Nicholas Partenza - IR Bruce Schanzer - CEO Robin Zeigler - COO Philip Mays - CFO

Todd Thomas - KeyBanc Capital Markets R.J. Milligan - Robert W. Baird Collin Mings - Raymond James Financial Flores Van Duskem - Boening Craig Kucera - Wunderlich

Welcome to the First Quarter 2016 Cedar Reality Trust Earnings Conference Call. As a reminder, the conference is being recorded. At this time, all audience lines have been placed on mute. We will conduct a question-and-answer session following the formal presentation. I will now turn the call over to Nicholas Partenza. Please proceed.

Good evening. And thank you for joining us for the first quarter 2016 Cedar Reality Trust earnings conference call. Participating in today’s call will be Bruce Schanzer, Chief Executive Officer; Robin Zeigler, Chief Operating Officer; and Philip Mays, Chief Financial Officer. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements and actual results may differ materially from those indicated by such forward-looking statements. These statements are subject to numerous risks and uncertainties, including those disclosed in the Company’s most recent Form 10-K for the year ended 2015, as updated by our subsequently filed quarterly reports on Form 10-Q and other periodic filings with the SEC. As a reminder, the forward-looking statements speak only as of the date of this call, May 5, 2016, and the Company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures including funds from operations and net operating income. Please see Cedar’s earnings press release and supplemental financial information posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will now turn the call over to Bruce Schanzer.

Thanks Nick. Good evening, and welcome to the first quarter 2016 earnings call for Cedar Realty Trust. Our results for the quarter slightly exceeded our expectation, as I’ll discuss in a moment. More generally, since our last call, we announced the hiring Robin Zeigler as our Chief Operating Officer, we acquired two high quality grocery-anchored centers and we closed on two important financings. As with our fourth quarter 2015 call, I’ll ask Phil Mays, our CFO to do a little bit more of the talking as he will review our results for the quarter, discuss some of the financings in a little more detail and provide an update on our 2016 guidance. In his last role [ph] as Interim COO, he will also review operations in leasing as we let Robin get adjusted. That said, Robin will spend a few minutes tonight introducing herself and providing an overview of where she will be focusing as she transitions into her new role. Before jumping into the substance of my comments, in addition to Phil and Robin, I would like to acknowledge my other senior executive colleagues, Michael Winters, Chief Investment Officer; Lori Manzo, Head of Leasing; Charles Burkert, Head of Construction and Development; and Adina Storch, General Counsel. Beyond these executives, whom I refer to as my kitchen cabinet, I would like to recognize the balance of team Cedar for all they do for this Company through their commitment to everyday excellence. During the quarter and up to this call, we have continued successfully executing on all facets of our long-term strategic plan, which begins with our focus on grocery-anchored shopping centers travelling the DC to Boston corridor, to which we have done a solid job in terms of leasing and operations, redevelopment and value-add investment, capital migration as well as balance sheet management. Our consistent operating FFO and same-store NOI growth for the quarter were on the higher end of our expectations, and our leasing results evidenced the beginning of recovery from the bottom tick, we experienced last quarter without our anchor vacancies. As Phil will discuss, the impact of these vacancies mess what is otherwise solid performance within our portfolio. In terms of our redevelopment, the most exciting progress was actually made on the personnel front with the arrival of Robin. As we mentioned in the press release announcing her hiring, Robin brings a wealth of experience and expertise to the shopping center redevelopment process from her tenure as regional Chief Operating Officer of Federal Realty, Mid Atlantic region. Although she has been with us for a little over a month, it is very evident that her skill set will help us more successfully execute our redevelopment, now underway as well as identify additional value add investment opportunities within our portfolio. On the capital migration front, we continue gradually making progress with our most recent move being the acquisition yesterday of Glenwood Village in Bloomfield New Jersey for approximately $20 million and in off market transaction. This 64,000 square-foot grocery-anchored retail condo is part of a transit oriented mixed use project that sits under an Avalon Bay apartment complex of the same name. The property is situated across the street from the Bloomfield train station, has average base rent of approximately $20 per square foot and has over 300,000 people within a three-mile radius. In addition, shortly after our last call in February, we announced the closing of shops at Arts District, an approximately 36,000 square-foot grocery-anchored shopping center within the DC Beltway, also for approximately $20 million in another off-market transaction. This center is the focal point of an award-winning master plan mixed used revitalization effort along the U.S. Route 1 Corridor in Hyattsville, Maryland. The center has average base rent of over $34 per square foot and a three-mile population of a 176,000 people. Lastly, in terms of our balance sheet, we completed two financings after the quarter end, totaling a $150 million in aggregate proceeds. With these financings, we have effectively addressed just about all our maturing obligations through 2018 while continuing to ladder our debt maturities. This is precisely the sort of approach to our balance sheet we have pursued since Phil and I started at Cedar and are pleased to now have this flexibility, as we come into what could be later phases of this cyclical economic recovery. From this vantage point, looking forward to the coming years, we can contemplate being defensive or opportunistic, depending on the economic environment. One may have note on the balance sheet is that although our leverage as measured by debt-to-EBITDA has drifted up, this should remedied as we execute on our capital recycling strategy and sell one or two assets using the proceeds to pay down our line. Taking all this together, I would characterize our progress as slow and steady, which I hope will allow us to eventually win the race in our goal of being counted among the best shopping center REITs. With that I’d give you Robin Zeigler to introduce herself and briefly review her objectives.

