Q3 2019 Earnings Call
Greetings and welcome to Cedar Realty Trust third quarter 2019 earnings Conference call.
Time, all participants Arnie listen only mode. A question answer session will follow the formal presentation. If anyone should require operator systems. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Nicholas Partenza director of financial reporting Mr. Pretend that you may begin.
Good evening. Thank you for joining us for third quarter 2019, Cedar Realty Trust earnings Conference call.
Heading in today's call, we Bruce Schanzer, Chief Executive Officer, Robbins, either Chief operating Officer, and Philip Mays, Chief Financial Officer.
Before we begin please be aware that statements made during the call that are not historical maybe deemed forward looking statements and actual results may differ materially from those indicated by such forward looking statements.
These statements are subject to numerous risks and uncertainties, including those disclosing the company's most recent Form 10-K , but a yearend 2018.
Updated by our subsequently filed quarterly reports on Form 10-Q , and other periodic filings with the FCC.
As a reminder of the forward looking statements speak only as of the date of this call October Thirtyth 2019, and the company undertakes no duty to update.
Many funds from operations and net operating income.
Please see <unk> earnings press release, and supplemental financial information posted on its website for reconciliations of these non-GAAP financial measures what the most directly comparable GAAP financial measures with that I'll now turn the colder Bruce Schanzer.
Thanks, Nick.
Good evening and welcome to the third quarter 2019 earnings call for Cedar Realty Trust with me as always our my senior management colleagues and dialed in our many of the members of team theater.
I want to sincerely thank them for their commitment to our core values of Queen reality collaboration and everyday excellence.
I will keep my comments for the quarter brief.
We continue advancing our redevelopment and have made terrific strides on the leasing front.
I will let robin spend more time on the redevelopment in her prepared remarks, though it is worth highlighting that we broke ground on our value add redevelopment project at this time crossing.
Can you make a good progress executing that project as well as our larger mixed use projects.
I would note on the leasing front. The this is Dan what are the better quarters in recent memory in terms of leasing volume and spreads.
Leased occupancy in our core portfolio continues to grow and ignoring redevelopment, which might be choppy as we incur additional that intentional vacancy. We anticipate continued positive momentum in our core portfolio in the quarters the comp.
There were a few large deals that were side. That's certainly contributed to our results most notably the urban air lease I Trexler mall that back filled a vacant boxes previously occupied by the now bankrupt Bob <unk>.
My compliments to Tim Haven, <unk> and is leasing team for their efforts this quarter.
Of course.
The elephant in the room is our low share price. We continue to believe that there is a meaningful disconnect between our share price and our intrinsic value.
We have observed softness in the investment sales market for shopping centers and a slight reduction in volume or were there still does appear to be liquidity for our asset type and reasonable visibility as to their private market values.
We hope that as we continue to successfully execute on our business plan that our stock price will likely appreciate and better reflect what we believed to be are warranted value.
With that I will give you Rob.
Thanks, Bruce good evening.
Our leasing team has had one of the strongest quarters in the past 18 month.
<unk> third quarter 2019.
Total of 576200 comparable square feet wasn't leased at a cash spread up 8.5%. This represents 14, new leases well, they spread up 28.4% and 26 renewal well they spread of 0.9% there.
No spread increases to 2.3% with exception of an acre deal executed with sacrifice some spread to solidify occupancy at one of our centers and also cure the co tenancy provision.
Two non comparable leases were completed this quarter, including a space that has not been leased since acquisition at an average rental rate of $18, a 65 cents per square foot.
While our total new lease Hbr is at $10, a 98 cents per square foot, that's rental rate increases the $13, an 11 cents per square foot. When you when you exclude two anchor deals executed at a friend's below $10.
The execution this quarter of the backfill the approximate 60000 square foot Bon ton box that trucks are more with urban air and the backfill of a portion of the tops friendly market box slipped tractor supply were completed at spreads of 95%.
Hundreds of 58% respectively.
Occupancy continues to be a keen focus for team theater as of September Thirtyth 2019, same center leased occupancy increased 80 basis points to 92.2% over prior quarter.
We have spoken in prior quarters about our strong leasing pipeline. Those fundamentals continue we currently have approximately 60, new deals in our pipeline comprised of both renewal and new deals.
The challenge, we have is working with a tennis and their respective legal departments threw up through the remainder of this year and holidays to get them execute a timely.
