Ladies and gentlemen welcome to the Third Quarter 2020 Cedar Realty Trust Earnings Conference Call. As a reminder, this conference call 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 third quarter 2020 Cedar Realty 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 to the year ended 2019, 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, October 29, 2020, 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, Nic. Good evening and welcome to the third quarter 2020 earnings call for Cedar Realty Trust. It has been a remarkable quarter and year-to-date and I wanted to thank the members of Team Cedar, not to mention our terrific Board of Directors for their focus and efforts on behalf of the company during these unprecedented times. As you all realize, this has been and continues to be a time of incredible stress, with many folks worrying about contracting a frightening virus, and managing all of the personal challenges this pandemic has engendered. Although, we usually describe our grocery anchored shopping center assets as being resilient, I can proudly say that the members of team Cedar are most valuable assets, have proven themselves to be even more resilient than our shopping centers, as they have performed their jobs with a characteristic focus on everyday excellence, collegiality, and collaboration. Since the outset of the pandemic, we have focused on a number of pressing matters in order for us to emerge from this period on a strong footing as possible. First and foremost, we have endeavored to help our tenants survive the economic shutdown, and ideally pay their rents or at a minimum agree to a forbearance arrangement, whereby we have the right to collect the rent in the future. Second, we have awaited the reopening of the real estate debt capital markets in order to arrange the refinancing of our $75 million term loan maturing in February 2021, as well as addressing our other upcoming debt maturities. Third, we have advanced our redevelopment projects, while exploring joint venture arrangements for the initial phases, especially the recently announced DGS building. Fourth, we have used this period to take a rigorous zero based approach to many G&A categories, and have identified substantial savings…

Thanks Bruce. Good evening. Not only are we living in unprecedented times, but we are operating shopping centers in unprecedented times as well. While our team has been focused on working with tenants through deferral negotiations and the collections process, we are also laser focused on what happens on the other side of this pandemic. What do our tenants need from their landlord to maximize their ability to survive this pandemic? How can we help our tenants pursue omnichannel operating measures to hedge their risk and pivot into a new operating environment? What cost savings measures can we put into place that help both the tenants and the landlord from a cam and capital expenditures standpoint. These are among the topics we are addressing as we deliberately, thoughtfully and strategically advance our operations. The professionalism of our team has been exemplary as they deal with not only ordinary course business challenges of daily operations, but astutely balancing those with the video conferences, field visits, and the ongoing impact from social unrest and some of our urban markets. Our centers remained open during the third quarter with 96% of our tenants open for business. The uses that have not reopened are mainly movie theatres, fitness and buffet style restaurants. We have had another successful quarter of rent collections reaching our highest yet collection rates since the inception of COVID have 91%. Moreover, October collections are currently at 91%, which does not reflect one high credit anchor that pays at the end of the month, which will take us to approximately 92.5% for October. In order to ensure tenant health and occupancy, we have actively engaged with almost all of our over 800 tenants during the pandemic. We completed 105 deferral and waiver agreements through September 30, 2020, totaling $3 million of…

Thanks Robin. Today we announced sequential quarterly improvements in both FFO and same property NOI. FFO increased to $8 million or $0.09 per share compared to $5.7 million or $0.06 per share reported for the previous quarter. Same property, NOI decreased 9.1% over the comparable period in 2019, and marked improvement from the 14.6% decrease we reported in the previous quarter. Both of these improvements were driven by our strong cash collections that Bruce and Robin discussed. Last quarter, I walked through our cash collections and revenue recognition in a fair amount of detail and received comments that was very helpful and understanding our results. Accordingly, I want to take a minute to once again walk through our revenue recognition in detail. Our total tenant billings for base rent and recoveries combined for this quarter were $31.6 million. During the quarter, we collected and recognized as revenue $30.1 million or 91% of these billings. Additionally, we recognized another $1.1 million or 3% as revenue that we determined to be collectible, the majority of which is covered by signed deferral agreements. Accordingly for this quarter, we recognize as revenue 94% of our build rent and recoveries for the quarter. The $1.9 million or 6%, that we did not recognize consists of $1.8 million that was not paid by tenants, and which we have determined at this time should be accounted for on a cash basis, and $100,000 that we agreed to waive. As reminder, just because we have placed certain tenants on the cash basis does not mean we will not collect anything from them. While some cash basis, tenants may fail, we expect some will simply make inconsistent payments or partial payments, which we will recognize as revenue if and when received. Moving to the balance sheet. On our prior…

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

Bruce, first question, you know you mentioned that you expect to be in the position to break ground on the DGS office building in early 2021. Can just provide us an update on your thinking around '21. Can you just provide us an update on your thinking around, funding that build out and sort of how you're weighing all of your options today?

Thanks Todd, and appreciate you calling in and asking about that. With respect to DGS, the plan is fairly simple. We're speaking with your classic capital partners on the equity side, with whom we'll partner, and then we'll couple that equity joint venture with construction financing. So fairly straightforward and we're in the process of advancing all those conversations.

Is there any update on pre-leasing for the ground floor retail? And are you moving forward, I believe there were some other phases of Northeast Heights. Are you moving forward at all and making progress on additional phases at this time?

I will let Robin take that.

We are actually looking at relocating several of our East River tenants to the ground floor of DGS. And we're in the middle of negotiating some of those deals, so it would be the [indiscernible] of the banks and a couple of the other tenants that are existing East River tenants that we want to keep on the project we're looking at moving into the ground floor of DGS. If we complete that relocation program, we would have about 5000 square feet left in the DGS, retail, and we're looking at fast casual restaurants service type users, you know, think the type of service providers that would be conducive to office tenancy, as well as fast casual type restaurants for the balance of the 5000 square feet.

