CEDAR REALTY TRUST, INC. - Quarter Report: 2011 March (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 001-31817

CEDAR SHOPPING CENTERS, INC.

(Exact name of registrant as specified in its charter)

Maryland		42-1241468
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

44 South Bayles Avenue, Port Washington, New York 11050-3765
(Address of principal executive offices) (Zip Code)

(516) 767-6492

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At April 29, 2011, there were 67,711,581 shares of Common Stock, $0.06 par value, outstanding.

 

 

CEDAR SHOPPING CENTERS, INC.

INDEX

Forward-Looking Statements			3
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets — March 31, 2011 (unaudited) and December 31, 2010			4
Consolidated Statements of Operations (unaudited) — Three months ended March 31, 2011 and 2010			5
Consolidated Statement of Equity (unaudited) — Three months ended March 31, 2011			6
Consolidated Statements of Cash Flows (unaudited) — Three months ended March 31, 2011 and 2010			7
Notes to Consolidated Financial Statements (unaudited)— March 31, 2011			8-35
Item 2. Management’s Discussion and Analysis of Financial Condition And Results of Operations			36-49
Item 3. Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures			50
Part II. Other Information
Item 6. Exhibits			51
Signatures			51
Exhibit 31
Exhibit 32

Forward-Looking Statements

Certain statements contained in this Form 10-Q constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, without limitation, statements containing the words “anticipates”, “believes”, “expects”, “intends”, “future”, and words of similar import which express the Company’s beliefs, expectations or intentions regarding future performance or future events or trends. While forward-looking statements reflect good faith beliefs, expectations or intentions, they are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements as a result of factors outside of the Company’s control. Certain factors that might cause such differences include, but are not limited to, the following: real estate investment considerations, such as the effect of economic and other conditions in general and in the Company’s market areas in particular; the financial viability of the Company’s tenants (including an inability to pay rent, filing for bankruptcy protection, closing stores and/or vacating the premises); the continuing availability of acquisition, development and redevelopment opportunities, on favorable terms; the availability of equity and debt capital (including the availability of construction financing) in the public and private markets; the availability of suitable joint venture partners and potential purchasers of the Company’s properties if offered for sale; the ability of the Company’s joint venture partner to fund its share of future property acquisitions; changes in interest rates; the fact that returns from acquisition, development and redevelopment activities may not be at expected levels or at expected times; risks inherent in ongoing development and redevelopment projects including, but not limited to, cost overruns resulting from weather delays, changes in the nature and scope of development and redevelopment efforts, changes in governmental regulations relating thereto, and market factors involved in the pricing of material and labor; the need to renew leases or re-let space upon the expiration or termination of current leases and incur applicable required replacement costs; and the financial flexibility of ourselves and our joint venture partners to repay or refinance debt obligations when due and to fund tenant improvements and capital expenditures.

CEDAR SHOPPING CENTERS, INC.

		March 31,				December 31,
		2011				2010
		(unaudited)
Assets
Real estate:
Land		$	337,474,000			$	327,813,000
Buildings and improvements			1,301,021,000				1,257,679,000
			1,638,495,000				1,585,492,000
Less accumulated depreciation			(197,948,000	)			(188,278,000	)
Real estate, net			1,440,547,000				1,397,214,000
Real estate held for sale — discontinued operations			59,426,000				74,661,000
Investment in unconsolidated joint ventures			50,324,000				52,466,000
Cash and cash equivalents			15,469,000				14,166,000
Restricted cash			16,109,000				14,545,000
Receivables:
Rents and other tenant receivables, net			10,389,000				7,048,000
Straight-line rents			16,097,000				15,669,000
Joint venture settlements and other receivables			5,989,000				8,599,000
Other assets			7,966,000				9,676,000
Deferred charges, net			26,331,000				28,443,000
Total assets		$	1,648,647,000			$	1,622,487,000
Liabilities and equity
Mortgage loans payable		$	698,010,000			$	672,143,000
Mortgage loans payable — real estate held for sale — discontinued operations			35,205,000				35,373,000
Secured revolving credit facilities			154,597,000				132,597,000
Accounts payable and accrued liabilities			24,586,000				29,026,000
Unamortized intangible lease liabilities			45,027,000				46,453,000
Liabilities — real estate held for sale — discontinued operations			1,413,000				1,371,000
Total liabilities			958,838,000				916,963,000
Limited partners’ interest in Operating Partnership			6,817,000				7,053,000
Commitments and contingencies			—				—
Equity:
Cedar Shopping Centers, Inc. shareholders’ equity:
Preferred stock ($.01 par value, $25.00 per share liquidation value, 12,500,000 shares authorized, 6,400,000 shares issued and outstanding)			158,575,000				158,575,000
Common stock ($.06 par value, 150,000,000 shares authorized 67,517,000 and 66,520,000 shares, respectively, issued and outstanding)			4,051,000				3,991,000
Treasury stock (1,223,000 and 1,120,000 shares, respectively, at cost)			(10,398,000	)			(10,367,000	)
Additional paid-in capital			715,702,000				712,548,000
Cumulative distributions in excess of net income			(249,636,000	)			(231,275,000	)
Accumulated other comprehensive loss			(3,112,000	)			(3,406,000	)
Total Cedar Shopping Centers, Inc. shareholders’ equity			615,182,000				630,066,000
Noncontrolling interests:
Minority interests in consolidated joint ventures			61,736,000				62,050,000
Limited partners’ interest in Operating Partnership			6,074,000				6,355,000
Total noncontrolling interests			67,810,000				68,405,000
Total equity			682,992,000				698,471,000
Total liabilities and equity		$	1,648,647,000			$	1,622,487,000

See accompanying notes to consolidated financial statements.

CEDAR SHOPPING CENTERS, INC.

		Three months ended March 31,
		2011				2010
Revenues:
Rents		$	31,390,000			$	32,257,000
Expense recoveries			9,524,000				9,431,000
Other			706,000				98,000
Total revenues			41,620,000				41,786,000
Expenses:
Operating, maintenance and management			10,619,000				9,474,000
Real estate and other property-related taxes			5,045,000				4,893,000
General and administrative			2,705,000				2,211,000
Impairments			—				1,555,000
Acquisition transaction costs and terminated projects			1,539,000				1,320,000
Depreciation and amortization			10,404,000				10,148,000
Total expenses			30,312,000				29,601,000
Operating income			11,308,000				12,185,000
Non-operating income and expense:
Interest expense, including amortization of deferred financing costs			(12,384,000	)			(13,284,000	)
Interest income			78,000				14,000
Equity in income of unconsolidated joint ventures			791,000				356,000
Gain on sale of land parcel			28,000				—
Total non-operating income and expense			(11,487,000	)			(12,914,000	)
Loss before discontinued operations			(179,000	)			(729,000	)
Discontinued operations:
Income (loss) from operations			1,002,000				(358,000	)
Impairment charges			(9,916,000	)			(248,000	)
Gain on sales			—				175,000
Total discontinued operations			(8,914,000	)			(431,000	)
Net loss			(9,093,000	)			(1,160,000	)
Less, net loss (income) attributable to noncontrolling interests:
Minority interests in consolidated joint ventures			25,000				(475,000	)
Limited partners’ interest in Operating Partnership			260,000				114,000
Total net loss (income) attributable to noncontrolling interests			285,000				(361,000	)
Net loss attributable to Cedar Shopping Centers, Inc.			(8,808,000	)			(1,521,000	)
Preferred distribution requirements			(3,501,000	)			(1,969,000	)
Net loss attributable to common shareholders		$	(12,309,000	)		$	(3,490,000	)
Per common share attributable to common sharehoders (basic and diluted):
Continuing operations		$	(0.05	)		$	(0.05	)
Discontinued operations			(0.13	)			(0.01	)
		$	(0.18	)		$	(0.06	)
Amounts attributable to Cedar Shopping Centers, Inc. common shareholders, net of limited partners’ interest:
Loss from continuing operations		$	(3,582,000	)		$	(3,073,000	)
Loss from discontinued operations			(8,727,000	)			(587,000	)
Gain on sales of discontinued operations			—				170,000
Net loss		$	(12,309,000	)		$	(3,490,000	)
Dividends declared per common share		$	0.09			$	—
Weighted average number of common shares outstanding			67,227,000				58,728,000

See accompanying notes to consolidated financial statements.

