Greetings and welcome to the Third Quarter 2017 Cedar Realty Trust Earnings Conference Call. As a reminder, this conference is being recorded. At this time, all audience lines have been placed on the muted mode. We will conduct a question-and-answer session following the formal presentation. Now I'll turn the call over to Mr. Nicholas Partenza. Please proceed.

Good evening and thank you for joining us for the third quarter 2017 Cedar Realty Trust earnings conference call. Participating in today’s call will be Bruce Schanzer, Chief Executive Officer; Robin Ziegler, 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 2016 as it may be updated or supplemented 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, November 2, 2017, 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, and thank you all for joining Cedars Third Quarter 2017 Earnings Conference Call. Before jumping into my prepared remarks, I would like to acknowledge my senior executive colleagues, Phil Mays, Adina Storch, Mike Winters, Robin Ziegler, Charles Brooker and Tim Havener as well as all of my Team Cedar colleagues who have committed themselves to everyday excellence. Approximately six years ago, on our third quarter 2011 earnings call, shortly after Phil and I started at Cedar, we introduced the new Cedar. Since then we have gone from being the worst performing shopping center REIT to being one of the best performing shopping center REITs, as measured by total shareholder return. While we are very proud of the track record we have successfully achieved, we embrace that there is more to accomplish as we seek to build a premier retail REIT and drive value creation for all Cedar’s shareholders. Over the last six years we have transformed this organization, streamlining a collection of approximately 140 discrete assets into a higher quality and strategically focused portfolio of 60 predominantly grocery anchored shopping centers in the D.C. to Boston corridor. The balance sheet we started with six years ago was highly levered and overly encumbered with mortgages. Since that time, we have diligently, systematically and successfully reduced leverage more than two terms and unencumbered substantially all of our underlying properties. In addition, we have turned out the majority of our unsecured debt to reach the position we have in today with no maturities until 2021. In tandem with improving the company's balance sheet and portfolio, we reduced headcount by approximately 40% while purposely building a keen Cedar culture based on the values of collegiality, collaboration and everyday excellence. And finally, we have opportunistically raised equity over the past few years in…

Thanks, Bruce. Good evening. We have been largely focused on two fronts in the recent months, leasing space and furthering the value creation opportunities within our portfolio. The emphasis on leasing is evidenced by a current physical same store occupancy of 92.7% and a same store leased percentage of 93.4%, our highest occupancy level since the third quarter of 2015 when the portfolio began to weather the effects of the five anchor closings. We were able to do this on several different fronts. In addition to the release of anchor boxes, we are assertively leasing our difficult-to-lease spaces, spaces that have been vacant a long time, spaces with credit or payment challenges and spaces with challenging physical configuration. We are capturing the highest rent than marketable bear and leasing them. We are aggressively pursuing our local markets, using brokerage strategically where needed to ensure each market we do businesses is getting the local touch it needs for effective deal making. We are strategically doing temporary and flexible deals and our future redevelopment projects to ensure income remains in place as long as possible as oppose to the same vacancy. And we are pushing annual rent box and requiring sales reporting in most of our new deals. In some ways it is going back to the basics, but this focus and perseverance bodes well for Cedar as we have a healthy deal pipeline going into the fourth quarter and beyond. During the last year, we have leased almost 1 million square feet in our current ABR on comps deals on our rolling 12-month basis is $13.79 per square foot at a spread of 11%. The cash basis spread of comparable new leases this quarter is a negative 5.2%, primarily due to the re-leasing of two small shop spaces that have been…

Thanks, Robin. On this call, I will briefly highlight operating results, recap and provide context around our recent balance sheet activity and discuss our updated 2017 guidance. First operating results. Operating results for this quarter were consistent with our expectations. Operating FFO was $12.5 million or $0.14 per share. Also consistent with our earlier guidance, same property NOI growth was negative 1.3%, excluding redevelopment, and was negative 0.6% including redevelopment properties. As previously discussed, the decrease in same property NOI was driven by our re-anchoring and remerchandising efforts along with temporary co-tenancy impacts. Again, we report same property NOI on a cash basis and expect singed leased before the five vacated anchors we have been discussing to gradually increase cash rental income through late 2018. Moving to the balance sheet. During the quarter, we completed several capital market transactions either disclosed at a subsequent event in last quarter's reporting on recent press releases. I will provide a high level summary of these transactions and then some context around them. First, on August 1, we fully settled our fourth equity offering by issuing the related 5,750,000 common shares, which after adjustment for dividends and other costs during the forward period, is out of the net cash proceeds of $43.2 million. These proceeds were primarily used to retire 37.5 million of our 7.25% Series B preferred. Next, in late August, we issued 3 million shares at a new 6.5% Series C preferred for gross proceeds of $75 million and then used these proceeds to retire a similar number of shares in amount of our 7.25% Series B preferred. Finally with the continued and consistent support of our bank lending group, we amended and extended our revolving credit facility and several term loans. These amendments in the aggregate extended our debt maturities so…

