CEDAR REALTY TRUST, INC. - Quarter Report: 2017 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

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

COMMISSION FILE NUMBER: 001-31817

CEDAR REALTY TRUST, 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

(Registrant's telephone number, including area code)

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 ☒ No ☐

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 ☒ No ☐

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	☐		Accelerated filer	☒

Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐

			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At October 31, 2017, there were 91,316,792 shares of Common Stock, $0.06 par value, outstanding.

CEDAR REALTY TRUST, INC.

INDEX

Forward-Looking Statements		3

Part I. Financial Information

Item 1.	Financial Statements (unaudited)

	Consolidated Balance Sheets – September 30, 2017 and December 31, 2016	4

	Consolidated Statements of Operations– Three and nine months ended September 30, 2017 and 2016	5

	Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2017 and 2016	6
	Consolidated Statement of Equity– Nine months ended September 30, 2017	7

	Consolidated Statements of Cash Flows– Nine months ended September 30, 2017 and 2016	8

	Notes to Consolidated Financial Statements – September 30, 2017	9-18

Item 2.	Management’s Discussion and Analysis of Financial Condition And Results of Operations	19-27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27-28

Part II. Other Information

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	29

Signatures		30

Forward-Looking Statements

Certain statements made in this Form 10-Q or incorporated by reference herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations, are generally identifiable by use of the words “may”, “will”, “should”, “estimates”, “projects”, “anticipates”, “believes”, “expects”, “intends”, “future”, and words of similar import, or the negative thereof. Factors which could cause actual results to differ materially from current expectations include, but are not limited to: adverse general economic conditions in the United States and uncertainty in the credit and retail markets; financing risks, such as the inability to obtain new financing or refinancing on favorable terms as the result of market volatility or instability; risks related to the market for retail space generally, including reductions in consumer spending, variability in retailer demand for leased space, tenant bankruptcies, adverse impact of internet sales demand, ongoing consolidation in the retail sector and changes in economic conditions and consumer confidence; risks endemic to real estate and the real estate industry generally; the impact of the Company’s level of indebtedness on operating performance; inability of tenants to meet their rent and other lease obligations; adverse impact of new technology and e-commerce developments on the Company’s tenants; competitive risk; risks related to the geographic concentration of the Company’s properties in the Washington, D.C. to Boston corridor; the effects of natural and other disasters; the inability of the Company to realize anticipated returns from its redevelopment activities; and the risk factors discussed under Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Except for ongoing obligations to disclose material information as required by the federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. All of the above factors are difficult to predict, contain uncertainties that may materially affect the Company’s actual results and may be beyond the Company’s control. New factors emerge from time to time, and it is not possible for the Company’s management to predict all such factors or to assess the effects of each factor on the Company’s business. Accordingly, there can be no assurance that the Company’s current expectations will be realized.

CEDAR REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30,			December 31,
	2017			2016
ASSETS
Real estate:
Land	$	304,237,000		$	301,299,000
Buildings and improvements		1,225,171,000			1,195,130,000
		1,529,408,000			1,496,429,000
Less accumulated depreciation		(332,893,000	)		(313,070,000	)
Real estate, net		1,196,515,000			1,183,359,000

Real estate held for sale		1,815,000			—
Cash and cash equivalents		2,240,000			2,882,000
Restricted cash		2,523,000			2,880,000
Receivables		17,275,000			14,894,000
Other assets and deferred charges, net		35,421,000			29,506,000
TOTAL ASSETS	$	1,255,789,000		$	1,233,521,000

LIABILITIES AND EQUITY
Mortgage loans payable	$	135,815,000		$	138,243,000
Unsecured revolving credit facility		95,000,000			72,000,000
Unsecured term loans		396,855,000			397,502,000
Accounts payable and accrued liabilities		30,572,000			23,463,000
Unamortized intangible lease liabilities		18,325,000			20,316,000
Total liabilities		676,567,000			651,524,000

Commitments and contingencies		—			—

Equity:
Cedar Realty Trust, Inc. shareholders' equity:
Preferred stock ($.01 par value, 12,500,000 shares authorized):
Series B ($25.00 per share liquidation value, 3,450,000 and 10,000,000 shares authorized, respectively, 3,450,000 and 7,950,000 shares issued and outstanding, respectively)		82,734,000			190,661,000
Series C ($25.00 per share liquidation value, 6,050,000 and 0 shares authorized, respectively, 3,000,000 and 0 shares issued and outstanding, respectively)		74,954,000			—
Common stock ($.06 par value, 150,000,000 shares authorized, 91,319,000 and 85,316,000 shares, issued and outstanding, respectively)		5,479,000			5,119,000
Treasury stock (3,367,000 and 3,264,000 shares, respectively, at cost)		(18,539,000	)		(18,129,000	)
Additional paid-in capital		876,121,000			829,526,000
Cumulative distributions in excess of net income		(445,007,000	)		(426,864,000	)
Accumulated other comprehensive income		2,012,000			427,000
Total Cedar Realty Trust, Inc. shareholders' equity		577,754,000			580,740,000
Noncontrolling interests:
Minority interests in consolidated joint ventures		(739,000	)		(1,132,000	)
Limited partners' OP Units		2,207,000			2,389,000
Total noncontrolling interests		1,468,000			1,257,000
Total equity		579,222,000			581,997,000
TOTAL LIABILITIES AND EQUITY	$	1,255,789,000		$	1,233,521,000

See accompanying notes to consolidated financial statements

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
REVENUES
Rents	$	28,362,000		$	30,159,000		$	84,790,000		$	89,186,000
Expense recoveries		7,436,000			7,523,000			22,796,000			23,952,000
Other		600,000			111,000			1,285,000			778,000
Total revenues		36,398,000			37,793,000			108,871,000			113,916,000
EXPENSES
Operating, maintenance and management		5,578,000			5,555,000			18,084,000			18,346,000
Real estate and other property-related taxes		4,931,000			5,019,000			14,597,000			14,840,000
General and administrative		4,121,000			4,318,000			12,494,000			13,640,000
Acquisition pursuit costs		-			293,000			156,000			3,417,000
Depreciation and amortization		9,807,000			10,413,000			30,178,000			31,046,000
Total expenses		24,437,000			25,598,000			75,509,000			81,289,000

OTHER
Gain on sale		—			—			7,099,000			59,000
Impairment charges		—			(6,270,000	)		(9,850,000	)		(6,270,000	)
Total other		—			(6,270,000	)		(2,751,000	)		(6,211,000	)

OPERATING INCOME		11,961,000			5,925,000			30,611,000			26,416,000

NON-OPERATING INCOME AND EXPENSES
Interest expense		(5,544,000	)		(6,636,000	)		(16,638,000	)		(20,769,000	)
Early extinguishment of debt costs		—			(50,000	)		—			(37,000	)
Total non-operating income and expenses		(5,544,000	)		(6,686,000	)		(16,638,000	)		(20,806,000	)

NET INCOME (LOSS)		6,417,000			(761,000	)		13,973,000			5,610,000

Net (income) loss attributable to noncontrolling interests:
Minority interests in consolidated joint ventures		(138,000	)		59,000			(393,000	)		239,000
Limited partners' interest in Operating Partnership		21,000			15,000			22,000			15,000
Total net (income) loss attributable to noncontrolling interests		(117,000	)		74,000			(371,000	)		254,000

NET INCOME (LOSS) ATTRIBUTABLE TO CEDAR REALTY TRUST, INC.		6,300,000			(687,000	)		13,602,000			5,864,000

Preferred stock dividends		(3,535,000	)		(3,602,000	)		(10,739,000	)		(10,806,000	)
Preferred stock redemption costs		(7,890,000	)		-			(7,890,000	)		-

NET (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(5,125,000	)	$	(4,289,000	)	$	(5,027,000	)	$	(4,942,000	)

NET (LOSS) PER COMMON SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS (BASIC AND DILUTED)	$	(0.06	)	$	(0.05	)	$	(0.07	)	$	(0.07	)

Weighted average number of common shares - basic and diluted		85,642,000			81,676,000			83,049,000			81,670,000

See accompanying notes to consolidated financial statements

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016

Net income (loss)	$	6,417,000		$	(761,000	)	$	13,973,000		$	5,610,000

Other comprehensive income - unrealized gain (loss) on change in fair value of cash flow hedges		1,279,000			2,506,000			1,591,000			(7,060,000	)

Comprehensive income (loss)		7,696,000			1,745,000			15,564,000			(1,450,000	)

Comprehensive (income) loss attributable to noncontrolling interests		(122,000	)		59,000			(377,000	)		279,000

Comprehensive income (loss) attributable to Cedar Realty Trust, Inc.	$	7,574,000		$	1,804,000		$	15,187,000		$	(1,171,000	)

See accompanying notes to consolidated financial statements

CEDAR REALTY TRUST, INC.