CEDAR SHOPPING CENTERS, INC.

Three months ended March 31, 2011
(unaudited)

		Cedar Shopping Centers, Inc. Shareholders
		Preferred stock								Common stock																Cumulative				Accumulated
						$25.00												Treasury				Additional				distributions				other
						Liquidation								$0.06				stock,				paid-in				in excess of				comprehensive
		Shares				value				Shares				Par value				at cost				capital				net income				(loss) income				Total
Balance, December 31, 2010			6,400,000			$	158,575,000				66,520,000			$	3,991,000			$	(10,367,000	)		$	712,548,000			$	(231,275,000	)		$	(3,406,000	)		$	630,066,000
Net loss																											(8,808,000	)							(8,808,000	)
Unrealized gain on change in fair value of cash flow hedges																															294,000				294,000
Total other comprehensive loss																																		$	(8,514,000	)
Deferred compensation activity, net											526,000				32,000				(31,000	)			241,000												242,000
Net proceeds from dividend reinvestment and direct stock purchase plan											471,000				28,000								2,779,000												2,807,000
Preferred distribution requirements																											(3,501,000	)							(3,501,000	)
Distributions to common shareholders/ noncontrolling interests																											(6,052,000	)							(6,052,000	)
Reallocation adjustment of limited partners’ interest																							134,000												134,000
Balance, March 31, 2011			6,400,000			$	158,575,000				67,517,000			$	4,051,000			$	(10,398,000	)		$	715,702,000			$	(249,636,000	)		$	(3,112,000	)		$	615,182,000

		Noncontrolling Interests
						Limited
		Minority				partners’
		interests in				interest in
		consolidated				Operating								Total
		joint ventures				Partnership				Total				equity
Balance, December 31, 2010		$	62,050,000			$	6,355,000			$	68,405,000			$	698,471,000
Net loss			(25,000	)			(141,000	)			(166,000	)			(8,974,000	)
Unrealized gain on change in fair value of cash flow hedges			—				2,000				2,000				296,000
Total other comprehensive loss			(25,000	)			(139,000	)			(164,000	)			(8,678,000	)
Deferred compensation activity, net			—				—				—				242,000
Net proceeds from dividend reinvestment and direct stock purchase plan			—				—				—				2,807,000
Preferred distribution requirements			—				—				—				(3,501,000	)
Distributions to common shareholders/ noncontrolling interests			(289,000	)			(69,000	)			(358,000	)			(6,410,000	)
Reallocation adjustment of limited partners’ interest			—				(73,000	)			(73,000	)			61,000
Balance, March 31, 2011		$	61,736,000			$	6,074,000			$	67,810,000			$	682,992,000

See accompanying notes to consolidated financial statements.

CEDAR SHOPPING CENTERS, INC.

		Three months ended March 31,
		2011				2010
Cash flow from operating activities:
Net loss		$	(9,093,000	)		$	(1,160,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash provisions:
Equity in income of unconsolidated joint ventures			(791,000	)			(356,000	)
Distributions from unconsolidated joint ventures			379,000				120,000
Impairments			—				1,555,000
Acquisition transaction costs and terminated projects			1,539,000				1,271,000
Impairments — discontinued operations			9,916,000				248,000
Gain on sales of real estate			(28,000	)			(175,000	)
Straight-line rents			(519,000	)			(787,000	)
Provision for doubtful accounts			1,053,000				678,000
Depreciation and amortization			10,459,000				11,380,000
Amortization of intangible lease liabilities			(1,477,000	)			(2,335,000	)
Amortization/market price adjustments relating to stock-based compensation			829,000				1,215,000
Amortization and accelerated write-off of deferred financing costs			1,006,000				1,207,000
Increases/decreases in operating assets and liabilities:
Rents and other receivables, net			(4,402,000	)			(3,918,000	)
Joint venture settlements			231,000				(1,473,000	)
Prepaid expenses and other			(1,208,000	)			(1,029,000	)
Accounts payable and accrued expenses			(3,664,000	)			(2,754,000	)
Net cash provided by operating activities			4,230,000				3,687,000
Cash flow from investing activities:
Expenditures for real estate and improvements			(53,583,000	)			(8,029,000	)
Net proceeds from sales of real estate			5,744,000				2,056,000
Net proceeds from transfers to unconsolidated joint venture, less cash at dates of transfer			3,009,000				11,379,000
Investments in and advances to unconsolidated joint ventures			—				(4,302,000	)
Distributions of capital from unconsolidated joint ventures			2,555,000				—
Construction escrows and other			(1,141,000	)			1,040,000
Net cash (used in) provided by investing activities			(43,416,000	)			2,144,000
Cash flow from financing activities:
Net advances/(repayments) from/(to) revolving credit facilities			22,000,000				(50,594,000	)
Proceeds from mortgage financings			28,100,000				6,699,000
Mortgage repayments			(2,401,000	)			(10,913,000	)
Payments of debt financing costs			—				(243,000	)
Termination payment related to interest rate swaps			—				(5,476,000	)
Noncontrolling interests:
Distributions to consolidated joint venture minority interests			(289,000	)			—
Redemption of Operating Partnership Units			—				(67,000	)
Distributions to limited partners			(127,000	)			(180,000	)
Net proceeds from the sales of common stock			2,807,000				60,227,000
Preferred stock distributions			(3,549,000	)			(1,969,000	)
Distributions to common shareholders			(6,052,000	)			(4,696,000	)
Net cash provided by (used in) financing activities			40,489,000				(7,212,000	)
Net increase (decrease) in cash and cash equivalents			1,303,000				(1,381,000	)
Cash and cash equivalents at beginning of period			14,166,000				17,164,000
Cash and cash equivalents at end of period		$	15,469,000			$	15,783,000

See accompanying notes to consolidated financial statements.

Cedar Shopping Centers, Inc.

Note 1. Organization and Basis of Preparation

Cedar Shopping Centers, Inc. (the “Company”) was organized in 1984 and elected to be taxed as a real estate investment trust (“REIT”) in 1986. The Company focuses primarily on ownership, operation, development and redevelopment of supermarket-anchored shopping centers predominantly in mid-Atlantic and Northeast coastal states. At March 31, 2011, the Company owned and managed 114 operating properties, including 21 properties in an unconsolidated joint venture.

