Cedar Shopping Centers CEO Discusses Q3 2010 Results - Earnings Call Transcript

Cedar Shopping Centers CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Cedar Shopping Centers, Inc. (

CDR

)

Q3 2010 Earnings Call

October 28, 2010 11:00 a.m. ET

Executives

Brad Cohen – IR, ICR

Leo Ullman – Chairman, CEO & President

Larry Kreider – CFO

Nancy Mozzachio – VP, Leasing

Analysts

RJ Milligan – Raymond James

Paul Adornato – BMO Capital Markets

Todd Thomas – KeyBanc Capital Markets

Craig Schmidt – Banc of America/Merrill Lynch

Nathan Isbee – Stifel Nicolaus

Arthur Friedman – Friedman Asset Management

Jordan Sadler – KeyBanc Capital Markets

Stephen Swett – Morgan Keegan

Mark Lutenski – BMO Capital Markets

Lindsey Scroll (ph) – Bank of America Merrill Lynch

Presentation

Operator

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Previous Statements by CDR
» Cedar Shopping Centers, Inc. Q2 2010 Earnings Call Transcript
» Cedar Shopping Centers Inc. Q1 2010 Earnings Call Transcript
» Cedar Shopping Centers, Inc. Q4 2009 Earnings Call Transcript
» Cedar Shopping Centers Inc. Q3 2009 Earnings Call Transcript

Good morning and welcome to the Cedar Shopping Centers Incorporated third quarter 2010 earnings conference call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation.

It is now my pleasure to turn the floor over to your host, Brad Cohen with ICR.

Brad Cohen

Thank you very much, operator. Good morning. At this time, management would like me to inform you that certain statements made during this call, which are not historical facts may be deemed forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995.

Although the company believes that expectations reflecting any forward-looking statements are based upon reasonable assumptions, they are subject to various risks and uncertainties. The company can provide no assurance that expectations will be achieved and actual results may differ.

Many of the factors and risks that could cause actual results to differ materially from expectations are detailed in the company’s press release and that release was put out yesterday and from time-to-time in the company’s filings with the Securities and Exchange Commission.

In the end, the company undertakes no obligation to revise or update any forward-looking statements reflected in our circumstances after the date of the company’s release.

It is now my pleasure to turn the call over to Mr. Leo Ullman, Chairman, Chief Executive Officer and President. Leo?

Leo Ullman

Thank you very much Brad. Good morning, everyone. Thank you very much for joining us today on the Cedar Shopping Center’s earnings conference call for the third quarter 2010 results.

With me on the call today is Larry Kreider, our Chief Financial Officer. Other members of our team, including Tom Richey, President of our Development and Construction Division; Brenda Walker, our Chief Operating Officer; and Nancy Mozzachio, our Vice President of Leasing are also on the call and available to you.

We had a strong quarter reflecting our continued efforts to enhance our balance sheet while positioning ourselves to achieve growth in net income, assets, and stockholder value for a long time to come.

Our results in the third quarter and throughout the past year reflect the fact that we have carefully and thoughtfully enhanced our balance sheet flexibility by driving down our total borrowings to the point where our debt represents approximately 55% of our total enterprise value depending of course on our stock price.

Having regard to the nature of our properties and the solidity of our primarily gross re-anchored tendencies, our cash flow is predictable, and accordingly, our current level of debt is certainly at a comfortable level, although we will nevertheless, continue to look for effective means of further reducing our overall debt, when and where appropriate.

We have sourced equity funding from capital markets during the year including this quarter with aggregate proceeds this year of more than $130 million, and with a clear expectation that we will be able to put that money to work effectively and accretively.

The primarily focus of the company going forward, remains investments that leverage our returns, and generated attractive fees from our joint venture acquisitions with RioCan. I’ll revert to the nature effect and purpose of those joint venture acquisitions shortly.

Also, having regard to the extremely attractive current levels of financing available to us and to our strongly anchored properties, we have been able to obtain favorable long-term fixed rate financing to replace much of our floating rate debt, including of course, a number of properties in the collateral pools securing our floating rate credit facilities; such as, the recently announced Suite Square Financing.

We have been able to reduce the overall commitments on our principal credit facility, while in fact, greatly expanding the availability under our credit facilities through joint venture arrangements and our capital market activities.

We are also continuing our program of selling off certain properties, which no longer fit our core of primarily grocery-anchored properties in an effort to effectively recycle capital. In this connection, we expect to complete additional dispositions consisting of, among other things, a few of the remaining small drug store anchored properties in Ohio, and a few smaller properties in Connecticut, Maryland, and Pennsylvania.

While we expect to report some impairment with respect to certain of those capital recycling transactions, they will better position our company for future growth. In terms of growing income during coming years, we have had solid results in acquiring excellent properties through the joint venture with RioCan. The attraction of those arrangements with respect to the 20% Cedar interest in the joint venture properties is that we have been acquiring properties in the 7.6 to 8.3% cap rate range while being able to finance them in the 5% range.

Further, the fee structure for these arrangements, in addition to the leverage, permits us to generate attractive returns on an ongoing basis. We also benefit from initial acquisition fees and placement fees for arranging debt on the properties. The properties we have acquired, most of which are quite new, also feature long leases with strong anchored tenants, little vacancy, and solid demographics.

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