Thanks, Bruce, good evening. After completing my first month as part of team Cedar, I have to tell you that I couldn’t be more excited about this Company, the people and the level of opportunity for additional value creation that it holds. As I have started visiting our assets, I recognize the quality of the existing platform and the significant untapped value it contains. And keeping with Cedar’s overall long-term strategy, I’m focused on four key areas, one, effective execution of redevelopments already in our pipeline with a particular focus on maximizing returns; two, identifying new accretive redevelopments within our existing portfolio; three, creating holistic and tactical leasing and merchandising strategies for each asset to improve overall performance; and four, evaluating skill sets and streamlining operations for more effective deployment of our human and financial capital. Smart execution and creation of a viable, sustainable redevelopment pipeline is a critical component of growing the Company’s net asset value. While I’m still in a process of visiting all of our assets, the property tours I’ve completed demonstrate considerable untapped potential within existing portfolio. We are taking a comprehensive analytical approach to reviewing the entire portfolio and are initially focusing on key assets to implement plans and ensure long-term value creation and growth. These plans will include mechanisms such as re-tenanting, improved merchandising façade upgrades, general property improvements as well as the addition of path [ph] sites or new buildings. Focus in these areas drives stronger tenant sales. And when coupled with the right merchandizing mix to fit each distinct center and market, result in higher rents and rollover growth. These initiatives collectively will ensure continuous pipeline of long-term value creation throughout the existing portfolio. While our value add pipeline will continue to evolve and many of these opportunities are subject to feasibility review and approval, I certainly believe our platform can initially support our targeted goal of $20 million to $30 million of redevelopment capital spent annually with this amount increasing over time. Operationally, I have initially focused on and already implemented new policies and procedures related to the lease approval process, collections, tenant construction, and lease administration. These efforts are intended to ensure efficient streamlined operations that make the most of our team’s individual skill set and our focus on bottom line NOI growth. These new approaches support our leasing efforts that as you would expect are now especially focused on the centers of vacant anchors as well as those centers where we have the ability to improve the tenant mix, improve occupancy and grow rents. In addition with my mandate to oversee asset management in order to drive value creation, we will be aggressively attacking vacancy, even at our lower quartile properties. In order to realize a long-term potential for our assets, while proactively identifying and addressing vulnerable tenants, these efforts could result in extended downtimes in the short-term. Accordingly, you may see more variability in our leasing statistics, particularly with new leases in terms of square footage and spreads. In conclusion, I want to thank my new colleagues on team Cedar for welcoming me with open arms. And I look forward to working with them to realize the full potential of this Company, its assets and its people. I will now turn the call over to Phil.