Consolidated Statement of Equity

Nine months ended September 30, 2017

(unaudited)

	Cedar Realty Trust, Inc. Shareholders
	Preferred stock												Common stock										Cumulative			Accumulated
																	Treasury			Additional			distributions			other
	Series B						Series C										stock,			paid-in			in excess of			comprehensive
	Shares			Amount			Shares			Amount			Shares		Amount		at cost			capital			net income			income		Total
Balance, December 31, 2016		7,950,000		$	190,661,000			—		$	-			85,316,000	$	5,119,000	$	(18,129,000	)	$	829,526,000		$	(426,864,000	)	$	427,000	$	580,740,000
Net income		—			—			—			—			—		—		—			—			13,602,000			—		13,602,000
Unrealized gain on change in fair value of flow hedges		—			—			—			—			—		—		—			—			—			1,585,000		1,585,000
Share-based compensation, net		—			—			—			—			251,000		15,000		(410,000	)		2,984,000			—			—		2,589,000
Net proceeds from sales of Series C Shares		—			—			3,000,000			74,954,000			—		—		—			(2,617,000	)		—			—		72,337,000
Redemptions of Series B Shares		(4,500,000	)		(107,927,000	)		—			—			—		—		—			3,307,000			(7,890,000	)		—		(112,510,000	)
Common stock sales, net of issuance expenses		—			—			—			—			5,752,000		345,000		—			42,819,000			—			—		43,164,000
Preferred stock dividends		—			—			—			—			—		—		—			—			(10,739,000	)		—		(10,739,000	)
Distributions to common shareholders/noncontrolling interests		—			—			—			—			—		—		—			—			(13,116,000	)		—		(13,116,000	)
Redemption of OP Units		—			—			—			—			—		—		—			—			—			—		—
Reallocation adjustment of limited partners' interest		—			—			—			—			—		—		—			102,000			—			—		102,000
Balance, September 30, 2017		3,450,000		$	82,734,000			3,000,000		$	74,954,000			91,319,000	$	5,479,000	$	(18,539,000	)	$	876,121,000		$	(445,007,000	)	$	2,012,000	$	577,754,000

	Noncontrolling Interests
	Minority			Limited
	interest in			partners'
	consolidated			interest in
	joint			Operating						Total
	ventures			Partnership			Total			Equity
Balance, December 31, 2016	$	(1,132,000	)	$	2,389,000		$	1,257,000		$	581,997,000
Net income		393,000			(22,000	)		371,000			13,973,000
Unrealized gain on change in fair value of flow hedges		—			6,000			6,000			1,591,000
Share-based compensation, net		—			—			—			2,589,000
Net proceeds from sales of Series C Shares		—			—			—			72,337,000
Redemptions of Series B Shares		—			—			—			(112,510,000	)
Common stock sales, net of issuance expenses		—			—			—			43,164,000
Preferred stock dividends		—			—			—			(10,739,000	)
Distributions to common shareholders/noncontrolling interests		—			(53,000	)		(53,000	)		(13,169,000	)
Redemption of OP Units		—			(11,000	)		(11,000	)		(11,000	)
Reallocation adjustment of limited partners' interest		—			(102,000	)		(102,000	)		—
Balance, September 30, 2017	$	(739,000	)	$	2,207,000		$	1,468,000		$	579,222,000

See accompanying notes to consolidated financial statements

CEDAR REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine months ended September 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	13,973,000		$	5,610,000
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sales		(7,099,000	)		(59,000	)
Impairment charges		9,850,000			6,270,000
Straight-line rents		(787,000	)		73,000
Provision for doubtful accounts		1,215,000			964,000
Depreciation and amortization		30,178,000			31,046,000
Amortization of intangible lease liabilities, net		(1,900,000	)		(2,105,000	)
Expense relating to share-based compensation, net		2,693,000			2,145,000
Amortization (including accelerated write-off) of deferred financing costs		1,040,000			1,214,000
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Rents and other receivables		(3,112,000	)		(1,833,000	)
Prepaid expenses and other		(5,736,000	)		(4,549,000	)
Accounts payable and accrued liabilities		1,827,000			1,791,000
Net cash provided by operating activities		42,142,000			40,567,000

INVESTING ACTIVITIES
Acquisitions of real estate		(32,442,000	)		(31,928,000	)
Expenditures for real estate improvements		(17,115,000	)		(10,487,000	)
Net proceeds from sales of real estate		10,372,000			14,494,000
Construction escrows and other		(303,000	)		2,427,000
Net cash (used in) investing activities		(39,488,000	)		(25,494,000	)

FINANCING ACTIVITIES
Repayments under revolving credit facility		(134,500,000	)		(106,000,000	)
Advances under revolving credit facility		157,500,000			158,000,000
Advances under term loans		—			100,000,000
Mortgage borrowing		—			50,000,000
Mortgage repayments		(2,496,000	)		(189,437,000	)
Payments of debt financing costs		(2,498,000	)		(1,400,000	)
Noncontrolling interests:
Distributions to limited partners		(53,000	)		(53,000	)
Redemptions of OP Units		(11,000	)		(8,000	)
Net proceeds from sale of preferred stock		72,337,000			—
Redemptions of preferred stock		(112,510,000	)		—
Common stock sales less issuance expenses, net		43,164,000			(161,000	)
Preferred stock dividends		(11,113,000	)		(10,806,000	)
Distributions to common shareholders		(13,116,000	)		(12,783,000	)
Net cash (used in) financing activities		(3,296,000	)		(12,648,000	)

Net (decrease) increase in cash and cash equivalents		(642,000	)		2,425,000
Cash and cash equivalents at beginning of period		2,882,000			2,083,000
Cash and cash equivalents at end of period	$	2,240,000		$	4,508,000

See accompanying notes to consolidated financial statements

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

Note 1. Business and Organization

Cedar Realty Trust, Inc. (the “Company”) is a real estate investment trust (“REIT”) that focuses primarily on ownership, operation and redevelopment of grocery-anchored shopping centers in high-density urban markets from Washington, D.C. to Boston. At September 30, 2017, the Company owned and managed a portfolio of 61 operating properties (excluding properties “held for sale”).

Cedar Realty Trust 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 September 30, 2017, the Company owned a 99.6% economic interest in, and was the sole general partner of, the Operating Partnership. The limited partners’ interest in the Operating Partnership (0.4% at September 30, 2017) 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 349,000 OP Units outstanding at September 30, 2017 are economically equivalent to the Company’s common stock. The holders of OP Units have the right to exchange their OP Units for the same number of shares of the Company’s common stock or, at the Company’s option, for cash.

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

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation/Basis of Preparation

The accompanying unaudited 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 statement disclosures. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring accruals) have been included. The financial statements are prepared on the accrual basis in accordance with GAAP, which requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements. Actual results could differ from these estimates. The unaudited 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, 2016.

The unaudited 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 for which it is the primary beneficiary.

Supplemental Consolidated Statements of Cash Flows Information

	Nine months ended September 30,
	2017		2016
Supplemental disclosure of cash activities:
Cash paid for interest	$	15,945,000	$	20,872,000
Supplemental disclosure of non-cash activities:
Capitalization of interest and financing costs		483,000		541,000
Mortgage loan payable assumed upon acquisition		—		(8,501,000	)

Recently-Issued Accounting Pronouncements

In May 2014, the FASB issued guidance which amends the accounting for revenue recognition. Under the amended guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled to and receive in exchange for those goods or services. Leases are specifically excluded from this guidance and will be governed by the applicable lease codification; however, this update may have implications with respect to certain variable payment terms included in lease agreements. The guidance would be effective for interim and annual reporting

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

periods beginning after December 15, 2017, with early adoption not permitted. The Company is in the final stages of evaluating the guidance and has identified non-lease components in its lease agreements. However, these non-lease components are not in the scope of the revenue standard until the lease accounting standard is adopted, and their materiality is currently in the process of being evaluated. Upon the adoption of the revenue standard, the Company does not believe there will be a material effect on its consolidated financial statements.

In February 2016, the FASB issued guidance which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less will be accounted for pursuant to existing guidance for operating leases. The guidance is expected to result in the recognition of a right-to-use asset and related liability to account for the Company’s future obligations under its ground lease and executive office lease agreements for which the Company is the lessee. Additionally, the guidance will require that lessees and lessors capitalize, as initial direct costs, only those costs that are incurred due to the execution of a lease. Under this guidance, allocated payroll costs and other costs that are incurred regardless of whether the lease is obtained will no longer be capitalized as initial direct costs and instead will be expensed as incurred. Lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for operating and other leases. The new lease accounting guidance requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption being permitted. The Company is currently in the process of evaluating the impact the adoption of the guidance will have on its consolidated financial statements.