Cedar Shopping Centers Partnership, L.P. (the “Operating Partnership”) is the entity through which the Company conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. At March 31, 2011 the Company owned a 97.9% economic interest in, and was the sole general partner of, the Operating Partnership. The limited partners’ interest in the Operating Partnership (2.1% at March 31, 2011) is represented by Operating Partnership Units (“OP Units”). The carrying amount of such interest is adjusted at the end of each reporting period to an amount equal to the limited partners’ ownership percentage of the Operating Partnership’s net equity. The approximately 1.4 million OP Units outstanding at March 31, 2011 are economically equivalent to the Company’s common stock and are convertible into the Company’s common stock at the option of the respective holders on a one-to-one basis.

As used herein, the “Company” refers to Cedar Shopping Centers, Inc. and its subsidiaries on a consolidated basis, including the Operating Partnership or, where the context so requires, Cedar Shopping Centers, Inc. only.

The consolidated financial statements include the accounts and operations of the Company, the Operating Partnership, its subsidiaries, and certain joint venture partnerships in which it participates. The Company consolidates all variable interest entities (“VIEs”) for which it is the primary beneficiary. Generally, a VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) as a group, the holders of the equity investment at risk (i) lack the power to make decisions about the entity’s activities that significantly impacts the entity’s performance through voting or similar rights, (ii) have no obligation to absorb the expected losses of the entity, or (iii) have no right to receive the expected residual returns of the entity, or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The Company follows the accounting guidance for determining whether an entity is a VIE, which requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. The updated guidance requires an entity to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

Cedar Shopping Centers, Inc.

With respect to its 12 consolidated operating joint ventures, the Company has general partnership interests of 20% in nine properties, 40% in two properties and 50% in one property. As (i) such entities are not VIEs, and (ii) the Company is the sole general partner and exercises substantial operating control over these entities, the Company has determined that such entities should be consolidated for financial statement purposes. Current accounting guidance provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or similar entity in which it owns a minority interest.

On February 15, 2011, Homburg Invest Inc. (“HII”), one of the Company’s joint venture partners, exercised its buy/sell option pursuant to the terms of the joint venture agreements for each of the nine properties owned by the venture. The offered values for the properties, in the aggregate, amounted to approximately $55.0 million over existing property-specific financing of approximately $101.9 million and $102.3 million at March 31, 2011 and December 31, 2010, respectively. The Company has elected to purchase HII’s 80% interest in one of the nine properties, Meadows Marketplace, located in Hershey, Pennsylvania. The offered purchase price for the 80% interest is approximately $5.3 million, and the outstanding balance of the mortgage loan payable on the property was approximately $10.1 million and $10.2 million at March 31, 2011 and December 31, 2010, respectively. The Company also determined not to meet HII’s buy/sell offers for each of the remaining eight properties. Accordingly, at closing, the Company will receive proceeds of approximately $9.7 million from HII for its 20% interest in these properties. The outstanding balances of the mortgage loans payable on the eight properties was approximately $91.8 million and $92.1 million at March 31, 2011 and December 31, 2010, respectively. The Company’s property management agreements for the eight properties will terminate upon the closing of the sale. In addition to normal closing conditions and the obtaining of approvals of the lenders holding mortgages on the properties, these transactions are subject to significant uncertainties. Accordingly, there can be no assurance that any of these transactions will be consummated.

The Company’s three 60%-owned joint ventures for development projects in Limerick, Pottsgrove and Stroudsburg, Pennsylvania, are consolidated as they are deemed to be VIEs and the Company is the primary beneficiary in each case. At March 31, 2011, these VIEs owned real estate with a carrying value of $136.4 million. The assets of the consolidated VIEs can be used to settle obligations other than those of the consolidated VIEs. At that date, one of the VIEs had a property-specific mortgage loan payable aggregating $62.6 million, and the real estate owned by the other two VIEs partially collateralized the secured revolving development property credit facility (the “development property credit facility”) to the extent of $28.1 million. Such obligations are guaranteed by, and are recourse to, the Company. For such development projects, the Company reviews the applicable budgets and provides supervisory support.

Cedar Shopping Centers, Inc.

With respect to its unconsolidated joint ventures, the Company has a 20% interest in a joint venture with RioCan Real Estate Investment Trust of Toronto, Canada, a publicly-traded Canadian real estate investment trust (“RioCan”) formed initially for the acquisition of seven shopping center properties owned by the Company; all seven properties had been transferred to the joint venture by May 2010 and, as of March 31, 2011, the joint venture owned 21 properties. The accounting treatment presentation on the accompanying consolidated statement of operations for the three months ended March 31, 2010 is to reflect the results of the properties’ operations through the respective dates of transfer in current operations and, prospectively following their transfer to the joint venture, as “equity in income (loss) of unconsolidated joint ventures”. Accordingly, the accompanying statement of operations for three months ended March 31, 2010 includes revenues of $2.6 million applicable to the periods prior to the dates of transfer to the RioCan joint venture. Although the Company provides management and other services, RioCan has significant management participation rights. The Company has determined that this joint venture is not a VIE and, accordingly, the Company accounts for its investment in this joint venture under the equity method.

In addition, the Company has a 76.3% limited partner’s interest in a joint venture which owns a single-tenant office property in Philadelphia, Pennsylvania. The Company has determined that this joint venture is not a VIE. In addition, the Company has no control over the entity, does not provide any management or other services to the entity, and has no substantial participating or “kick out” rights. The Company currently accounts for its investment in this joint venture under the equity method. As on March 31, 2011, the Company deemed its investment in the joint venture to be recoverable.

At March 31, 2011, the Company had deposits of $0.8 million on four land parcels (which is its maximum exposure) to be purchased for future development. Although each of the entities holding the deposits is considered a VIE, the Company has not consolidated any of them as the Company is not the primary beneficiary in each case.

Note 2. Summary of Significant Accounting Policies

The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by U.S. Generally Accepted Accounting Principles (“GAAP”) for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring accruals) have been included. The consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Cedar Shopping Centers, Inc.

The consolidated financial statements reflect certain reclassifications of prior period amounts to conform to the 2011 presentation, principally to reflect the sale and/or treatment as “held for sale” of certain operating properties and the treatment thereof as “discontinued operations”. The reclassifications had no impact on previously-reported net income attributable to common shareholders or earnings per share.

Real Estate Investments

Real estate investments are carried at cost less accumulated depreciation. The provision for depreciation is calculated using the straight-line method based upon the estimated useful lives of the respective assets of between 3 and 40 years. Depreciation expense amounted to $9.7 million and $9.5 million for the three months ended March 31, 2011 and 2010, respectively. Expenditures for betterments that substantially extend the useful lives of the assets are capitalized. Expenditures for maintenance, repairs, and betterments that do not substantially prolong the normal useful life of an asset are charged to operations as incurred.

Upon the sale (or treatment as “held for sale”) or other disposition of assets, the cost and related accumulated depreciation and amortization are removed from the accounts and the resulting gain or impairment loss, if any, is reflected as discontinued operations. In addition, prior periods’ financial statements would be reclassified to reflect the sold properties’ operations as discontinued.

