Executive Summary / Key Takeaways

• Cedar Realty Trust (CDR-PB) is a Northeast-focused REIT specializing in grocery-anchored shopping centers, currently undergoing a strategic transformation involving targeted asset sales and significant preferred stock repurchases aimed at strengthening the balance sheet and enhancing financial stability.
• Recent financial performance reflects this strategic shift, with Q1 2025 revenues and NOI decreasing year-over-year primarily due to property dispositions, although same-property NOI saw modest growth, indicating underlying operational stability in the retained portfolio.
• The Company has aggressively repurchased preferred stock at a discount to liquidation value, funded by asset sales and a new bridge loan, a move intended to reduce future dividend obligations and potentially offset lost NOI from divestitures, thereby optimizing capital allocation.
• While leveraging its niche in high-density urban markets and the stability of grocery anchors provides competitive advantages, CDR-PB faces challenges from larger, more diversified peers and macroeconomic factors, without a clearly articulated technological moat in its public filings.
• Key considerations for investors include the successful execution of the portfolio optimization strategy, the impact of ongoing litigation related to the 2022 merger, future capital allocation decisions, and the sustainability of preferred dividends amidst strategic changes.

A REIT in Transition: Reshaping the Portfolio for Stability

Cedar Realty Trust operates as a real estate investment trust with a concentrated focus on owning and managing income-producing retail properties. Its strategic emphasis lies squarely on grocery-anchored shopping centers, predominantly situated within the high-density urban markets spanning the Northeast United States. This specialization is rooted in the belief that properties anchored by essential retailers like grocery stores offer a degree of resilience, providing relatively stable revenue streams even during periods of economic uncertainty, as consumers consistently require food and staple goods. The Company's business model is fundamentally driven by generating revenue through rental income and expense reimbursements from its tenant base.

As of March 31, 2025, Cedar Realty Trust's portfolio comprised 14 properties. The Company functions as a subsidiary of Wheeler Real Estate Investment Trust, Inc. (WHLR), following a merger in August 2022. This relationship extends to operational aspects, with WHLR providing property management and leasing services under a management agreement, compensated through fees based on gross operating income and commissions.

The competitive landscape for retail REITs is dynamic, featuring larger, more diversified players alongside those with specific regional or property type focuses. Cedar Realty Trust competes with entities like Realty Income (O), Kimco Realty (KIM), Brixmor Property Group (BRX), and Simon Property Group (SPG). While larger peers like Realty Income benefit from scale and diversification across property types and geographies, and Kimco and Brixmor operate extensive portfolios of open-air and community centers, Cedar Realty Trust carves out its niche through its concentration in high-density urban areas and its specific focus on grocery anchors. This urban focus can translate into advantages such as potentially lower operating costs per square foot due to proximity and higher tenant retention in necessity-based retail. However, the Company's regional scale limits its overall market share compared to national players.

Within this competitive environment, the effective use of technology is increasingly important for operational efficiency and competitive positioning. While some peers are noted for leveraging digital tools for faster leasing processes and improved property management efficiency, Cedar Realty Trust's public filings do not highlight specific proprietary technological differentiators or significant R&D initiatives aimed at creating a technological moat. The Company's competitive standing is thus more heavily reliant on its strategic property selection and management execution within its chosen niche, rather than technological leadership.

A defining characteristic of Cedar Realty Trust's recent history and current strategy is a deliberate process of portfolio optimization through targeted asset dispositions. This initiative gained significant momentum in 2024 and continued into the first quarter of 2025. During the three months ended March 31, 2025, the Company completed the sales of the Webster Commons property for a contract price of $14.5 million, realizing a gain of $2.33 million, and the Oregon Avenue property for $3.0 million, with a gain of $90,000. These sales generated net proceeds of $13.91 million and $2.77 million, respectively. The strategic rationale behind these divestitures is multifaceted: the proceeds are utilized to fund ongoing operating expenses, service debt obligations, cover tenant improvements and leasing commissions, and notably, finance the repurchase of the Company's preferred stock. Management views these sales as a means to enhance financial stability, strengthen the balance sheet, and optimize capital allocation.

