of redeemable securities, is an ownership interest in
a consolidated entity which should be reported as equity in the parent company’s consolidated
financial statements. The updated guidance requires a reconciliation of the beginning and ending
balances of equity attributable to noncontrolling interests and disclosure, on the face of the
consolidated income statement, of those amounts of consolidated net income attributable to the
noncontrolling interests, eliminating the past practice of reporting these amounts as an adjustment
in arriving at consolidated net income. The updated guidance is to be applied prospectively as of
January 1, 2009, but requires retroactive application of the presentation and disclosure
requirements for all periods presented, and early adoption was not permitted. The Company has
reclassified, for all periods presented, the balances related to minority interests in consolidated
joint ventures and limited partners’ interest in the Operating Partnership into the consolidated
equity accounts, as appropriate (certain non-controlling interests of the Company will continue to
be classified in the mezzanine section of the balance sheet as such Mezz OP Units do not meet the
requirements for equity classification, since certain of the holders of OP Units have registration
rights that provide such holders with the right to
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
demand registration under the federal securities law of the common stock of the Company issuable
upon conversion of such OP Units). The Company will adjust the carrying value of the Mezz OP Units
each period to equal the greater of its historical carrying value or its redemption value. Through
December 31, 2009, there have been no cumulative net adjustments recorded to the carrying amounts
of the Mezz OP Units.
In January 2009, the Company adopted the updated accounting guidance related to disclosures
about derivative instruments and hedging activities, which is intended to improve financial
standards for derivative instruments and hedging activities by requiring enhanced disclosures to
enable investors to better understand their effects on an entity’s financial position, financial
performance, and cash flows. Among other requirements, entities are required to provide enhanced
disclosures about (1) how and why an entity uses derivative instruments, (2) the accounting
treatment for derivative instruments and related hedged items, and (3) how derivative instruments
and related hedged items affect an entity’s financial position, financial performance and cash
flows. Other than the enhanced disclosure requirements, the adoption of this guidance did not have
a material effect on the Company’s consolidated financial statements.
In January 2009, the Company adopted the updated accounting guidance related to determining
whether instruments granted in share-based payment transactions are participating securities, which
states that unvested share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and shall be included in
the computation of earnings per share. The adoption of this guidance had no impact on the Company’s
consolidated financial statements as unvested restricted stock awards are included in the
computations of both basic and diluted earnings per share.
In January 2009, the Company adopted the updated guidance on initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets and liabilities
arising from contingencies in a business combination. The adoption of this guidance did not have a
material effect on the Company’s consolidated financial statements.
In April 2009, the Company adopted the updated accounting guidance related to interim
disclosures about fair value of financial instruments (the prior guidance had required annual
disclosures of the fair value of all instruments, recognized or unrecognized, except for those
specifically excluded, when practical to do so). The updated guidance requires a publicly-traded
company to include disclosures about the fair value of its financial instruments whenever it issues
summarized financial information for interim reporting periods. The updated guidance must be
applied prospectively and does not require disclosures for earlier periods presented for
comparative periods at initial adoption. Other than the enhanced disclosure requirements, the
adoption of this guidance did not have a material effect on the Company’s consolidated financial
statements.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
In April 2009, the Company adopted additional updated accounting guidance relating to fair
value measurements and disclosures, which clarifies the guidance for fair value measurements when
the volume and level of activity for the asset or liability have significantly decreased, and
includes guidance on identifying circumstances that indicate a transaction is not orderly. The
adoption of this guidance did not have a material effect on the Company’s consolidated financial
statements.
In June 2009, the FASB issued updated accounting guidance for determining whether an entity
is a VIE, and requires the performance of a qualitative rather than a quantitative analysis to
determine the primary beneficiary of a VIE. The updated guidance requires an entity to consolidate
a VIE if it has (i) the power to direct the activities that most significantly impact the entity’s
economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive
benefits from the VIE that could be significant to the VIE. This guidance is effective for fiscal
years beginning after November 15, 2009 and early adoption is not permitted. The Company will adopt
the updated guidance as of January 1, 2010 and does not believe the adoption of this guidance will
have a material effect on the consolidated financial statements.
In January 2010, the FASB issued updated guidance on fair value measurements and disclosures,
which requires disclosure of details of significant asset or liability transfers in and out of
Level 1 and Level 2 measurements within the fair value hierarchy and inclusion of gross purchases,
sales, issuances, and settlements in the rollforward of assets and liabilities valued using Level 3
inputs within the fair value hierarchy. The guidance also clarifies and expands existing disclosure
requirements related to the disaggregation of fair value disclosures and inputs used in arriving at
fair values for assets and liabilities using Level 2 and Level 3 inputs within the fair value
hierarchy. This guidance is effective for interim and annual reporting periods beginning after
December 15, 2009, except for the gross presentation of the Level 3 rollforward, which is required
for annual reporting periods beginning after December 15, 2010, and for the respective interim
periods within those years. The Company does not expect the adoption of this guidance will have a
material effect on the consolidated financial statements.
In January 2010, the FASB issued updated guidance on accounting for distributions to
shareholders with components of stock and cash, which clarifies the treatment of the stock portion
of a distribution to shareholders that allows the election to receive cash or stock. This guidance
is effective for interim and annual reporting periods beginning after December 15, 2009. The
Company does not expect the adoption of this guidance will have a material effect on the
consolidated financial statements.
Real estate at December 31, 2009 and 2008 is comprised of the following:
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
| Years ended December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Cost
|
||||||||
|
Balance, beginning of year (a)
|
$ | 1,539,213,000 | $ | 1,386,801,000 | ||||
|
Properties acquired
|
73,152,000 | 98,337,000 | ||||||
|
Improvements and betterments
|
69,104,000 | 56,382,000 | ||||||
|
Write-off of fully-depreciated assets
|
(6,147,000 | ) | (2,307,000 | ) | ||||
|
|
||||||||
|
Balance, end of the year
|
$ | 1,675,322,000 | $ | 1,539,213,000 | ||||
|
|
||||||||
|
|
||||||||
|
Accumulated depreciation
|
||||||||
|
Balance, beginning of the year (a)
|
(124,387,000 | ) | $ | (86,695,000 | ) | |||
|
Depreciation expense
|
(46,375,000 | ) | (39,999,000 | ) | ||||
|
Write-off of fully-depreciated assets
|
6,147,000 | 2,307,000 | ||||||
|
|
||||||||
|
Balance, end of the year
|
$ | (164,615,000 | ) | $ | (124,387,000 | ) | ||
|
|
||||||||
|
|
||||||||
|
Net book value
|
$ | 1,510,707,000 | $ | 1,414,826,000 | ||||
|
|
||||||||
| (a) | Restated to reflect the reclassifications of properties transferred or to be transferred to the RioCan joint venture and properties treated as discontinued operations. |
Real estate net book value at December 31, 2009 and 2008 included projects under development
and land held for expansion and/or future development of
$128.6 million and $132.8 million,
respectively.
Wholly-owned properties
During 2008, the Company acquired four shopping and convenience centers (including the
remaining portion of a shopping center in addition to the supermarket anchor store it had acquired
in 2005), purchased the joint venture minority interests in four properties, and acquired land for
development, expansion and/or future development.
In April 2008, Value City, the only tenant at the Value City Shopping center, vacated its
premises at the end of the lease term. In keeping with the Company’s redevelopment plans for the
property, the vacant building was subsequently razed and the Company took a one-time depreciation
charge of $1.9 million. The property is no longer included as one of the Company’s operating
properties. During the fourth quarter of 2008, the Company determined not to proceed with the
development of a land parcel in Ephrata, Pennsylvania, and the land was reclassified to “real
estate held for sale” in all periods presented.
The 2008 property acquisitions are summarized as follows:
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
| Number of | Acquisition | |||||||
| Property | properties | cost | ||||||
|
Operating properties (i)
|
3 | $ | 43,215,000 | |||||
|
|
||||||||
|
|
||||||||
|
Land for projects under development,
expansion and/or future development
|
6 | 55,122,000 | ||||||
|
|
||||||||
|
|
||||||||
|
Total
|
$ | 98,337,000 | ||||||
|
|
||||||||
| (i) | The three operating properties acquired in 2008 were acquired individually and not as part of a portfolio and had acquisition costs of less than $20.0 million each. |
Discontinued operations
During 2009, the Company sold, or has treated as “held for sale”, nine of its drug
store/convenience centers, located in Ohio and
New York, , including the McDonalds/Waffle House property, located in Medina, Ohio, the CVS property located in Westfield, New York, the Staples property located in Oswego, New York, the Hudson Ohio Discount Drug Mart Plaza, the Dover Ohio Discount Drug Mart Plaza, the Gabriel Brothers property located in Kent, Ohio, the Carrollton Ohio Discount Drug Mart Plaza, the Pondside Plaza located in Geneseo, New York, and the Powell Ohio Discount Drug Mart Plaza. The aggregate sales prices for the nine properties are approximately $27.1 million, including property-specific mortgage loans payable of approximately $17.7 million. In connection with these transactions, the Company recorded impairment charges aggregating $3.6 million, and has realized gain on sales of $557,000. The carrying values of the assets and liabilities of these properties, principally the net book values of the real estate and the related mortgage loans payable to be assumed, have been reclassified as “held for sale” on the Company’s consolidated balance sheets at December 31, 2009 and 2008. In addition, the properties’ results of operations have been classified as “discontinued operations” for all periods presented.
New York, , including the McDonalds/Waffle House property, located in Medina, Ohio, the CVS property located in Westfield, New York, the Staples property located in Oswego, New York, the Hudson Ohio Discount Drug Mart Plaza, the Dover Ohio Discount Drug Mart Plaza, the Gabriel Brothers property located in Kent, Ohio, the Carrollton Ohio Discount Drug Mart Plaza, the Pondside Plaza located in Geneseo, New York, and the Powell Ohio Discount Drug Mart Plaza. The aggregate sales prices for the nine properties are approximately $27.1 million, including property-specific mortgage loans payable of approximately $17.7 million. In connection with these transactions, the Company recorded impairment charges aggregating $3.6 million, and has realized gain on sales of $557,000. The carrying values of the assets and liabilities of these properties, principally the net book values of the real estate and the related mortgage loans payable to be assumed, have been reclassified as “held for sale” on the Company’s consolidated balance sheets at December 31, 2009 and 2008. In addition, the properties’ results of operations have been classified as “discontinued operations” for all periods presented.
The following is a summary of the results of operations from discontinued operations for 2009,
2008 and 2007:
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
| Years ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Revenues:
|
||||||||||||
|
Rents
|
$ | 2,526,000 | $ | 2,872,000 | $ | 2,841,000 | ||||||
|
Expense recoveries
|
855,000 | 943,000 | 1,002,000 | |||||||||
|
|
||||||||||||
|
Total revenues
|
3,381,000 | 3,815,000 | 3,843,000 | |||||||||
|
|
||||||||||||
|
Expenses:
|
||||||||||||
|
Operating, maintenance and management
|
427,000 | 360,000 | 401,000 | |||||||||
|
Real estate and other property-related taxes
|
636,000 | 683,000 | 692,000 | |||||||||
|
Depreciation and amortization
|
943,000 | 1,061,000 | 1,156,000 | |||||||||
|
Interest expense
|
899,000 | 1,023,000 | 1,034,000 | |||||||||
|
|
||||||||||||
|
|
2,905,000 | 3,127,000 | 3,283,000 | |||||||||
|
|
||||||||||||
|
Income from discontinued operations before
impairment charges
|
476,000 | 688,000 | 560,000 | |||||||||
|
Impairment charges
|
(3,559,000 | ) | — | — | ||||||||
|
|
||||||||||||
|
(Loss) income from discontinued operations
|
$ | (3,083,000 | ) | $ | 688,000 | $ | 560,000 | |||||
|
|
||||||||||||
|
|
||||||||||||
|
Gain on sales of discontinued operations
|
$ | 557,000 | $ | — | $ | — | ||||||
|
|
||||||||||||
Joint Venture Activities
2009 Transactions
PCP.
On January 30, 2009, a newly-formed 40% Company-owned joint venture acquired the New
London Mall in New London, Connecticut, a supermarket-anchored shopping center, for a purchase
price of approximately $40.7 million. The purchase price included the assumption of an existing
$27.4 million first mortgage bearing interest at 4.9% per annum and maturing in 2015. The total
joint venture partnership contribution was approximately $14.0 million, of which the Company’s 40%
share ($5.6 million) was funded from its secured revolving stabilized property credit facility. The
Company is the managing partner of the venture and receives certain acquisition, property
management, construction management and leasing fees. In addition, the Company will be entitled to
a “promote” fee structure, pursuant to which its profits participation would be increased to 44% if
the venture reaches certain income targets. The Company’s joint venture partners are affiliates of
Prime Commercial Properties PLC (“PCP”), a London-based real estate/development company.
On February 10, 2009, a second newly-formed (also with affiliates of PCP) 40% Company-owned
joint venture acquired San Souci Plaza in California, Maryland, a supermarket-anchored shopping
center, for a purchase price of approximately $31.8 million. The purchase
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
price included the assumption of an existing $27.2 million first mortgage bearing interest at 6.2%
per annum and maturing in 2016. The total joint venture partnership contribution was approximately
$5.8 million, of which the Company’s 40% share ($2.3 million) was funded from its secured revolving
stabilized property credit facility. The Company is the managing partner of the venture and
receives certain acquisition, property management, construction management and leasing fees. In
addition, the Company will be entitled to a “promote” fee structure, pursuant to which its profits
participation would be increased to 44% if the venture reaches certain income targets.
RioCan.