Here is theater, we continue to advance our redevelopment platform as we have discussed in previous earnings calls we have two platform our value added renovation platform and our mixed use renovation platform.
The value out of innovation side, we announced the official groundbreaking official crossing formerly Port Richmond Shopping center in Philadelphia, Pennsylvania on October Threerd 2019.
This was celebrated with an event onsite attended by local dignitaries politicians that community and members of teams theater. It was the press coverage from a B C. NBC chain store age and Globe Street to name a few.
Demolition of the small shop building on Air Amigo Avenue has occurred I construction is underway. We're in discussions with multiple tenants on the remaining small shop and the project is expected to stabilize and 2022.
Yorktown Plaza in Cocky still Maryland is now fully entitled.
Leases are executed with I hopped <unk> relocation into a new quota typical restaurant on a path I location of Panda Express is fully executed.
There are executed Hello eyes, with several restaurants that will be new to the area and we'll bring vibrancy and enhance traffic to this grocery anchored center.
The leasing strategy is allowing space to be occupied at least at market rates, historically difficult police and or interior corner space, while simultaneously, providing new restaurant entertainment and a retail concepts to the market.
This project is expected to stabilize in 2023.
Our other value added renovation project comments Plaza is nearing completion. The SaaS innovations I work is complete 24 hour fitness popcorn beauty and key foods are open new leases have been executed with Phoenix Alon do crab and many other small shops to round out the small shop lot up.
There was one junior anchor under executed Ela lie and for available small shops for which we were in active discussions with potential tenants.
The project that is anticipated to stabilize and 2022.
Additionally, we have three projects in our mix use platform. So quarter crossing has had a lot of positive momentum. This quarter. The project scope includes 800000 square feet of retail and to mix to five storey mixed use buildings that comprised 277 residential rental units.
Through the anticipated lease up AB are at south quarter crossing is projected to increase from $13. A 93 cents per square foot, she when I'm out approaching $20 per square foot.
As mentioned last quarter zoning approval, which creates the overlay district to allow residential was successfully signed by the mayor in July 2019.
The project also receive the Pennsylvania Department of Environmental Protection was released allowing for a residential development.
There is one additional review approval needed for us to be fully entitled for the project.
The first phase of the multi phase project is scheduled to begin in late 2019.
Revelry formally river view Plaza in Philadelphia, Pennsylvania is also plan for ground floor retail residential above it requires knows owning variance we were the final lease negotiation with a movie theater anchor and are continuing to refine our entertainment restaurant merchandising mix.
The project is expected to commence at early to mid 2021.
Lastly, northeast type the combination of East River shopping center as Senator square in Washington, DC, well be a catalytic investment east of the river and we're excited to see the elements of this neighborhood read of revitalization come together.
Leasing efforts for the anchor the small shops continue and their project.
That's also commenced in late 2020 early 21.
Teams theater is energized by the prospect, so creating vibrant neighborhoods with the goal of ultimately enhancing value for our shareholders with that I will give you Phil.
Thanks, Robin I'm going to add just a few brief highlights Bruce in Robbins remarks, and then open the call to question starting with operating results.
For the quarter operating at that though what $10.6 million or 12 cents per share compared to $10.2 million or 11 cents per share in the preceding quarter.
Excluding redevelopment properties same property NOI, what compared to the comparable quarter in 2018 increased 8.7%.
When redevelopment properties are included in a wide decreased 8.7%, primarily driven by the decommissioning of spaces at several properties to facilitate our redevelopment plans for these properties.
In particular much of this redevelopment activity is occurring at South Philadelphia shopping center.
Moving to the balance sheet, there were no property dispositions and no common shares purchased under a common stock repurchase plan.
We ended the quarter with debt to EBITDA of 8.1 time, and approximately $115 million available under our revolving credit facility.
Further we have no debt maturing until.
2021.
And finally guide.
Affirming our full year operating FFO per share guidance range of 44 cents to 45 cents per share.
The key assumptions related to this guidance are detailed in our press release and remain unchanged from the previous quarter, except for property dispositions.
We now expect dispositions for the full year to be approximately $25 million.
With that I'll open the call to question.
At this time, we will be conducting a question answer session. If you would like to ask your question. Please press star one under telephone keypad, a confirmation tone will indicate your line is in the question Q.