Thank you. [Operator Instructions]. And our first question comes from the line of Todd Thomas with Keybanc Capital Markets. Please go ahead.

Bruce, you talked about the $70 million to $75 million of capital needs expected over the next few quarters that will be funded through dispositions. Can you just talk about where you're at in terms of selling additional assets?

So the plan is and it's been our plan in general when we’ve sold assets to fund acquisitions which is, generally speaking, will sell into the capital spend. So we'll generally spend the capital and then sell the assets to pay down the line and I expect to continue to do that. So as we commence the projects, we’ve drown our line and we'll sale down the assets into that capital usage.

And can you just elaborate a little bit? You mentioned that the spread for single assets is kind of held up relative to pricing for the larger portfolios or where the stocks trading I guess essentially. Can you just sort of quantify that and talk about a little bit what you're seeing in terms of pricing for some of the assets that you might be contemplating selling?

Sure. So just to clarify what I said, so the observation that I made and some of this is based on what we have seen personally as well as what we have learned anecdotally both by speaking with other sellers and also by speaking with many other brokers is that while the market for single assets appears to be holding up without meaningful cap rate slippage that the portfolios that have come to market have either not gotten a bit at all or have been priced on a weighted average cap rate that's well above where the assets we trade if they were sold individually. And so that’s what we have observed both as Cedar and that's what we have observed – that’s what we have learned in speaking with more anecdotally.

Okay. And then a clarification around the negative new lease spreads in the quarter. I think I might have misheard this but I think the comment about that space or that there were a couple of leases that were vacant for several years, can you just clarify that? Because the spreads were in the comparable bucket, right? So I’m just curious what constitutes comparable versus non-comparable, and if you could just talk about that in a little bit more detail?

Hey, Todd. It's Phil. So I know there are some diversity impact on the comparable when the space has been vacant for over a year. So if you look in the table, we're speak that out by a quarter, we include anything that's comparable whether it is a prior tenant that you could -- there is now a new tenant even it's been vacant over a year, but then down at the bottom to be the helpful do the foot note. And we know there is a diversity impact let them say, “Hey look, if you excluded the ones that were vacant over a year, here is what it would look like for the rolling 12 months or whatever.” Does that help? I mean, kind of report you both ways that try to give you numbers that are comparable to whoever you're comparing to what spaces that have been vacant more than a year and comparable with spaces that have all been vacant for the less than a year. So we give it to you both the ways.

And then just lastly. If I look at your expense recovery ratio, about 68% in the quarter. Just given some of the commencements and the ramp you are anticipating in occupancy, where would you expect that recovery ratio to be by the end of '18? I mean how much of a pick-up would you anticipate to see over the next several quarters?

Probably a couple of hundred basis points. I mean we are going to see let’s say 4 or 5 anchor all coming online, but we – hopefully by the end of '18 it's around couple of hundred basis points higher.

And our next question comes from the line of [Indiscernible]. Please go ahead.

Bruce, I feel questions -- you made comments about bigger and necessarily better. If we look at Cedar though, your leverage including – and notwithstanding the fact that you guys make nice strides since you've been at the company in producing leverage, but if we look at your leverage relative to peers and include preferred in that, which is almost the best to look at it, but you still would screen at the high in the space and you’ve talked in the past about your bottom 50% by number of assets that have been a drag in terms of your NOI performance. Why wouldn’t you continue to strength the company further and so to the bottom half. Why for new developments to hit in order for you to sell assets?