In March 2016, the FASB issued guidance which amends the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and the policy election with respect to accounting for forfeitures either as they occur or by estimating forfeitures. The guidance was adopted on January 1, 2017. The Company has elected to account for forfeitures as they occur, and the guidance did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued guidance which enhances the methodology of measuring expected credit losses to include the use of forward-looking information to better calculate credit loss estimates. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, including accounts receivable, straight-line rent receivables, loans, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures. The guidance will require that the Company estimate the lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. The Company will also be required to disclose information about how it developed the allowances, including changes in the factors that influenced the Company’s estimate of expected credit losses and the reasons for those changes. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently in the process of evaluating the impact the adoption of the guidance will have on its consolidated financial statements.

In August 2016, the FASB issued guidance that clarifies how an entity should classify certain cash receipts and cash payments on its statement of cash flows. The guidance established that an entity will classify cash payments for debt prepayment or extinguishment costs as financing cash flows. In addition, the guidance provides entities with an alternative to consider regarding the nature of the source of distributions that an investor receives from an equity method investment when classifying distributions received in its cash flow statement (the nature of the distribution approach). Alternatively, entities can elect to classify the distributions received from equity method investees based on the cumulative earnings approach. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption being permitted. The Company has evaluated the guidance and does not believe it will have a material impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued guidance that will require entities to show the changes in the total of cash, cash equivalents and restricted cash in the statement of cash flows. When cash, cash equivalents and restricted cash are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions on the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2017,

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

with early adoption being permitted. The Company has evaluated the guidance and does not believe it will have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued guidance which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset and/or a group of similar identifiable assets; if these criteria are met, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in the guidance on revenue from contracts with customers. The guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption being permitted. The Company has elected to early adopt this guidance effective January 1, 2017. The Company believes that most of its typical acquisitions of real estate will not meet the new definition of a business, and accordingly, will result in the capitalization of associated acquisition pursuit costs, as is the case regarding all acquisitions in 2017.

Note 3. Real Estate

Acquisitions

On February 22, 2017, the Company acquired Christina Crossing, located in Wilmington, Delaware. The purchase price for the property, which was unencumbered, was $27.9 million. The purchase price has been allocated to real estate assets acquired and liabilities assumed.

On July 6, 2017, the Company acquired a parcel adjacent to its South Philadelphia Shopping Center for future expansion. The purchase price for the property, which was unencumbered, was $3.3 million. The purchase price has been allocated to real estate assets acquired and liabilities assumed.

Disposition

On February 1, 2017, the Company sold an outparcel building adjacent to Camp Hill, located in Camp Hill, Pennsylvania, for $10.7 million, resulting in a $7.1 million gain which is included in operating income in the accompanying consolidated statement of operations.

Real Estate Held for Sale

The Company, when applicable, conducts a continuing review of the values for all properties “held for sale” based on final sales prices and sales contracts entered into. Impairment charges/reversals, if applicable, are based on a comparison of the carrying values of the properties with either (1) actual sales prices less costs to sell for properties sold, or contract amounts for properties in the process of being sold, (2) estimated sales prices, less costs to sell, based on discounted cash flow analyses, if no contract amounts are being negotiated (see Note 4 - “Fair Value Measurements”), or (3) with respect to land parcels, estimated sales prices, less costs to sell, based on comparable sales completed in the selected market areas. Prior to the Company’s determination to dispose of properties, which are subsequently reclassified to “held for sale”, the Company performed recoverability analyses based on the estimated undiscounted cash flows that were expected to result from the real estate investments’ use and eventual disposal. The projected undiscounted cash flows of each property reflects that the carrying value of each real estate investment would be recovered. However, as a result of the properties’ meeting the “held for sale” criteria, such properties were written down to the lower of their carrying value and estimated fair values less costs to sell.

As of September 30, 2017, Fredericksburg Way, located in Fredericksburg, Virginia, has been classified as “real estate held for sale” on the accompanying consolidated balance sheet. The Company recorded an impairment charge of $9.9 million during 2017, which is included in operating income in the accompanying consolidated statement of operations.

Note 4. Fair Value Measurements

The carrying amounts of cash and cash equivalents, restricted cash, rents and other receivables, certain other assets, accounts payable and accrued liabilities, and variable-rate debt approximate their fair value due to their terms and/or short-term nature. The fair value of the Company’s investments and liabilities related to share-based compensation were determined to be Level 1 within the valuation hierarchy, and were based on independent values provided by financial institutions.

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

The fair value of the Company’s fixed rate mortgage loans were estimated using available market information and discounted cash flow analyses based on borrowing rates the Company believes it could obtain with similar terms and maturities. As of September 30, 2017 and December 31, 2016, the aggregate fair values of the Company’s fixed rate mortgage loans payable, which were determined to be Level 3 within the valuation hierarchy, were $138.6 million and $143.2 million, respectively; the carrying values of such loans were $135.8 million and $138.2 million, respectively. As of September 30, 2017 and December 31, 2016, respectively, the aggregate fair values of the Company’s unsecured revolving credit facility and term loans approximated the carrying values.

The valuation of the assets and liabilities for the Company’s interest rate swaps, which are measured on a recurring basis, were determined to be Level 2 within the valuation hierarchy, and were based on independent values provided by financial institutions. Such valuations were determined using widely accepted valuation techniques, including discounted cash flow analyses, on the expected cash flows of each derivative. The analyses reflect the contractual terms of the swaps, including the period to maturity, and user-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 that, as of September 30, 2017, 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, 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 consist of real estate held for sale, which, if applicable, are measured on a nonrecurring basis, and have been determined to be (1) Level 2 within the valuation hierarchy, where applicable, based on the respective contracts of sale, adjusted for closing costs and expenses, or (2) Level 3 within the valuation hierarchy, where applicable, based on estimated sales prices, adjusted for closing costs and expenses, determined by discounted cash flow analyses, direct capitalization analyses or a sales comparison approach if no contracts had been concluded. The discounted cash flow and direct capitalization analyses include all estimated cash inflows and outflows over a specific holding period and, where applicable, any estimated debt premiums. These cash flows were composed of unobservable inputs which included forecasted rental revenues and expenses based upon existing in-place leases, 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 sales comparison approach is utilized for certain land values and includes comparable sales that were completed in the selected market areas. The comparable sales utilized in these analyses were based upon observable per acre rates that the Company believes to be within a reasonable range of current market rates for the respective properties.

Valuations were prepared using internally-developed valuation models. These valuations are reviewed and approved, during each reporting period, by a diverse group of management, as deemed necessary, including personnel from the acquisition, accounting, finance, operations, development and leasing departments, and the valuations are updated as appropriate. In addition, the Company may engage third-party valuation experts to assist with the preparation of certain of its valuations.

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

The following tables show the hierarchy for those assets measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, respectively:

	September 30, 2017
Description	Level 1		Level 2		Level 3		Total
Investments related to deferred
compensation liabilities (a)	$	506,000	$	—	$	—	$	506,000
Deferred compensation liabilities (b)	$	506,000	$	—	$	—	$	506,000
Interest rate swaps asset (a)	$	—	$	3,614,000	$	—	$	3,614,000
Interest rate swaps liability (b)	$	—	$	1,392,000	$	—	$	1,392,000


	December 31, 2016
Description	Level 1		Level 2		Level 3		Total
Investments related to deferred
compensation liabilities (a)	$	447,000	$	—	$	—	$	447,000
Deferred compensation liabilities (b)	$	435,000	$	—	$	—	$	435,000
Interest rate swaps asset (a)	$	—	$	3,074,000	$	—	$	3,074,000
Interest rate swaps liability (b)	$	—	$	2,321,000	$	—	$	2,321,000

(a) Included in other assets and deferred charges, net in the accompanying consolidated balance sheets.
(b) Included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

The following table shows the hierarchy for the asset measured at fair value on a non-recurring basis as of September 30, 2017:

	September 30, 2017
Description	Level 1		Level 2		Level 3		Total
Real estate held for sale	$	—	$	—	$	1,815,000	$	1,815,000

There were no assets measured at fair value on a non-recurring basis as of December 31, 2016. The following table details the quantitative information regarding Level 3 assets measured at fair value on a non-recurring basis as of September 30, 2017:

September 30, 2017

Valuation

Unobservable

Description

Fair value

Technique

inputs

Rate

Vacant commercial property

1,815,000

Discounted cash flow

Capitalization rate

9.0%

Discount rate

13.0%

Note 5. Mortgage Loans Payable and Credit Facility

The Company has a $300 million unsecured credit facility which, as amended and restated on September 8, 2017, consists of (1) a $250 million revolving credit facility, expiring on September 8, 2021, and (2) a $50 million term loan, expiring on September 8, 2022. The revolving credit facility may be extended, at the Company’s option, for an additional one-year period, subject to customary conditions. Under an accordion feature, the facility can be increased to $750 million, subject to customary conditions and lending commitments. Interest on borrowings under the revolving credit facility component can range from LIBOR plus 135 basis points (“bps”) to 195 bps (135 bps at September 30, 2017) and interest on borrowings under the term loan component can range from LIBOR plus 130 to 190 bps (130 bps at September 30, 2017), each based on the Company’s leverage ratio. As of September 30, 2017, the Company had $143.4 million available for additional borrowings under the revolving credit facility.

