Author Topic: CDR - Cedar Realty Trust  (Read 3643 times)

thepupil

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CDR - Cedar Realty Trust
« on: September 27, 2019, 11:59:05 AM »
So here's a fun one, way too levered and retail-y for the likes of BG2008, we've got a strip center REIT that's been left for dead, with a CEO who bloviates about the massive disconnect between public and private markets, a few new board members, some scary re-developments and development plans, a salacious history of accusations of harassment and failed activist plan, retailpocalypse, all coming together to create this hodge podge at an apparent 9 cap but with a of S,G,&A.

Placeholder for more work, putting her out there for group contributions.

It's certainly no KIM at $14 and an 8 cap in terms of quality/diversity/etc. like we had in early 2018, but those guys are all through the roof this year (KIM, DDR, BRX all about 45% total return YTD) and this is down in no man's small cap REIT land and it's way too levered for the public market's liking. but that leverage at extremely low cost in conjunction with the stock at 1/2 NAV leads to a quite juicy 15% FFO yield, virtually all of which is being used to (according to the questionably credible management) upgrade the quality of the portfolio.

$1.5 billion of gross property (purchase price) spread across 58 buildings and 8.7mm sq feet, all yours for $1B ($277mm common, $163mm preferred, $623mm debt, all of which is swapped into fixed and termed out roughly evenly over the next 6-7 years). annualized NOI is about $90mm, less $20mm of G&A, $70mm to cover interest of $24mm, leaving about $45mm to de-lever, re-develop, maintain the buildings, and pay somewhat high cost preferred divvies ($10mm) etc. the appeal here is there seems to be a fair amount of cash flowing to the equity, such that one can make a good return as long as fundamentals don't drastically deteriorate.

They've been culling the portfolio for 8 years. the number of buiding hasn't declined drastically, but there are purchases mixed in there. $333mm in sales 2011-2018, $240mm of purchases. 
10-K 2011-2018
Number of buildings: 70,67, 65, 59, 60, 61, 58
Square feet: 9.8--->8.7

The question is, is it even possible to have "good" strip center real estate. My answer to that is yes, but I don't know if what CDR owns is at all good. I ahve a feeling it's significantly better than the 9 cap would suggest, but not sure of the degree.
Note that according to bloomberg, CDR's term loans all trade $98-$99.5 w/ a yield at about 4.05%, the preferred at $90/7.2%, then the equity at 15% (FFO). the term loans seem pretty confident this is not CBL, the pref's seem complacent (the easiest way to conserve cash would be to cut common/pref divvies, pref's have no upside). but the common is implying distress/absolute crap (-47% over the past 5 years).

Quote
During these same years we have refined our portfolio, repaired our balance sheet and strengthened our management
team such that we now have a pipeline of redevelopment projects being advanced similar to South Quarter Crossing in
their ambitions and scale. Over the same period we have also observed the secular dynamics we predicted back in 2012
starting to take root throughout much of the bricks and mortar retail universe. Despite these prescient strategic
decisions, today our shares trade for roughly 60% of the value they did back in 2012 when we were more highly
levered, had an inferior portfolio and had no meaningful plan for creating shareholder value.
Moreover, today we trade for approximately 50% of the consensus net asset value for our portfolio. As a management
team, we are pursuing these ambitious redevelopments and more generally are keenly focused on astute capital
allocation in order to grow the net asset value of Cedar and correspondingly its share price. In pursuing these
redevelopments, we have determined that we can achieve the best risk-adjusted returns over our weighted average cost
of capital versus other capital allocation alternatives. Accordingly, we continue forging ahead with these projects.
As I've noted on earlier earnings calls, over the last five years, we have issued equity only when trading at a premium
to our consensus net asset value and commenced a share repurchase program when trading at a significant net asset
value discount. This conduct is the foundation of our capital allocation scorecard and is what is expected of the best
REIT managers. Accordingly, we are puzzled at our trading level relative to our net asset value and our value creation
pipeline since our capital allocation decisions to this point should cause an investor to feel confident about owning our
shares. That said, we very much believe that in executing the capital migration plan, we have been pursuing for many
years now, we will meaningfully grow our net asset value and hope we will narrow the discount between our prevailing
share price and our net asset value.

