Cedar Realty Trust's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Start Time: 17:00

End Time: 17:28

Cedar Realty Trust (CDR)

Q2 2012 Earnings Call

August 9, 2012 05:00 p.m. ET


Brad Cohen – ICR

Bruce Schanzer – President & CEO

Phil Mays – CFO

Nancy Mozzachio – VP of Leasing


Nathan Isbee – Stifel Nicolaus

Todd Thomas – KeyBanc

Josh Patinkin – BMO



Greetings and welcome to the Cedar Realty Trust Second Quarter 2012 Earnings Conference Call. (Operator Instructions).

It is now my pleasure to introduce your host, Brad Cohen of ICR. Thank you. Mr. Cohen, you may begin.

Brad Cohen

Good afternoon. At this time management, would like me to inform you that certain statements made during the call which are not historical facts may be deemed forward-looking statements within the meaning of Section 27A of the Securities and Exchange Commission of 1933 and Section 21E of the Securities and 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 that actual results may or will differ. Many other factors and risks that could cause actual results to differ materially from expectations are detailed in the company’s press release, which was put out this afternoon, 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 any circumstances after the date of the company’s release.

It is now my pleasure to turn the call over to Mr. Bruce Schanzer, Chief Executive Officer and President. Bruce?

Bruce Schanzer

Thanks, Brad, and welcome to the second quarter 2012 earnings call of Cedar Realty Trust. On this call, we will review our second quarter 2012 results, provide an update on the strategic plan we first described last November, as well as some of the other measures we are taking to preserve and enhance shareholder value. Before beginning my remarks, I would like to acknowledge and thank all of my colleagues for their outstanding efforts on behalf of the company.

I am joined, as always, by our senior management team, specifically, Phillip Mays our CFO; Brenda Walker, our COO; Nancy Mozzachio, our Head of Leasing; Mike Winters, our Head of Acquisitions; Tom Richey, our Head of Development; and Stuart Widowski, our General Counsel. The balance of team Cedar is dialed into the call.

In a moment, Phil will discuss our financial results and update guidance in greater detail, however, I would just highlight the continued consistency of our portfolio, driven in part by strong leasing and property operations. One of the effects we expected when we undertook our strategic initiatives to streamline and focus the company is exactly what we are starting to see, as evidenced this past quarter, namely that our leasing and operating people are more effective because they are managing a portfolio of fewer assets that are more homogeneous by type and more geographically concentrated along the Washington, D.C. to Boston corridor.

I think the numbers are compelling and really convey much of this story. Our operating portfolio is now 91.9% leased, a healthy 170 basis points above our occupancy of 90.2% and a 10 basis points improvement over last quarter. In addition, we achieved the positive spread on our 31 lease renewals this quarter of 8.6% on a cash basis, which is our highest renewal rate spread in 12 quarters and continues our remarkable streak of positive renewals, at 26 quarters in a row.

Over the past six months, of the 77 comparable new and renewal leases, we achieved a positive spread of 5.9%, excluding the one dark anchor replacement deal we have discussed.

Two things I would highlight as we look a little deeper into these numbers relate to our small shop occupancy focus and our dark anchor replacement initiative. In terms of small shop, we are now 83.8% leased, a year-over-year improvement of 110 basis points, with a growing proportion of national retailers among our new small shop lease signings. We believe the steady progress we are making in small shop occupancy is a direct result of the intense focus we are placing on this component of our portfolio.

Similarly, we continue to make progress on our dark anchor replacement initiative, having executed our second lease termination agreement. We will provide further details on this once we finalize the replacement tenant lease, which is when the termination will become effective. Notably, and as we mentioned on our last call, this initiative negatively impacts some of our metrics as we go through the rotation from a dark anchor to a replacement tenant. We feel these are acceptable short-term costs for the long-term benefit of having an operating anchor with higher credit quality.

One last point. Of what were originally six dark anchors, five are SUPERVALU contents. We have already executed two lease termination agreements with SUPERVALU and are negotiating others, further reducing our risk profile. As we make progress in replacing our dark anchors with operating anchors that are of a higher credit quality, we are also reducing our exposure to the relatively riskier SUPERVALU credit. In terms of SUPERVALU, more generally, we are carefully monitoring the situation, though we are comfortable with our exposure considering the leases in question.

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