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

On September 8, 2017, the Company also amended and restated the terms of four of its existing unsecured term loans. Interest on the borrowings are based on the Company’s leverage ratio. The terms are as follows:


		As amended		Previously
Amount		Maturity date	Interest range	Maturity date	Interest range
$	75,000,000	February 2021	LIBOR + 130 bps to 190 bps	February 2021	LIBOR + 170 bps to 230 bps
$	50,000,000	February 2022	LIBOR + 130 bps to 190 bps	February 2022	LIBOR + 155 bps to 215 bps
$	50,000,000	September 2022	LIBOR + 130 bps to 190 bps	February 2020	LIBOR + 130 bps to 190 bps
$	75,000,000	September 2024	LIBOR + 170 bps to 225 bps	February 2019	LIBOR + 130 bps to 190 bps

Debt is composed of the following at September 30, 2017:


		September 30, 2017
					Contractual
	Maturity	Balance			interest rates
Description	dates	outstanding			weighted-average
Fixed-rate mortgages	2021-2029	$	135,888,000			4.6%
Unsecured credit facilities:
Variable-rate:
Revolving credit facility (a)	Sep 2021		95,000,000			2.7%
Term loan	Sep 2022		50,000,000			2.6%
Fixed-rate (b):
Term loan	Feb 2021		75,000,000			3.6%
Term loan	Feb 2022		50,000,000			3.0%
Term loan (c)	Sep 2022		50,000,000			2.8%
Term loan	Apr 2023		100,000,000			3.2%
Term loan (d)	Sep 2024		75,000,000			3.3%
			630,888,000			3.4%
Unamortized premium			570,000
Unamortized debt issuance costs			(3,788,000	)
		$	627,670,000

(a)

The revolving credit facility is subject to a one-year extension at the Company’s option.

(b)

The interest rates on these term loans consist of the London Interbank Offered Rate (“LIBOR”) plus a credit spread based on the Company’s leverage ratio, for which the Company has interest rate swap agreements which convert the LIBOR rates to fixed rates. Accordingly, these term loans are presented as fixed-rate debt.

(c)

The current interest rate swap agreement expires in February 2019 at which time a new interest rate swap agreement will begin resulting in an effective interest rate of 3.2%, based on the Company’s current leverage ratio.

(d)

The current interest rate swap agreement expires in February 2020 at which time a new interest rate swap agreement will begin resulting in an effective interest ratio of 3.7%, based on the Company’s current leverage ratio.

The Company’s unsecured credit facility and term loans contain financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum fixed charge coverage, and minimum net worth. In addition, the facility contains restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. Although the credit facility is unsecured, borrowing availability is based on unencumbered property adjusted net operating income, as defined in the agreements. The Company’s failure to comply with the covenants or the occurrence of an event of default under the facilities could result in the acceleration of the related debt and exercise of other lender remedies. As of September 30, 2017, the Company is in compliance with all financial covenants. Interest on borrowings under the unsecured credit facility and term loans are based on the Company’s leverage ratio.

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

Derivative Financial Instruments

At September 30, 2017, the Company had $3.6 million included in other assets and deferred charges, net, as well as $1.4 million included in accounts payable and accrued liabilities on the consolidated balance sheet relating to the fair value of the interest rate swaps applicable to the unsecured term loans discussed above. Charges and/or credits relating to the changes in the fair value of the interest rate swaps are made to accumulated other comprehensive income (loss), noncontrolling interests (minority interests in consolidated joint ventures and limited partners’ interest), or operations (included in interest expense), as applicable. Over time, the unrealized gains and losses recorded in accumulated other comprehensive loss will be reclassified into earnings as an increase or reduction to interest expense in the same periods in which the hedged interest payments affect earnings. The Company estimates that approximately $1.2 million of accumulated other comprehensive loss will be reclassified as a charge to earnings within the next twelve months.

The following is a summary of the derivative financial instruments held by the Company at September 30, 2017 and December 31, 2016:

September 30, 2017

Designation/

Fair

Maturity

Balance sheet

Cash flow

Derivative

Count

value

dates

location

Qualifying

Interest rate swaps

3,614,000

2020-2024

Other assets and deferred charges, net

Qualifying

Interest rate swaps

1,392,000

2019-2021

Accounts payable and accrued liabilities

December 31, 2016

Designation/

Fair

Maturity

Balance sheet

Cash flow

Derivative

Count

value

dates

location

Qualifying

Interest rate swaps

3,074,000

2020 - 2023

Other assets and deferred charges, net

Qualifying

Interest rate swaps

2,321,000

2019 - 2021

Accounts payable and accrued liabilities

The notional values of the interest rate swaps held by the Company at September 30, 2017 and December 30, 2016 were $350.0 million and $350.0 million, respectively.

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 and nine months ended September 30, 2017 and 2016, respectively:

		Gain (loss) recognized in other
		comprehensive income
		(effective portion)
Designation/		Three months ended September 30,						Nine months ended September 30,
Cash flow	Derivative	2017			2016			2017			2016
Qualifying	Interest rate swaps	$	872,000		$	1,625,000		$	(332,000	)	$	(9,771,000	)

		(Loss) recognized in other
		comprehensive income
		reclassified into earnings (effective portion)
		Three months ended September 30,						Nine months ended September 30,
	Classification	2017			2016			2017			2016
	Continuing Operations	$	(407,000	)	$	(881,000	)	$	(1,923,000	)	$	(2,711,000	)

As of September 30, 2017 the Company believes it has no significant risk associated with non-performance of the financial institutions which are the counterparties to its derivative contracts.

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

Note 6. Commitments and Contingencies

The Company is a party to certain legal actions arising in the normal course of business. Management does not expect there to be adverse consequences from these actions that would be material to the Company’s consolidated financial statements.

Note 7. Shareholders’ Equity

Common Stock

Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”)

The Company’s 6.50% Series C Preferred Stock has a liquidation preference of $25.00 per share, has no stated maturity, is not convertible into any other security of the Company, and is redeemable at the Company’s option beginning August 24, 2022 at a price of $25.00 per share plus accrued and unpaid distributions.

On August 24, 2017, the Company concluded a public offering of 3,000,000 shares of Series C Preferred Stock at $25.00 per share, and realized net proceeds, after offering expenses, of approximately $72.3 million.

Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”)

The Company’s 7.25% Series B Preferred Stock has a liquidation preference of $25.00 per share, has no stated maturity, is not convertible into any other security of the Company, and became redeemable, in whole or in part, at the Company’s option beginning May 22, 2017 at a price of $25.00 per share plus accrued and unpaid distributions.

On August 16, 2017, the Company redeemed 1,500,000 shares of Series B Preferred Stock at a price of $25.00 per share for an aggregate of $37.5 million, plus all accrued and unpaid dividends up to (but excluding) the redemption date.

On September 15, 2017, the Company redeemed 3,000,000 shares of Series B Preferred Stock at a price of $25.00 per share for an aggregate of $75.0 million, plus all accrued and unpaid dividends up to (but excluding) the redemption date.

Dividends

The following table provides a summary of dividends declared and paid per share:

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Common stock	$	0.050	$	0.050	$	0.150	$	0.150
7.25% Series B Preferred Stock	$	0.453	$	0.453	$	1.359	$	1.359

On October 16, 2017, the Company’s Board of Directors declared a dividend of $0.05 per share with respect to its common stock. At the same time, the Board declared dividends of $0.453125 and $0.388194 per share with respect to the Company’s Series B Preferred Stock and Series C Preferred Stock, respectively. The distributions are payable on November 20, 2017 to shareholders of record on November 10, 2017.

