Cedar Shopping Centers Inc. Reports Operating Results (10-Q)

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May 10, 2010
Cedar Shopping Centers Inc. (CDR, Financial) filed Quarterly Report for the period ended 2010-03-31.

Cedar Shopping Centers Inc. has a market cap of $418.55 million; its shares were traded at around $6.75 with and P/S ratio of 2.3. The dividend yield of Cedar Shopping Centers Inc. stocks is 5.33%.CDR is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC.

Highlight of Business Operations:

Differences in results of operations between 2010 and 2009 were primarily the result of the Companys property acquisition/disposition program and continuing development/redevelopment activities. During the period January 1, 2009 through March 31, 2010, the Company acquired two shopping centers aggregating approximately 522,000 square feet of GLA for a total cost of approximately $72.5 million. In addition, the Company placed into service four ground-up developments having an aggregate cost of approximately $149.8 million. The Company sold ten drug store/convenience centers aggregating approximately 311,000 square feet of GLA for an aggregate sales price of approximately $27.7 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 net proceeds. Net (loss) income was ($1.2) million and $5.7 million for three months ended March 31, 2010 and 2009, respectively.

Total revenues decreased primarily as a result of (i) 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), (ii) a decrease in base rents ($0.5 million), (iii) a decrease in other income predominately related to insurance proceeds received during the first quarter of 2009 ($0.4 million), (iv) a decrease in tenant recovery income ($0.3 million), (v) a decrease in non-cash straight-line rents primarily as a result of early lease terminations ($0.2 million) and (vi) a decrease in percentage rent ($22,000). 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. However, there can be no assurance that the amount of such relief will not become more significant in future periods.

Non-operating income and expense, net, increased primarily a result of (i) higher amortization of deferred financing costs ($0.6 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 interest expense principally related to an increase in the interest rate for the stabilized property line of credit, an increase in the outstanding balance of the development property line of credit, which is partially off-set by a reduction in the outstanding balance of the stabilized property line of credit ($1.1 million), (iii) a decrease in the development activity reducing the amount of interest expense capitalized to the development projects ($0.5 million), (iv) a decrease in the gain on sale of land parcel ($0.2 million) partially off-set by (v) an increase in equity in income of unconsolidated joint venture ($0.1 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 was expanded 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 Companys common stock had been sold pursuant to the SEPA Agreement at an average selling price of $6.97 per share, and the Company realized net proceeds of approximately $5.0 million.

Net cash flows provided by investing activities were $2.1 million for the three months ended March 31, 2010; net cash flows used in investing activities were $36.4 million for the three months ended March 31, 2009, and were primarily the result of the Companys acquisition/disposition activities. During the three months ended March 31, 2010, the Company realized proceeds from (i) the transfers of two properties to the RioCan joint venture ($11.4 million net of a settlement receivable of $1.3 million) and (ii) the sales of properties treated as discontinued operations ($2.0 million), offset by (iii) investments in the unconsolidated joint venture ($4.3 million), and (iv) expenditures for property improvements ($8.0 million). During the three months ended March 31, 2009, the Company acquired two shopping centers and incurred expenditures for property improvements, an aggregate of $36.0 million.

Net cash flows used in financing activities were $7.2 million for the three months ended March 31, 2010; net cash flows provided by financing activities were $33.4 million for the three months ended March 31, 2009. During 2010, the Company had net repayments to its revolving credit facilities of $50.6 million, repayment of mortgage obligations of $10.9 million (including $7.8 million of mortgage balloon payments), preferred and common stock distributions of $6.7 million, termination payments relating to interest rate swaps of $5.5 million, the payment of debt financing costs of $0.2 million, and distributions paid to noncontrolling interests (limited partners) of $0.2 million, offset by the proceeds from sales of common stock of $60.2 million and the proceeds of mortgage financings of $6.7 million. During the three months ended March 31, 2009, the Company received net advance proceeds of $32.4 million from its revolving credit facilities, $11.9 million in contributions from noncontrolling interests (minority interest partners), and $8.0 million in proceeds from its property-specific construction facility, offset by repayment of mortgage obligations of $11.5 million, preferred and common stock dividend distributions of $7.0 million, distributions to noncontrolling interests (limited partners) of $0.2 million, and the payment of financing costs of $0.1 million.

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