The answer is sort of complicated. So because Cedar is a relatively small company, we do need to be mindful of making sure that as we pursue the value creation opportunities which I've spoken about and which Robin have spoken about in this call and while we've been seeking about for going back to the first quarter of 2012, the critical thing is to make sure that we don’t do anything precipitative with our capital base which is embodied in our assets. And so we are comfortable with our leverage where it is. Again, as you noted, we don’t think about of our preferred as leverage the way you do. We don’t worry about it for a number of reasons primarily because it never matures and we can't afford. And those are the two things that represents financial leverage that would cause people some cost. Again, but that getting into which investors included and which investors don’t, this management team does think about it as leverage. So we're comfortable with our net debt to EBITDA and we think that the more prudent capital strategy as it relates to the assets in our bottom half is to sell them into the capital uses unless we have a way of maintaining our cash flow such that our G&A doesn’t create a burden that's value destructive on our platform.

So you are concerned about the G&A -- now your comments initially indicated look we’re going to have higher G&A because we’re smaller?

Well, I wouldn’t say concerned. I would say we are mindful of that. I mean that sort of responsible management team does is that it's constantly focusing on making sure that it's creating value and as a small company one of the things we need to focus on if making sure that we maintain a scale such that our G&A works with the platform side. So I wouldn’t say that I'm concerned about it, but I would say that we are mindful of it as a responsible management team should be.

One other question I have for you, can you maybe give on the [indiscernible] potentially investments that you are going to have to make there?

I think that you are probably somewhat familiar with these processes, but just for those who are more familiar with how these types of projects work, these permits will be pulled at the appropriate time and it will be premature to pull then now as we are continuing to round out our tenant roaster and other facets of the project. So the permits will be pulled in the ordinary course and that was not the appropriate time be pulling them as part of these projects.

You are still developing the [indiscernible] expanded on the leasing you do?

I am sorry. I apologize. There is a lot of background noise on your line.

Sorry, [indiscernible] on the leasing that you do the final submission of your plans?

It’s a bunch of different things, but the point is is that looking at permit filings and drawing any conclusions about the state of our redevelopment projects just wouldn’t be a sensible way to go about evaluating where we are in those projects.

[Operator Instructions] Our next question comes from the line of RJ Milligan with Baird. Please go ahead.

A question on the last vacant anchor, any progress there? I think this is a LOI out there or signed lease?

We do have a LOI out there as fully negotiated actually and we are in final discussion to wrap that up and maybe taking it to lease very soon.

And when do you expect the rent commencement?

So we don’t have a pre-rent period commensurate with other anchor leases of that nature, so I would say sometime in late '18.

And then, Robin, I know you came over from federal which arguably probably the best mix use developer out there. Can you just talk about as you look to take on some of these larger redevelopment projects, obviously Robin you have the experience, how deep is the bench there and are you going to need to hire more people to execute on those plans?

As you are aware, we have also brought on Oody Cooperman from Equity One and he has been working with me hand-in-hand everyday on our redevelopment. We have also happed in third party resources for various projects as we needed. And as Bruce said, we are very mindful of G&A given where we are in the projects. And so as the projects evolve, we may consider staffing as needed as we go along, but at this juncture we have myself, we have Oody Cooperman, we have Charles Burkert, who you are already aware of on our -- Senior Vice President, Construction and Development and we have also hired Lars Kerstein from Metro Commercial last year, who has our leasing effort in all of developments. And so that -- and then we have also brought over Todd Schively, who was internal to Cedar, who also works on our development projects. So that’s our team internally. And as I said we also use third-party resources for a lot of things that that we have.

Okay, and one last question. Bruce, how active do you think you will be on the acquisition side with the focus on some of these larger redevelopments over the next 12 to 18 months?

I would say we're going to be pretty opportunistic. So we're not actively looking to make acquisitions for a number of reasons, one is because we like the return profile that the redevelopments offer relative to the acquisitions, and the second it is just where the market is right now it feels like there is why I wouldn't say it's okay, I would say it's probably translucent in terms of really understanding pricing today. And so I think with that context, I can't tell you that we would jump ahead first into acquisitions, the only qualifier being that to the extent that we can make acquisitions that are tactical around some of our redevelopment projects, we might want to add real estate around those assets that you said that the opportunity presenting itself, but that will be more tactical than it would be financial.

Our next question comes from the line of Collin Mings with Raymond James. Please proceed.

I just wanted to follow up. Phil, just going back to your prepared remarks about the balance sheet and then, Bruce, you just on in response to another question, just feeling comfort with the current level of debt to EBITDA. Can you maybe just talk on what are the goals you have from a balance sheet perspective here in the near term just given kind of where the debt profile and the maturities been pushed out now through 2021 for all purposes? So just maybe what are the near-term goals from the balance sheet is sort of the heart of my question.