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

Note 8. Revenues

Rental revenues for the three and nine months ended September 30, 2017 and 2016, respectively, comprise the following:

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Base rents	$	27,187,000	$	29,147,000	$	81,398,000	$	86,734,000
Percentage rent		259,000		160,000		705,000		420,000
Straight-line rents		291,000		157,000		787,000		(73,000	)
Amortization of intangible lease liabilities, net		625,000		695,000		1,900,000		2,105,000
Total rents	$	28,362,000	$	30,159,000	$	84,790,000	$	89,186,000

Note 9. Share-Based Compensation

The following tables set forth certain share-based compensation information for the three and nine months ended September 30, 2017 and 2016, respectively:

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Expense relating to share grants	$	936,000		$	859,000		$	2,880,000		$	2,312,000		(a)
Amounts capitalized		(76,000	)		(54,000	)		(187,000	)		(167,000	)
Total charged to operations	$	860,000		$	805,000		$	2,693,000		$	2,145,000

(a)

Net of an expense reduction of $267,000 relating to a forfeiture of restricted shares in connection with an employment termination.

On May 2, 2017, the Company’s shareholders approved the 2017 Stock Incentive Plan (the “2017 Plan”), which replaces the Company’s 2012 Stock Incentive Plan (the “2012 Plan”). As of the effective date of the 2017 Plan, the Company may not grant any further awards under the 2012 Plan. The 2017 Plan describes certain terms and conditions governing the grant of, among other things, restricted stock awards. The maximum number of shares initially reserved and available for issuance is 4.0 million shares, which may be subject to adjustment under certain circumstances as described more fully in the 2017 Plan. At September 30, 2017, approximately 4.0 million shares remained available for grants under the 2017 Plan.

During the nine months ended September 30, 2017, there were 305,000 restricted shares issued, with a weighted average grant date fair value of $6.20 per share.

Note 10. Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to the Company’s common shareholders by the weighted average number of common shares outstanding for the period including participating securities (restricted shares issued pursuant to the Company’s share-based compensation program are considered participating securities, as such shares have non-forfeitable rights to receive dividends). Unvested restricted shares are not allocated net losses and/or any excess of dividends declared over net income, as such amounts are allocated entirely to the common shareholders. For the three months ended September 30, 2017 and 2016, the Company had 3.8 million and 3.7 million, respectively, of weighted average unvested restricted shares outstanding. For the nine months ended September 30, 2017 and 2016, the Company had 3.8 million and 3.6 million, respectively, of weighted average unvested restricted shares outstanding. The following table provides a reconciliation of the numerator and denominator of the EPS calculations for the three and nine months ended September 30, 2017 and 2016, respectively:

Cedar Realty Trust, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Numerator
Income (loss) from continuing operations	$	6,417,000		$	(761,000	)	$	13,973,000		$	5,610,000
Preferred stock dividends		(3,535,000	)		(3,602,000	)		(10,739,000	)		(10,806,000	)
Preferred stock redemptions costs		(7,890,000	)		-			(7,890,000	)		-
Net (income) loss attributable to noncontrolling interests		(117,000	)		74,000			(371,000	)		254,000
Net earnings allocated to unvested shares		(190,000	)		(183,000	)		(564,000	)		(533,000	)
Net (loss) attributable to vested common shares outstanding	$	(5,315,000	)	$	(4,472,000	)	$	(5,591,000	)	$	(5,475,000	)
Denominator
Weighted average number of vested common shares outstanding		85,642,000			81,676,000			83,049,000			81,670,000

Net (loss) per commons share attributable to common shareholders, basic and diluted	$	(0.06	)	$	(0.05	)	$	(0.07	)	$	(0.07	)

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. For the applicable periods, the 5,750,000 common shares that were subject to the forward sale agreements (see Note 7 - “Shareholders’ Equity”) have been excluded from the denominator prior to their issuance on August 1, 2017, as they were anti-dilutive using the treasury stock method. Net loss attributable to noncontrolling interests of the Operating Partnership has been excluded from the numerator and the related OP Units have been excluded from the denominator for the purpose of calculating diluted EPS as there would have been no effect had such amounts been included. The weighted average number of OP Units outstanding were 349,000 and 352,000 for the three months ended September 30, 2017 and 2016, respectively, and 350,000 and 352,000 for the nine months ended September 30, 2017 and 2016, respectively.

Note 11. Subsequent Events

In determining subsequent events, management reviewed all activity from October 1, 2017 through the date of filing this Quarterly Report on Form 10-Q.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s consolidated financial statements and related notes thereto included elsewhere in this report.

Executive Summary

The Company is a fully-integrated real estate investment trust that focuses primarily on ownership, operation and redevelopment of grocery-anchored shopping centers in high-density urban markets from Washington, D.C. to Boston. At September 30, 2017, the Company owned and managed a portfolio of 61 operating properties (excluding properties “held for sale”) totaling 9.0 million square feet of gross leasable area (“GLA”). The portfolio was 92.7% leased and 91.4% occupied at September 30, 2017.

The Company derives substantially all of its revenues from rents and operating expense reimbursements received pursuant to leases. The Company’s operating results therefore depend on the ability of its tenants to make the payments required by the terms of their leases. The Company focuses its investment activities on grocery-anchored shopping centers. The Company believes that, because of the need of consumers to purchase food and other staple goods and services generally available at such centers, its type of “necessities-based” properties should provide relatively stable revenue flows even during difficult economic times.

Significant Transactions

Acquisitions

On February 22, 2017, the Company acquired Christina Crossing, located in Wilmington, Delaware. The purchase price for the property, which was unencumbered, was $27.9 million.

On July 6, 2017, the Company acquired a parcel adjacent to its South Philadelphia Shopping Center for future expansion. The purchase price for the property, which was unencumbered, was $3.3 million.

Disposition

On February 1, 2017, the Company sold an outparcel building adjacent to Camp Hill, located in Camp Hill, Pennsylvania, for $10.7 million, which resulted in a $7.1 million gain.

Held for Sale

As of September 30, 2017, Fredericksburg Way, located in Fredericksburg, Virginia, has been classified as “real estate held for sale”. The Company recorded an impairment charge of $9.9 million in connection with the property during 2017.

Credit Facility and Term Loans

On September 8, 2017, the Company amended and restated its unsecured credit facility, which, as amended, consists of (1) a $250 million revolving credit facility, expiring on September 8, 2021, and (2) a $50 million term loan, expiring on September 8, 2022. The revolving credit facility may be extended, at the Company’s option, for an additional one-year period, subject to customary conditions.

In addition, on September 8, 2017, the Company amended and restated the terms of four of its existing unsecured term loans. The terms are as follows:


		As amended		Previously
Amount		Maturity date	Interest range	Maturity date	Interest range
$	75,000,000	February 2021	LIBOR + 130 bps to 190 bps	February 2021	LIBOR + 170 bps to 230 bps
$	50,000,000	February 2022	LIBOR + 130 bps to 190 bps	February 2022	LIBOR + 155 bps to 215 bps
$	50,000,000	September 2022	LIBOR + 130 bps to 190 bps	February 2020	LIBOR + 130 bps to 190 bps
$	75,000,000	September 2024	LIBOR + 170 bps to 225 bps	February 2019	LIBOR + 130 bps to 190 bps

Equity

Common Stock

The Company’s forward sales agreements, entered into on August 1, 2016 for the issuance of 5,750,000 common shares, were settled by August 1, 2017 for net proceeds, after adjustments for dividends paid and other administrative costs, of approximately $43.2 million. The proceeds of the offering were predominantly to redeem 1.5 million shares of Series B Preferred Stock (see below).

Series C Preferred Stock

On August 24 2017, the Company concluded a public offering of 3,000,000 shares of Series C Preferred Stock at $25.00 per share, and realized net proceeds, after offering expenses, of approximately $72.3 million.

Series B Preferred Stock

Critical Accounting Policies

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition and the allowance for doubtful accounts receivable, real estate investments and purchase accounting allocations related thereto, asset impairment, and derivatives used to hedge interest-rate risks. Management’s estimates are based both on information that is currently available and on various other assumptions management believes to be reasonable under the circumstances. Actual results could differ from those estimates and those estimates could be different under varying assumptions or conditions.

The Company believes there have been no material changes to the items disclosed as its critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, other than the adoption in January 2017 of accounting guidance requiring the capitalization of costs in typical acquisitions of real estate (see above Note 2 - “Summary of Significant Accounting Policies”).