The press Star too if you like to remove your question from the Q4 participants you think speaker equipment. It maybe that's hard to pick up your handset, but for president of Starkey is one moment. Please lobby <unk> poll for questions.
Our first question is from.
Collin Mings Raymond James. Please proceed with your question.
Good afternoon, everyone.
Hi, Tom.
First one for me and I may have missed the spruce budworm or maybe misinterpreted it but just in the prepared remarks I believe you referenced some softness in the transaction market can you, maybe just clarify or elaborate on that comment.
Sure just.
We've gotten reports.
Hey.
The volume.
Sales in our footprint is down meaningfully.
Year over year, so, whereas last year at this point in the year I believe there were 23 sales.
At this point this year there has been fewer than 10 cells I believe eight or nine shelves as that was what I was alluding to.
Got it I understood I mean, maybe just continuing on that point have you seen that reflected in any pricing I know, they're getting a few quarters ago, you put together some very interesting slides I just kind of highlighted the.
Value at some I have some of the properties that have transacted. So I was just curious if you actually seen that show up in pricing or is it just volume.
We do continue to update that slide it's part of our corporate presentation.
I would tell you say the fewer data points.
Yeah, we have the harder it is to draw and inferences about cap rate trends.
Since.
Each transaction has its own.
Yes in Cradic qualities that.
You know allow one to potentially differentiated whether it's a positive in friends or negative in France, and when you have a lot of data points of course goes idiosyncrasies are overwhelmed by just the magnitude of the data.
We ate data points I would tell you that we can't really draw.
Meaningful in France about cap rate trends.
One way or the other.
Yes.
Well I would say is they clearly right now there's a low in the him out the volume.
In our market that's really all that we can say for now but again, that's what I was referring to in my prepared remarks.
Okay appreciate that.
Robin just in the prepared remarks, you again, you discussed a fish town cross thing and I believe last quarter you reference some of that the jumps in rent you were witnessing or were poised to get there. Just maybe can you just elaborate a little bit more on where pre leasing on that project stands and now that the official.
Groundbreaking is occurred just any additional details you can kind of update.
<unk>.
Sure as we've announced previously they executed leases or stage town are what Starbucks and Nifty 50. There are several other leases that are in various stages of negotiation.
At the property.
The small shop rents there range between anywhere from the low fortys.
On up from there so.
So you know are saying, hey, I have a half the increase from the in place rents of what was there previously after the after the.
Nation or the announcement of the renovation.
Okay and.
And then I'm wondering I do want to circle back to and then I'll turn it over but Bruce just earlier. This year you didn't make reference to potentially exploring a JV partners at least that potentially one of your redevelopments just maybe any update now as a several months of past any start up that you can provide on that and particular in context of the Oh.
Reference you made to the dislocation in the stock price than your and your comments earlier.
Sure the.
Comment on the share price.
It is unrelated to.
Our pursued other potential joint venture partner.
The more significant consideration and looking for a joint venture partner.
Candidly is the incredibly deep.
Availability of.
Capital.
Construction financing.
Hi, I.
Attractive terms.
Greg.
Really overwhelms.
The benefits of doing a joint venture.
As you might imagine.
Joint ventures require a fair amount, the given take and negotiation and almost inevitably what happened is the developer will.
Got a benefit on the backend.
In exchange for making sure that the investor the joint venture partner.
Hi, guys greater certainty of return on the front end.
And the luxury of the financing that's available it so cheap and so flexible that.
Even our joint ventures prospective partners, who we were talking to work.
Asking why we would.
Consider doing a joint venture.
Which for a comedy such as Cedar even as small as we are which still represents a relatively.
Modest amount that incremental capital in the face again of the very attractive financing that was available to us and ultimately.
We concluded that while we're still open minded about doing joint ventures, and could potentially explore them in the future.
Again, depending on what happens in the financing environment that also depending on what our capital needs are.
At a.
Point in the future, where potentially we're undertaking more than one project.
Right now.
Again considering.
The construction.
Financing market, we concluded that.
That was the better.
Place to focus on for purposes of figuring out how to capitalize.
Our first redevelopment project.
Okay I appreciate all the detail there and I will turn it over thank you.
As a reminder, we are now conducting a question answer session. If he would like to ask a question. Please press star one under telephone keypad.
For participants using speaker equipment, it may be necessary to pick up brands that before pressing the star keys. One moment. Please while we pull for quick poll for questions.