Complementing the asset sales, a significant strategic initiative has been the aggressive repurchase of the Company's preferred stock. Recognizing that both the Series B and Series C Preferred Stock have been trading at a discount to their $25.00 liquidation value, the Company's Board authorized a repurchase program in August 2024. This was followed by several tender offers. The December 2024 tender offer resulted in the purchase of 645,276 shares of Series C Preferred Stock at $15.75 per share for approximately $10.2 million. Subsequent offers in February and March 2025 led to the purchase of an additional 655,883 shares of Series C at $16.25 per share (approximately $10.7 million) and, following an extension into April 2025, 592,372 shares of Series B at $17.75 per share (approximately $10.5 million). In total, since 2024 and through the completion of the February 2025 offers, the Company has repurchased approximately $42.4 million of preferred stock. These repurchases were funded by asset sales and, in part, by a $10.0 million bridge loan entered into in April 2025. The strategic implication of these buybacks is significant: they substantially reduce the number of outstanding preferred shares (41% of Series B and 42% of Series C since the 2022 merger), which is expected to reduce future annual preferred dividend payments by an estimated $1.1 million for Series B and $3.4 million for Series C. This reduction in dividend obligations is seen as a way to partially offset the net operating income lost from property sales and contribute to strengthening the balance sheet and potentially enhancing value for common shareholders.

Financial Performance Reflecting Strategic Shifts

The financial results for the three months ended March 31, 2025, clearly illustrate the impact of the Company's strategic divestitures. Total revenues decreased by 15.4%, falling from $8.77 million in Q1 2024 to $7.42 million in Q1 2025. This decline was primarily attributable to the properties sold in 2024 and early 2025. However, this was partially mitigated by an increase in market lease amortization, straight-line rents, and a modest increase in rental revenues and expense recoveries from properties owned throughout both periods (same-center properties).

Operating expenses also decreased, by 9.1%, from $6.26 million to $5.69 million, largely reflecting the removal of expenses associated with the sold properties. Corporate general and administrative costs, however, saw an increase, rising from $612,000 to $653,000, primarily due to higher professional fees. Depreciation and amortization expenses increased slightly to $1.98 million from $1.89 million, with an increase from same-center properties partially offset by the impact of dispositions.

The gain on sales of properties in Q1 2025 totaled $2.42 million, contributing positively to the bottom line. Interest expense, net, decreased from $2.18 million to $1.99 million, benefiting from a lower overall weighted average principal debt balance and reduced amortization of deferred financing costs, partially offset by interest income. A loss on loan prepayment of $718,000 was recognized in Q1 2025 related to the October 2022 Term Loan.

Net income for the quarter improved significantly, reaching $1.45 million compared to $323,000 in the prior year period, largely influenced by the gain on asset sales. Preferred stock dividends declared totaled $1.86 million in Q1 2025 ($2.69 million in Q1 2024). The substantial preferred stock repurchases during the period resulted in a $10.25 million deemed contribution related to these buybacks, which flows through to net income attributable to common shareholders. Consequently, net income attributable to common shareholders was $9.83 million, or $0.72 per share, compared to $2.37 million, or $0.17 per share, in Q1 2024.

Analyzing core operational performance through Net Operating Income (NOI) provides a clearer picture of the retained portfolio's health. Total NOI decreased by 12.8%, from $5.00 million to $4.36 million, reflecting the impact of the sold properties. However, Same-Property NOI, which excludes properties not owned for the entirety of both periods, increased by 1.6% for the three months ended March 31, 2025, compared to the prior year. This modest increase was driven by higher revenues and lower property operating expenses within the stable portfolio. Same-property occupancy improved to 86.7% at March 31, 2025, from 84.3% a year prior, although the same-property leased percentage saw a slight decrease to 86.9% from 88.4%. The average base rent for same-property leases decreased slightly to $10.69 per square foot from $10.89.

Leasing activity in Q1 2025 showed positive trends in rental rate growth. Renewals, covering 74,390 square feet across 8 leases, achieved a weighted average change over prior rates of 8.28%, a notable improvement from 3.07% in the prior year. New leases, totaling 15,705 square feet across 4 leases, were signed at a weighted average rate of $16.58 per square foot, representing a weighted average change over prior rates of 12.46%. This indicates the Company's ability to capture higher market rents on new and renewing leases within its portfolio.

