03/10/2014 | by
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Repositioned Portfolio Has Improved Cedar Realty Balance Sheet

Bruce Schanzer, president and CEO of Cedar Realty Trust, Inc. (NYSE: CDR),  joined REIT.com for a CEO Spotlight video interview at NAREIT’s Washington, D.C. headquarters, during NAREIT’s 2014 Washington Leadership Forum.

Schanzer discussed some of the biggest challenges that Cedar Realty has faced in repositioning its portfolio in the period since he joined the company in June 2011.

“Cedar was a company that had underperformed for many, many years, and it appeared to us that it was a company that was bloated, both in terms of having too much leverage and also having an indiscriminate portfolio,” Schanzer said.

Recognizing that its best assets were its grocery-anchored shopping centers that straddled the corridor from Washington, D.C. to Boston, Cedar Realty sold anything that didn’t fit into this category, Schanzer explained. As a result, Cedar Realty’s high leverage level dropped from more than nine times the company’s debt to earnings before interest, taxes, depreciation and amortization (EBITDA) to less than 7.3 times on a pro forma basis, he said.

Schanzer also commented on the impact of e-commerce on Cedar Realty’s operations.

“We have not seen as much of an incursion of the e-grocer concept… As a practical matter, grocery is a very thin-margin business, and inserting that incremental cost of delivery has so far not made it a viable strategy,” Schanzer said.

Taking a longer-term perspective, Schanzer highlighted other trends that will impact Cedar Realty in the future. Those trends include aging baby boomers, a shift among the younger population towards urban centers and even Google Inc.’s concept of driverless cars, Schanzer said.

Schanzer also elaborated on the company’s shift from playing a defensive to offensive role. Part of that shift will occur in the next three years as Cedar Realty re-leases a significant proportion of its portfolio. Schanzer said re-leasing activity will result in positive cash-flow trends of 8 percent or better.

Cedar Realty is also planning to invest back into its centers, according to Schanzer. This will generate double-digit rates of return, Schanzer said, which in turn will support a move to sell weaker assets and acquire higher-quality ones. Schanzer predicted that while this strategy will be dilutive to funds from operation (FFO), it will be “dramatically accretive” to net asset value (NAV) in the long term.