On October 26, 2009, the Company entered into definitive agreements with RioCan Real
Estate Investment Trust of Toronto, Canada, a publicly-traded Canadian real estate investment trust
listed on the Toronto Stock Exchange (“RioCan”), pursuant to which the Company (1) sold to RioCan
approximately 6,667,000 shares of the Company’s common stock at $6.00 per share in a private
placement (RioCan agreeing that it would not sell any of such shares for a period of one year), (2)
issued to RioCan warrants to purchase approximately 1,429,000 shares of the Company’s common stock
at an exercise price of $7.00 per share, exercisable over a two-year period (valued at $1,643,000),
(3) entered into an 80% (RioCan) and 20% (Cedar) joint venture (i) initially for the purchase of
seven supermarket-anchored properties presently owned by the Company, and (ii) then to acquire
additional primarily supermarket-anchored properties in the Company’s primary market areas during
the next two years, in the same joint venture format, and (4) entered into a “standstill” agreement
with respect to increases in RioCan’s ownership of the Company’s common stock for a three-year
period. In addition, subject to certain exceptions, the Company has agreed that it will not issue
any new shares of common stock unless RioCan is offered the right to purchase that additional
number of shares that will maintain its pro rata percentage ownership, on a fully diluted basis. In
connection with the formation of the joint venture, the Company recorded an impairment charge of
$23.6 million relating to the seven properties transferred or to be transferred to the joint
venture.
The private placement investment by RioCan and the issuance of the warrants by the Company
were concluded on October 30, 2009. Two of the properties (Blue Mountain Commons located in
Harrisburg, Pennsylvania and Sunset Crossing located in Dickson City, Pennsylvania) were
transferred to the joint venture on December 10, 2009, resulting in proceeds to the Company of
approximately $33 million (in connection with the closing, a repayment of $25.9 million was
required under the Company’s secured revolving development property credit facility). The remaining
five properties are subject to mortgage loans payable aggregating approximately $94 million. Two of
the properties (Columbus Crossing Shopping Center located in Philadelphia, Pennsylvania and
Franklin Village Plaza located in Franklin, Massachusetts) were transferred to the joint venture in
January and February 2010, resulting in net proceeds to the Company of approximately $16 million.
The remaining three properties (Loyal Plaza Shopping Center located in Williamsport, Pennsylvania,
Shaw’s Plaza located in Raynham, Massachusetts, and Stop & Shop Plaza located in Bridgeport,
Connecticut) are to be transferred during the first half of 2010, resulting in net proceeds to the
Company of an additional
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
approximately $16 million. In connection with the transfers of the seven properties to
the joint venture and the private placement transactions, the Company will have received aggregate
net proceeds of approximately $105 million, after estimated closing and transaction costs, which
have been or will be used to repay/reduce the outstanding balances under the Company’s secured
revolving credit facilities. In connection with these transactions, the Company incurred costs and
fees of approximately $6.0 million, including fees to the Company’s investment advisor ($3.5
million), the value assigned to the warrants (approximately $1.6 million), and other costs and
expenses aggregating $0.9 million. In addition, the Company agreed to pay to its investment advisor
a fee of 1% of the gross cost of future acquisitions made by the joint venture for a two-year
period, up to a maximum of $3.0 million. At December 31, 2009, the Company was owed approximately
$2.3 million ($1.6 million related to contingent consideration) relating to post-closing
adjustments applicable to the two properties transferred to the joint venture prior to that date,
which is included in rents and other receivables, net on the
consolidated balance sheet.
2008 Transactions
On January 3, 2008, the Company entered into a joint venture agreement for the
redevelopment/retenanting of its existing shopping center located in Bloomsburg, Pennsylvania,
including adjacent land parcels comprising an additional 46 acres. The required equity contribution
from the Company’s joint venture partner was $4.0 million for a 25% interest in the property. The
Company used the funds to reduce the outstanding balance on its secured revolving stabilized
property credit facility.
On March 7, 2008, a 60%-owned development joint venture of the Company acquired land in
Pottsgrove, Pennsylvania, for a shopping center development project. The $28.4 million purchase
price, including closing costs, was funded by the issuance of a non-interest-bearing purchase money
mortgage of $14.6 million, which was repaid when property-specific construction financing was
concluded in September 2008. The balance of the purchase price was funded by the Company’s capital
contribution to the joint venture which was funded from its secured revolving stabilized property
credit facility. As of December 31, 2008, the Company’s equity capital requirement of $28.7 million
had been met, funded from its secured revolving stabilized property credit facility. The remaining
costs of development and construction of this project are being funded by the property-specific
construction financing.
On March 18, 2008, the Company acquired the remaining 70% interests in Fairview Plaza, Halifax
Plaza and Newport Plaza, and the remaining 75% interest in Loyal Plaza, previously owned in joint
venture with the same partner, and consolidated for financial reporting purposes, for a purchase
price of approximately $17.5 million, which was funded from its secured revolving stabilized
property credit facility. The total outstanding mortgage loans payable on the properties were
approximately $27.3 million at the time. The excess of the purchase price and closing costs over
the carrying value of the minority interest partner’s
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
accounts (approximately $8.4 million) was allocated to the Company’s intangible asset and
liability accounts.
On April 23, 2008 the Company entered into a joint venture for the construction and
development of a shopping center located in Hamilton Township (Stroudsburg), Pennsylvania. The
Company is committed to paying a development fee of $500,000 to the joint venture partner, and has
provided approximately $40.5 million to date of equity capital, with a preferred rate of return of
9.25% per annum on its investment, and has a 60% profits interest in the joint venture. The
required equity contribution from the Company’s joint venture partner was $400,000. As of December
31, 2008, the Company’s joint venture equity requirement had been funded from its secured revolving
stabilized property credit facility. Prior to the formation of the venture, the partner had
previously acquired the land parcels at a cost of approximately $15.4 million, incurring mortgage
indebtedness of approximately $10.8 million (including purchase money mortgages payable to the
seller of $3.9 million). In addition, the partner had entered into an interest rate swap agreement
with respect to its existing construction/development loan facility, as well as a future swap
agreement applicable to anticipated permanent financing of $28.0 million. The joint venture is
deemed to be a variable interest entity with the Company as the primary income or loss beneficiary;
accordingly, the Company has consolidated the property. The minority interest partners in the
Pottsgrove and Stroudsburg joint ventures are principally the same individuals.
On September 12, 2008, the Company entered into a joint venture for the construction and
development of a shopping center located in Limerick, Pennsylvania. The Company is committed to
paying a development fee of $333,000 to the joint venture partner, and has provided approximately
$3.3 million to date of equity capital, with a preferred rate of return of 9.5% per annum on its
investment, and has a 60% profits interest in the joint venture. The required equity contribution
from the Company’s joint venture partner is $217,000. Financing for the balance of the project
costs is being funded from the Company’s secured revolving development property credit facility.
The joint venture purchased the land parcels on October 27, 2008 and, in addition, reimbursed the
seller for certain construction-in-progress costs incurred to date, for a total acquisition cost of
approximately $8.4 million. The joint venture is deemed to be a variable interest entity with the
Company as the primary income or loss beneficiary; accordingly, the Company will consolidate the
property.
In February 2008, the Company and Homburg Invest Inc., a publicly-traded Canadian corporation
listed on the Toronto and Euronext Amsterdam Stock Exchanges (”Homburg”), entered into an agreement
in principle to form a group of joint ventures into which the Company would contribute 32 of its
properties (mostly drug store-anchored convenience centers and including all 27 of the Company’s
Ohio properties). Richard Homburg, a director of the Company, is Chairman and CEO of Homburg. On
November 3, 2008, the Company announced that it had been advised by Homburg that Homburg would not
proceed with a proposed joint venture for 32 properties, as previously contemplated and disclosed
by the Company and the
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Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
Company expensed all costs it had incurred of approximately $203,000. While Homburg had
substantially completed physical, financial and legal due diligence with respect to the properties,
it cited the unprecedented current events that have taken place in the U.S. capital markets and the
virtual collapse of the world capital markets as the basis for its decision. Homburg noted that it
and its affiliates rely on Canadian, U.S. and European capital and retail markets for equity as
well as short-term and long-term funding sources. The Company had previously entered into a
nine property 20% owned joint venture with Homburg during 2007.
Real Estate Pledged
At December 31, 2009 a substantial portion of the Company’s real estate was pledged as
collateral for mortgage loans payable and the revolving credit facilities, as follows:
| Net book | ||||
| Description | value | |||
|
Collateral for mortgage loans payable
|
$ | 1,019,139,000 | ||
|
Collateral for revolving credit facilities
|
465,852,000 | |||
|
Unencumbered properties
|
25,716,000 | |||
|
|
||||
|
Total
|
$ | 1,510,707,000 | ||
|
|
||||
Pro Forma Financial Information (unaudited)
During the period January 1, 2008 through December 31, 2009, the Company acquired six shopping
and convenience centers aggregating approximately 790,000 square foot of GLA, purchased the joint
venture minority interests in four properties, and acquired approximately 181.7 acres of land for
development, expansion and/or future development, for a total cost of approximately $189.0 million.
In addition, the Company placed into service six ground-up developments having an aggregate cost of
approximately $194.3 million. The Company sold or held for sale nine primarily drug store anchored
shopping centers aggregating approximately 304,000 square foot of GLA for an aggregate sales price
of approximately $27.1 million. The following table summarizes, on an unaudited pro forma basis,
the combined results of operations of the Company for 2009 and 2008, respectively, as if all of
these property acquisitions and sales were completed as of January 1, 2008. This unaudited pro
forma information does not purport to represent what the actual results of operations of the
Company would have been had all the above occurred as of January 1, 2008, nor does it purport to
predict the results of operations for future periods.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
| Years ended December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Revenues
|
$ | 182,482,000 | $ | 181,215,000 | ||||
|
Net (loss) income attributable to common shareholders
|
$ | (21,979,000 | ) | $ | 9,844,000 | |||
|
|
||||||||
|
Per common share
|
$ | (0.48 | ) | $ | 0.22 | |||
|
|
||||||||
|
Weighted average number of common shares outstanding
|
46,234,000 | 44,475,000 | ||||||
Annual future base rents due to be received under non-cancelable operating leases in effect at
December 31, 2009 are approximately as follows (excluding those base rents applicable to properties
transferred or to be transferred to the RioCan joint venture and properties treated as discontinued
operations):
|
2010
|
$ | 115,541,000 | ||
|
2011
|
108,076,000 | |||
|
2012
|
99,915,000 | |||
|
2013
|
92,983,000 | |||
|
2014
|
82,584,000 | |||
|
Thereafter
|
505,055,000 | |||
|
|
||||
|
|
$ | 1,004,154,000 | ||
|
|
||||
Total future minimum rents do not include expense recoveries for real estate taxes and
operating costs, or percentage rents based upon tenants’ sales volume. Such other rental amounted
to approximately $36.3 million, $33.8 million and $30.4 million for 2009, 2008 and 2007,
respectively. In addition, such amounts do not include amortization of intangible lease
liabilities.
Secured debt is comprised of the following at December 31, 2009 and 2008:
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Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
| December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
| Interest rates | Interest rates | |||||||||||||||||||||||
| Balance | Weighted | Balance | Weighted | |||||||||||||||||||||
| Description | outstanding | average | Range | outstanding | average | Range | ||||||||||||||||||
|
Fixed-rate mortgages (a)
|
$ | 610,798,000 | 5.8 | % | 5.0% - 8.5 | % | $ | 560,410,000 | 5.8 | % | 5.0% - 8.5 | % | ||||||||||||
|
Variable-rate mortgages
|
82,181,000 | 3.4 | % | 2.5% - 5.9 | % | 53,302,000 | 4.4 | % | 2.5% - 5.9 | % | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Total property-specific mortgages
|
692,979,000 | 5.6 | % | 613,712,000 | 5.7 | % | ||||||||||||||||||
|
Stabilized property credit facility
|
187,985,000 | 5.5 | % | 250,190,000 | 2.7 | % | ||||||||||||||||||
|
Development property credit facility
|
69,700,000 | 2.5 | % | 54,300,000 | 3.4 | % | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
$ | 950,664,000 | 5.3 | % | $ | 918,202,000 | 4.8 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Fixed-rate mortgages related to:
|
||||||||||||||||||||||||
|
Real estate transferred or to be
transferred
to a joint venture
|
$ | 94,018,000 | 5.8 | % | 4.8% - 7.2 | % | $ | 77,307,000 | 5.6 | % | 4.8% - 7.2 | % | ||||||||||||
|
|
||||||||||||||||||||||||
|
Real estate held for sale -
discontinued
operations
|
$ | 7,765,000 | 5.4 | % | 5.2% - 5.6 | % | $ | 17,964,000 | 5.4 | % | 5.2% - 5.6 | % | ||||||||||||
|
|
||||||||||||||||||||||||
| (a) | Restated to reflect the reclassifications of properties transferred or to be transferred to the RioCan joint venture and properties treated as discontinued operations. |
Mortgage loans payable
Mortgage loan activity for 2009 and 2008 is summarized as follows:
| Years ended December 31, | ||||||||
| 2009 | 2008 | |||||||
|
Balance, beginning of year (a)
|
$ | 613,712,000 | $ | 572,320,000 | ||||
|
New mortgage borrowings
|
43,950,000 | 106,738,000 | ||||||
|
Acquisition debt assumed (b)
|
52,963,000 | 27,488,000 | ||||||
|
Repayments
|
(17,646,000 | ) | (92,834,000 | ) | ||||
|
|
||||||||
|
Balance, end of the year
|
$ | 692,979,000 | $ | 613,712,000 | ||||
|
|
||||||||
| (a) | Restated to reflect the reclassifications of properties transferred or to be transferred to the RioCan joint venture and properties treated as discontinued operations. | |
| (b) | Includes net reductions of $1.6 million and $0.1 million, respectively, relating to purchase acounting allocations. |
During 2009, the Company assumed $53.0 million of fixed-rate mortgage loans payable in
connection with acquisitions, with interest rates of 6.1% and 6.2% per annum, with an average
of 6.2% per annum. These principal amounts and rates of interest represent the fair values at
the respective dates of acquisition. The stated contract amounts were $27.4 million and $27.2
million at the respective dates of acquisition, bearing interest at rates of 4.9% and 6.2% per
annum, with an average of 5.5% per annum.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
During 2009, the Company refinanced one property that had collateralized the secured revolving
stabilized property credit facility. The new fixed-rate mortgage, aggregating $17.0 million, bears
interest at 6.8% per annum. The Company used the mortgage proceeds to reduce the balance
outstanding under the secured revolving stabilized property credit facility.