Real estate investments include costs of development and redevelopment activities, and construction in progress. Capitalized costs, including interest and other carrying costs during the construction and/or renovation periods, are included in the cost of the related asset and charged to operations through depreciation over the asset’s estimated useful life. Interest and financing costs capitalized amounted to $0.3 million and $0.9 million for the three months ended March 31, 2011 and 2010, respectively. A variety of costs are incurred in the acquisition, development and leasing of a property, such as pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs, and other costs incurred during the period of development. After a determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. The Company ceases capitalization on the portions substantially completed and occupied, or held available for occupancy, and capitalizes only those costs associated with the portions under development. The Company considers a construction project to be substantially completed and held available for occupancy upon the completion of tenant improvements, but not later than one year from cessation of major construction activity.

Cedar Shopping Centers, Inc.

Management reviews each real estate investment for impairment whenever events or circumstances indicate that the carrying value of a real estate investment may not be recoverable. The review of recoverability is based on an estimate of the future cash flows that are expected to result from the real estate investment’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If an impairment event exists due to the projected inability to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the carrying value exceeds estimated fair value. Real estate investments held for sale are carried at the lower of their respective carrying amounts or estimated fair values, less costs to sell. Depreciation and amortization are suspended during the periods held for sale.

During the three months ended March 31, 2010, the Company wrote-off approximately $1.3 million of costs incurred in prior years for a potential development project in Williamsport, Pennsylvania that the Company determined would not go forward.

Conditional asset retirement obligation

A conditional asset retirement obligation is a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within the control of the Company. The Company would record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. Environmental studies conducted at the time of acquisition with respect to all of the Company’s properties did not reveal any material environmental liabilities, and the Company is unaware of any subsequent environmental matters that would have created a material liability. The Company believes that its properties are currently in material compliance with applicable environmental, as well as non-environmental, statutory and regulatory requirements. There were no conditional asset retirement obligation liabilities recorded by the Company during the three months ended March 31, 2011 and 2010, respectively.

Fair Value Measurements

The fair value measurement accounting guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

•

Level 1 — Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2 — Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Cedar Shopping Centers, Inc.

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible while also considering counterparty credit risk in the assessment of fair value. Financial liabilities measured at fair value in the consolidated financial statements consist of interest rate swaps. The fair values of interest rate swaps are determined using widely accepted valuation techniques, including discounted cash flow analysis, on the expected cash flows of each derivative. The analysis reflects the contractual terms of the swaps, including the period to maturity, and uses observable market-based inputs, including interest rate curves (“significant other observable inputs”). The fair value calculation also includes an amount for risk of non-performance using “significant unobservable inputs” such as estimates of current credit spreads to evaluate the likelihood of default. The Company has concluded, as of March 31, 2011, that the fair value associated with the “significant unobservable inputs” relating to the Company’s risk of non-performance was insignificant to the overall fair value of the interest rate swap agreements and, as a result, the Company has determined that the relevant inputs for purposes of calculating the fair value of the interest rate swap agreements, in their entirety, were based upon “significant other observable inputs”. Nonfinancial assets and liabilities measured at fair value in the consolidated financial statements consists of real estate held for sale- discontinued operations.

Cedar Shopping Centers, Inc.

The following tables show the hierarchy for those assets measured at fair value on a non-recurring basis as of March 31, 2011 and December 31, 2010, respectively:

		Assets Measured at Fair Value on a
		Non Recurring Basis
		March 31, 2011
Asset Description		Level 1				Level 2				Level 3				Total
Real estate held for sale		$	—			$	15,365,000			$	44,061,000			$	59,426,000

		Assets Measured at Fair Value on a
		Non Recurring Basis
		December 31, 2010
Asset Description		Level 1				Level 2				Level 3				Total
Real estate held for sale		$	—			$	22,773,000			$	47,186,000			$	69,959,000	(a)

The carrying amounts of cash and cash equivalents, restricted cash, rents and other receivables, other assets, accounts payable and accrued expenses approximate fair value. The valuation of the liability for the Company’s interest rate swaps ($1.5 million and $1.6 million at March 31, 2011 and December 31, 2010, respectively), which is measured on a recurring basis, was determined to be a Level 2 within the valuation hierarchy, and was based on independent values provided by financial institutions. The valuation of the assets for the Company’s real estate held for sale — discontinued operations, which is measured on a nonrecurring basis, have been determined to be (i) a Level 2 within the valuation hierarchy, based on the respective contracts of sale or (ii) Level 3 within the valuation hierarchy, where applicable, based on estimated sales prices determined by discounted cash flow analyses if no contract amounts were as yet being negotiated. The discounted cash flow analyses included all estimated cash inflows and outflows over a specific holding period and where applicable, any estimated debt premiums. These cash flows were comprised of unobservable inputs which included contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these analyses were based upon observable rates that the Company believed to be within a reasonable range of current market rates for the respective properties.

The fair value of the Company’s fixed rate mortgage loans was estimated using available market information and discounted cash flows analyses based on borrowing rates the Company believes it could obtain with similar terms and maturities. As of March 31, 2011 and December 31, 2010, the aggregate fair values of the Company’s fixed rate mortgage loans were approximately $614.8 million and $592.6 million, respectively; the carrying values of such loans were $614.5 million and $588.6 million, respectively, at those dates.

Cedar Shopping Centers, Inc.

Intangible Lease Asset/Liability

The Company allocates the fair value of real estate acquired to land, buildings and improvements. In addition, the fair value of in-place leases is allocated to intangible lease assets and liabilities.

The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, which value is then allocated to land, buildings and improvements based on management’s determination of the relative fair values of these assets. In valuing an acquired property’s intangibles, factors considered by management include an estimate of carrying costs during the expected lease-up periods, such as real estate taxes, insurance, other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on its evaluation of current market demand. Management also estimates costs to execute similar leases, including leasing commissions, tenant improvements, legal and other related costs.

The values of acquired above-market and below-market leases are recorded based on the present values (using discount rates which reflect the risks associated with the leases acquired) of the differences between the contractual amounts to be received and management’s estimate of market lease rates, measured over the terms of the respective leases that management deemed appropriate at the time of the acquisitions. Such valuations include a consideration of the non-cancellable terms of the respective leases as well as any applicable renewal period(s). The fair values associated with below-market rental renewal options are determined based on the Company’s experience and the relevant facts and circumstances that existed at the time of the acquisitions. The values of above-market leases are amortized to rental income over the terms of the respective non-cancelable lease periods. The portion of the values of below-market leases associated with the original non-cancelable lease terms are amortized to rental income over the terms of the respective non-cancelable lease periods. The portion of the values of the leases associated with below-market renewal options that are likely of exercise are amortized to rental income over the respective renewal periods. The value of other intangible assets (including leasing commissions, tenant improvements, etc.) is amortized to expense over the applicable terms of the respective leases. If a lease were to be terminated prior to its stated expiration or not renewed, all unamortized amounts relating to that lease would be recognized in operations at that time.

With respect to the Company’s acquisitions, the fair values of in-place leases and other intangibles have been allocated to the intangible asset and liability accounts. Such allocations are preliminary and are based on information and estimates available as of the respective dates of acquisition. As final information becomes available and is refined, appropriate adjustments are made to the purchase price allocations, which are finalized within twelve months of the respective dates of acquisition.

Cedar Shopping Centers, Inc.

Total unamortized intangible lease liabilities relate primarily to below-market leases, and amounted to $45.0 million and $46.5 million at March 31, 2011 and December 31, 2010, respectively.