Results of Operations

Comparison of three months ended September 30, 2017 to 2016

							Change
	2017			2016			Dollars			Percent
Revenues	$	36,398,000		$	37,793,000		$	(1,395,000	)		-3.7%
Property operating expenses		(10,509,000	)		(10,574,000	)		65,000			-0.6%
Property operating income		25,889,000			27,219,000			(1,330,000	)
General and administrative		(4,121,000	)		(4,318,000	)		197,000			-4.6%
Acquisition pursuit costs		—			(293,000	)		293,000		n/a
Depreciation and amortization		(9,807,000	)		(10,413,000	)		606,000			-5.8%
Impairment charges		—			(6,270,000	)		6,270,000		n/a
Interest expense		(5,544,000	)		(6,636,000	)		1,092,000			-16.5%
Early extinguishment of debt costs		—			(50,000	)		50,000		n/a
Net income (loss)		6,417,000			(761,000	)		7,178,000
Net (income) loss attributable to noncontrolling interests		(117,000	)		74,000			(191,000	)
Net income (loss) attributable to Cedar Realty Trust, Inc.	$	6,300,000		$	(687,000	)	$	6,987,000

Revenues were lower primarily as a result of (1) a decrease of $2.6 million in rental revenues and expense recoveries attributable to properties that were sold in 2017 and 2016, and (2) a decrease of $0.2 million in rental revenues and expense recoveries attributable to same-center properties, partially offset by (1) an increase of $0.7 million in rental revenues and expense recoveries

attributable to properties acquired in 2017 and 2016, (2) an increase of $0.4 million in other income, and (3) an increase of $0.3 million in rental revenues and expense recoveries attributable to the Company’s redevelopment properties.

Property operating expenses were lower primarily as a result of a decrease of $0.6 million in property operating expenses attributable to properties that were sold in 2017 and 2016, partially offset by (1) an increase of $0.2 million in property operating expenses attributable to properties acquired in 2017 and 2016, and (2) an increase of $0.2 million in property operating expenses attributable to same-center properties.

General and administrative costs were lower primarily as a result of a decrease in payroll and payroll related benefits, offset by an increase in professional fees.

Depreciation and amortization expenses were lower primarily as a result of (1) a decrease of $0.7 million attributable to properties that were sold or held for sale in 2017 and 2016 and (2) a decrease of $0.3 million attributable to redevelopment properties, partially offset by an increase of $0.3 million attributable to properties acquired in 2017 and 2016.

Impairment charges in 2016 relate to Upland Square, located in Pottstown, Pennsylvania, which was sold on November 2, 2016.

Interest expense was lower primarily as a result of (1) $0.6 million as a result of a decrease in the overall outstanding principal balance of debt, and (2) $0.4 million as a result of a decrease in the overall weighted average interest rate.

Comparison of nine months ended September 30, 2017 to 2016

							Change
	2017			2016			Dollars			Percent
Revenues	$	108,871,000		$	113,916,000		$	(5,045,000	)		-4.4%
Property operating expenses		(32,681,000	)		(33,186,000	)		505,000			-1.5%
Property operating income		76,190,000			80,730,000			(4,540,000	)
General and administrative		(12,494,000	)		(13,640,000	)		1,146,000			-8.4%
Acquisition pursuit costs		(156,000	)		(3,417,000	)		3,261,000		n/a
Depreciation and amortization		(30,178,000	)		(31,046,000	)		868,000			-2.8%
Gain on sale		7,099,000			59,000			7,040,000		n/a
Impairment charges		(9,850,000	)		(6,270,000	)		(3,580,000	)	n/a
Interest expense		(16,638,000	)		(20,769,000	)		4,131,000			-19.9%
Early extinguishment of debt costs		—			(37,000	)		37,000		n/a
Net income		13,973,000			5,610,000			8,363,000
Net (income) loss attributable to noncontrolling interests		(371,000	)		254,000			(625,000	)
Net income attributable to Cedar Realty Trust, Inc.	$	13,602,000		$	5,864,000		$	7,738,000

Revenues were lower primarily as a result of (1) a decrease of $7.4 million in rental revenues and expense recoveries attributable to properties that were sold or held for sale in 2017 and 2016, and (2) a decrease of $0.9 million in rental revenues and expense recoveries attributable to same-center properties, partially offset by (1) an increase of $2.4 million in rental revenues and expense recoveries attributable to properties acquired in 2017 and 2016, (2) an increase of $0.5 million in rental revenues and expense recoveries attributable to the Company’s redevelopment properties, and (3) an increase of $0.5 million in other income.

Property operating expenses were lower primarily as a result of a decrease of $1.8 million in property operating expenses attributable to properties that were sold in 2017 and 2016, partially offset by (1) an increase of $0.9 million in property operating expenses attributable to properties acquired in 2017 and 2016, and (2) an increase of $0.2 million in property operating expenses attributable to same-center properties.

General and administrative costs were lower primarily as a result of $1.4 million of costs and estimated expenses associated with the Chief Operating Officer transition in 2016.

Acquisition pursuit costs were lower in 2017 as compared to 2016 as the Company adopted the accounting guidance in 2017 which requires the capitalization of costs in typical acquisitions of real estate (see Note 2 - “Summary of Significant Accounting Policies”). Acquisition pursuit costs in 2017 relate to costs associated with acquisitions the Company chose not to continue to pursue. Acquisition pursuit costs in 2016, which were recorded under the prior accounting guidance, relate to (1) $1.7 million of transfer taxes relating to the buyout of a ground lease and acquisition of the fee interest in a currently owned property, (2) $0.6 million for the purchase of The Shops at Bloomfield Station, located in Bloomfield, New Jersey, (3) $0.5 million for the purchase of the Shoppes at Arts District, located in Hyattsville, Maryland, (4) $0.4 million for additional real estate transfer taxes assessed on a property which was purchased in 2014, and (5) $0.3 million of costs associated with acquisitions the Company chose not to continue to pursue.

Depreciation and amortization expenses were lower primarily as a result of (1) a decrease of $1.8 million attributable to properties that were sold or “held for sale” in 2017 and 2016, and (2) a decrease of $0.4 million attributable to redevelopment properties, partially offset by an increase of $1.2 million attributable to properties acquired in 2017 and 2016.

Gain on sale in 2017 relates to the sale of an outparcel building adjacent to Camp Hill, located in Camp Hill, Pennsylvania on February 1, 2017.

Impairment charges in 2017 relate to Fredericksburg Way, located in Fredericksburg, Virginia, which is currently classified as “held for sale” as of September 30, 2017. Impairment charges in 2016 relate to Upland Square, located in Pottstown, Pennsylvania, which was sold on November 2, 2016.

Interest expense was lower primarily as a result of (1) $2.1 million as a result of a decrease in the overall weighted average interest rate, and (2) $1.9 million as a result of a decrease in the overall outstanding principal balance of debt.

Same-Property Net Operating Income

Same-property net operating income (“same-property NOI”) is a widely-used non-GAAP financial measure for REITs that the Company believes, when considered with financial statements prepared in accordance with GAAP, is useful to investors as it provides an indication of the recurring cash generated by the Company’s properties by excluding certain non-cash revenues and expenses, as well as other infrequent items such as lease termination income which tends to fluctuate more than rents from year to year. Properties are included in same-property NOI if they are owned and operated for the entirety of both periods being compared, except for properties undergoing significant redevelopment and expansion until such properties have stabilized, and properties classified as held for sale. Consistent with the capital treatment of such costs under GAAP, tenant improvements, leasing commissions and other direct leasing costs are excluded from same-property NOI.

The most directly comparable GAAP financial measure is consolidated operating income. Same-property NOI should not be considered as an alternative to consolidated operating income prepared in accordance with GAAP or as a measure of liquidity. Further, same-property NOI is a measure for which there is no standard industry definition and, as such, it is not consistently defined or reported on among the Company’s peers, and thus may not provide an adequate basis for comparison among REITs.

The following table reconciles same-property NOI to the Company’s consolidated operating income:

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Consolidated operating income	$	11,961,000		$	5,925,000		$	30,611,000		$	26,416,000
Add (deduct):
General and administrative		4,121,000			4,318,000			12,494,000			13,640,000
Acquisition pursuit costs		—			293,000			156,000			3,417,000
Gain on sales		—			—			(7,099,000	)		(59,000	)
Impairment charges		—			6,270,000			9,850,000			6,270,000
Depreciation and amortization		9,807,000			10,413,000			30,178,000			31,046,000
Straight-line rents		(291,000	)		(157,000	)		(787,000	)		73,000
Amortization of intangible lease liabilities		(625,000	)		(695,000	)		(1,900,000	)		(2,105,000	)
Other adjustments		(218,000	)		(7,000	)		(68,000	)		(356,000	)
NOI related to properties not defined as same-property		(4,264,000	)		(5,597,000	)		(14,141,000	)		(17,979,000	)
Same-property NOI	$	20,491,000		$	20,763,000		$	59,294,000		$	60,363,000

Number of same properties		52			52			50			50
Same-property occupancy, end of period		92.7	%		92.8	%		92.7	%		92.8	%
Same-property leased, end of period		93.4	%		93.7	%		93.4	%		93.4	%
Same-property average base rent, end of period	$	13.20		$	13.25		$	13.03		$	13.08

Same-property NOI for the comparative three and nine month periods decreased by 1.3% and 1.8%, respectively. The results are driven primarily by (1) two vacant anchors which resulted in reduced rental revenue, along with certain related temporary co-tenancy rental reductions, and (2) a reduction in average base rents of $0.05 per square foot.