Thanks, Robin. On this call, I will discuss our operating results for the quarter and provide updates on our leasing activities, balance sheet and 2016 guidance. First, operating results, for the quarter operating FFO was $12 million or $0.14 per diluted share. Again our operating FFO adjust NAREIT defined FFO for acquisition, financing and development costs that are treated as period expenses under GAAP, provide long-term future benefits. Additionally, this quarter includes an adjustment for our COO transition. Same-property NOI growth for the quarter was 1.3%. This result is better than the first quarter growth expectations we had on our last call. As a reminder, we had four anchors that vacated in the fourth quarter of 2015. These move-outs will weigh down our full-year 2016 operating FFO by approximately $2 million and our full year same-store NOI growth by approximately 200 basis points until these spaces are released. Further to provide additional context, let me just note that same-property NOI for the comparable quarter was about $23 million, so just over $200,000 represents a 100 basis points to growth. So, this quarter it was in fact the contribution at several small positive variances that contributed to the slightly better than expected growth. With respect to leasing, during the quarter, we signed 64 leases for 346,000 square feet including 60 comparable leases for 319,000 square feet with the positive spread of 8.7%. Digging deeper into our comparable leases, they were primarily comprised of 53 renewal leases for 299,000 square feet with the positive spread of 9.5%, very much in line with our renewal spreads over the last few years. Additionally, we had seven new leases for just 21,000 square feet, having a negative spread of 1.1%. This negative spread was driven by modest slowdown in rents associated with the new dollar [ph] release but which resulted in a significant improvement into net credit and two small sub-leases at a lower quartile asset for spaces that were both vacant in excess of a year. Excluding these three releases, new lease spread would have been approximately a positive 9%. Some recoveries exclude vacancies greater than one-year from comparable leases spreads but others include such vacancies. In an effort to provide complete and transparent lease disclosures, the leasing activity presented in our supplement includes all leases even if they are for spaces that were vacant greater than one year. However, we do further supplement this information with a note at the bottom of the page that presents what our comparable lease spreads were over the prior quarters if vacancies greater than one year were excluded. As you might expect, excluding the leases related to vacancies greater than one-year improved our leasing stat. As this note shows, our leasing spreads for total comparable and new leases would be a part of 11% and 23% respectively. Hopefully, you find having comparable lease stats provided under both the posts to be informative. Moving to our balance sheet, consistent with the last two years, we have again proactively addressed our upcoming debt maturity. Last week, we closed a new $100 million seven-year unsecured term loan that provides for delayed draws of the proceeds through October. This loan bears interest at LIBOR plus the spreads based on the Company’s leverage ratio. At closing, we also entered into a forward LIBOR swap that resulted in an initial effective fixed rate on this loan of 3.2%, beginning November 1st based on our current leverage ratio. Further, earlier this week, we refinanced the $40 million mortgage loan on Franklin Village that was scheduled to mature in August of this year with a new $50 million mortgage loan. This new mortgage loan has a 10-year term and bears interest at 3.9%. The $150 million of aggregate proceeds from these two financings, not only prefund our 2016 debt maturities, they cover significant portion of the $200 million of debt maturities we have in the aggregate through 2018. This combined with the $181 million currently available on our revolving credit facility and the portfolio that will soon be about 90% on unencumbered provides us with an enviable amount of flexibility. And finally, guidance, the quarter of actual results behind us completion of our financing activities and the better sense of timing related to acquisition and dispositions, we are raising the low-end of our full year 2016 operating FFO guidance to an updated range of $0.54 to $0.56. This range is still base on underlying assumptions noted on our fourth quarter 2015 call. And we just note that while recent acquisition of Glenwood takes us to our acquisition guidance of $40 million, again it does not mean that we will not acquire any additional assets prior to the end of the year. Our acquisition pipeline consists solely of off market acquisitions that proceed at a harder predict pace, so we would just update our guidance each quarter based on additional closed acquisitions, if any. And with that I’ll open the call for questions.

Thank you. [Operator Instructions] The first question comes from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

First question, in terms of the same-store NOI growth, last quarter you had anticipated that it could be negative in the first quarter or maybe the first half. And as you mentioned the quarter’s results exceeded your own internal expectations, but you left the forecast of 1% to 2% I guess unchanged for the year. It is the first quarter the trough here or is there still some additional diminishing in rent and NOI from the poor anchor vacancies that could impact the second quarter?

For the first half of the year, even a little bit in the third quarter, it’s going to be low but those four anchors that we have filling, three of them are same-store, and we don’t expect them -- late in the year or early in the next year. So, the first half year for sure, we’ll have a drag from that. Keep in mind then we had to beat -- I tried to put it in context with the size of our same-store NOI for any quarter, while it is majority of our property, $23 million, so coupe of 100 grands, 1%, so not a huge number, so little move, little positive variance here and there to move the number. For full year, we are still okay with the original guidance we put out there.

And then with regard to the $100 million unsecured term loan that you just closed, is your intent to ratably draw down throughout the remainder of the year here to pay the 2016 maturities when they are open for prepayment or is it sort of one-time draw; how does that work?

We are allowed multiple draw, I believe we allowed up to three. And so, if you look at the mortgages that are maturing, the first one is Franklin, which we refinanced earlier this week, so there is no need to draw down for that one. And then you get to ones after that that are October, November, December, January, we can get some a little earlier with a prepayment window, but are going to be pretty late in the year. So, I mean if you want to target it just for modeling, you might say half of it gets drawn early third quarter and the other half late in the quarter, something like that.