In addition, the Company has a $77.7 million construction facility with Manufacturers and
Traders Trust Company (as agent) and several other banks, pursuant to which the Company
has guaranteed and pledged its joint venture development project in Pottsgrove, Pennsylvania
as collateral for borrowings to be made thereunder. This facility will expire in September 2011,
subject to a one-year extension option. Borrowings outstanding under the facility aggregated $61.2
million at December 31, 2009, and such borrowings bore interest at an average rate of 2.5% per
annum. Borrowings under the facility bear interest at the Company’s option at either LIBOR plus a
spread of 225 bps, or the agent bank’s prime rate. As of December 31, 2009, the Company was in
compliance with the financial covenants and financial statement ratios required by the terms of the
construction facility.
During 2008, the Company (i) borrowed an aggregate of $56,351,000 of new fixed-rate mortgage
loans, bearing interest at rates ranging from 5.4% to 9.25% per annum, with an average of 6.8% per
annum (these amounts include a $14,575,000 non-interest-bearing purchase money mortgage issued in
connection with the purchase of land, and recorded as $13,851,000 reflecting an imputed interest
rate of 9.25% per annum), and (ii) borrowed $50,387,000 in variable-rate mortgage loans bearing
interest at LIBOR plus spreads of 225 bps and 275 bps (the latter with a floor of 5.9%). In
addition, the Company assumed $24,488,000 of fixed-rate mortgage loans payable in connection with
acquisitions, with interest rates ranging from 5.0% to 8.5% per annum, with an average of 7.0% per
annum. These principal amounts and rates of interest represent the fair values at the respective
dates of acquisition. The stated contract amounts were $24,631,000 at the respective dates of
acquisition, bearing interest at rates ranging from 5.0% to 8.5% per annum, with an average of 6.9%
per annum. The Company also assumed $2,915,000 in variable-rate mortgage loans bearing interest at
LIBOR plus a spread of 190 bps.
Scheduled principal payments on mortgage loans payable and secured revolving credit facilities
at December 31, 2009, due on various dates from 2010 to 2029, are as follows:
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Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
|
2010
|
20,421,000 | |||
|
2011
|
160,753,000 | |||
|
2012
|
227,614,000 | |||
|
2013
|
64,194,000 | |||
|
2014
|
123,771,000 | |||
|
Thereafter
|
353,911,000 | |||
|
|
||||
|
|
$ | 950,664,000 | ||
|
|
||||
Secured Revolving Stabilized Property Credit Facility
In November 2009, the Company closed an amended and restated secured revolving stabilized
property credit facility with Bank of America, N.A., continuing as administrative agent, together
with three other lead lenders and other participating banks, with commitments from participants of
$265.0 million (increased to $285.0 million in January 2010). The facility, as amended, is
expandable to $400 million, subject to certain conditions, including acceptable collateral. The
principal terms of the new facility include (i) an availability based primarily on appraisals, with
a 67.5% advance rate, (ii) an interest rate based on LIBOR plus 350 bps, with a
200 bps LIBOR floor (under the prior arrangement, the interest rate was based on LIBOR plus a
bps spread depending upon the Company’s leverage ratio, as defined, which had been 135 bps prior to
the new facility), (iii) a leverage ratio limited to 67.5%, (iv) an unused portion fee of 50 bps
(previously 25 bps), and (v) a maturity date of January 31, 2012, subject to a one-year extension
option. In connection with the new facility, the Company paid participating lender fees and closing
and transaction costs of approximately $9.0 million.
Borrowings outstanding under the facility aggregated $188.0 million at December 31, 2009, such
borrowings bore interest at an average rate of 5.5% per annum, and the Company had pledged 34 of
its shopping center properties as collateral for such borrowings.
The secured revolving stabilized property credit facility has been and will be used to fund
acquisitions, certain development and redevelopment activities, capital expenditures, mortgage
repayments, dividend distributions, working capital and other general corporate purposes. The
facility is subject to customary financial covenants, including limits on leverage as discussed
above and distributions (limited to 95% of funds from operations, as defined), and other financial
statement ratios. Based on covenant measurements and collateral in place as of December 31, 2009,
the Company was permitted to draw up to approximately $204.3 million, of which approximately $16.3
million remained available as of that date. As a result of the application of the net proceeds
from, among other things, the transfers of two of the remaining properties to the RioCan joint
venture (more fully described above) and the sales of shares of the Company’s common stock in
February 2010 (more fully described below), such availability will have increased to approximately
$104 million as of March 3, 2010. As of December 31, 2009, the Company was in compliance with the
financial covenants and financial statement ratios required by the terms of the secured revolving
stabilized property credit facility.
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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
Secured Revolving Development Property Credit Facility
The Company has a $150 million secured revolving development property credit facility with
KeyBank, National Association (as agent) and several other banks, pursuant to which the Company has
pledged certain of its development projects and redevelopment properties as collateral for
borrowings thereunder. The facility, as amended, is expandable to $250 million, subject to certain
conditions, including acceptable collateral, and will expire in June 2011, subject to a one-year
extension option. Borrowings under the facility bear interest at the Company’s option at either
LIBOR or the agent bank’s prime rate, plus a spread of 225 bps or 75 bps, respectively. Advances
under the facility are calculated at the least of 70% of aggregate project costs, 70% of “as
stabilized” appraised values, or costs incurred in excess of a 30% equity requirement on the part
of the Company. The facility also requires an unused portion fee of 15 bps. This facility has been
and will be used to fund in part the Company’s and certain joint ventures’ development activities.
In order to draw funds under this construction facility, the Company must meet certain pre-leasing
and other conditions. Borrowings outstanding under the facility aggregated $69.7 million at
December 31, 2009, and such borrowings bore interest at a rate of 2.5% per annum. As of December
31, 2009, the Company was in compliance with the financial covenants and financial statement ratios
required by the terms of the secured revolving
development property credit facility.
The Company’s 8-7/8% Series A Cumulative Redeemable Preferred Stock has no stated maturity, is
not convertible into any other security of the Company, and is redeemable at the Company’s option
at a price of $25.00 per share, plus accrued and unpaid distributions.
In connection with the RioCan transactions (more fully described above), the Company (1) sold
approximately 6,667,000 shares of its common stock to RioCan at $6.00 per share in a private
placement, and realized net proceeds of $38.6 million, and (2) issued to RioCan warrants to
purchase approximately 1,429,000 shares of its common stock at an exercise price of $7.00 per
share, exercisable over a two-year period.
In September 2009, the Company entered into a Standby Equity Purchase Agreement (the “SEPA
Agreement”) with an investment company for sales of its shares of common stock aggregating up to
$30 million over a two-year commitment period; the commitment is expandable at the Company’s option
to $45 million. Under the terms of the SEPA Agreement, the Company may sell, from time to time,
shares of its common stock at a discount to market of 1.75%. The amount of these daily sales is
generally limited to the lesser of 20% of the average daily trading volume or $1.0 million. In
connection with these sales transactions, the Company agreed to pay an investment advisor a 0.75%
placement agent fee.
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Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
In addition, the Company may require the investment company to advance from time to time up to
$5.0 million provided, however, that the Company may only request these larger advances
approximately once a month. With respect to such advances, the common stock sales are at a discount
to market of 2.75% and the placement agent fee is 1.25%. As the Company has a conditional
obligation to issue a variable number of shares of its common stock, advances are initially
recorded as a liability, and as shares are sold on a daily basis and the advance is settled, such
liability is reflected in equity.
Through December 31, 2009, 422,000 shares had been sold pursuant to the SEPA Agreement, at an
average price of $5.93 per share, and the Company realized net proceeds, after allocation of other
issuance expenses, of approximately $2.3 million. At December 31, 2009, there was an unsettled
advance liability of $5.0 million, which is included in accounts payable and accrued liabilities on
the consolidated balance sheet. Such advance was settled in January and February 2010 by the sale
of 718,000 shares of the Company’s common stock at an average selling price of $6.97 per share.
In January 2007, in connection with 7,500,000 shares of the Company’s common stock that it
sold in December 2006, the underwriters exercised their over-allotment option to the extent of
275,000 shares, and the Company realized additional net proceeds of $4.1 million.
On September 12, 2007, stockholders approved amendments to the Company’s Articles
of Incorporation increasing the number of authorized shares of common stock to 150,000,000 and
the number of authorized shares of preferred stock to 12,500,000.
With respect to the Company’s 20% joint-venture interest in nine properties in partnership
with affiliates of Homburg Invest Inc., the terms of the partnership agreements include buy/sell
provisions with respect to equity ownership interests which can be exercised by either party. The
buy/sell provisions allow either party to provide notice that it intends to purchase the
non-initiating party’s interest at a specific price premised on a value for the entire
venture. The
non-initiating party may either accept that offer or instead may reject that offer and become the
purchaser of the initiating party’s interest at the initially offered price.
With respect to the Company’s 20% joint-venture interest in the properties transferred or to
be transferred to the RioCan joint venture, the terms of the partnership agreements include
buy/sell provisions with respect to equity ownership interests which can be exercised by either
party during the period ending in December 2012 or upon certain change-of-control circumstances.
The buy/sell provisions allow either party to provide notice that it intends to purchase the
non-initiating party’s interest at a specific price premised on a value for the entire
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Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
venture. The
non-initiating party may either accept that offer or instead may reject that offer and become the
purchaser of the initiating party’s interest at the initially offered price.
The Company is a party to certain legal actions arising in the normal course of business.
Management does not expect there to be adverse consequences from these actions that would be
material to the Company’s consolidated financial statements.
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 petroleum product releases, at its properties. The owner may be liable to governmental entities
or to third parties for property damage, and for investigation and cleanup costs incurred by such
parties in connection with any contamination. Management is unaware of any environmental matters
that would have a material impact on the Company’s consolidated financial statements.
The Company’s executive offices are located at 44 South Bayles Avenue, Port Washington, New
York, in which it presently occupies approximately 8,600 square feet leased from a partnership
owned 43.6% by the Company’s Chairman. Under the terms of the lease, as amended, which will expire
in February 2020, the Company will add an additional 6,400 square feet by the end of 2010. Future
minimum rents payable under the terms of the lease, as amended, amount to $484,000, $545,000,
$560,000, $575,000, $591,000 and $3.3 million during the years 2010 through 2014, and thereafter,
respectively. In addition, several of the Company’s properties and portions of several others are
owned subject to ground leases which provide for annual payments subject, in certain cases, to
cost-of-living or fair market value adjustments, through 2014, as follows: 2010 — $660,000 2011 —
$668,000, 2012 — $659,000, 2013 — $659,000, 2014 — $659,000 and thereafter — $18.2 million.
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Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
| Quarter ended | ||||||||||||||||
| Year | March 31 | June 30 | September 30 | December 31 | ||||||||||||
|
2009
|
||||||||||||||||
|
Revenues as previously reported
|
$ | 46,895,000 | $ | 44,776,000 | $ | 45,850,000 | $ | 46,791,000 | ||||||||
|
Revenues from discontinued operations (a)
|
(1,010,000 | ) | (851,000 | ) | (740,000 | ) | — | |||||||||
|
|
||||||||||||||||
|
Revenues
|
$ | 45,885,000 | $ | 43,925,000 | $ | 45,110,000 | $ | 46,791,000 | ||||||||
|
|
||||||||||||||||
|
Net income (loss)
|
$ | 5,779,000 | $ | 1,964,000 | $ | 3,814,000 | $ | (28,356,000 | ) | |||||||
|
|
||||||||||||||||
|
Net income (loss) attributable to common shareholders
|
$ | 3,999,000 | $ | (316,000 | ) | $ | 1,447,000 | $ | (29,673,000 | ) | ||||||
|
|
||||||||||||||||
|
Per common share (basic and diluted) (b)
|
$ | 0.09 | $ | (0.01 | ) | $ | 0.03 | $ | (0.59 | ) | ||||||
|
|
||||||||||||||||
|
2008
|
||||||||||||||||
|
Revenues as previously reported
|
$ | 43,635,000 | $ | 42,915,000 | $ | 43,322,000 | $ | 44,608,000 | ||||||||
|
Revenues from discontinued operations (a)
|
(996,000 | ) | (953,000 | ) | (945,000 | ) | (921,000 | ) | ||||||||
|
|
||||||||||||||||
|
Revenues
|
$ | 42,639,000 | $ | 41,962,000 | $ | 42,377,000 | $ | 43,687,000 | ||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 5,928,000 | $ | 3,733,000 | $ | 5,806,000 | $ | 5,542,000 | ||||||||
|
|
||||||||||||||||
|
Net income attributable to common shareholders
|
$ | 3,112,000 | $ | 1,224,000 | $ | 3,277,000 | $ | 2,885,000 | ||||||||
|
|
||||||||||||||||
|
Per common share (basic and diluted) (b)
|
$ | 0.07 | $ | 0.03 | $ | 0.07 | $ | 0.06 | ||||||||
| (a) | Represents revenues from discontinued operations which were previously included in revenues as previously reported. | |
| (b) | Difference between the sum of the four quraterly per share amounts and the annual per share amount are attributable to the effect of the weighted average outstanding share calculations for the respective periods. |
In determining subsequent events, management reviewed all activity from January 1, 2010
through the date of filing this Annual Report on Form 10-K.
On January 20, 2010, the Company paid approximately $5.5 million to terminate interest rate
swaps applicable to approximately $23.9 million of mortgage loans payable as well as the interest
rate swap applicable to anticipated permanent financing of $28.0 million, both for its development
joint venture project in Stroudsburg, Pennsylvania.
On January 26, 2010, the Cedar/RioCan joint venture acquired the Town Square Plaza shopping
center in Temple, Pennsylvania, an approximately 128,000 square foot supermarket-anchored shopping
center which was completed in 2008, and which is anchored by a 73,000 square foot Giant Foods
supermarket. The purchase price for the property, which is presently unencumbered, was
approximately $19 million, excluding closing costs.