Leasing Activity

The following is a summary of the Company’s retail leasing activity during the nine months ended September 30, 2017:

												Tenant
					New rent		Prior rent		Cash basis			improvements
	Leases				per		per		%			per
	signed		GLA		sq.ft. ($)		sq.ft. ($)		change			sq.ft. ($) (a)
Renewals		74		568,900		13.35		12.59		6.1	%		0.00
New Leases - Comparable		20		121,400		14.31		13.43		6.6	%		42.62
New Leases - Non-Comparable (b)		7		35,100		16.51	n/a		n/a				25.88
Total (c)		101		725,400		13.67	n/a		n/a				8.39

(a)

Includes both tenant allowance and landlord work. Excludes first generation space.

(b)

Includes leases signed at first generation and expansion spaces.

(c)

Legal fees and leasing commissions averaged a combined total of $3.63 per square foot.

Liquidity and Capital Resources

The Company funds operating expenses and other short-term liquidity requirements, including debt service, tenant improvements, leasing commissions, preferred and common dividend distributions and distributions to minority interest partners, if made, primarily from its operations. The Company may also use its revolving credit facility for these purposes. The Company expects to fund long-term liquidity requirements for property acquisitions, redevelopment costs, capital improvements, and maturing debt initially with its revolving credit facility, and ultimately through a combination of issuing and/or assuming additional debt, the sale of equity securities, the issuance of additional OP Units, and/or the sale of properties. Although the Company believes it has access to secured and unsecured financing, there can be no assurance that the Company will have the availability of financing on completed development projects, additional construction financing, or proceeds from the refinancing of existing debt.

The Company has a $300 million unsecured credit facility which, as amended and restated on September 8, 2017, consists of (1) a $250 million revolving credit facility, and (2) a $50 million term loan. Under an accordion feature, the facility can be increased to

$750 million, subject to customary conditions and lending commitments. As of September 30, 2017, the Company had $143.4 million available for additional borrowings under the revolving credit facility.

The Company’s unsecured credit facility and term loans contain financial covenants including, but not limited to, maximum debt leverage, maximum secured debt, minimum fixed charge coverage, and minimum net worth. In addition, the facilities contain restrictions including, but not limited to, limits on indebtedness, certain investments and distributions. Although the credit facilities are unsecured, borrowing availability is based on unencumbered property adjusted net operating income, as defined in the agreements. The Company’s failure to comply with the covenants or the occurrence of an event of default under the facilities could result in the acceleration of the related debt and exercise of other lender remedies. As of September 30, 2017, the Company is in compliance with all financial covenants. Interest on borrowings under the unsecured credit facility and term loans are based on the Company’s leverage ratio.

Debt is composed of the following at September 30, 2017:


		September 30, 2017
					Contractual
	Maturity	Balance			interest rates
Description	dates	outstanding			weighted-average
Fixed-rate mortgages	2021-2029	$	135,888,000			4.6%
Unsecured credit facilities:
Variable-rate:
Revolving credit facility (a)	Sep 2021		95,000,000			2.7%
Term loan	Sep 2022		50,000,000			2.6%
Fixed-rate (b):
Term loan	Feb 2021		75,000,000			3.6%
Term loan	Feb 2022		50,000,000			3.0%
Term loan (c)	Sep 2022		50,000,000			2.8%
Term loan	Apr 2023		100,000,000			3.2%
Term loan (d)	Sep 2024		75,000,000			3.3%
			630,888,000			3.4%
Unamortized premium			570,000
Unamortized debt issuance costs			(3,788,000	)
		$	627,670,000

(a)

The revolving credit facility is subject to a one-year extension at the Company’s option.

(b) The interest rates on these term loans consist of LIBOR plus a credit spread based on the Company’s leverage ratio, for which the Company has interest rate swap agreements which convert the LIBOR rates to fixed rates. Accordingly, these term loans are presented as fixed-rate debt.

(c) The current interest rate swap agreement expires in February 2019 at which time a new interest rate swap agreement will begin resulting in an effective interest rate of 3.2%, based on the Company’s current leverage ratio.

(d) The current interest rate swap agreement expires in February 2020 at which time a new interest rate swap agreement will begin resulting in an effective interest ratio of 3.7%, based on the Company’s current leverage ratio.

The following table details the Company’s debt maturities at September 30, 2017:

	Secured Debt				Unsecured Debt
	Scheduled		Balloon		Revolving			Term
Year	Amortization		Payments		Credit Facility			Loans		Total
2017	$	822,000	$	-	$	-		$	-	$	822,000
2018		3,377,000		-		-			-		3,377,000
2019		3,542,000		-		-					3,542,000
2020		3,707,000		-		-					3,707,000
2021		3,253,000		22,367,000		95,000,000	(a)		75,000,000		195,620,000
Thereafter		11,560,000		87,260,000		-			325,000,000		423,820,000
	$	26,261,000	$	109,627,000	$	95,000,000		$	400,000,000	$	630,888,000

(a)

The revolving credit facility is subject to a one-year extension at the Company’s option.

Property-specific mortgage loans payable mature at various dates through 2029. 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.

In order to continue qualifying as a REIT, the Company is required to distribute at least 90% of its “REIT taxable income”, as defined in the Internal Revenue Code of 1986, as amended (the “Code”). The Company paid common and preferred stock dividends during 2016, and has continued to declare and pay common and preferred stock dividends during 2017. While the Company intends to continue paying regular quarterly dividends, future dividend declarations will continue to be at the discretion of the Board of Directors, and will depend on the cash flow and financial condition of the Company, capital requirements, annual distribution requirements under the REIT provisions of the Code, and such other factors as the Board of Directors may deem relevant.

Net Cash Flows

	Nine months ended September 30,
	2017			2016
Cash flows provided by (used in):
Operating activities	$	42,142,000		$	40,567,000
Investing activities	$	(39,488,000	)	$	(25,494,000	)
Financing activities	$	(3,296,000	)	$	(12,648,000	)

Operating Activities

Net cash provided by operating activities, before net changes in operating assets and liabilities, was $49.2 million for the nine months ended September 30, 2017 and $45.2 million for the nine months ended September 30, 2016. The $4.0 million increase was primarily attributable to the decrease in acquisition pursuit costs, interest expense and management transition costs.

Investing Activities

Net cash flows used in investing activities were primarily the result of the Company’s property acquisitions, expenditures for property improvements and property disposition activities. During the nine months ended September 30, 2017, the Company acquired shopping centers for $32.4 million, and incurred expenditures of $17.1 million for property improvements, which was offset by $10.4 million in proceeds from the sale of an outparcel building, and an increase of $0.3 million in construction escrows and other. During the nine months ended September 30, 2016, the Company acquired two shopping centers, which were partially paid in cash for $31.9 million, and incurred expenditures of $10.5 million for property improvements, which was offset by $14.5 million in proceeds from the sale of a property classified as held for sale, and a decrease of $2.4 million in construction escrows and other.

Financing Activities

During the nine months ended September 30, 2017, the Company paid $112.5 million to partially redeem shares of its Series B Preferred Stock, had $24.2 million of preferred and common stock distributions, $2.5 million of payments for debt financing costs, and $2.5 million of repayments of mortgage obligations, which was offset by net proceeds of $72.3 million from the sale of shares of its Series C Preferred Stock, net proceeds of $43.2 million from the sale of its common stock, and net borrowings of $23.0 million

under the revolving credit facility. During the nine months ended September 30, 2016, the Company made $189.4 million of repayments of mortgage obligations, $23.6 million of preferred and common stock distributions, and $1.4 million of payments for debt financing costs, which was offset by a $100.0 million borrowing under a term loan, net borrowings of $52.0 million under the revolving credit facility, and a mortgage borrowing of $50.0 million.