As a result of recording the intangible lease assets and liabilities, (i) revenues were increased by $1.4 million and $2.3 million for the three months ended March 31, 2011 and 2010, respectively, relating to the amortization of intangible lease liabilities, and (ii) depreciation and amortization expense was increased correspondingly by $2.0 million and $2.4 million for the three months ended March 31, 2011 and 2010, respectively.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and short-term investments with original maturities of less than ninety days, and include cash at consolidated joint ventures of $8.1 million and $6.7 million at March 31, 2011 and December 31, 2010, respectively.

Restricted Cash

The terms of several of the Company’s mortgage loans payable require the Company to deposit certain replacement and other reserves with its lenders. Such “restricted cash” is generally available only for property-level requirements for which the reserves have been established, and is not available to fund other property-level or Company-level obligations.

Rents and Other Receivables

Management has determined that all of the Company’s leases with its various tenants are operating leases. Rental income with scheduled rent increases is recognized using the straight-line method over the respective non-cancelable terms of the leases. The aggregate excess of rental revenue recognized on a straight-line basis over the contractual base rents is included in straight-line rents on the consolidated balance sheet. Leases also generally contain provisions under which the tenants reimburse the Company for a portion of property operating expenses and real estate taxes incurred, generally attributable to their respective allocable portions of GLA. Such income is recognized in the periods earned. In addition, a limited number of operating leases contain contingent rent provisions under which tenants are required to pay, as additional rent, a percentage of their sales in excess of a specified amount. The Company defers recognition of contingent rental income until those specified sales targets are met. Other contingent fees are recognized when earned.

Cedar Shopping Centers, Inc.

The Company must make estimates as to the collectibility of its accounts receivable related to base rent, straight-line rent, percentage rent, expense reimbursements and other revenues. When management analyzes accounts receivable and evaluates the adequacy of the allowance for doubtful accounts, it considers such things as historical bad debts, tenant creditworthiness, current economic trends, current developments relevant to a tenant’s business specifically and to its business category generally, and changes in tenants’ payment patterns. The allowance for doubtful accounts was $5.6 million and $5.4 million at March 31, 2011 and December 31, 2010, respectively. The provision for doubtful accounts (included in operating, maintenance and management expenses) was $0.9 million and $0.4 million for the three months ended March 31, 2011 and 2010, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents in excess of insured amounts and tenant receivables. The Company places its cash and cash equivalents with high quality financial institutions. Management performs ongoing credit evaluations of its tenants and requires certain tenants to provide security deposits and/or suitable guarantees.

Other Assets

Other assets at March 31, 2011 and December 31, 2010 are comprised of the following:

		March 31,				December 31,
		2011				2010
Prepaid expenses		$	4,884,000			$	5,258,000
Cumulative mark-to-market adjustments related to stock-based compensation			1,719,000				2,101,000
Property deposits			802,000				1,792,000
Other			561,000				525,000
		$	7,966,000			$	9,676,000

Cedar Shopping Centers, Inc.

Deferred Charges, Net

Deferred charges at March 31, 2011 and December 31, 2010 are net of accumulated amortization and are comprised of the following:

		March 31,				December 31,
		2011				2010
Lease origination costs (i)		$	16,020,000			$	16,102,000
Financing costs (ii)			9,736,000				10,790,000
Other			575,000				1,551,000
		$	26,331,000			$	28,443,000

Deferred charges are amortized over the terms of the related agreements. Amortization expense related to deferred charges (including amortization of deferred financing costs included in non-operating income and expense) amounted to $2.0 million and $1.8 million for the three months ended March 31, 2011 and 2010, respectively.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). A REIT will generally not be subject to federal income taxation on that portion of its income that qualifies as REIT taxable income, to the extent that it distributes at least 90% of such REIT taxable income to its shareholders and complies with certain other requirements. As of March 31, 2011, the Company was in compliance with all REIT requirements.

The Company follows a two-step approach for evaluating uncertain tax positions. Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that more-likely-than-not will be realized upon settlement. Derecognition of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. The use of a valuation allowance as a substitute for derecognition of tax positions is prohibited. The Company has not identified any uncertain tax positions which would require an accrual.

Cedar Shopping Centers, Inc.

Derivative Financial Instruments

The Company occasionally utilizes derivative financial instruments, principally interest rate swaps, to manage its exposure to fluctuations in interest rates. The Company has established policies and procedures for risk assessment, and the approval, reporting and monitoring of derivative financial instruments. Derivative financial instruments must be effective in reducing the Company’s interest rate risk exposure in order to qualify for hedge accounting. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income for each period until the derivative financial instrument matures or is settled. Any derivative financial instrument used for risk management that does not meet the hedging criteria is marked-to-market with the changes in value included in net income. The Company has not entered into, and does not plan to enter into, derivative financial instruments for trading or speculative purposes. Additionally, the Company has a policy of entering into derivative contracts only with major financial institutions. On January 20, 2010, the Company paid approximately $5.5 million to terminate interest rate swaps applicable to the financing for its development joint venture project in Stroudsburg, Pennsylvania.

As of March 31, 2011, the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts. Additionally, based on the rates in effect as of March 31, 2011, if a counterparty were to default, the Company would receive a net interest benefit. At March 31, 2011, the Company had approximately $20.0 million of mortgage loans payable subject to interest rate swaps. Such interest rate swaps converted LIBOR-based variable rates to fixed annual rates of 5.4% and 6.5% per annum. At that date, the Company had accrued liabilities of $1.5 million (included in accounts payable and accrued expenses on the consolidated balance sheet) relating to the fair value of interest rate swaps applicable to existing mortgage loans payable. Charges and/or credits relating to the changes in fair values of such interest rate swaps are made to accumulated other comprehensive (loss) income, noncontrolling interests (minority interests in consolidated joint ventures and limited partners’ interest), or operations (included in interest expense), as appropriate.

The following is a summary of the derivative financial instruments held by the Company at March 31, 2011 and December 31, 2010:

Notional values

Balance

Fair value

Designation/

March 31,

December 31,

Expiration

sheet

March 31,

December 31,

Cash flow

Derivative

Count

2011

Count

2010

dates

location

2011

2010

Qualifying

rate swaps

2

$

19,995,000

2

$20,094,000

2011 – 2020

Accounts payable and accrued expenses

$

1,451,000

$

1,642,000

Cedar Shopping Centers, Inc.

The following presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and the consolidated statements of equity for the three months ended March 31, 2011 and 2010:

				Amount of gain (loss) recognized in other
				comprehensive (loss) income (effective portion)
Designation/				March 31,
Cash flow		Derivative		2011				2010
Qualifying		swaps		$	294,000			$	(997,000	)

There was no ineffectiveness recorded in earnings for the three months ended March 31, 2011 and 2010.