On February 5, 2010, the Company concluded a public offering of 7,500,000 shares of its common
stock at $6.60 per share, and realized net proceeds after offering expenses of
90
Table of Contents
Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
December 31, 2009
Notes to Consolidated Financial Statements
December 31, 2009
approximately $47.0
million. On March 3, 2010, the underwriters exercised their over-allotment option to the extent of
698,000 shares, and the Company realized additional net proceeds of $4.4
million. In connection with the offering, RioCan acquired 1,350,000 shares of the Company’s
common stock, including 100,000 shares acquired in connection with the exercise of the
over-allotment option, and the Company realized net proceeds of $8.9 million.
On March 10, 2010, the Company exercised its option to expand the SEPA Agreement
to $45.0 million.
91
Table of Contents
Cedar Shopping Centers,
Inc.
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
| Year built/ | Gross | Initial cost to the Company | ||||||||||||||||||||||||||
| Year | Precent | Year last | leasable | Building and | ||||||||||||||||||||||||
| Property | State | acquired | owned | renovated | area | Land | Improvements | |||||||||||||||||||||
|
Wholly-Owned Stabilized Properties (1):
|
||||||||||||||||||||||||||||
|
Academy Plaza
|
PA | 2001 | 100 | % | 1965/1998 | 152,727 | 2,406,000 | 9,623,000 | ||||||||||||||||||||
|
Annie Land Plaza
|
VA | 2006 | 100 | % | 1999 | 42,500 | 809,000 | 3,857,000 | ||||||||||||||||||||
|
Camp Hill
|
PA | 2002 | 100 | % | 1958/2005 | 472,458 | 4,460,000 | 17,857,000 | ||||||||||||||||||||
|
Carbondale Plaza
|
PA | 2004 | 100 | % | 1972/2005 | 129,915 | 1,586,000 | 7,289,000 | ||||||||||||||||||||
|
Carmans Plaza
|
NY | 2007 | 100 | % | 1954/2007 | 194,481 | 8,539,000 | 35,040,000 | ||||||||||||||||||||
|
Carll’s Corner
|
NJ | 2007 | 100 | % | 1960's-1999/ | 129,582 | 3,034,000 | 15,293,000 | ||||||||||||||||||||
|
Circle Plaza
|
PA | 2007 | 100 | % | 1979/1991 | 92,171 | 561,000 | 2,884,000 | ||||||||||||||||||||
|
Clyde Discount Drug Mart Plaza
|
OH | 2005 | 100 | % | 2002 | 34,592 | 451,000 | 2,326,000 | ||||||||||||||||||||
|
Coliseum Marketplace
|
VA | 2005 | 100 | % | 1987/2005 | 98,359 | 2,924,000 | 14,416,000 | ||||||||||||||||||||
|
CVS at Bradford
|
PA | 2005 | 100 | % | 1996 | 10,722 | 291,000 | 1,466,000 | ||||||||||||||||||||
|
CVS at Celina
|
OH | 2005 | 100 | % | 1998 | 10,195 | 418,000 | 1,967,000 | ||||||||||||||||||||
|
CVS at Erie
|
PA | 2005 | 100 | % | 1997 | 10,125 | 399,000 | 1,783,000 | ||||||||||||||||||||
|
CVS at Kinderhook
|
NY | 2007 | 100 | % | 2007 | 13,225 | 1,678,000 | — | ||||||||||||||||||||
|
CVS at Portage Trail
|
OH | 2005 | 100 | % | 1996 | 10,722 | 341,000 | 1,603,000 | ||||||||||||||||||||
|
East Chestnut
|
PA | 2005 | 100 | % | 1996 | 21,180 | 800,000 | 3,699,000 | ||||||||||||||||||||
|
Elmhurst Square
|
VA | 2006 | 100 | % | 1961-1983 | 66,250 | 1,371,000 | 5,994,000 | ||||||||||||||||||||
|
Enon Discount Drug Mart Plaza
|
OH | 2007 | 100 | % | 2005-2006 | 42,876 | 904,000 | 3,426,000 | ||||||||||||||||||||
|
Fairfield Plaza
|
CT | 2005 | 100 | % | 2001/2005 | 72,279 | 1,816,000 | 7,891,000 | ||||||||||||||||||||
|
Fairview Plaza
|
PA | 2003 | 100 | % | 1992 | 69,579 | 2,128,000 | 8,483,000 | ||||||||||||||||||||
|
Family Dollar at Zanesville
|
OH | 2005 | 100 | % | 2000 | 6,900 | 82,000 | 569,000 | ||||||||||||||||||||
|
FirstMerit Bank at Akron
|
OH | 2005 | 100 | % | 1996 | 3,200 | 169,000 | 734,000 | ||||||||||||||||||||
|
FirstMerit Bank at Cuyahoga Falls
|
OH | 2006 | 100 | % | 1973/2003 | 18,300 | 264,000 | 1,304,000 | ||||||||||||||||||||
|
Gahanna Discount Drug Mart Plaza
|
OH | 2006 | 100 | % | 2003 | 48,992 | 1,379,000 | 5,385,000 | ||||||||||||||||||||
|
General Booth Plaza
|
VA | 2005 | 100 | % | 1985 | 73,320 | 1,935,000 | 9,493,000 | ||||||||||||||||||||
|
Gold Star Plaza
|
PA | 2006 | 100 | % | 1988 | 71,720 | 1,644,000 | 6,519,000 | ||||||||||||||||||||
|
Golden Triangle
|
PA | 2003 | 100 | % | 1960/2005 | 202,943 | 2,320,000 | 9,713,000 | ||||||||||||||||||||
|
Groton Shopping Center
|
CT | 2007 | 100 | % | 1969 | 117,986 | 3,070,000 | 12,320,000 | ||||||||||||||||||||
|
Grove City Discount Drug Mart Plaza
|
OH | 2007 | 100 | % | 2005 | 40,848 | 874,000 | 3,394,000 | ||||||||||||||||||||
|
Halifax Plaza
|
PA | 2003 | 100 | % | 1994 | 51,510 | 1,412,000 | 5,799,000 | ||||||||||||||||||||
|
Hamburg Commons
|
PA | 2004 | 100 | % | 1988-1993 | 99,580 | 1,153,000 | 4,678,000 | ||||||||||||||||||||
|
Hannaford Plaza
|
MA | 2006 | 100 | % | 1965/2006 | 102,459 | 1,874,000 | 8,453,000 | ||||||||||||||||||||
|
Hilliard Discount Drug Mart Plaza
|
OH | 2007 | 100 | % | 2003 | 40,988 | 1,200,000 | 3,977,000 | ||||||||||||||||||||
|
Hills & Dales Discount Drug Mart Plaza
|
OH | 2007 | 100 | % | 1992-2007 | 33,553 | 786,000 | 2,967,000 | ||||||||||||||||||||
|
Jordan Lane
|
CT | 2005 | 100 | % | 1969/1991 | 181,730 | 4,291,000 | 20,866,000 | ||||||||||||||||||||
|
Kempsville Crossing
|
VA | 2005 | 100 | % | 1985 | 94,477 | 2,207,000 | 11,000,000 | ||||||||||||||||||||
|
Kenley Village
|
MD | 2005 | 100 | % | 1988 | 51,894 | 726,000 | 3,512,000 | ||||||||||||||||||||
|
Kings Plaza
|
MA | 2007 | 100 | % | 1970/1994 | 168,243 | 2,413,000 | 11,795,000 | ||||||||||||||||||||
|
Kingston Plaza
|
NY | 2006 | 100 | % | 2006 | 18,337 | 2,891,000 | — | ||||||||||||||||||||
|
LA Fitness Facility
|
PA | 2002 | 100 | % | 2003 | 41,000 | 2,462,000 | — | ||||||||||||||||||||
|
Liberty Marketplace
|
PA | 2005 | 100 | % | 2003 | 68,200 | 2,665,000 | 12,639,000 | ||||||||||||||||||||
|
Lodi Discount Drug Mart Plaza
|
OH | 2005 | 100 | % | 2003 | 38,576 | 704,000 | 3,393,000 | ||||||||||||||||||||
|
Long Reach Village
|
MD | 2006 | 100 | % | 1973/1998 | 104,932 | 1,721,000 | 8,554,000 | ||||||||||||||||||||
|
Mason Discount Drug Mart Plaza
|
OH | 2008 | 100 | % | 2005/2007 | 52,896 | 1,298,000 | 5,022,000 | ||||||||||||||||||||
|
McCormick Place
|
OH | 2005 | 100 | % | 1995 | 46,000 | 847,000 | 4,022,000 | ||||||||||||||||||||
|
Mechanicsburg Giant
|
PA | 2005 | 100 | % | 2003 | 51,500 | 2,709,000 | 12,159,000 | ||||||||||||||||||||
|
Metro Square
|
MD | 2008 | 100 | % | 1999 | 71,896 | 3,121,000 | 12,341,000 | ||||||||||||||||||||
|
Newport Plaza
|
PA | 2003 | 100 | % | 1996 | 66,789 | 1,721,000 | 7,758,000 | ||||||||||||||||||||
|
Oak Ridge
|
VA | 2006 | 100 | % | 2000 | 38,700 | 960,000 | 4,254,000 | ||||||||||||||||||||
|
Oakland Commons
|
CT | 2007 | 100 | % | 1962/1995 | 89,850 | 2,504,000 | 15,662,000 | ||||||||||||||||||||
|
Oakland Mills
|
MD | 2005 | 100 | % | 1960's/2004 | 58,224 | 1,611,000 | 6,292,000 | ||||||||||||||||||||
|
Palmyra Shopping Center
|
PA | 2005 | 100 | % | 1960/1995 | 112,108 | 1,488,000 | 6,566,000 | ||||||||||||||||||||
|
Pickerington Discount Drug Mart Plaza
|
OH | 2005 | 100 | % | 2002 | 47,810 | 1,186,000 | 5,396,000 | ||||||||||||||||||||
|
Pine Grove Plaza
|
NJ | 2003 | 100 | % | 2001/2002 | 79,306 | 1,622,000 | 6,489,000 | ||||||||||||||||||||
92
Table of Contents
Cedar Shopping Centers, Inc.