Funds From Operations

Funds From Operations (“FFO”) is a widely recognized supplemental non-GAAP measure utilized to evaluate the financial performance of a REIT. The Company presents FFO in accordance with the definition adopted by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT generally defines FFO as net income attributable to common shareholders (determined in accordance with GAAP), excluding gains (losses) from sales of real estate properties, impairment provisions on real estate properties, plus real estate related depreciation and amortization, and adjustments for partnerships and joint ventures to reflect FFO on the same basis. The Company considers FFO to be an appropriate measure of its financial performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than other depreciable assets.

The Company also considers Operating Funds From Operations (“Operating FFO”) to be an additional meaningful financial measure of financial performance because it excludes items the Company does not believe are indicative of its core operating performance, such as non-capitalized acquisition pursuit costs, amounts relating to early extinguishment of debt and preferred stock redemption costs, management transition costs and certain redevelopment costs. The Company believes Operating FFO further assists in comparing the Company’s performance across reporting periods on a consistent basis by excluding such items.

FFO and Operating FFO should be reviewed with net income attributable to common shareholders, the most directly comparable GAAP financial measure, when trying to understand the Company’s operating performance. FFO and Operating FFO do not represent cash generated from operating activities and should not be considered as an alternative to net income attributable to common shareholders or to cash flow from operating activities. The Company’s computations of FFO and Operating FFO may differ from the computations utilized by other REITs and, accordingly, may not by comparable to such REITs.

A reconciliation of net loss attributable to common shareholders to FFO and Operating FFO for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Net (loss) attributable to common shareholders	$	(5,125,000	)	$	(4,289,000	)	$	(5,027,000	)	$	(4,942,000	)
Real estate depreciation and amortization		9,756,000			10,370,000			30,036,000			30,918,000
Limited partners' interest		(21,000	)		(15,000	)		(22,000	)		(15,000	)
Gain on sales		—			—			(7,099,000	)		(59,000	)
Impairment charges		—			6,270,000			9,850,000			6,270,000
Consolidated minority interests:
Share of income / (loss)		138,000			(59,000	)		393,000			(239,000	)
Share of FFO		(125,000	)		(38,000	)		(322,000	)		(150,000	)
FFO applicable to diluted common shares		4,623,000			12,239,000			27,809,000			31,783,000
Acquisition pursuit costs (a)		—			293,000			156,000			3,417,000
Financing costs (b)		—			50,000			—			37,000
Redevelopment costs (c)		—			35,000			37,000			511,000
Management transition costs (d)		—			—			—			1,427,000
Preferred stock redemption costs		7,890,000			—			7,890,000			—
Operating FFO applicable to diluted common shares	$	12,513,000		$	12,617,000		$	35,892,000		$	37,175,000

FFO per diluted common share	$	0.05		$	0.14		$	0.32		$	0.37
Operating FFO per diluted common share	$	0.14		$	0.15		$	0.41		$	0.43
Weighted average number of diluted common shares (e):
Common shares		89,434,000			85,339,000			86,825,000			85,298,000
OP Units		349,000			352,000			350,000			352,000
		89,783,000			85,691,000			87,175,000			85,650,000

(a)

In 2017, represents costs associated with acquisitions which the Company chose not to continue to pursue. In 2016, represents costs directly associated with acquiring properties that were expensed pursuant to GAAP such as transfer taxes, brokerage fees and legal expenses.

(b)

Represents extinguishment of debt costs.

(c)

Includes redevelopment project costs expensed pursuant to GAAP such as certain demolition and lease termination costs.

(d)

Costs and estimated expenses associated with the Chief Operating Officer transition.

(e)

The weighted average number of diluted common shares used to compute FFO and Operating FFO applicable to diluted common shares includes OP Units and unvested restricted shares that are excluded from the computation of diluted EPS.

Inflation

Inflation has been relatively low in recent years and has not had a significant detrimental impact on the Company’s results of operations. Should inflation rates increase in the future, substantially all of the Company’s tenant leases contain provisions designed to partially mitigate the negative impact of inflation in the near term. Such lease provisions include clauses that require tenants to reimburse the Company for inflation-sensitive costs such as real estate taxes and many of the operating expenses it incurs. Significant inflation rate increases over a prolonged period of time may have a material adverse impact on the Company’s business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

One of the principal market risks facing the Company is the risk of interest rate changes, primarily through its variable-rate revolving credit facility and term loans. The Company’s objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows, and to lower its overall borrowing costs. To achieve these objectives, the Company may borrow at either fixed rates or at variable rates and enter into derivative financial instruments, such as interest rate swaps, to mitigate its interest rate risk. The Company does not enter into derivative or interest rate transactions for speculative purposes. The Company is not directly subject to foreign currency risk.

The Company has entered into forward interest rate swap agreements which convert the LIBOR rates to fixed rates for certain unsecured term loans. At September 30, 2017, the Company had $3.6 million included in deferred charges and other assets, net, as well as $1.4 million included in accounts payable and accrued liabilities on the consolidated balance sheet relating to the fair value of the interest rate swaps applicable to certain unsecured term loans.

At September 30, 2017, long-term debt consisted of fixed-rate mortgage loans payable, unsecured term loans, and the Company’s unsecured variable-rate credit facility. Excluding unamortized premiums and debt issuance costs, the average interest rate on the $485.9 million of fixed-rate debt outstanding was 3.6%, with maturities at various dates through 2029. The average interest rate on the $145.0 million of variable-rate debt outstanding, which consists of the unsecured revolving credit facility and a term loan, was 2.7%. With respect to the $145.0 million of variable-rate debt, if contractual interest rates either increase or decrease by 100 bps, the Company’s interest cost would increase or decrease respectively by approximately $1.5 million per annum.

With respect to the Company’s fixed rate mortgage notes and unsecured term loans, changes in interest rates generally do not affect the Company’s interest expense as these notes are at fixed rates for extended terms. Because the Company presently intends to hold its existing fixed-rate debt either to maturity or until the sale of the associated property, these fixed-rate notes pose an interest rate risk to the Company’s results of operations and its working capital position only upon the refinancing of that indebtedness. The Company’s possible risk is from increases in long-term interest rates that may occur as this may increase the cost of refinancing maturing fixed-rate debt. In addition, the Company may incur prepayment penalties or defeasance costs when prepaying or defeasing debt.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), designed to ensure that information required to be disclosed in its filings under the Exchange Act is reported within the time periods specified in the rules and regulations of the Securities and Exchange Commission (“SEC”). In this regard, the Company has formed a Disclosure Committee currently comprising several of the Company’s executive officers as well as certain other employees with knowledge of information that may be considered in the SEC reporting process. The Committee has responsibility for the development and assessment of the financial and non-financial information to be included in the reports filed with the SEC, and assists the Company’s Chief Executive Officer and Chief Financial Officer in connection with their certifications contained in the Company’s SEC filings. The Committee meets regularly and reports to the Audit Committee on a quarterly or more frequent basis. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated its disclosure controls and procedures as of September 30, 2017, and have concluded that such disclosure controls and procedures are effective.

During the three months ended September 30, 2017, there have been no changes in the Company’s internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Part II

Other Information

Item 1.

Legal Proceedings

The Company is not presently involved in any litigation, nor, to its knowledge, is any litigation threatened against the Company or its subsidiaries, which is either not covered by the Company’s liability insurance, or, in management’s opinion, would result in a material adverse effect on the Company’s financial position or results of operations.

Item 1A.

Risk Factors

There were no material changes to the Risk Factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable

Item 5.

Other Information

None.

Item 6.

Exhibits

Exhibit 10.1

Fourth Amended and Restated Loan Agreement (the “Loan Agreement”) by and among Cedar Realty Trust Partnership, L.P., KeyBank National Association and other lending institutions which are or may become parties to the Loan Agreement, and KeyBank National Association (as Administrative Agent), dated as of September 8, 2017

Exhibit 10.2

Second Amended and Restated Loan Agreement (the “Loan Agreement”) by and among Cedar Realty Trust Partnership, L.P., KeyBank National Association and other lending institutions which are or may become parties to the Loan Agreement, and KeyBank National Association (as Administrative Agent), dated as of September 8, 2017

Exhibit 31.1

Rule 13a-14(a) Certification of Chief Executive Officer

Exhibit 31.2

Rule 13a-14(a) Certification of Chief Financial Officer

Exhibit 32.1

Section 1350 Certification of Chief Executive Officer

Exhibit 32.2

Section 1350 Certification of Chief Financial Officer

Exhibit 101.INS

XBRL Instance Document

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CEDAR REALTY TRUST, INC.

By:	/s/ BRUCE J. SCHANZER	By:	/s/ PHILIP R. MAYS
	Bruce J. Schanzer		Philip R. Mays
	President and Chief Executive Officer (Principal executive officer)		Executive Vice President, Chief Financial Officer and Treasurer
			(Principal financial officer)

	November 2, 2017