Quote
s. Our leasing activity has been remarkably strong over
the last 12 months, with a very solid leasing pipeline, although we did not execute a number of them before the end of
the second quarter, the prospect of occupancy growth is visible and at hand.
This is true for both our core portfolio as well as our redevelopment assets. Furthermore, our value-add redevelopments
continue to be getting completed, generating attractive returns with a growing pipeline of value-add opportunities.
Robin will expand on this further. While I don't want to take too much time speculating as to why we are trading where
we are today, I would highlight a few ideas.
First, we own relatively small shopping centers, for which there is a highly liquid private sale market with readily
realizable liquidity. In our corporate presentation posted on our website, we share cap rate information on comparable
assets within our markets, as well as the building blocks of our NAV calculation. In addition, in our supplemental
financial filing, we share information on assets we have sold recently. All these transactions, whether in our portfolio or
in the market more generally, support the consensus NAV for Cedar.
Second, beyond our current NAV, our redevelopment pipeline is strong, and we anticipate it will grow our NAV over
time in a manner that far exceeds inflation. Thus, beyond our current NAV, we anticipate above inflation NAV growth.
We believe none of this is being reflected in our current share price. Third, we have a management team and Board that
is keenly focused on thoughtful capital allocation and strategic decision making.
We have a demonstrated track record of astute capital allocation decisions, some offensive and others defensive. What
they have in common is a nimble, analytical and flexible mindset. We sell stock at optimal moments, divest assets
when appropriate, acquire assets when they make strategic, as well as financial sense and repurchase shares in the same
manner. In that vein, I can assure you that the Board and management are keenly focused on addressing this disconnect
between the public and private valuation for Cedar.

Quote
On Monday, December 17, we came to terms with a buyer for one of our bottom half assets. It was an approximately
$10 million sale priced at a cap rate below 7%. Keep in mind the consensus net asset value or NAV for Cedar of
approximately $6.15 per share for our entire portfolio utilizes the 7% cap rate, which necessarily means that analysts in
arriving at a cap rate for our portfolio are using a cap rate above 7% for our bottom half assets.
On that day, December 17, after weeks of downward pressure on our share price, we fell over 12% in a single day;
drifting down to a low of $2.73 per share in the days that followed. This share price level implied a cap rate for our
entire portfolio of well over 9%. We were literally selling for more than a 50% discount to our consensus NAV.
Equipped with the real-time market color from that day's asset sale, we confidently announced a share repurchase plan
the following day at an initial $30 million.
Since announcing our share repurchase plan, we have been active purchasers of our stock and have bought in
approximately 2.8 million shares or 3% of our outstanding shares at a weighted average price of $3.25 per share or an
approximate 9% cap rate for a total of approximately $9 million. Essentially, we sold one of our lower rated assets at a
sub 7% cap rate and used the proceeds to purchase a pool of our better assets at a 9% cap rate. Notably, just last week,
we came to terms for another roughly $10 million sale of another bottom half asset, this time at a 7.25% cap rate.
As all will agree, selling our lower half assets at roughly 7% cap rates to purchase our better assets at an approximate
9% cap rate is compelling. Essentially, this is the investment equivalent of shooting fish in a barrel and it is irrational.
Today, you will hear from Robin and Phil about both our results and forecast. You will hear from them that there is no
financial or operating distress at Cedar. In fact, as Robin will discuss in greater detail, we have a strategy being actively
executed that we believe will meaningfully grow our NAV in the years to come. We own retail real estate, which
admittedly is a challenging arena in which to operate. However, even with a recent spate of anchor bankruptcies that
has hurt our occupancy, we are still 91% occupied.
I imagine one of my children coming home and telling me he or she got a 91 on a test, and my seeing this is a sign that
things aren't going well. And keep in mind, students generally get scored out of 100, while our effective full occupancy
is well below that figure. So our occupancy is solid, with a little room for improvement and a leasing pipeline that
causes me to be optimistic.
Nonetheless, it is still not possible to reconcile observable and realizable private value for our real estate, which
supports our consensus NAV at a minimum, with the trading level for our shares. In my opinion, the explanation for
this irrational public-private disconnect is much simpler and it presents a compelling and sustained investment
opportunity.
Over the last few years, we have seen slightly less than half of Cedar's ownership drift into the hands of ETFs and
index funds. This is a little greater than for REITs in general, though it is consistent with the overall trend. In
December, it appears that the downward drift in our stock was largely attributable to selling by these fund vehicles.
This selling appears to be a function of fund flows and not fundamentals. Accordingly, it was truly an example of
sellers who are so insistent on selling they were selling without regard to publicly available information and intrinsic
value.
For Cedar, on the other hand, we have precise information regarding our portfolio. We know what our assets are worth
and our underlying net asset value. Accordingly, we were presented with a unique opportunity, which we have and will
continue to exploit on behalf of our shareholders. However, as the John Maynard Keynes saying highlights, we are
constrained in fully exploiting this irrational buying opportunity by our responsibility to our shareholders to be
conservative in our use of their capital.