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
(continued)
| Gross amount at which carried at | ||||||||||||||||||||||||
| Subsquent | December 31, 2009 | |||||||||||||||||||||||
| cost | Building and | Accumulated | Amount of | |||||||||||||||||||||
| Property | capitalized | Land | improvements | Total | depreciation (4) | Encumbrance | ||||||||||||||||||
|
Wholly-Owned Stabilized Properties (1):
|
||||||||||||||||||||||||
|
Academy Plaza
|
$ | 1,561,000 | $ | 2,406,000 | $ | 11,184,000 | $ | 13,590,000 | $ | 2,319,000 | $ | 9,365,000 | ||||||||||||
|
Annie Land Plaza
|
12,000 | 809,000 | 3,869,000 | 4,678,000 | 492,000 | (2) | ||||||||||||||||||
|
Camp Hill
|
42,879,000 | 4,424,000 | 60,772,000 | 65,196,000 | 7,948,000 | 65,000,000 | ||||||||||||||||||
|
Carbondale Plaza
|
4,858,000 | 1,586,000 | 12,147,000 | 13,733,000 | 1,891,000 | (3) | ||||||||||||||||||
|
Carmans Plaza
|
(961,000 | ) | 8,416,000 | 34,202,000 | 42,618,000 | 2,892,000 | 33,345,000 | |||||||||||||||||
|
Carll’s Corner
|
31,000 | 2,964,000 | 15,394,000 | 18,358,000 | 1,231,000 | 5,908,000 | ||||||||||||||||||
|
Circle Plaza
|
32,000 | 561,000 | 2,916,000 | 3,477,000 | 194,000 | (2) | ||||||||||||||||||
|
Clyde Discount Drug Mart Plaza
|
1,128,000 | 673,000 | 3,232,000 | 3,905,000 | 513,000 | 1,939,000 | ||||||||||||||||||
|
Coliseum Marketplace
|
3,410,000 | 3,586,000 | 17,164,000 | 20,750,000 | 2,713,000 | 12,228,000 | ||||||||||||||||||
|
CVS at Bradford
|
16,000 | 291,000 | 1,482,000 | 1,773,000 | 257,000 | 775,000 | ||||||||||||||||||
|
CVS at Celina
|
— | 418,000 | 1,967,000 | 2,385,000 | 288,000 | 1,429,000 | ||||||||||||||||||
|
CVS at Erie
|
— | 399,000 | 1,783,000 | 2,182,000 | 249,000 | 1,114,000 | ||||||||||||||||||
|
CVS at Kinderhook
|
1,930,000 | 2,502,000 | 1,106,000 | 3,608,000 | 69,000 | 2,480,000 | ||||||||||||||||||
|
CVS at Portage Trail
|
8,000 | 341,000 | 1,611,000 | 1,952,000 | 245,000 | 843,000 | ||||||||||||||||||
|
East Chestnut
|
3,000 | 800,000 | 3,702,000 | 4,502,000 | 713,000 | 1,988,000 | ||||||||||||||||||
|
Elmhurst Square
|
235,000 | 1,371,000 | 6,229,000 | 7,600,000 | 815,000 | 4,045,000 | ||||||||||||||||||
|
Enon Discount Drug Mart Plaza
|
1,161,000 | 1,135,000 | 4,356,000 | 5,491,000 | 386,000 | (2) | ||||||||||||||||||
|
Fairfield Plaza
|
1,889,000 | 2,202,000 | 9,394,000 | 11,596,000 | 1,355,000 | 5,106,000 | ||||||||||||||||||
|
Fairview Plaza
|
234,000 | 2,129,000 | 8,716,000 | 10,845,000 | 1,516,000 | 5,479,000 | ||||||||||||||||||
|
Family Dollar at Zanesville
|
(2,000 | ) | 81,000 | 568,000 | 649,000 | 281,000 | (2) | |||||||||||||||||
|
FirstMerit Bank at Akron
|
1,000 | 168,000 | 736,000 | 904,000 | 121,000 | (2) | ||||||||||||||||||
|
FirstMerit Bank at Cuyahoga Falls
|
8,000 | 264,000 | 1,312,000 | 1,576,000 | 176,000 | (2) | ||||||||||||||||||
|
Gahanna Discount Drug Mart Plaza
|
1,739,000 | 1,738,000 | 6,765,000 | 8,503,000 | 868,000 | 4,998,000 | ||||||||||||||||||
|
General Booth Plaza
|
73,000 | 1,935,000 | 9,566,000 | 11,501,000 | 1,773,000 | 5,409,000 | ||||||||||||||||||
|
Gold Star Plaza
|
83,000 | 1,644,000 | 6,602,000 | 8,246,000 | 942,000 | 2,417,000 | ||||||||||||||||||
|
Golden Triangle
|
9,526,000 | 2,320,000 | 19,239,000 | 21,559,000 | 3,561,000 | 20,999,000 | ||||||||||||||||||
|
Groton Shopping Center
|
58,000 | 3,073,000 | 12,375,000 | 15,448,000 | 1,341,000 | 11,622,000 | ||||||||||||||||||
|
Grove City Discount Drug Mart Plaza
|
2,014,000 | 1,241,000 | 5,041,000 | 6,282,000 | 496,000 | (2) | ||||||||||||||||||
|
Halifax Plaza
|
162,000 | 1,347,000 | 6,026,000 | 7,373,000 | 960,000 | 3,324,000 | ||||||||||||||||||
|
Hamburg Commons
|
5,210,000 | 1,153,000 | 9,888,000 | 11,041,000 | 1,277,000 | 5,180,000 | ||||||||||||||||||
|
Hannaford Plaza
|
353,000 | 1,874,000 | 8,806,000 | 10,680,000 | 1,076,000 | (2) | ||||||||||||||||||
|
Hilliard Discount Drug Mart Plaza
|
1,110,000 | 1,307,000 | 4,980,000 | 6,287,000 | 429,000 | (2) | ||||||||||||||||||
|
Hills & Dales Discount Drug Mart Plaza
|
105,000 | 786,000 | 3,072,000 | 3,858,000 | 301,000 | (2) | ||||||||||||||||||
|
Jordan Lane
|
545,000 | 4,291,000 | 21,411,000 | 25,702,000 | 3,310,000 | 13,080,000 | ||||||||||||||||||
|
Kempsville Crossing
|
129,000 | 2,207,000 | 11,129,000 | 13,336,000 | 2,123,000 | 6,122,000 | ||||||||||||||||||
|
Kenley Village
|
45,000 | 726,000 | 3,557,000 | 4,283,000 | 953,000 | (2) | ||||||||||||||||||
|
Kings Plaza
|
72,000 | 2,408,000 | 11,872,000 | 14,280,000 | 1,168,000 | 7,811,000 | ||||||||||||||||||
|
Kingston Plaza
|
2,344,000 | 2,891,000 | 2,344,000 | 5,235,000 | 186,000 | 3,727,000 | ||||||||||||||||||
|
LA Fitness Facility
|
5,176,000 | 2,462,000 | 5,176,000 | 7,638,000 | 849,000 | 5,790,000 | ||||||||||||||||||
|
Liberty Marketplace
|
238,000 | 2,695,000 | 12,847,000 | 15,542,000 | 1,746,000 | 9,373,000 | ||||||||||||||||||
|
Lodi Discount Drug Mart Plaza
|
68,000 | 704,000 | 3,461,000 | 4,165,000 | 633,000 | 2,363,000 | ||||||||||||||||||
|
Long Reach Village
|
144,000 | 1,721,000 | 8,698,000 | 10,419,000 | 1,197,000 | 4,690,000 | ||||||||||||||||||
|
Mason Discount Drug Mart Plaza
|
2,978,000 | 1,849,000 | 7,449,000 | 9,298,000 | 668,000 | (2) | ||||||||||||||||||
|
McCormick Place
|
44,000 | 849,000 | 4,064,000 | 4,913,000 | 858,000 | 2,621,000 | ||||||||||||||||||
|
Mechanicsburg Giant
|
— | 2,709,000 | 12,159,000 | 14,868,000 | 1,471,000 | 9,667,000 | ||||||||||||||||||
|
Metro Square
|
10,000 | 3,121,000 | 12,351,000 | 15,472,000 | 520,000 | 9,162,000 | ||||||||||||||||||
|
Newport Plaza
|
346,000 | 1,672,000 | 8,153,000 | 9,825,000 | 1,165,000 | 4,338,000 | ||||||||||||||||||
|
Oak Ridge
|
27,000 | 960,000 | 4,281,000 | 5,241,000 | 437,000 | 3,459,000 | ||||||||||||||||||
|
Oakland Commons
|
15,000 | 2,504,000 | 15,677,000 | 18,181,000 | 1,375,000 | (2) | ||||||||||||||||||
|
Oakland Mills
|
29,000 | 1,611,000 | 6,321,000 | 7,932,000 | 1,159,000 | 4,918,000 | ||||||||||||||||||
|
Palmyra Shopping Center
|
342,000 | 1,488,000 | 6,908,000 | 8,396,000 | 1,240,000 | (2) | ||||||||||||||||||
|
Pickerington Discount Drug Mart Plaza
|
675,000 | 1,305,000 | 5,952,000 | 7,257,000 | 969,000 | 4,150,000 | ||||||||||||||||||
|
Pine Grove Plaza
|
18,000 | 1,622,000 | 6,507,000 | 8,129,000 | 1,107,000 | 5,797,000 | ||||||||||||||||||
93
Table of Contents
Cedar Shopping Centers, Inc.
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
(continued)
| Year built/ | Gross | Initial cost to the Company | ||||||||||||||||||||||||||
| Year | Precent | Year last | leasable | Building and | ||||||||||||||||||||||||
| Property | State | acquired | owned | renovated | area | Land | Improvements | |||||||||||||||||||||
|
Wholly-Owned Stabilized Properties (1):
|
||||||||||||||||||||||||||||
|
Polaris Discount Drug Mart Plaza
|
OH | 2005 | 100 | % | 2001 | 50,283 | 1,242,000 | 5,816,000 | ||||||||||||||||||||
|
Port Richmond Village
|
PA | 2001 | 100 | % | 1988 | 154,908 | 2,942,000 | 11,769,000 | ||||||||||||||||||||
|
Price Chopper Plaza
|
MA | 2007 | 100 | % | 1960’s-2004 | 101,824 | 3,551,000 | 18,412,000 | ||||||||||||||||||||
|
Rite Aid at Massillon
|
OH | 2005 | 100 | % | 1999 | 10,125 | 442,000 | 2,014,000 | ||||||||||||||||||||
|
River View Plaza I, II and III
|
PA | 2003 | 100 | % | 1991/1998 | 244,225 | 9,718,000 | 40,356,000 | ||||||||||||||||||||
|
Smithfield Plaza
|
VA | 2005-2008 | 100 | % | 1987/1996 | 134,664 | 2,947,000 | 12,737,000 | ||||||||||||||||||||
|
South Philadelphia
|
PA | 2003 | 100 | % | 1950/2003 | 283,415 | 8,222,000 | 35,907,000 | ||||||||||||||||||||
|
St. James Square
|
MD | 2005 | 100 | % | 2000 | 39,903 | 688,000 | 3,838,000 | ||||||||||||||||||||
|
Stadium Plaza
|
MI | 2005 | 100 | % | 1960's/2003 | 77,688 | 2,341,000 | 9,175,000 | ||||||||||||||||||||
|
Suffolk Plaza
|
VA | 2005 | 100 | % | 1984 | 67,216 | 1,402,000 | 7,236,000 | ||||||||||||||||||||
|
Swede Square
|
PA | 2003 | 100 | % | 1980/2004 | 98,792 | 2,268,000 | 6,232,000 | ||||||||||||||||||||
|
The Brickyard
|
CT | 2004 | 100 | % | 1990 | 274,553 | 6,465,000 | 28,281,000 | ||||||||||||||||||||
|
The Commons
|
PA | 2004 | 100 | % | 2003 | 175,121 | 3,098,000 | 14,047,000 | ||||||||||||||||||||
|
The Point
|
PA | 2000 | 100 | % | 1972/2001 | 250,697 | 2,700,000 | 10,800,000 | ||||||||||||||||||||
|
The Point at Carlisle Plaza
|
PA | 2005 | 100 | % | 1965/2005 | 182,859 | 2,233,000 | 11,105,000 | ||||||||||||||||||||
|
Timpany Plaza
|
MA | 2007 | 100 | % | 1970's-1989 | 183,775 | 3,412,000 | 16,148,000 | ||||||||||||||||||||
|
Trexler Mall
|
PA | 2005 | 100 | % | 1973/2004 | 339,363 | 6,932,000 | 31,661,000 | ||||||||||||||||||||
|
Ukrop’s at Fredericksburg
|
VA | 2005 | 100 | % | 1997 | 63,000 | 3,213,000 | 12,758,000 | ||||||||||||||||||||
|
Ukrop’s at Glen Allen
|
VA | 2005 | 100 | % | 2000 | 43,000 | 6,769,000 | 213,000 | ||||||||||||||||||||
|
Valley Plaza
|
MD | 2003 | 100 | % | 1975/1994 | 190,939 | 1,950,000 | 7,766,000 | ||||||||||||||||||||
|
Virginia Center Commons
|
VA | 2005 | 100 | % | 2002 | 9,763 | 992,000 | 3,860,000 | ||||||||||||||||||||
|
Virginia Little Creek
|
VA | 2005 | 100 | % | 1996/2001 | 69,620 | 1,650,000 | 8,350,000 | ||||||||||||||||||||
|
Wal-Mart Center
|
CT | 2003 | 100 | % | 1972/2000 | 155,842 | — | 11,834,000 | ||||||||||||||||||||
|
Washington Center Shoppes
|
NJ | 2001 | 100 | % | 1979/1995 | 157,290 | 2,061,000 | 7,314,000 | ||||||||||||||||||||
|
West Bridgewater Plaza
|
MA | 2007 | 100 | % | 1970/2007 | 133,039 | 2,823,000 | 14,901,000 | ||||||||||||||||||||
|
Westlake Discount Drug Mart Plaza
|
OH | 2005 | 100 | % | 2005 | 55,775 | 1,004,000 | 3,905,000 | ||||||||||||||||||||
|
Yorktowne Plaza
|
MD | 2007 | 100 | % | 1970/2000 | 158,982 | 5,940,000 | 25,354,000 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Wholly-Owned Stabilized Properties
|
7,775,366 | 179,230,000 | 739,711,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Properties Owned in Joint Venture:
|
||||||||||||||||||||||||||||
|
Homburg Joint Venture:
|
||||||||||||||||||||||||||||
|
Aston Center
|
PA | 2007 | 20 | % | 2005 | 55,000 | 4,319,000 | 17,070,000 | ||||||||||||||||||||
|
Ayr Town Center
|
PA | 2007 | 20 | % | 2005 | 55,600 | 2,442,000 | 9,748,000 | ||||||||||||||||||||
|
Fieldstone Marketplace
|
MA | 2005 | 20 | % | 1988/2003 | 193,970 | 5,229,000 | 21,440,000 | ||||||||||||||||||||
|
Meadows Marketplace
|
PA | 2004 | 20 | % | 2005 | 91,538 | 1,914,000 | — | ||||||||||||||||||||
|
Parkway Plaza
|
PA | 2007 | 20 | % | 1998-2002 | 106,628 | 4,647,000 | 19,420,000 | ||||||||||||||||||||
|
Pennsboro Commons
|
PA | 2005 | 20 | % | 1999 | 107,384 | 3,608,000 | 14,254,000 | ||||||||||||||||||||
|
Scott Town Center
|
PA | 2007 | 20 | % | 2004 | 67,933 | 2,959,000 | 11,800,000 | ||||||||||||||||||||
|
Spring Meadow Shopping Center
|
PA | 2007 | 20 | % | 2004 | 67,950 | 4,111,000 | 16,410,000 | ||||||||||||||||||||
|
Stonehedge Square
|
PA | 2006 | 20 | % | 1990/2006 | 88,677 | 2,732,000 | 11,614,000 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
834,680 | 31,961,000 | 121,756,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
PCP Joint Venture:
|
||||||||||||||||||||||||||||
|
New London Mall
|
CT | 2009 | 40 | % | 1967/1997 | 257,814 | 14,891,000 | 24,967,000 | ||||||||||||||||||||
|
San Souci Plaza
|
MD | 2009 | 40 | % | 1985 - 1997 | 264,134 | 14,849,000 | 18,445,000 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
521,948 | 29,740,000 | 43,412,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Joint Ventures (other):
|
||||||||||||||||||||||||||||
|
CVS at Naugatuck
|
CT | 2008 | 50 | % | 2008 | 13,225 | — | — | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Consolidated Joint Ventures
|
1,369,853 | 61,701,000 | 165,168,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Stabilized Portfiolio
|
9,145,219 | 240,931,000 | 904,879,000 | |||||||||||||||||||||||||
94
Table of Contents
Cedar Shopping Centers, Inc.