Our next questions from Todd Thomas Keybanc capital markets. Please proceed with your question.
Hi, Thanks, Good afternoon, I just wanted to ask about the same store NOI growth you know good to see a moving into right direction here.
So you're down roughly 30 basis points year to date year to date and I know the guidance.
You know has a relatively flat a forecast for the full year I'm not sure. If there's really a range there sort of baked into that guidance, but I.
Thinking about the fourth quarter, and then also sort of thinking about 2020 <unk>.
Is it your expectation that we would continue to see.
That metric same store NOI growth.
Improve from here.
Hey, Todd this is bill.
We didn't give a range, we just said relatively flat for the full year and we're still comfortable with relatively flat for the full year and you know what I'm Gonna say next because I say it all the time when we talk about the same store pool, which is.
Substantially.
The vast majority of our properties the very small.
Dollar amount of all right so for any given quarter. The Eli is about $20 million. So 100 basis points is just $20000.
So you know is little things can move the quickly.
And how have a large impact.
For 2020, we've not given any guidance I'm a lot of they.
Things are causing a difficult comparable periods such as the valid.
Vacate that happened in the Bon ton all our burning off so we won't have as tough comparable period.
But again, it's a small pool and you know little things can move it. So we'll wait and we'll give a guidance on that on our next call.
Okay understood in in terms of let me, let me ask about maybe base rents a little more specifically so you have 170 basis point spread between leased and occupied space in the portfolio. So it's a little wider than it's been and your leasing.
As you commented as has been improving.
Do you have some some larger commencements that are scheduled to take place before the end of this year that.
You know, we should we should be thinking about.
[noise] <unk>.
Thank you know I'm not sure about the specific you know commencement there you know when we do same store, we do it on a cash basis.
Suggest.
The least moving to occupied.
Obviously is a favorable thing, but you know it takes.
You know, sometimes there is free rent period that takes a little while for that they kick in.
And there was you know not that that the years almost over time I don't think there's anything that's going to call. It like a dramatic change and same store in the last quarter as compared to this quarter.
Okay, and with you know the comments around.
Dispositions just just following up there I guess you you know you do have a few assets on the market or held for sale and you know you're having discussions with <unk> investor. So I'm just curious I understand that maybe transaction volumes are down.
And your markets, but you know in terms of that the general level of interest.
You know from investors can can you comment on that and then do you have a sense for timing at this point on the potential sale of of carls corner and stuff like Plaza.
Sure so the.
[noise], while they are juxtapose their unrelated.
I said that haven't yet so.
I haven't yet sold for very.
Asset specific reasons.
Unrelated to.
The more.
The more general.
They're being [noise].
Slightly reduced volumes.
And we've observed this year, although obviously that volume.
As impacted our sales process as well in the sense that were contributing to lower volume that said.
The.
Suffolk assay is under contract Alright, pardon me I said that it's.
We have a contract I'm are trading comments and so we're.
Parada juncture, where we can see a finish line of course nothing is done until it's done carls corner is a very very small asset that's kinda eventually be sold.
For at a modest amount and we're just working through some.
Some practical issues there that we need to resolve before we can sell the asset but again, it's on our held for sale list, but it's not going to be meaningful.
Contributor to anything other than just add eventually being removed from the west.
And the last asset that we have hanging out there is in western P.A. I truly not even in the market.
I was describing is having reduced volume and we've just been waiting to finalize always there before we bring to market. So again very specific facts.
Around our particular assets being sold.
And.
The fact that they haven't sold whose.
Unrelated to this larger trend that I've observed through it I commented on.
Just last volume asset sales in the most recent period.
Okay, just one last one for fell the.
Guidance included this year that $750000.
Related to that the community outreach and some marketing costs.
That expected to continue in 2020.
Yeah, I mean, it will probably.
You know it's across a couple of our redevelopment properties.
The run rate probably a decent run rate also for next year. Just you know the the problems related will change as we.
Kind of get further along on some redevelopment and start to ramp up others, but the run rate.
For this year next year should be fairly consistent.
Okay, Alright, great. Thank you.
We have reached the end of the question answer session. Now, we'll now turn the call back over to Bruce Schanzer for closing remarks.
Thank you operator, thank you for joining us this evening and for following our company. We look forward to continue to report good news in the months and quarters ahead.
This concludes todays conference you may disconnect your lines at this time. Thank you for your participation.