Snow Park Drama (Activist Fund Pointed out bad track record and sexual harassment suit). Then manager at activist fund accused of sexual harassment, then said activist accused accuser of embezzlement.
https://www.bisnow.com/national/news/capital-markets/activist-investor-flawed-structure-from-unproven-executives-is-failing-cedar-realty-trust-80835
https://www.scmp.com/property/international/article/2113715/activist-hedge-fund-snow-park-builds-stake-cedar-realty-trust
https://www.globest.com/2018/02/22/cedar-realty-reaches-agreement-with-activist-shareholder-snow-park/?slreturn=20190827145346
https://www.wsj.com/articles/cedar-realty-trust-chief-faces-sexual-harassment-allegations-1523962800
https://dealbreaker.com/2018/06/accused-hedge-fund-cfo-tackler-claims-files-countersuit-claiming-hedge-fund-cfo-embezzlement
https://dealbreaker.com/2018/05/after-being-recorded-getting-all-handsy-with-his-cfo-hedge-fund-manager-allegedly-got-all-tackley-with-her


« Last Edit: September 27, 2019, 01:29:34 PM by thepupil »


thepupil

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Re: CDR - Cedar Realty Trust
« Reply #1 on: March 24, 2020, 03:21:37 AM »
Thankfully; i never bought this.

With the pref’s and common collapsing it’s an interesting “option-like” equity.

Surely KIM at $9/10 is a better risk/reward, but if you want to get long $1.5 billion of property with a $70mm equity sliver with maybe more than a snowballs chance in hell of making a multi bagger, this is an option.

An immediate opportunity would be to turn off the pref/common and buy back the pref’s at low prices. REIT prefs exist to be screwed in a distressed scenario (or even in a not distressed one, looking at you Brookfield DTLA!)

The term loans create the company at a pre-corona 14 cap, so I think there’s equity value.
« Last Edit: March 24, 2020, 03:29:02 AM by thepupil »

thepupil

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Re: CDR - Cedar Realty Trust
« Reply #2 on: June 03, 2020, 12:10:47 PM »
Lol, I bought <100 bps of this yesterday as an option. You get long $1.5B of crappy but mostly grocery/essential strip centers with a $70mm (now $100mm) equity sliver.

I bought when they reported they collected 73% of rents, seemed like enough to keep the term loans/banks happy.

 Today it decided to go up 45%..I guess the enterprise value moved a couple percent.

Will probably drop 50% tomorrow.

Big and weird moves in real estate land today.
« Last Edit: June 03, 2020, 12:21:01 PM by thepupil »

BG2008

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Re: CDR - Cedar Realty Trust
« Reply #3 on: June 03, 2020, 01:43:49 PM »
Lol, I bought <100 bps of this yesterday as an option. You get long $1.5B of crappy but mostly grocery/essential strip centers with a $70mm (now $100mm) equity sliver.

I bought when they reported they collected 73% of rents, seemed like enough to keep the term loans/banks happy.

 Today it decided to go up 45%..I guess the enterprise value moved a couple percent.

Will probably drop 50% tomorrow.

Big and weird moves in real estate land today.