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
(continued)
| Gross amount at which carried at | ||||||||||||||||||||||||
| Subsquent | December 31, 2009 | |||||||||||||||||||||||
| cost | Building and | Accumulated | Amount of | |||||||||||||||||||||
| Property | capitalized | Land | improvements | Total | depreciation (4) | Encumbrance | ||||||||||||||||||
|
Wholly-Owned Stabilized Properties (1):
|
||||||||||||||||||||||||
|
Polaris Discount Drug Mart Plaza
|
$ | 30,000 | $ | 1,242,000 | $ | 5,846,000 | $ | 7,088,000 | $ | 1,132,000 | 4,451,000 | |||||||||||||
|
Port Richmond Village
|
568,000 | 2,843,000 | 12,436,000 | 15,279,000 | 2,607,000 | 14,683,000 | ||||||||||||||||||
|
Price Chopper Plaza
|
604,000 | 4,111,000 | 18,456,000 | 22,567,000 | 1,308,000 | (3) | ||||||||||||||||||
|
Rite Aid at Massillon
|
6,000 | 442,000 | 2,020,000 | 2,462,000 | 280,000 | 1,437,000 | ||||||||||||||||||
|
River View Plaza I, II and III
|
3,714,000 | 9,718,000 | 44,070,000 | 53,788,000 | 7,600,000 | (2) | ||||||||||||||||||
|
Smithfield Plaza
|
215,000 | 2,919,000 | 12,980,000 | 15,899,000 | 1,347,000 | 10,405,000 | ||||||||||||||||||
|
South Philadelphia
|
2,532,000 | 8,222,000 | 38,439,000 | 46,661,000 | 7,796,000 | (2) | ||||||||||||||||||
|
St. James Square
|
523,000 | 688,000 | 4,361,000 | 5,049,000 | 815,000 | (2) | ||||||||||||||||||
|
Stadium Plaza
|
740,000 | 2,443,000 | 9,813,000 | 12,256,000 | 1,295,000 | (2) | ||||||||||||||||||
|
Suffolk Plaza
|
— | 1,402,000 | 7,236,000 | 8,638,000 | 1,341,000 | 4,617,000 | ||||||||||||||||||
|
Swede Square
|
4,457,000 | 2,272,000 | 10,685,000 | 12,957,000 | 2,321,000 | (2) | ||||||||||||||||||
|
The Brickyard
|
488,000 | 6,465,000 | 28,769,000 | 35,234,000 | 5,767,000 | (2) | ||||||||||||||||||
|
The Commons
|
1,131,000 | 3,098,000 | 15,178,000 | 18,276,000 | 2,980,000 | (2) | ||||||||||||||||||
|
The Point
|
12,355,000 | 2,996,000 | 22,859,000 | 25,855,000 | 5,355,000 | 17,298,000 | ||||||||||||||||||
|
The Point at Carlisle Plaza
|
211,000 | 2,233,000 | 11,316,000 | 13,549,000 | 2,210,000 | (2) | ||||||||||||||||||
|
Timpany Plaza
|
328,000 | 3,379,000 | 16,509,000 | 19,888,000 | 1,603,000 | 8,377,000 | ||||||||||||||||||
|
Trexler Mall
|
715,000 | 6,932,000 | 32,376,000 | 39,308,000 | 4,226,000 | 21,526,000 | ||||||||||||||||||
|
Ukrop’s at Fredericksburg
|
— | 3,213,000 | 12,758,000 | 15,971,000 | 1,522,000 | (2) | ||||||||||||||||||
|
Ukrop’s at Glen Allen
|
— | 6,769,000 | 213,000 | 6,982,000 | 205,000 | (2) | ||||||||||||||||||
|
Valley Plaza
|
637,000 | 1,950,000 | 8,403,000 | 10,353,000 | 1,352,000 | (2) | ||||||||||||||||||
|
Virginia Center Commons
|
3,000 | 992,000 | 3,863,000 | 4,855,000 | 559,000 | (2) | ||||||||||||||||||
|
Virginia Little Creek
|
(11,000 | ) | 1,639,000 | 8,350,000 | 9,989,000 | 1,424,000 | 5,348,000 | |||||||||||||||||
|
Wal-Mart Center
|
23,000 | — | 11,857,000 | 11,857,000 | 1,884,000 | 5,795,000 | ||||||||||||||||||
|
Washington Center Shoppes
|
3,692,000 | 1,999,000 | 11,068,000 | 13,067,000 | 2,286,000 | 8,575,000 | ||||||||||||||||||
|
West Bridgewater Plaza
|
(606,000 | ) | 2,712,000 | 14,406,000 | 17,118,000 | 1,100,000 | 10,885,000 | |||||||||||||||||
|
Westlake Discount Drug Mart Plaza
|
70,000 | 1,004,000 | 3,975,000 | 4,979,000 | 451,000 | 3,215,000 | ||||||||||||||||||
|
Yorktowne Plaza
|
(141,000 | ) | 5,898,000 | 25,255,000 | 31,153,000 | 2,423,000 | 20,418,000 | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Wholly-Owned Stabilized Properties
|
124,395,000 | 183,320,000 | 860,016,000 | 1,043,336,000 | 126,011,000 | 439,091,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Properties Owned in Joint Venture:
|
||||||||||||||||||||||||
|
Homburg Joint Venture:
|
||||||||||||||||||||||||
|
Aston Center
|
— | 4,319,000 | 17,070,000 | 21,389,000 | 1,303,000 | 12,802,000 | ||||||||||||||||||
|
Ayr Town Center
|
2,000 | 2,442,000 | 9,750,000 | 12,192,000 | 840,000 | 7,225,000 | ||||||||||||||||||
|
Fieldstone Marketplace
|
441,000 | 5,167,000 | 21,943,000 | 27,110,000 | 3,093,000 | 18,647,000 | ||||||||||||||||||
|
Meadows Marketplace
|
11,390,000 | 1,914,000 | 11,390,000 | 13,304,000 | 1,094,000 | 10,333,000 | ||||||||||||||||||
|
Parkway Plaza
|
15,000 | 4,647,000 | 19,435,000 | 24,082,000 | 1,800,000 | 14,300,000 | ||||||||||||||||||
|
Pennsboro Commons
|
43,000 | 3,608,000 | 14,297,000 | 17,905,000 | 2,147,000 | 10,949,000 | ||||||||||||||||||
|
Scott Town Center
|
1,000 | 2,959,000 | 11,801,000 | 14,760,000 | 1,073,000 | 8,669,000 | ||||||||||||||||||
|
Spring Meadow Shopping Center
|
20,000 | 4,112,000 | 16,429,000 | 20,541,000 | 1,318,000 | 12,698,000 | ||||||||||||||||||
|
Stonehedge Square
|
57,000 | 2,698,000 | 11,705,000 | 14,403,000 | 1,464,000 | 8,700,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
11,969,000 | 31,866,000 | 133,820,000 | 165,686,000 | 14,132,000 | 104,323,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
PCP Joint Venture:
|
||||||||||||||||||||||||
|
New London Mall
|
24,000 | 14,891,000 | 24,991,000 | 39,882,000 | 918,000 | 26,009,000 | ||||||||||||||||||
|
San Souci Plaza
|
25,000 | 14,849,000 | 18,470,000 | 33,319,000 | 918,000 | 27,200,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
49,000 | 29,740,000 | 43,461,000 | 73,201,000 | 1,836,000 | 53,209,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Joint Ventures (other):
|
||||||||||||||||||||||||
|
CVS at Naugatuck
|
2,825,000 | — | 2,825,000 | 2,825,000 | 82,000 | 2,450,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Consolidated Joint Ventures
|
14,843,000 | 61,606,000 | 180,106,000 | 241,712,000 | 16,050,000 | 159,982,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Stabilized Portfiolio
|
139,238,000 | 244,926,000 | 1,040,122,000 | 1,285,048,000 | 142,061,000 | 599,073,000 | ||||||||||||||||||
95
Table of Contents
Cedar Shopping Centers, Inc.
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
(continued)
| Year built/ | Gross | Initial cost to the Company | ||||||||||||||||||||||||||
| Year | Precent | Year last | leasable | Building and | ||||||||||||||||||||||||
| Property | State | acquired | owned | renovated | area | Land | Improvements | |||||||||||||||||||||
|
Redevelopment Properties: (1)
|
||||||||||||||||||||||||||||
|
Dunmore Shopping Center
|
PA | 2005 | 100 | % | 1962/1997 | 101,000 | 565,000 | 2,203,000 | ||||||||||||||||||||
|
Lake Raystown Plaza
|
PA | 2004 | 100 | % | 1995 | 145,727 | 2,231,000 | 6,735,000 | ||||||||||||||||||||
|
Shore Mall
|
NJ | 2006 | 100 | % | 1960/1980 | 459,098 | 7,179,000 | 37,868,000 | ||||||||||||||||||||
|
The Shops at Suffolk Downs
|
MA | 2005 | 100 | % | 2005 | 121,829 | 7,580,000 | 11,089,000 | ||||||||||||||||||||
|
Townfair Center
|
PA | 2004 | 100 | % | 2002 | 138,041 | 3,022,000 | 13,786,000 | ||||||||||||||||||||
|
Trexlertown Plaza
|
PA | 2006 | 100 | % | 1990/2005 | 241,381 | 5,262,000 | 23,867,000 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Redevelopment Properties
|
1,207,076 | 25,839,000 | 95,548,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Retenanting Properties: (1)
|
||||||||||||||||||||||||||||
|
Columbia Mall
|
PA | 2005 | 75 | % | 1988 | 348,574 | 2,855,000 | 15,600,000 | ||||||||||||||||||||
|
Centerville Discount Drug Mart Plaza
|
OH | 2005 | 100 | % | 2000 | 49,494 | 780,000 | 3,607,000 | ||||||||||||||||||||
|
Fairview Commons
|
PA | 2007 | 100 | % | 1976/2003 | 59,578 | 858,000 | 3,568,000 | ||||||||||||||||||||
|
Huntingdon Plaza
|
PA | 2004 | 100 | % | 1972 - 2003 | 147,355 | 933,000 | 4,129,000 | ||||||||||||||||||||
|
Oakhurst Plaza
|
VA | 2006 | 100 | % | 1980/2001 | 107,869 | 4,539,000 | 18,177,000 | ||||||||||||||||||||
|
Ontario Discount Drug Mart Plaza
|
OH | 2005 | 100 | % | 2002 | 38,623 | 809,000 | 3,643,000 | ||||||||||||||||||||
|
Shelby Discount Drug Mart Plaza
|
OH | 2005 | 100 | % | 2002 | 36,596 | 671,000 | 3,264,000 | ||||||||||||||||||||
|
Shoppes at Salem Run
|
VA | 2005 | 100 | % | 2005 | 15,100 | 1,076,000 | 4,253,000 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Retenanting Properties
|
803,189 | 12,521,000 | 56,241,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Non-Stabilized Properties
|
2,010,265 | 38,360,000 | 151,789,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Operating Portfolio
|
11,155,484 | 279,291,000 | 1,056,668,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Ground-Up Developments: (1)
|
||||||||||||||||||||||||||||
|
Crossroads II
|
PA | 2008 | 60 | % | 2009 | 133,618 | 15,383,000 | — | ||||||||||||||||||||
|
Heritage Crossing
|
PA | 2008 | 60 | % | 2009 | 59,396 | 5,080,000 | — | ||||||||||||||||||||
|
Northside Commons
|
PA | 2008 | 100 | % | 2009 | 85,300 | 3,332,000 | — | ||||||||||||||||||||
|
Upland Square
|
PA | 2007 | 60 | % | 2009 | 352,456 | 28,187,000 | — | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Ground-Up Developments
|
630,770 | 51,982,000 | — | |||||||||||||||||||||||||
|
Total Portfolio
|
11,786,254 | 331,273,000 | 1,056,668,000 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Projects Under Development and Land Held
|
||||||||||||||||||||||||||||
|
For Future Expansion and Development:
|
||||||||||||||||||||||||||||
|
Columbia Mall
|
PA | 75 | % | 46.21 | 1,466,000 | — | ||||||||||||||||||||||
|
Halifax Commons
|
PA | 100 | % | 4.37 | 858,000 | — | ||||||||||||||||||||||
|
Halifax Plaza
|
PA | 100 | % | 12.83 | 1,107,000 | — | ||||||||||||||||||||||
|
Liberty Marketplace
|
PA | 100 | % | 15.51 | 1,564,000 | — | ||||||||||||||||||||||
|
Oregon Pike
|
PA | 100 | % | 11.20 | 2,283,000 | — | ||||||||||||||||||||||
|
Pine Grove Plaza
|
NJ | 100 | % | 2.66 | 388,000 | — | ||||||||||||||||||||||
|
Shore Mall
|
NJ | 100 | % | 50.00 | 2,018,000 | — | ||||||||||||||||||||||
|
The Brickyard
|
CT | 100 | % | 1.95 | 1,167,000 | — | ||||||||||||||||||||||
|
Trexlertown Plaza
|
PA | 100 | % | 37.28 | 8,087,000 | — | ||||||||||||||||||||||
|
Trindle Spring
|
NY | 100 | % | 2.10 | 1,028,000 | — | ||||||||||||||||||||||
|
Wyoming
|
MI | 100 | % | 12.32 | 360,000 | — | ||||||||||||||||||||||
|
Various projects in progress
|
N/A | 100 | % | 0.00 | — | — | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Projects Under Development and Land
|
||||||||||||||||||||||||||||
|
Held For Future Expansion and Development:
|
196.41 | 20,326,000 | — | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Carrying Value
|
351,599,000 | 1,056,668,000 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
96
Table of Contents
Cedar Shopping Centers,
Inc.