Limited Partners Interest In Operating Partnership (Mezz OP Units)

The Company follows the accounting guidance related to noncontrolling interests in consolidated financial statements, which clarifies that a noncontrolling interest in a subsidiary (minority interests or certain limited partners’ interest, in the case of the Company), subject to the classification and measurement of redeemable securities, is an ownership interest in a consolidated entity which should be reported as equity in the parent company’s consolidated financial statements. The guidance requires a reconciliation of the beginning and ending balances of equity attributable to noncontrolling interests and disclosure, on the face of the consolidated income statement, of those amounts of consolidated net income attributable to the noncontrolling interests. The Company classifies the balances related to minority interests in consolidated joint ventures and limited partners’ interest in the Operating Partnership into the consolidated equity accounts, as appropriate (certain non-controlling interests of the Company are classified in the mezzanine section of the balance sheet (the “Mezz OP Units”) as such Mezz OP Units do not meet the requirements for equity classification, as certain of the holders of OP Units have registration rights that provide such holders with the right to demand registration under the federal securities laws of the common stock of the Company issuable upon conversion of such OP Units). The Company adjusts the carrying value of the Mezz OP Units each period to equal the greater of its historical carrying value or its redemption value. Through March 31, 2011, there have been no cumulative net adjustments recorded to the carrying amounts of the Mezz OP Units.

Cedar Shopping Centers, Inc.

The following is an analysis of the activity relating to the Mezz OP units:

Balance, December 31, 2010		$	7,053,000
Net loss			(119,000	)
Unrealized gain on change in fair value of cash flow hedges			2,000
Total other comprehensive loss			(117,000	)
Distributions			(58,000	)
Reallocation adjustment of limited partners’ interest			(61,000	)
Balance, March 31, 2011		$	6,817,000

Earnings/ Dividends Per Share

Basic earnings per share (“EPS”) is computed by dividing net (loss) income attributable to the Company’s common shareholders by the weighted average number of common shares outstanding for the period (including restricted shares and shares held by Rabbi Trusts as these are participating securities). Fully-diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into shares of common stock. The calculation of the number of such additional shares was anti-dilutive for the three months ended March 31, 2011 as the Company reported a net loss for that period. The calculation of the number of such additional shares was 24,000 for the three months ended March 31, 2010 and related to the warrants issued to RioCan prior to their exercise; however, such amount was anti-dillutive as the Company reported a net loss for that period. Fully-diluted EPS was the same as basic EPS for both periods.

Dividends to common shareholders declared during the three months ended March 31, 2011 and March 31, 2010 were $6,052,000 ($0.09 per share) and $0, respectively.

Stock-Based Compensation

The Company’s 2004 Stock Incentive Plan (the “Incentive Plan”) establishes the procedures for the granting of incentive stock options, stock appreciation rights, restricted shares, performance units and performance shares. The maximum number of shares of the Company’s common stock that may be issued pursuant to the Incentive Plan is 4,850,000 (including a 2,100,000 share increase approved by the Company’s Board of Directors on March 21, 2011, subject to shareholder approval), and the maximum number of shares that may be granted to a participant in any calendar year may not exceed 250,000. Substantially all grants issued pursuant to the Incentive Plan are “restricted stock grants” which specify vesting (i) upon the third anniversary of the date of grant for time-based grants, or (ii) upon the completion of a designated period of performance for performance-based grants and satisfaction of performance criteria. Time—based grants are valued according to the market price for the Company’s common stock at the date of grant. For performance-based grants, the Company generally engages an independent appraisal company to determine the value of the shares at the date of grant, taking into account the underlying contingency risks associated with the performance criteria.

Cedar Shopping Centers, Inc.

In January 2009, the Company issued 218,000 shares of common stock as performance-based grants, based on the total annual return on an investment in the Company’s common stock (“TSR”) over the three-year period ending December 31, 2011, with 75% to vest if such TSR is equal to, or greater than an average of 6% TSR per year on the Company’s common stock, and 25% to vest based on a comparison of TSR for such three years to the Company’s peer group. The independent appraisal determined the values of the performance-based shares to be $5.44 and $6.48 per share, respectively, compared to a market price at the date of grant of $7.02 per share.

In January 2010, the Company issued 227,000 shares of common stock as performance-based grants. As modified in September 2010, one-half of these amounts will vest upon the satisfaction of the following conditions: (a) if the TSR on the Company’s common stock is at least an average of 6% per year for the three years ending December 31, 2012, and (b) if there is a positive comparison of TSR on the Company’s common stock to the median of the TSR for the Company’s peer group for the three years ending December 31, 2012. The independent appraisal determined the values of the category (a) and (b) performance-based shares to be $4.56 per share and $6.00 per share, respectively, compared to a market price at the date of grant of $6.70 per share.

In January 2011, the Company issued 275,000 shares of common stock as performance-based grants. One-half of these amounts will vest upon the satisfaction of the following conditions: (a) if the TSR on the Company’s common stock is at least an average of 8% per year for the three years ending December 31, 2013, and (b) if there is a positive comparison of TSR on the Company’s common stock to the median of the TSR for the Company’s peer group for the three years ending December 31, 2013. The independent appraisal determined the values of the category (a) and (b) performance-based shares to be $4.40 per share and $5.91 per share, respectively, compared to a market price at the date of grant of $6.54 per share.

Cedar Shopping Centers, Inc.

The additional restricted shares issued during the three months ended March 31, 2011 and 2010 were time-based grants, and amounted to 299,000 shares and 274,000 shares, respectively. The value of all grants is being amortized on a straight-line basis over the respective vesting periods (irrespective of achievement of the performance grants) adjusted, as applicable, for fluctuations in the market value of the Company’s common stock and forfeiture assumptions. Those grants of restricted shares that are transferred to Rabbi Trusts are classified as treasury stock on the Company’s consolidated balance sheet. The following table sets forth certain stock- based compensation information for the three months ended March 31, 2011 and 2010, respectively:

		March 31
		2011				2010
Restricted share grants			574,000				501,000
Average per-share value		$	5.70			$	6.55
Recorded as deferred compensation, net		$	3,189,000			$	3,275,000
Charged to operations:
Amortization relating to stock-based compensation		$	979,000			$	706,000
Adjustments to reflect changes in market price of Company’s common stock			(150,000	)			509,000
Total charged to operations		$	829,000			$	1,215,000
Non-vested shares:
Non-vested, beginning of period			1,280,000				980,000
Grants			574,000				501,000
Vested during period			(291,000	)			(113,000	)
Forfeitures/cancellations			(15,000	)			—
Non-vested, end of period			1,548,000				1,368,000
Average value of non-vested shares (based on valuation at date of grant)		$	5.54			$	6.49
Weighted average value of shares forfeited		$	5.66			$	—
Value of shares vested during the period (based on valuation at date of grant)		$	2,594,000			$	1,790,000

At March 31, 2011, 2.6 million shares remained available for grants pursuant to the Incentive Plan (including 2.1 million shares subject to shareholder approval), and $5.1 million remained as deferred compensation, to be amortized over various periods ending in January 2014.

During 2001, pursuant to the 1998 Stock Option Plan (the “Option Plan”), the Company granted to the then directors options to purchase an aggregate of approximately 13,000 shares of common stock at $10.50 per share, the market value of the Company’s common stock on the date of the grant. The options are fully exercisable and expire on July 11, 2011. In connection with the adoption of the Incentive Plan, the Company agreed that it would not grant any more options under the Option Plan.

In connection with an acquisition of a shopping center in 2002, the Operating Partnership issued warrants to purchase approximately 83,000 OP Units to a then minority interest partner in the property. Such warrants have an exercise price of $13.50 per unit, subject to certain anti-dilution adjustments, are fully vested, and expire on May 31, 2012.

Cedar Shopping Centers, Inc.