So Collin, what I would tell you is that -- and this is Bruce and I'll let Phil stand on this. But Phil and I spent a lot of time talking about our balance sheet and thinking about the strategies around the balance sheet even with the comfort of know that we don't have any debt maturing until 2021. And so I would expect that you'll see continued measures to make sure that when 2021 rolls around we're having a similar discussion with that similar that we turn out. So right now our plan is with our debt higher than where we would like it be from a debt-to- EBITDA perspective, that was just going to continue to maintain this cushion from a term structure perspective with the hope that our EBITDA will grow into the term structure such that when we next have maturities on the near-term horizon our EBITDA is greater and therefore debt-to-EBITDA is lower. But from a balance sheet strategy perspective in terms of just reducing that nominal number, what we're reluctant to do is: either a, issue equity at a discounted net asset value in order to lower leverage; or b, sale assets that we could otherwise use to invest into higher yielding redevelopment projects and use that capital to pay down very low yielding debt just to achieve a statistics that will only be relevant in 2021 when we next have even repaying debt. So our feeling is that while we recognize the debt to EBITDA figure is on the higher side, we think the best way to address it is by leveraging -- or leveraging might be word used – by addressing the issue through our term structure rather than through the nominal statistic. I don't know, Phil, if you want to expand that or not?

I think that pretty much covers it. I think we're yield to see as continue to consistently and systematically in a -- way and reduce the leverage, but in the meantime we keep a long runway of no debt maturities to give us flexibility.

Got you. Maybe along those lines just talk about the current level of kind of mortgage debt you have out there and opportunities you said you think about that?

Yeah so there is not a lot of mortgage debt now. The NOI, the property-level NOI is about 85% unencumbered, which is nice for us, right? We can always encumber a property. So I think you might see us that’s turn out some debt longer than the bank term loans 7 years. We may take advantage of one of the encumbered properties to do something like that. But again we have no debt maturing, so there is not a rush to do anything right now.

Okay. And switching gears just far from operating environment standpoint, I mean just looking at the 2018 lease explorations, let’s call about 12% or so of ABR rolling, maybe just talk a little bit more about the any sort of rent relief request you have at this point as far as with negotiations with tenants and did you think about that -- some of the upcoming explorations, how are you approaching those and how are those dialogues going?

Sure. Every once in a while you get the rent relief requests from small shops and I think I mentioned in comments we have been kind of aggressively and proactively dealing with those types tenants that have those types of issues by frankly just releasing their space better credit operators, and so we've been handling that in that fashion. For some of the anchors that have come to us with those types of requests, we negotiate their deals based on relative to what's going on in the market and what we need for the center. But by and large it hasn’t been a systematic problem. That’s kind of the one-off problem that you see having done this for many, many years. It’s no different than just what happens with the normal course of business. People ask, you say no and you carry on with the conversations.

And then along those lines let me go on back to the conversation around but the leasing, can you just expand a little bit more just on the temporary tenants. It does look like -- just on the margin to some exposure to months and month leases has picked up relative to the year so we go after slightly. Maybe just talk a little bit more about that in the context of the prepared remarks?

Sure. So on some occasions as we've talked about there are some times and we intentionally do a short-term deal if we are looking at a value creation opportunity over looking at a leasing opportunity. So we strategically may do a shorter term leasing in those instances and so you may see some of that kind of forth calling through on the reporting as we position some of these redevelopment. But and large it is just a nature of our normal course operations. There is not a months-to-months tenancy is something that happens under a normal course from time to time. But the only time that we do is purposely or strategically is really related to redevelopment efforts or if we are needing to get the one space and relocate in the other tenants for some kind of leasing renew where we may be doing at a shopping center for value creation purposes. So that's really all that you are seeing coming through there, and we do actively manage that as part of our kind of AR and bad debt operation. We are really aggressively looking at those things that may -- maybe they are existing as we manage those things going through, we make sure that those things are getting taken care of through our kind of normal operating procedures.

Okay. I appreciate the color. Thanks.

Ladies and gentlemen, this is the end of our question-and-answer session. I'll turn it back over to management.

Thank you all for joining us this evening. We appreciate your taking the time to continue learning about our company and look forward to seeing you at NAREIT in a few weeks.

Ladies and gentlemen, this does conclude the call for today. We thank you for your time and participation. Have a wonderful rest of the day, and we disconnect your lines at this time.