Today is a very weird day for real estate, it's weird seeing so many of these RE names work simultaneously

BG2008

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Re: CDR - Cedar Realty Trust
« Reply #4 on: June 03, 2020, 01:44:09 PM »
FOMO taking over?

thepupil

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Re: CDR - Cedar Realty Trust
« Reply #5 on: June 03, 2020, 02:13:11 PM »
Also a “Namco Realty LLC” run by an Igal Namdar just purchased 8.8% of Cedar and filed a 13G. Mr Namdar seems to be a buyer of malls/strip centers that no one wants, so Cedar is a good fit in their portfolio.

Private market crap real estate investor, I’d like to introduce you to my fickle friend, Mr. Market. He offers you levered strips at a 10 cap / 2x FFO, with some preferred stocks ripe to be taken advantage of and the loans trade at par. I think you’ll like him

https://namdarrealtygroup.com/
« Last Edit: June 03, 2020, 02:16:01 PM by thepupil »

BG2008

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Re: CDR - Cedar Realty Trust
« Reply #6 on: June 03, 2020, 02:33:39 PM »
Lol, I bought <100 bps of this yesterday as an option. You get long $1.5B of crappy but mostly grocery/essential strip centers with a $70mm (now $100mm) equity sliver.

I bought when they reported they collected 73% of rents, seemed like enough to keep the term loans/banks happy.

 Today it decided to go up 45%..I guess the enterprise value moved a couple percent.

Will probably drop 50% tomorrow.

Big and weird moves in real estate land today.

Today is a very weird day for real estate, it's weird seeing so many of these RE names work simultaneously

It's weird having a day where my dodgy RE names are beating the tech names.  Small victories, small victories

thepupil

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Re: CDR - Cedar Realty Trust
« Reply #7 on: June 04, 2020, 07:45:01 AM »
Anyone else looked at this company?

It is up 100% in 2 days and all I can find is a private market operator bought 9% of the company. Given that a T Rowe Value fund owns a large (18%) at much higher cost, the high g&A, the decreased likelihood they proceed with aggressive redevelopments, I think this is ripe to be taken over, but I also see no news for the 2x move on 2 days and 3x from the lows.

When buying highly levered property for a 10 cap, I expect big upside commensurate with the jnpairment risk, but also would expect news to accompany that.

EDIT: I just sold half to size back down to ~80 bps. Please read up on all the fun behavioral finance errors committed. It is probably rational to buy more given that we know someone's aggressively accumulating shares, but who knows?

it's still a super risky pile of dogshit.


« Last Edit: June 04, 2020, 08:12:45 AM by thepupil »

thepupil

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Re: CDR - Cedar Realty Trust
« Reply #8 on: July 28, 2020, 03:55:08 AM »
It's odd when  your overlevered retail strip mall company that you view as an option is successfully inking government backed built to suit office development deals.

actually somewhat validating to their strategy which is "buy strips where there are a lot of people, regardless of income/demographics".

in some ways, this could be a negative, because it could encourage the existing management team to plow ahead with their strategy rather than sell the company....some sort of transformation needs to happen. Management teams with -74% 10 year and -80% 5 year total returns shouldn't last forever

the term loans are low 90's / 370-400DM so showing some signs of worry but not distress


https://www.bizjournals.com/washington/news/2020/05/28/dc-dgs-moving-east-of-anacostia-river.html
Quote
D.C.’s Department of General Services will move its headquarters to a development along Minnesota Ave. NE, making it the first agency to commit to Mayor Muriel Bowser’s pledge to push more of the District government east of the Anacostia River.

Bowser announced Thursday that DGS has signed a letter of intent to build a new headquarters at Senator Square, a shopping center owned by the New York-based Cedar Realty Trust. The agency is currently located in the Reeves Center on the U Street corridor, but will someday build new space at 3924 Minnesota Ave. NE, near the Benning Road intersection and about a mile from the Benning Road Metro station on the Blue and Silver lines.

“My charge was to use our resources and leasing power to attract much-needed retail, amenities and jobs, and that is what we will do for the residents of Ward 7,” Bowser said in a statement.

Bowser’s office did not disclose the terms of the deal, or the size of what DGS will look to build. The agency’s request for space said it was seeking between 175,000 and 200,000 square feet.