Supplemental consolidated statements of cash flows information

		Three months ended March 31,
		2011				2010
Supplemental disclosure of cash activities:
Interest paid		$	11,270,000			$	13,620,000
Supplemental disclosure of non-cash activities:
Additions to deferred compensation plans			3,189,000				3,275,000
Assumption of mortgage loans payable — disposition			—				(7,740,000	)
Conversion of OP Units into common stock			—				163,000
Purchase accounting allocations:
Intangible lease assets			—				(2,130,000	)
Other non-cash investing and financing activities:
Accrued interest rate swap liabilities			(191,000	)			(1,110,000	)
Accrued real estate improvements and construction escrows			(299,000	)			(2,190,000	)
Capitalization of deferred financing costs			264,000				293,000
Deconsolidation of properties transferred to joint venture:
Real estate, net			—				79,542,000
Other assets/liabilties, net			—				(60,366,000	)
Investment in and advances to unconsolidated joint venture			—				4,504,000
Settlement receivable from unconsolidated joint venture			—				3,705,000

Recently-Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued updated guidance on fair value measurements and disclosures, which requires disclosure of details of significant asset or liability transfers in and out of Level 1 and Level 2 measurements within the fair value hierarchy and inclusion of gross purchases, sales, issuances, and settlements in the rollforward of assets and liabilities valued using Level 3 inputs within the fair value hierarchy. The guidance also clarifies and expands existing disclosure requirements related to the disaggregation of fair value disclosures and inputs used in arriving at fair values for assets and liabilities using Level 2 and Level 3 inputs within the fair value hierarchy. This guidance was effective for interim and annual reporting periods beginning after December 15, 2009, except for the gross presentation of the Level 3 rollforward, which is required for annual reporting periods beginning after December 15, 2010, and for the respective interim periods within those years. The adoption of the guidance that became effective on January 1, 2010 and January 1, 2011 did not have a material effect on the consolidated financial statements.

Cedar Shopping Centers, Inc.

Note 3. Real Estate/Discontinued Operations/Investment in Cedar/RioCan Joint Venture

The following are the significant real estate transactions that occurred during the three months ended March 31, 2011.

Wholly-owned properties

On January 14, 2011, the Company acquired Colonial Commons, a shopping center located in Lower Paxton Township, Pennsylvania. The purchase price for the property was approximately $49.1 million. At closing, the Company entered into a first mortgage in the amount of $28.1 million, which bears interest at 5.55% per annum.

On February 14, 2011, the Company completed the sale of a development land parcel, located near Ephrata, Pennsylvania for approximately $1.9 million, which approximated its carrying value at December 31, 2010.

At March 31, 2011 a substantial portion of the Company’s real estate was pledged as collateral for mortgage loans payable and the revolving credit facilities.

Discontinued operations

During the recent volatile economic environment, the Company’s properties in Ohio, principally drugstore-anchored centers, were disproportionately impacted, relative to the Company’s other properties, by continuing unemployment and adverse economic conditions attributable in large part to the decline in automobile production and sales which, in turn, resulted in factory closings and/or downsizing. This has resulted in disproportionately larger vacancies at those properties. As a result of the challenges in maintaining viable tenancies in those areas, the Company has developed a strategy to dispose of these and several other properties.

Cedar Shopping Centers, Inc.

During the period from January 1, 2010 through March 31, 2011, the Company sold, or treated as “held for sale”, 24 of its properties, including a number of drug store/convenience centers (it is the Company’s present intention to sell many of these drug store/convenience centers to certain members of the group from which they were originally acquired). The carrying values of the assets and liabilities of these properties, principally the net book values of the real estate and the related mortgage loans payable to be assumed by the buyers, have been reclassified as “held for sale” on the Company’s consolidated balance sheets at March 31, 2011 and December 31, 2010. In addition, the properties’ results of operations have been classified as “discontinued operations” for all periods presented. In connection therewith, net impairment charges of $9.9 million and $39.5 million were recorded for the three months ended March 31, 2011 and the year ended December 31 2010, respectively (including $0.2 million during the three months ended March 31, 2010). The 2011 charge includes approximately $2.0 million for two additional properties reclassified to “held for sale” during the period and approximately $7.9 million principally representing adjustments to the net realizable values of certain of the properties treated as “held for sale” as of December 31, 2010 based principally on changes in the structure of previously negotiated transactions. On March 22, 2011, the Company terminated a contract to swap three properties for certain land parcels in Ohio and instead entered into a new agreement to sell the properties for cash (and assumption of existing debt) which resulted in an additional impairment charge recognized in the first quarter of 2011. The buyers are the same group with which the Company has entered into a contract, on April 29, 2011, for the sale of 14 additional “held for sale” properties discussed in more detail below. Such charges were based on a comparison of the carrying values of the properties with either (1) the actual sales price less costs to sell for the properties sold or contract amounts for properties in the process of being sold, or (2) estimated sales prices based on discounted cash flow analyses if no contract amounts were as yet being negotiated, as discussed in more detail in Note 2 — “Fair Value Measurements”. Prior to the Company’s plan to dispose of assets reclassified to “held for sale”, the Company performed recoverability analyses based on the estimated cash flows that were expected to result from the real estate investments’ use and eventual disposal. The projected undiscounted cash flows of each asset reflected that the carrying value of each real estate investment would be recovered. However, as a result of the assets’ meeting the “held for sale” criteria, such assets have been written down to their estimated fair values as described above. On March 30, 2011, the Company completed the sale of two of the properties treated as “held for sale” for approximately $3.8 million, which approximated their adjusted carrying values. In addition, on April 15, 2011, the Company completed the sale of another of the properties treated as “held for sale” for approximately $10.8 million, which approximated $0.5 million in excess of its adjusted carrying value.

Cedar Shopping Centers, Inc.

The following table summarizes information relating to the Company’s properties which were sold, or treated as “held for sale”, as of March 31, 2011 and December 31, 2010:

												Mortgage loans payable
				Property carrying value								Maturity				Int.				Financial statement carrying value
Property Description		State		Mar. 31, 2011				Dec. 31, 2010				date				rate				Mar. 31, 2011				Dec. 31, 2010
Carrolton Discount Drug Mart Plaza (a)		OH		$	—			$	—				—				—			$	—			$	—
Centerville Discount Drug Mart Plaza		OH			2,481,000				2,481,000			May 2015					5.2	%			2,729,000				2,743,000
Clyde Discount Drug Mart Plaza		OH			2,167,000				2,287,000			May 2015					5.2	%			1,893,000				1,903,000
Columbia Mall		PA			10,377,000				10,774,000				—				—				—				—
Enon Discount Drug Mart Plaza (b)		OH			—				4,598,000				—				—				—				—
Family Dollar at Zanesville (a)		OH			—				—				—				—				—				—
Fairfield Plaza		CT			10,133,000				10,150,000			July 2015					5.0	%			4,984,000				5,009,000
FirstMerit Bank at Akron		OH			711,000				760,000				—				—				—				—
FirstMerit Bank at Cuyahoga Falls		OH			569,000				569,000				—				—				—				—
Gahanna Discount Drug Mart Plaza		OH			5,232,000				7,103,000			Nov 2016					5.8	%			4,904,000				4,924,000
Grove City Discount Drug Mart Plaza		OH			2,771,000				2,911,000				—				—				—				—
Hilliard Discount Drug Mart Plaza		OH			2,489,000				2,627,000				—				—				—				—
Hills & Dales Discount Drug Mart Plaza (b)		OH			—				3,263,000				—				—				—				—
Lodi Discount Drug Mart Plaza		OH			2,466,000				2,550,000			May 2015					5.2	%			2,307,000				2,319,000
Long Reach Village (a)		MD			—				—				—				—				—				—
Mason Discount Drug Mart Plaza		OH			4,347,000				4,499,000				—				—				—				—
McCormick Place		OH			1,947,000				3,942,000			Aug 2017					6.1	%			2,577,000				2,587,000
Ontario Discount Drug Mart Plaza		OH			2,534,000				2,534,000			May 2015					5.2	%			2,131,000				2,141,000
Pickerington Discount Drug Mart Plaza		OH			3,403,000				3,532,000			Jul 2015					5.0	%			4,051,000				4,072,000
Polaris Discount Drug Mart Plaza		OH			4,396,000				4,640,000			May 2015					5.2	%			4,347,000				4,369,000
Pondside Plaza (a)		NY			—				—				—				—				—				—
Powell Discount Drug Mart Plaza (a)		OH			—				—				—				—				—				—
Shelby Discount Drug Mart Plaza		OH			1,824,000				1,925,000			May 2015					5.2	%			2,130,000				2,141,000
Westlake Discount Drug Mart Plaza		OH			1,579,000				1,667,000			Dec 2016					5.6	%			3,152,000				3,165,000
					59,426,000				72,812,000												35,205,000				35,373,000
Development Land Parcel (b)		PA			—				1,849,000				—				—				—				—
				$	59,426,000			$	74,661,000											$	35,205,000			$	35,373,000

Cedar Shopping Centers, Inc.

The following is a summary of the components of (loss) income from discontinued operations for the three months ended March 31, 2011 and 2010, respectively:

		Three months ended March 31,
		2011				2010
Revenues:
Rents		$	2,057,000			$	2,681,000
Expense recoveries			695,000				712,000
Other			307,000				30,000
Total revenues			3,059,000				3,423,000
Expenses:
Operating, maintenance and management			989,000				1,359,000
Real estate and other property-related taxes			517,000				579,000
Depreciation and amortization			81,000				1,232,000
Interest expense			470,000				611,000
			2,057,000				3,781,000
Income (loss) from discontinued operations before impairment charges			1,002,000				(358,000	)
Impairment charges			(9,916,000	)			(248,000	)
Loss from discontinued operations		$	(8,914,000	)		$	(606,000	)
Gain on sales of discontinued operations		$	—			$	175,000

RioCan Joint Venture

The Company and RioCan have entered into an 80% (RioCan) and 20% (Cedar) joint venture (i) initially for the purchase of seven supermarket-anchored properties previously owned by the Company, and (ii) then to acquire additional primarily supermarket-anchored properties in the Company’s primary market areas, in the same joint venture format. The transfers of the initial seven properties, which commenced in December 2009, were completed in May 2010. At March 31, 2011, the Company was owed approximately $2.8 million ($0.7 million related to contingent consideration) relating to post-closing adjustments applicable to properties transferred to or acquired by the joint venture.

During the three months ended March 31, 2011 and 2010, the Company earned approximately $0.5 million and $0.2 million, respectively, in fees from the joint venture, representing accounting fees, management fees, acquisition fees and financing fees. Such fees are included in other revenues in the accompanying statements of operations. During the three months ended March 31, 2010, the Company recorded an impairment charge of approximately $1.6 million, related principally to the remaining completion work at the Blue Mountain Commons property transferred to the joint venture in December 2009, and paid fees to its investment advisor of approximately $0.2 million which are included in transaction costs in the accompanying statement of operations.

Cedar Shopping Centers, Inc.

The following are the 21 properties owned by the Cedar/RioCan joint venture properties as of March 31, 2011:

				Date of			Transfer
				transfer			or				Mortgage
				or			purchase				Loans				Int.
Property Description		State		acquisition			price				Payable (b)				rate
Blue Mountain Commons		PA		12/10/2009	(a)		$	32,150,000			$	17,500,000				5.0	%
Columbus Crossing		PA		2/23/2010	(a)			24,538,000				16,880,000				6.8	%
Creekview Plaza		PA		9/29/2010				26,240,000				14,432,000				4.8	%
Cross Keys Place		NJ		10/13/2010				26,336,000				14,600,000				5.1	%
Exeter Commons		PA		8/3/2010				53,000,000				30,000,000				5.3	%
Franklin Village Plaza		MA		2/4/2010	(a)			54,656,000				43,500,000				4.8	%
Gettysburg Marketplace		PA		10/21/2010				19,850,000				10,918,000				5.0	%
Loyal Plaza		PA		5/26/2010	(a)			26,950,000				12,615,000				7.2	%
Marlboro Crossroads		MD		10/21/2010				12,500,000				6,875,000				5.1	%
Monroe Marketplace		PA		9/29/2010				41,990,000				23,095,000				4.8	%
Montville Commons		CT		9/29/2010				18,900,000				10,500,000				5.8	%
New River Valley		VA		9/29/2010				27,970,000				15,163,000				4.8	%
Northland Center		PA		10/21/2010				10,248,000				6,298,000				5.0	%
Pitney Road Plaza		PA		9/29/2010				11,060,000				6,083,000				4.8	%
Shaw’s Plaza		MA		4/27/2010	(a)			20,363,000				14,200,000				6.0	%
Stop & Shop Plaza		CT		4/27/2010	(a)			8,974,000				7,000,000				6.2	%
Sunset Crossing		PA		12/10/2009	(a)			9,850,000				4,500,000				5.0	%
Sunrise Plaza		NJ		9/29/2010				26,460,000				13,728,000				4.8	%
Town Square Plaza		PA		1/26/2010				18,854,000				11,000,000				5.0	%
Towne Crossings		VA		10/21/2010				19,000,000				10,450,000				5.0	%
York Marketplace		PA		10/21/2010				29,200,000				16,060,000				5.0	%
							$	519,089,000			$	305,397,000

Cedar Shopping Centers, Inc.

The following summarizes certain financial information related to the Company’s investment in the Cedar/RioCan unconsolidated joint venture at March 31, 2011 and December 31, 2010, respectively, and for the three months ended March 31, 2011 and 2010, respectively:

		Cedar/RioCan Joint Venture
		March 31, 2011				December 31, 2010
Assets:
Real estate, net (a)		$	519,840,000			$	524,447,000
Cash and cash equivalents			8,654,000				5,934,000
Restricted cash			4,925,000				4,464,000
Rent and other receivables			3,302,000				2,074,000
Straight-line rent			1,457,000				1,000,000
Deferred charges, net			12,779,000				13,269,000
Other assets			5,404,000				8,514,000
Total assets		$	556,361,000			$	559,702,000
Liabilities and partners’ capital:
Mortgage loans payable (a)		$	303,157,000			$	293,400,000
Due to the Company			2,796,000				6,036,000
Unamortized lease liability			23,736,000				24,573,000
Other liabilities			7,821,000				7,738,000
Preferred stock			97,000				97,000
Partners’ capital:
RioCan			174,692,000				181,239,000
The Company			44,062,000				46,619,000
Total partners’ capital			218,754,000				227,858,000
Total liabilties and partners’ capital		$	556,361,000			$	559,702,000