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
(continued)
| Gross amount at which carried at | ||||||||||||||||||||||||
| Subsquent | December 31, 2009 | |||||||||||||||||||||||
| cost | Building and | Accumulated | Amount of | |||||||||||||||||||||
| Property | capitalized | Land | improvements | Total | depreciation (4) | Encumbrance | ||||||||||||||||||
|
Redevelopment Properties: (1)
|
||||||||||||||||||||||||
|
Dunmore Shopping Center
|
$ | 42,000 | $ | 565,000 | $ | 2,245,000 | $ | 2,810,000 | $ | 424,000 | (3) | |||||||||||||
|
Lake Raystown Plaza
|
6,115,000 | 2,231,000 | 12,850,000 | 15,081,000 | 2,016,000 | (3) | ||||||||||||||||||
|
Shore Mall
|
4,028,000 | 7,179,000 | 41,896,000 | 49,075,000 | 4,991,000 | 21,243,000 | ||||||||||||||||||
|
The Shops at Suffolk Downs
|
8,180,000 | 7,580,000 | 19,269,000 | 26,849,000 | 1,503,000 | (2)(3) | ||||||||||||||||||
|
Townfair Center
|
(1,574,000 | ) | 3,022,000 | 12,212,000 | 15,234,000 | 2,325,000 | (3) | |||||||||||||||||
|
Trexlertown Plaza
|
2,808,000 | 5,262,000 | 26,675,000 | 31,937,000 | 2,589,000 | (3) | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Redevelopment Properties
|
19,599,000 | 25,839,000 | 115,147,000 | 140,986,000 | 13,848,000 | 21,243,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Retenanting Properties: (1)
|
||||||||||||||||||||||||
|
Columbia Mall
|
1,346,000 | 2,855,000 | 16,946,000 | 19,801,000 | 2,335,000 | |||||||||||||||||||
|
Centerville Discount Drug Mart Plaza
|
2,277,000 | 1,219,000 | 5,445,000 | 6,664,000 | 825,000 | 2,795,000 | ||||||||||||||||||
|
Fairview Commons
|
5,000 | 858,000 | 3,573,000 | 4,431,000 | 490,000 | (2) | ||||||||||||||||||
|
Huntingdon Plaza
|
1,813,000 | 933,000 | 5,942,000 | 6,875,000 | 727,000 | (3) | ||||||||||||||||||
|
Oakhurst Plaza
|
12,000 | 4,539,000 | 18,189,000 | 22,728,000 | 2,095,000 | (2) | ||||||||||||||||||
|
Ontario Discount Drug Mart Plaza
|
27,000 | 809,000 | 3,670,000 | 4,479,000 | 588,000 | 2,181,000 | ||||||||||||||||||
|
Shelby Discount Drug Mart Plaza
|
12,000 | 671,000 | 3,276,000 | 3,947,000 | 611,000 | 2,181,000 | ||||||||||||||||||
|
Shoppes at Salem Run
|
12,000 | 1,076,000 | 4,265,000 | 5,341,000 | 498,000 | (2) | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Retenanting Properties
|
5,504,000 | 12,960,000 | 61,306,000 | 74,266,000 | 8,169,000 | 7,157,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Non-Stabilized Properties
|
25,103,000 | 38,799,000 | 176,453,000 | 215,252,000 | 22,017,000 | 28,400,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Operating Portfolio
|
(164,341,000 | ) | 283,725,000 | 1,216,575,000 | 1,500,300,000 | 164,078,000 | 627,473,000 | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Ground-Up Developments: (1)
|
||||||||||||||||||||||||
|
Crossroads II
|
25,123,000 | 17,671,000 | 22,835,000 | 40,506,000 | 118,000 | 1,325,000 | ||||||||||||||||||
|
Heritage Crossing
|
5,623,000 | 5,066,000 | 5,637,000 | 10,703,000 | 91,000 | (3) | ||||||||||||||||||
|
Northside Commons
|
10,009,000 | 3,379,000 | 9,962,000 | 13,341,000 | 43,000 | (3) | ||||||||||||||||||
|
Upland Square
|
55,956,000 | 27,454,000 | 56,689,000 | 84,143,000 | 285,000 | 61,181,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Ground-Up Developments
|
96,711,000 | 53,570,000 | 95,123,000 | 148,693,000 | 537,000 | 62,506,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Portfolio
|
261,052,000 | 337,295,000 | 1,311,698,000 | 1,648,993,000 | 164,615,000 | 689,979,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Projects Under Development and Land Held
|
||||||||||||||||||||||||
|
For Future Expansion and Development:
|
||||||||||||||||||||||||
|
Columbia Mall
|
402,000 | 1,465,000 | 403,000 | 1,868,000 | — | |||||||||||||||||||
|
Halifax Commons
|
303,000 | 872,000 | 289,000 | 1,161,000 | — | |||||||||||||||||||
|
Halifax Plaza
|
1,603,000 | 1,503,000 | 1,207,000 | 2,710,000 | — | |||||||||||||||||||
|
Liberty Marketplace
|
25,000 | 1,564,000 | 25,000 | 1,589,000 | — | 750,000 | ||||||||||||||||||
|
Oregon Pike
|
63,000 | 2,283,000 | 63,000 | 2,346,000 | — | 750,000 | ||||||||||||||||||
|
Pine Grove Plaza
|
71,000 | 388,000 | 71,000 | 459,000 | — | |||||||||||||||||||
|
Shore Mall
|
149,000 | 2,018,000 | 149,000 | 2,167,000 | — | (6) | ||||||||||||||||||
|
The Brickyard
|
178,000 | 1,183,000 | 162,000 | 1,345,000 | — | |||||||||||||||||||
|
Trexlertown Plaza
|
2,478,000 | 8,089,000 | 2,476,000 | 10,565,000 | — | (3) | ||||||||||||||||||
|
Trindle Spring
|
380,000 | 1,148,000 | 260,000 | 1,408,000 | — | 750,000 | ||||||||||||||||||
|
Wyoming
|
— | 360,000 | — | 360,000 | — | 750,000 | ||||||||||||||||||
|
Various projects in progress
|
351,000 | — | 351,000 | 351,000 | — | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Projects Under Development and Land
|
||||||||||||||||||||||||
|
Held For Future Expansion and Development
|
6,003,000 | 20,873,000 | 5,456,000 | 26,329,000 | — | 3,000,000 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Carrying Value
|
$ | 267,055,000 | $ | 358,168,000 | $ | 1,317,154,000 | $ | 1,675,322,000 | $ | 164,615,000 | 692,979,000 | |||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Real estate to be transferred to a joint venture (7)
|
$ | 139,743,000 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Real estate held for sale — discontinued operations (7)
|
$ | 11,599,000 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Unconsolidated joint venture (5)
|
$ | 14,113,000 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
97
Table of Contents
Cedar Shopping Centers,
Inc.
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
Schedule III
Real Estate and Accumulated Depreciation
Year ended December 31, 2009
(continued)
The changes in real estate and accumulated depreciation for the three years ended December
31, 2009 are as follows (7):
| Cost | 2009 | 2008 | 2007 | |||||||||
|
Balance, beginning of the year
|
$ | 1,539,213,000 | $ | 1,386,801,000 | $ | 1,036,154,000 | ||||||
|
Properties acquired
|
73,152,000 | 98,337,000 | 321,668,000 | |||||||||
|
Improvements and betterments
|
69,104,000 | 56,382,000 | 28,979,000 | |||||||||
|
Write-off fully-depreciated assets
|
(6,147,000 | ) | (2,307,000 | ) | — | |||||||
|
|
||||||||||||
|
Balance, end of the year
|
$ | 1,675,322,000 | $ | 1,539,213,000 | $ | 1,386,801,000 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Accumulated depreciation
|
||||||||||||
|
|
||||||||||||
|
Balance, beginning of the year
|
$ | 124,387,000 | $ | 86,695,000 | $ | 53,216,000 | ||||||
|
Depreciation
expense
|
46,375,000 | 39,999,000 | 33,479,000 | |||||||||
|
Write-off fully-depreciated assets
|
(6,147,000 | ) | (2,307,000 | ) | — | |||||||
|
|
||||||||||||
|
Balance, end of the year
|
$ | 164,615,000 | $ | 124,387,000 | $ | 86,695,000 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net book value
|
$ | 1,510,707,000 | $ | 1,414,826,000 | $ | 1,300,106,000 | ||||||
|
|
||||||||||||
| (1) | “Stabilized properties” are those properties which are at least 80% leased and not designated as “development/redevelopment” properties as of December 31, 2009. Eight of the Company’s properties are being re- tenanted, are not- stabilized, and are not designated as development/ redevelopment properties as of December 31, 2009. | |
| (2) | Properties pledged as collateral under the Company’s stabilized property credit facility. The total net book value of such properties was $323,285,000 at December 31, 2009; the total amount outstanding under the secured revolving credit facility at that date was $187,985,000. | |
| (3) | Properties pledged as collateral under the Company’s development property credit facility. The total net book value of all such properties was $142,567,000 at December 31, 2009; the total amount outstanding the secured development revolving credit facility at that date was $69,700,000. | |
| (4) | Depreciation is provided over the estimated useful lives of the buildings and improvements, which range from 3 to 40 years. | |
| (5) | The Company has a 76.3% interest in an unconsolidated joint venture, which owns a single- tenant office property located in Philadelphia, PA. and an 20% interest in an unconsolidated joint venture that owns two supermarket shopping center located in Dickson City and Harrisburg, Pa. | |
| (6) | The Shore Mall land parcel also collateralizes the mortgage loan payable relating to the Shore Mall shopping center. | |
| (7) | Restated to reflect the reclassification of properties to “real estate held for sale” and “real estate to be transferred to a joint venture” during 2009. |
98
Table of Contents
None
I
tem 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures and internal controls designed to
ensure that information required to be disclosed in its filings under the Securities Exchange Act
of 1934 is reported within the time periods specified in the rules and regulations of the
Securities and Exchange Commission (“SEC”). In this regard, the Company has formed a Disclosure
Committee currently comprised of several of the Company’s executive officers as well as certain
other employees with knowledge of information that may be considered in the SEC reporting process.
The Committee has responsibility for the development and assessment of the financial and
non-financial information to be included in the reports filed with the SEC, and assists the
Company’s Chief Executive Officer and Chief Financial Officer in connection with their
certifications contained in the Company’s SEC filings. The Committee meets regularly and reports to
the Audit Committee on a quarterly or more frequent basis. The Company’s principal executive and
financial officers have evaluated its disclosure controls and procedures as of December 31, 2009,
and have determined that such disclosure controls and procedures are effective.
There have been no changes in the internal controls over financial reporting or in other
factors that have materially affected, or are reasonably likely to materially affect, these
internal controls over financial reporting during the last quarter of 2009.
Management Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company’s internal control system was designed to provide
reasonable assurance to the Company’s management and Board of Directors regarding the preparation
and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
The Company’s management assessed the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2009. In making this assessment, it used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal
Control — Integrated Framework”. Based on such assessment, management believes that, as of
December 31, 2009, the Company’s internal control over financial reporting is effective based on
those criteria.
Ernst & Young LLP, the Company’s independent registered public accounting firm, has issued an
opinion on the Company’s internal control over financial reporting, which appears elsewhere in this
report.
99
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Cedar Shopping Centers, Inc.
The Board of Directors and Shareholders
Cedar Shopping Centers, Inc.
We have audited Cedar Shopping Centers, Inc.’s (the “Company”) internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Cedar Shopping Center, Inc.’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Item 9A. Controls and Procedures
—“Management Report on Internal Control Over Financial Reporting”. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Cedar Shopping Centers, Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the 2009 consolidated financial statements of Cedar Shopping Centers, Inc.
and our report dated March 15, 2010 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
New York, New York
March 15, 2010
March 15, 2010
100
Table of Contents
None.
This item is incorporated by reference to the definitive proxy statement for the 2010 Annual
Meeting of Shareholders, to be filed pursuant to Regulation 14A.
This item is incorporated by reference to the definitive proxy statement for the 2010 Annual
Meeting of Shareholders, to be filed pursuant to Regulation 14A.
This item is incorporated by reference to the definitive proxy statement for the 2010 Annual
Meeting of Shareholders, to be filed pursuant to Regulation 14A.
This item is incorporated by reference to the definitive proxy statement for the 2010 Annual
Meeting of Shareholders, to be filed pursuant to Regulation 14A.
This item is incorporated by reference to the definitive proxy statement for the 2010 Annual
Meeting of Shareholders, to be filed pursuant to Regulation 14A.