From a liquidity perspective, the Company ended Q1 2025 with $16.1 million in cash, cash equivalents, and restricted cash. It has no scheduled debt maturities for the twelve months ending March 31, 2026, providing some near-term flexibility. The $10.0 million bridge loan secured in April 2025, maturing in January 2026, further bolstered liquidity, primarily to fund preferred stock repurchases. The Company has $1.2 million in outstanding construction commitments as of March 31, 2025, related to property improvements. Funding for these commitments, as well as ongoing operations, debt service, and leasing costs, is expected to come from operations, asset sales, and existing cash.

The significant preferred stock repurchases have materially altered the capital structure and future cash flow profile. By reducing the preferred share count, the Company lowers its fixed dividend obligation, which could enhance financial flexibility and potentially improve coverage ratios over time.

Outlook and Key Considerations

Cedar Realty Trust's outlook is centered on executing its strategic plan of portfolio optimization and balance sheet enhancement. While specific quantitative guidance for future periods was not provided in the recent filing, the actions taken signal a focus on consolidating the portfolio, reducing preferred equity obligations, and improving operational efficiency within the retained assets. The increase in same-property NOI and positive rental rate growth on new and renewing leases suggest potential for organic growth within the core portfolio, which could partially offset the income lost from asset sales.

The Company intends to continue operating in a manner that allows it to maintain its qualification as a REIT, which requires distributing at least 90% of its REIT taxable income. Future dividend declarations on both common and preferred stock remain at the discretion of the Board of Directors, contingent on financial performance, cash flow, capital requirements, and REIT distribution rules. The substantial reduction in preferred shares outstanding is a positive factor for the sustainability of preferred dividends going forward.

However, several risks and challenges warrant investor attention. Macroeconomic factors, including inflation and interest rate fluctuations, could impact the Company's operating performance and borrowing costs. While lease provisions offer some protection against inflation and the debt structure has limited floating rate exposure, prolonged adverse conditions could still exert pressure. Changes in tariffs could also affect construction costs and tenant viability.

A notable ongoing risk is the putative class action lawsuit filed against former directors related to the 2022 merger. Although neither the Company nor WHLR are defendants, Cedar Realty Trust has a contractual obligation to indemnify the former directors. The outcome of this litigation remains uncertain and could potentially result in significant costs for the Company.

From a competitive standpoint, Cedar Realty Trust's ability to attract and retain tenants in its urban niche against larger, more diversified competitors remains critical. While its grocery-anchored focus provides stability, the broader retail environment is subject to shifts in consumer behavior and the ongoing impact of e-commerce, which could affect tenant demand and rental rates. The relative lack of highlighted technological advantages compared to peers could also present a long-term challenge in operational efficiency and tenant experience.

Conclusion

Cedar Realty Trust is navigating a period of deliberate strategic transformation, shedding non-core assets and aggressively repurchasing preferred equity to fortify its financial position. The first quarter 2025 results underscore the impact of these actions, showing reduced scale but underlying stability and modest growth within the core, retained portfolio as evidenced by same-property NOI performance and positive leasing spreads. The significant reduction in preferred shares outstanding is a key development, lowering future dividend obligations and representing a strategic capture of value given the discount to liquidation price.

The investment thesis for Cedar Realty Trust hinges on the successful execution of this focused strategy: leveraging the stability of its Northeast urban grocery-anchored properties, continuing to improve occupancy and rental rates within the core portfolio, and managing its capital structure effectively. While the Company benefits from its niche market focus and the defensive nature of its asset class, it operates within a competitive landscape dominated by larger players and faces potential headwinds from macroeconomic volatility and litigation risk. The absence of detailed technological differentiators in its public profile suggests that competitive advantages are primarily derived from location and operational execution rather than technological innovation. Investors should monitor the Company's progress in leasing up vacant space, future capital allocation decisions, the resolution of the pending litigation, and the continued ability of its core properties to generate stable cash flow in the face of evolving retail trends. The yield offered by the preferred shares, coupled with the Company's actions to reduce the outstanding float, presents a distinct dynamic for preferred shareholders, while the long-term value for common shareholders will depend on the ultimate success of the strategic repositioning.