And the Bruce, so you hit the $40 million acquisition guidance; I guess you are still continuing to be opportunistic, and you seem to be finding one-off deals on sort of a surgical basis off market. I mean what else is in the pipeline that you are looking at today, maybe you could kind of characterize what are you seeing out there?

So, we’re still having success and lot of credit goes to Mike and his team unearthing opportunities. As is our practice, even with our guidance, we generally speaking, try not to overpromise and under deliver and so hopefully will delight you with the opportunities that we unearth and announce them when they close, but it’s still too early for me to get into too much more detail on what we are look at it this time.

Next question comes from R.J. Milligan of Robert W. Baird. Please go ahead. R.J. Milligan: Bruce, I was wondering if you could give a little detail on the Glenwood acquisition, obviously in a good market and good rent per square foot, curious what you think the opportunity is there; whether it be below market rents or some redevelopment opportunities?

So, the way I would characterize our acquisition strategy more generally, again, we are building a portfolio. And when you think about a portfolio, the classic investment portfolio is made up of stocks and bonds. And I would characterize this more like a bond than like a stock. And as much as there is some upside, there is upside really from two perspectives, one is this is a development that’s just being completed. There is still lease-up and we are going to take advantage of the opportunity there. And then because of the fact that this is a development that was done in a very strong market, there is embedded growth and a lot of leases. And so, this investment satisfies our return requirement from an unlevered IRR perspective, considering our cost of capital, but I would defiantly characterize this more like a bond. And we contrast it let’s say with the East River acquisition, which I would characterize more as a stock. That’s an opportunity to do a significant redevelopment where there will be a lot more upside potentially down the road. R.J. Milligan: And welcome, Robin. And just question on your comments about sort of we relooking at the portfolio and looking for redevelopment and re-tenanting opportunities. I was curious if that $20 million to $30 million, which you expect to grow over time will have a -- and you mentioned that might have a short-term impact; if you expect that to have an impact on same-store NOI growth over the next 12 to 24 months, as you look to increase that pipeline?

The timeframe for some of these things could result in longer downtime. But as Phil mentioned earlier for a lot of the major movers here, they weren’t forecasted to begin until late ‘16 and early ‘17. So, I wouldn’t expect a large impact to this year’s earnings. But, from that standpoint, we are looking at what the available opportunities are from our existing assets and to that end, there could be some longer downtime as a result as we go through it.

The next question comes from Collin Mings of Raymond James Financial. Please go ahead.

I guess first question, just going back to Glenwood Village really quick. How should we think about the pricing of that transaction? And then just kind of looking at the details on the property, it looks like there is some vacant small shop space in there, maybe just talk through if you have tenants identified for that or just a little bit more about the opportunity there?

Sure. So, again, as I was describing earlier, there is a limited amounts of leasing opportunities that we are going to take advantage of and that should drive the returns in terms of how we underwrote it. This was a deal that was done in the fives [ph] on a cap rate basis and that we underwrote to achieve an unlevered IRR in the ‘17.

And then switching gears just a little bit going back to the four vacant spaces, just maybe as you guys talked about in last fall, just updated thoughts as far as on the mark-to-market there; I think you referenced maybe hoping to achieve about 20% spread, has that come down, gone up or stayed about the same as you kind of moved through the process here?

That stayed about the same, and we really haven’t adjusted any of our timing there. We’re still kind of tracking our original estimates of what’s filling those, at what rents and what capital, and again it’s going to be later this year or early in the next year, but 20% maybe little better but that’s a good -- for modeling, it’s not a bad number.

And then, Robin, in your remarks, you touched on some changes as far as the lease approval process, that you’ve implemented, I don’t know if the -- collectively the three you can maybe just address what -- is that more procedural or are there some different targets as you’re thinking about term and escalators that you got to do the leasing process?

Yes, thank you. It was largely procedural. One of the things, as I alluded to in the comments is making sure that all of our capital is accretive and that we’re getting a favorable return, and that obviously includes leasing capital as well. And so, since refining the process internally to make sure that every dollar gets analyzed and goes through the proper channels to make sure that as we continue to grow our ADR and ultimately grow NOI that all of our -- our leasing efforts are in line with our overall strategic plan as a Company.

And then, the only thing I would add to expand on that, and I took my hat to the folks at Federal, they have a well run company and employed some real best practices certainly; when Phil came over, we benefited from that on the financial side and I hope -- and it appears that as Robin comes over, we’re going to be benefiting from that on the operations side. And so, even within the first 30 days, we’ve already seen some significant changes operationally and I expect that will continue as Robin’s tenure continues.