The mayor announced a directive last fall that any District agency looking for office space should start their searches east of the river in wards 7 and 8, reasoning that city workers can provide an influx of daytime foot traffic for retailers. That could prop up existing businesses and lure new ones, a key focus for District officials, who are eager to see new grocers and other amenities flow to the city’s historically underserved neighborhoods.

She followed up by directing DGS to launch its search for new space as the first test of this initiative, kicking off the process last September. The agency said at the time that it hoped to see the new office deliver within two to three years, as the city simultaneously weighs the redevelopment potential of the Reeves Center. DGS also recently re-upped a lease for supplemental space elsewhere on the U Street corridor.


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Someday, DGS’ roughly 700 employees will be located alongside a handful of small retailers at Senator Square, including Subway, Cricket Wireless and Dollar Tree locations.

Cedar bought the property back in 2018, outlining plans to someday redevelop it in conjunction with the East River Park office and retail campus across the street. That property is anchored by a Safeway, and the District’s Department of Employment Services.

With an anchor tenant in tow, Cedar hopes Senator Square can become “the signature redevelopment of Northeast D.C.,” Cedar COO Robin Zeigler said in a statement.

“This transaction will be one of the most significant office leases in the area, and it reflects our success at creating a working relationship with the District for the betterment of the entire community,” Ziegler said.



Quote
Items 1.01 Entry into a Material Definitive Agreement

On July 23, 2020, Cedar-Senator Square, LLC, a Delaware limited liability company and wholly-owned subsidiary of Cedar Realty Trust Partnership, L.P., the operating partnership of Cedar Realty Trust, Inc. (the “Company”), entered into a commercial lease agreement (the “Lease”) with the Government of the District of Columbia (“District”), for the lease by the District of approximately 240,000 square feet of office space in a new 6-story building to be constructed by the Company at 3924 Minnesota Avenue NE, Washington, DC (the “Premises”). The building is planned to house the new office headquarters for the District of Columbia’s Department of General Services’ (“DGS”) 700-member workforce. The term of the Lease is 20 years and 10 months, to commence upon substantial completion and delivery to DGS of the Premises along with related parking, including all permits and approvals required from governmental authorities for occupancy and use, as detailed more fully in the Lease (the “Term”). The Company anticipates commencement of construction to occur in the first quarter of 2021 and currently estimates that the Premises will be delivered during the end of the fourth quarter 2022.

Upon completion of the building, the District will be obligated to pay initial annual net rent of approximately $5.4 million per year, subject to a 2.5% annual escalator on each anniversary of rent commencement, plus certain operating costs, property taxes and amortization of tenant improvements together totaling approximately an additional $8.1 million per year, for an aggregate total annual rent of approximately $13.5 million. The Lease provides for a free rent period of 10 months immediately following rent commencement. The Lease also provides the District with a tenant credit of approximately $6.8 million to be applied, at the District’s election, against either annual rent or any other tenant payment obligations including tenant improvement costs, in excess of the tenant improvement allowance. Pursuant to the Lease, the Landlord will contribute up to $155 per rentable square foot of the Premises toward the cost of tenant improvements for the Premises, to be amortized over 240 months. In addition, the Lease provides that the Company will contribute $9.38 per rentable square foot in additional tenant improvement allowance between the 10th and 12th Lease years to refresh the Premises, upon the District’s timely election. The obligations of the District under the Lease are subject to annual budget appropriation.

The foregoing description of the Lease does not purport to be complete and is qualified in its entirety by reference to the actual Lease, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information included above under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

« Last Edit: July 28, 2020, 04:16:47 AM by thepupil »

lnofeisone

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Re: CDR - Cedar Realty Trust
« Reply #9 on: July 28, 2020, 08:54:51 AM »
Pupil - this is a fun one. I bought 50 shares just for fun.

On the unrelated note, the area where DC gov't office is planning to move got redeveloped a lot in the past 2 years. I drove there just last week (mostly by accident). Lots of new developments. I took a look at one - https://www.facebook.com/ParkSevenDC/. Studio for $700/mo. Basically 1/2 the price of what one would pay across the river. DC gov't is not really getting a great deal here. Looks like about $56/sq. ft, I'd say it's about average for downtown. This can be had A LOT cheaper where they are moving to so, as a taxpayer, I'm not thrilled.