| (a) | 1. Financial Statements | ||
| The response to this portion of Item 15 is included in Item 8 of this report. |
| 2. Financial Statement Schedules | |||
| The response to this portion of Item 15 is included in Item 8 of this report. | |||
| 3. Exhibits |
101
Table of Contents
| Item | Title or Description | |
|
3.1
|
Articles of Incorporation of Cedar Shopping Centers, Inc., including all amendments and articles supplementary previously filed, incorporated by reference to Exhibits 3.1.a and 3.1.b of Form 10-Q for the quarterly period ended September 30, 2007. | |
|
|
||
|
3.2
|
By-laws of Cedar Shopping Centers, Inc., including all amendments previously filed, incorporated by reference to Exhibit 3.2 of Form 8-K filed on November 28, 2007. | |
|
|
||
|
3.3.a
|
Agreement of Limited Partnership of Cedar Shopping Centers Partnership, L.P., incorporated by reference to Exhibit 3.4 of the Registration Statement on Form S-11 filed on August 20, 2003, as amended. | |
|
|
||
|
3.3.b
|
Amendment No. 1 to Agreement of Limited Partnership of Cedar Shopping Centers Partnership, L.P., incorporated by reference to Exhibit 3.5 of the Registration Statement on Form S-11 filed on August 20, 2003, as amended. | |
|
|
||
|
3.3.c
|
Amendment No. 2 to Agreement of Limited Partnership of Cedar Shopping Centers Partnership, L.P., incorporated by reference to Exhibit 3.3.c of Form 10-K for the year ended December 31, 2004. | |
|
|
||
|
3.3.d
|
Amendment No. 3 to Agreement of Limited Partnership of Cedar Shopping Centers Partnership, L.P. , incorporated by reference to Exhibit 3.3.d of Form 10-K for the year ended December 31, 2006. | |
|
|
||
|
10.1.a*
|
Cedar Shopping Centers, Inc. Senior Executive Deferred Compensation Plan, effective as of October 29, 2003, incorporated by reference to Exhibit 10.6.a of Form 10-K for the year ended December 31, 2004. | |
|
|
||
|
10.1.b*
|
Amendment No. 1 to the Cedar Shopping Centers, Inc. Senior Executive Deferred Compensation Plan, effective as of October 29, 2003, incorporated by reference to Exhibit 10.6.b of Form 10-K for the year ended December 31, 2004. | |
|
|
||
|
10.1.c*
|
Amendment No. 2 to the Cedar Shopping Centers, Inc. Senior Executive Deferred Compensation Plan, effective as of August 9, 2004, incorporated by reference to Exhibit 10.6.c of Form 10-K for the year ended December 31, 2004. | |
|
|
||
|
10.1.d*
|
Amendment No. 3 to the Cedar Shopping Centers, Inc. Senior Executive Deferred Compensation Plan, effective as of December 19, 2005, incorporated by reference to Exhibit 10.2 of Form 8-K filed on December 22, 2005. | |
|
|
||
|
10.1.e*
|
Amendment No. 4 to the Cedar Shopping Centers, Inc. Senior Executive Deferred Compensation Plan, effective as of December 21, 2006, incorporated by reference to Exhibit 10.1.e of Form 10-K for the year ended December 31, 2006. | |
|
|
||
|
10.1.f*
|
Amendment No. 5 to the Cedar Shopping Centers, Inc. Senior Executive Deferred Compensation Plan, effective as of December 11, 2007, incorporated by reference to Exhibit 10.1.f of Form 10-K for the year ended December 31, 2007. | |
|
|
||
|
.10.2.a*
|
2005 Cedar Shopping Centers, Inc. Deferred Compensation Plan, incorporated by reference to Exhibit 10.1 of Form 8-K filed on December 22, 2005. | |
|
|
||
|
10.2.b*
|
Amendment No. 1 to the 2005 Cedar Shopping Centers, Inc. Deferred Compensation Plan, effective as of December 21, 2006, incorporated by reference to Exhibit 10.2.b of Form 10-K for the year ended December 31, 2006. |
102
Table of Contents
| Item | Title or Description | |
|
10.2.c*
|
Amendment No. 2 to the 2005 Cedar Shopping Centers, Inc. Deferred Compensation Plan, effective as of December 11, 2007, incorporated by reference to Exhibit 10.2.c of Form 10-K for the year ended December 31, 2007. | |
|
|
||
|
10.2.d*
|
Amendment No. 3 to the 2005 Cedar Shopping Centers, Inc. Deferred Compensation Plan, effective as of December 16, 2008, incorporated by reference to Exhibit 10.2.d of Form 10-K for the year ended December 31, 2008. | |
|
|
||
|
..10.3.a.i*
|
Employment Agreement between Cedar Shopping Centers, Inc. and Leo S. Ullman, dated as of November 1, 2003, incorporated by reference to Exhibit 10.39 of the Registration Statement on Form S-11 filed on August 20, 2003, as amended. | |
|
|
||
|
10.3.a.ii*
|
First Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Leo S. Ullman, dated as of March 23, 2004, incorporated by reference to Exhibit 10.5.a.ii of Form 10-K for the year ended December 31, 2004. | |
|
|
||
|
10.3.a.iii*
|
Second Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Leo S. Ullman, dated as of October 19, 2005, incorporated by reference to Exhibit 10.1 of Form 8-K filed on October 20, 2005. | |
|
|
||
|
10.3.a.iv*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Leo S. Ullman, dated as of May 1, 2007, incorporated by reference to Exhibit 10.1 of Form 8-K filed on May 3, 2007. | |
|
|
||
|
10.3.b.i*
|
Employment Agreement between Cedar Shopping Centers, Inc. and Brenda J. Walker, dated as of November 1, 2003, incorporated by reference to Exhibit 10.40 of the Registration Statement on Form S-11 filed on August 20, 2003, as amended. | |
|
|
||
|
10.3.b.ii*
|
First Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Brenda J. Walker, dated as of March 23, 2004, incorporated by reference to Exhibit 10.5.b.ii of Form 10-K for the year ended December 31, 2004. | |
|
|
||
|
10.3.b.iii*
|
Second Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Brenda J. Walker, dated as of October 19, 2005, incorporated by reference to Exhibit 10.2 of Form 8-K filed on October 20, 2005. | |
|
|
||
|
10.3.b.iv*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Brenda J. Walker, dated as of December 29, 2006, incorporated by reference to Exhibit 10.3.b.iv of Form 10-K for the year ended December 31, 2006. | |
|
|
||
|
10.3.b.v*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Brenda J. Walker, dated as of September 18, 2008, incorporated by reference to Exhibit 10.3.b.v of Form 10-K for the year ended December 31, 2008. | |
|
|
||
|
10.3.b.vi*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Brenda J. Walker, dated as of April, 17, 2009, incorporated by reference to Exhibit 10.2 of Form 10-Q for the quarterly period ended June 30, 2009. | |
|
|
||
|
10.3.c.i*
|
Employment Agreement between Cedar Shopping Centers, Inc. and Thomas B. Richey, dated as of November 1, 2003, incorporated by reference to Exhibit 10.42 of the Registration Statement on Form S-11 field on August 20, 2003, as amended. | |
|
|
||
|
10.3.c.ii*
|
First Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Thomas B. Richey, dated as of March 23, 2004, incorporated by reference to Exhibit 10.5.d.ii of Form 10-K for the year ended December 31, 2004. |
103
Table of Contents
| Item | Title or Description | |
|
10.3.c.iii*
|
Second Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Thomas B. Richey, dated as of October 19, 2005, incorporated by reference to Exhibit 10.4 of Form 8-K filed on October 20, 2005. | |
|
|
||
|
10.3.c.iv*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Thomas B. Richey, dated as of December 29, 2006, incorporated by reference to Exhibit 10.3.d.iv of Form 10-K for the year ended December 31, 2006. | |
|
|
||
|
10.3.c.v*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Thomas B. Richey, dated as of September 18, 2008, incorporated by reference to Exhibit 10.3.c.v of Form 10-K for the year ended December 31, 2008. | |
|
|
||
|
10.3.d.i*
|
Employment Agreement between Cedar Shopping Centers, Inc. and Nancy H. Mozzachio, dated as of August 1, 2003, incorporated by reference to Exhibit 10.3.e.i of Form 10-K for the year ended December 31, 2006. | |
|
|
||
|
10.3.d.ii*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Nancy H. Mozzachio, dated as of October 19, 2005, incorporated by reference to Exhibit 10.2 of Form 8-K filed on April 6, 2007. | |
|
|
||
|
10.3.d.iii*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Nancy H. Mozzachio, dated as of December 29, 2006, incorporated by reference to Exhibit 10.3.e.ii of Form 10-K for the year ended December 31, 2006. | |
|
|
||
|
10.3.d.iv*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Nancy H. Mozzachio, dated as of September 18, 2008, incorporated by reference to Exhibit 10.3.d.iv of Form 10-K for the year ended December 31, 2008. | |
|
|
||
|
10.3.d.v*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Nancy H. Mozzachio, dated as of April 17, 2009, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarterly period ended June 30, 2009. | |
|
|
||
|
10.3.e*
|
Employment Agreement between Cedar Shopping Centers, Inc. and Lawrence E. Kreider, Jr., dated as of June 20, 2007, incorporated by reference to Exhibit 10.1 of Form 8-K filed on June 20, 2007. | |
|
|
||
|
10.3.f.i*
|
Employment Agreement between Cedar Shopping Centers, Inc. and Frank C. Ullman, dated as of September 18, 2008, incorporated by reference to Exhibit 10.3.f of Form 10-K for the year ended December 31, 2008. | |
|
|
||
|
10.3.f.ii*
|
Amendment to Employment Agreement between Cedar Shopping Centers, Inc. and Frank C. Ullman, dated as of April; 17, 2009, incorporated by reference to Exhibit 10.3 of Form 10-Q for the quarterly period ended June 30, 2009. | |
|
|
||
|
10.3.g*
|
Employment Agreement between Cedar Shopping Centers, Inc. and Joel I. Yarmak, dated as of September 14, 2009, incorporated by reference to Exhibit 10.1 of Form 8-K filed on September 16, 2009. | |
|
|
||
|
10.3.h*
|
Consulting Agreement between Cedar Shopping Centers, Inc. and Thomas J. O’Keeffe, dated as of June 20, 2007, incorporated by reference to Exhibit 10.2 of Form 8-K filed on June 20, 2007. | |
|
|
||
|
10.4.a
|
Loan Agreement (the “Loan Agreement”) by and among Cedar Shopping Centers Partnership, L.P., Bank of America, N.A., KeyBank, National Association, Manufacturers and Traders Trust Company, Regions Bank, Citizens Bank of Pennsylvania, Raymond James Bank, FSB, Royal Bank of Canada, Bank of Montreal, and the other lending institutions which are or may become parties to the Loan Agreement (the “Lenders”) and Bank of America, N.A. (as Administrative Agent), dated as of November 10, 2009, incorporated by reference to Exhibit 10.1 of Form 8-K filed on November 16, 2009. |
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| Item | Title or Description | |
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10.5.a
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Loan Agreement between Cedar-Franklin Village LLC as Borrower and Eurohypo AG, New York Branch as Lender, dated as of November 1, 2004, incorporated by reference to Exhibit 10.13 of Form 8-K filed on November 5, 2004. | |
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10.5.b
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Promissory Note for Cedar-Franklin Village LLC to Eurohypo AG, New York Branch, dated November 1, 2004, incorporated by reference to Exhibit 10.14 of Form 8-K filed on November 5, 2004. | |
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10.5.c
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Mortgage and Security Agreement for Cedar-Franklin Village LLC as Borrower to Eurohypo AG, New York Branch as Lender, dated as of November 1, 2004, incorporated by reference to Exhibit 10.15 of Form 8-K filed on November 5, 2004. | |
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10.5.d
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Guaranty for Cedar Shopping Centers Partnership, L.P. as Guarantor for the benefit of Eurohypo AG, New York Branch as Lender, executed as of November 1, 2004, incorporated by reference to Exhibit 10.18 of Form 8-K filed on November 5, 2004. | |
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10.6
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Agreement Regarding Purchase of Partnership Interests By and Between Cedar Shopping Centers Partnership, L.P. and Homburg Holdings (U.S.) Inc. dated as of March 26, 2007, incorporated by reference to Exhibit 10.1 of Form 8-K filed on April 6, 2007. | |
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10.6.a
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First Amendment to Agreement Regarding Purchase of Partnership Interests dated as of June 29, 2007, incorporated by reference to Exhibit 10.1 of Form 8-K filed on December 12, 2007. | |
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10.6.b
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Second Amendment to Agreement Regarding Purchase of Partnership Interests dated as of October 31, 2007, incorporated by reference to Exhibit 10.2 of Form 8-K filed on December 12, 2007. | |
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10.7
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Voting Agreement dated February 13, 2008 among Cedar Shopping Centers, Inc., Inland American Real Estate Trust, Inc., Inland Investment Advisors, Inc. Inland Real Estate Investment Corporation and The Inland Group, Inc., incorporated by reference to Exhibit 10.11 of Form 10-K for the year ended December 31, 2007. | |
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10.8
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Amended and Restated Loan Agreement (the “Loan Agreement”) by and among Cedar Shopping Centers Partnership, L.P., KeyBank, National Association, Manufacturers and Traders Trust Company, Citizens Bank of Pennsylvania, Raymond James Bank, FSB, Regions Bank, TD Bank, N.A., TriState Capital Bank and the other lending institutions which are or may become parties to the Loan Agreement (the “Lenders”) and KeyBank, National Association (as Administrative Agent), dated as of October 17, 2008, incorporated by reference to Exhibit 10.8 of Form 10-K for the year ended December 31, 2008. | |
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10.9
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Standby Equity Purchase Agreement dated as of September 21, 2009 by and between YA Global Master SPV Ltd. and Cedar Shopping Centers, Inc., incorporated by reference to Exhibit 4.1 of Form 8-K filed on September 22, 2009. |
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| Item | Title or Description | |
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10.10.a
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Securities Purchase Agreement dated as of October 26, 2009, by and among Cedar Shopping Centers, Inc., Cedar Shopping Centers Partnership L.P., RioCan Holdings USA Inc. and RioCan Real Estate Investment Trust, incorporated by reference to Exhibit 10.1 of Form 8-K filed on October 30, 2009. | |
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10.10.b
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Agreement regarding purchase of Partnership Interests dated October 26, 2009 between Cedar Shopping Centers, Inc. and RioCan Holdings USA Inc., incorporated by reference to Exhibit 10.2 of Form 8-K filed on October 30, 2009. | |
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21.1
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List of Subsidiaries of the Registrant | |
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23.1
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Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm | |
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31.1
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Section 302 Chief Executive Officer Certification | |
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31.2
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Section 302 Chief Financial Officer Certification | |
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32.1
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Section 906 Chief Executive Officer Certification | |
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32.2
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Section 906 Chief Financial Officer Certification |
| * | Management contracts or compensatory plans required to be filed pursuant to Rule 601 of Regulation S-K. |
| (b) | Exhibits | |
| The response to this portion of Item 15 is included in Item 15(a) (3) above. | ||
| (c) | The following documents are filed as part of the report: |
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CEDAR SHOPPING CENTERS, INC. | ||||||
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||||||
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/s/ LEO S. ULLMAN
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/s/ LAWRENCE E. KREIDER, JR.
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President and Chairman
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Chief Financial Officer | |||||
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(principal executive officer)
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(principal financial officer) | |||||
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||||||
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/s/ GASPARE J. SAITTA, II
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||||||
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||||||
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Gaspare J. Saitta, II
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||||||
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Chief Accounting Officer
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||||||
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(principal accounting officer)
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||||||
March 15, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by
the following persons on behalf of the registrant and in the capacities and as of the date indicated.
|
/s/ JAMES J. BURNS
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/s/ RAGHUNATH DAVLOOR
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|||
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Director
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Director | |||
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/s/ RICHARD HOMBURG
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/s/ PAMELA N. HOOTKIN
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Director
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Director | |||
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||||
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/s/ EVERETT B. MILLER, III
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/s/ LEO S. ULLMAN
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Director
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Director | |||
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/s/ROGER M. WIDMANN
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Director
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March 15, 2010
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107
TABLE OF CONTENTS
Part IItem 1A. Risk FactorsItem 1B. Unresolved Staff Comments: NoneItem 1B. Unresolved Staff Comments:Item 3. Legal ProceedingsItem 4. [reserved]Part IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial Data (a)Item 6. Selected Financial Data (a) (continued)Item 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 1. Organization and Basis Of PreparationNote 2. Summary Of Significant Accounting PoliciesNote 3. Real EstateNote 4. Rentals Under Operating LeasesNote 5. Mortgage Loans Payable and Secured Revolving Credit FacilitiesNote 6. Preferred and Common StockNote 7. Commitments and ContingenciesNote 8. Selected Quarterly Financial Data (unaudited)Note 9. Subsequent EventsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement SchedulesItem Title Or Description