And then just, one last one here, as we go back, I know we just talked about this on the last call as well, but just, Bruce, all the conversation obviously, a lot of questions throughout this earnings season about tenant health overall. Maybe just share your thoughts as far as the health of your tenants, anything changing on the watch list on margin over the last couple of months?

So, I’ll handle that; I’ll let Phil comment on that as well. We haven’t been hit by any of the very recent tenant bankruptcies. The A&P bankruptcy obviously affected us with one anchor move-out. More generally, we maintain a watch list; it hasn’t really changed dramatically, certainly the bankruptcies that we’re seeing most recently with Aeropostale, which again doesn’t affect us, we’re certainly mindful of what appears to be a wave of potential retailer bankruptcies. But again as it relates to Cedar’s portfolio in particular, we’re still pretty comfortable with the health of our tenants and with our watch list.

And I don’t have much to add. The context or the content of that watch list really hasn’t changed much. Recently, we had greater check on there as everybody did. So that wasn’t a surprise. But it’s generally consistent…

And then, Phil, one other one and again recognizing you kind of update as you go along throughout the year but just on the disposition guidance about the 110 million, maybe just any updated thoughts, how we should be thinking about the timing of the remainder of that?

I believe the original guidance we put out was a $110 million; we’ve completed $15 million with the disposition of Liberty. The remainder will be in the latter half. So, it’s not going to happen in the first two quarters. I would think of it more in the sort of third quarter, something along those lines, if you want pick a date, but it’s flexible at this point.

[Operator Instructions] The next question comes from Flores Van Duskem of Boening. Please go ahead.

I wanted to follow up on your dispositions, maybe I know that it’s going to be back ended this year but is that because of market conditions or is that because pricing isn’t coming in as expected or if you can give us a little bit more color on that that would be great?

There isn’t too much drama behind the curtain; it’s really just how we are staging our capital migration process. So, we sold an asset earlier in the year, we have a couple of acquisitions as you’re coming to learn that we’re getting close and we have a pretty healthy pipeline. And so, what we’re looking to do is just get our dispositions recently well-matched up with our capital needs on the acquisition side. And I’m pretty comfortable that that’s how it’s all lining up. So, again, these things aren’t close both on the acquisition side, nor on the disposition side until they are closed, but we’re pretty comfortable with the matching of acquisitions and dispositions. And there is not too much beyond that that’s worth sharing.

But that would imply though, Bruce, that you have some more than preliminary discussions already on the dispositions; would that be correct?

Oh, absolutely. We have -- I don’t think it’s a secret but it’s less marketed; we have an asset upland that’s being marketed for sale. And so, we are in the process of selling that.

The next question comes from Craig Kucera of Wunderlich. Please go ahead, Craig.

So, I guess my question is kind of on market. You mentioned that you’ve done a lease up to the anchors or expect to lease them up the next 12 months or so. Can you give us some color on the level of incentives in the market; do you anticipate having to give maybe some free rents for three to six months or kind of what are your thoughts?

Look, we are still in the early stages, so I can tell you that at least with one situation, which is reasonably far a long, there certainly is a negotiation around the incentives. I don’t think that it is anything different than what we have seen in the last few years. I don’t think that -- I wouldn’t characterize it as being a situation where the market is softening and they are expecting greater incentives; I think it’s a pretty typical type of incentive negotiation for an anchor lease. And so that’s what I would say is reasonably good snapshot of where the market is today. But again, we are early on in the process of replacing our anchors. And so, I guess they really could change as the year progresses.

And one more, just looking at your AFFO calculation this quarter, you had a line item for redevelopment costs. Can you give us some color on that, project design and an ongoing projects and do you see more of that in future quarters or is that more of a one-timer related to demolition?

All the above. But generally what come through there is demolishing and without causing to take a minimum [ph] time out because we talk about a lot of gap or whatever but sometimes it the demolition can be capitalized, sometimes it can’t. So, I don’t think that will flow through there. The other type of item that will flow there is sometimes then getting tenants to vacate early will have a straight line balance and you’ll have to write that off if it’s a non-cash item or all come through the P&L all at once. So, it’s items like that; it’ll happen sporadically but it will happen from quarter-to-quarter.

There are no further questions at this time. This concludes the question-and-answer session. I would like to turn the conference back over to Bruce Schanzer for any closing remarks.

Thank you all for joining us this evening. We look forward to seeing you at ICSC RECon and the NAREIT conference in New York in the coming weeks.

This concludes today’s conference call. You may now disconnect your lines. Thanks for participating and have a pleasant day.