Okay, that's helpful. In terms of dispositions, I was just wondering if you could talk a little bit about the market for asset sales today. In general, what you're saying, whether we should expect to see an increase in activity in the coming months, and then maybe you could just touch on Glen Allen and maybe talk about pricing for that disposition.

Sure. The Cedar disposition program is one topic and then I can give you a little bit of color around what's happening in the market more generally, just because as I've described in the past, we pretty carefully track all the deal activity in our market. The transactions that we have been advancing are pretty consistent and as much as they are all single asset pad deals, and generally speaking, intended to address just some fairly simple liquidity concerns that we had as everybody else did at the outset of the pandemic. So we started marketing some pads and were able to get reasonably compelling offers on them and are now closing on those deals that we took to market in the spring. In terms of Glen Allen in particular, that asset close it was a net lease publics and it closed in the mid-5s. In terms of the bid, again, notice that's very reflective of anything other than just the appetite for high credit quality, net lease grocers. The market more generally for grocery anchored centers is fairly strong in our market right now. So while there hasn't been a huge amount of transaction activity, there are a number of deals that we've been tracking that are teed up. Many of these deals are in the low sevens. There's a deal that we're tracking right now. That's in the low 6s. These are generally speaking grocery anchored centers, much like our assets, they've had pretty strong collections through the pandemic period. And one of the things that we're seeing, which I think is supportive of this type of pricing is that the financing markets are fairly receptive to these types of assets as Phil described. So when you have high cash collections grocery anchored centers, it seemed to have been fairly successful navigating through the pandemic. You've had a real world stress test of an asset. And that is something that lenders find encouraging. So again, although these are Cedar assets, these are very comparable to the assets that we own. And we are seeing a fairly healthy transaction market right now, some of these get close, and some of these are teed up to close. And so I think as we get towards the end of the year, we'll probably have some clarity around nothing else, what is the warranted cap rate for Cedar's portfolio, and therefore, maybe have an even crisper view on the disconnect between our share price and our net asset value.

Okay, that's helpful. And Phil, sort of I guess, pro forma, the paid out of the February term loan on the line, I was just wondering how much borrowing capacity you have remaining on the line today? I don't know if there is any - there any constraints against drawing down? The remaining amount that's available? And also can you talk a little bit more about the terms you're seeing in the mortgage market today, it sounds like it's sort of pegged for like an early '21 transaction and you know of at least $75 million. But can you just talk a little bit more about some of the terms you're seeing in the market today and what that might look like?

Yes Todd. So in our queue, we disclosed the remaining capacity on our line, which is about almost $45 million as we speak plus we have some cash, so approaching kind of $50 million of liquidity there between the line capacity and cash on hand. Just keep in mind you that is rolling four quarter covenant. So that could turn - that will turn down over the next couple of quarters as we get four full quarters in the calculation that are impacted by COVID. But I think that roll down will be offset with the pad cells that Bruce discussed, along with I think you're familiar, you know, our San Souci asset, and San Souci Maryland has a JV partner, but the way the waterfall work was completely buried. So we expect for a couple hundred thousand dollars to close out the buyout of that partner. And once that occurs, we'll be able to add that to the borrowing base. So when you combine that four along with the pad sites that should mitigate any roll down and NOI over the next six months, and I don't mean roll down like sequentially, but just as you get four full quarters into that calculation that's been negatively impacted by COVID. With regard to the secured financing, yes, for grocery anchored centers with other tenants that fall kind of in this central bucket with high cash collections, there is CMBS appetite, there's a live company appetite. Generally loan devalues are 65% but let's just say 60% to 65%. You can get there is a fair amount of term left on the anchors, you can get some IO with that, maybe significant IO depending on the remaining term. And rates generally come in the mid-3s. You know, that's what we're seeing right now.

And just one last one, Phil, the percentage rent in the quarter was meaningfully higher? Is that sales based rent that you moved certain tenants to in the quarter?

Yes, there was a couple of tenants that moved from base rent to percentage rent one in particular, because of a code tenancy provision makes up a lot of that - the majority of that, and that code tenancy provision should be corrected I think around year end. But that's why it was elevated. It just moved from base rent, it was more geography, and that move from base rent to percentage sales, did roll down a little when the guy got to convert to percentage sales, but that should correct itself around the end of the year.

[Operator Instructions] The next question comes from Floris van Dijkum from Compass Point. Please go ahead.

Quick update on obviously very - I think investors would be very keen to hear about the refinancing, it sounds like it's going to go via CMBS. And it sounds like there's - based on the numbers you're talking about - it's not punitive, which would be very encouraging? Maybe if you can, you've got - number of assets held for sale, how much liquidity you think you can raise and timing wise on, if you were to get rid of the four assets that you listed, held for sale?

I guess I'll take that. These are assets that are all fairly small, but as you could see them with the activity, since the commencement of the pandemic, these singles do add up. And so for example, we've been able to raise about $30 million since the beginning of the pandemic, just selling off relatively small assets. And I would suspect that, these four assets are probably going to be call it in the high teens to around $20 million in total, if and when they were all divested. More generally Floris is the way to think about it is that we approach this facet of our portfolio management, the balance sheet management pre dynamically. Again, the back story behind how these pads came to be sold was really that when the pandemic started not knowing what the future look like but recognizing the deadline for 10/31s was extended, the financing market for single tenant net leased assets was still pretty frothy. We thought it made sense to bring those assets to market in order to tap the capital available in that market at a relatively low cost. That's something that we continue to monitor, obviously, as Phil has described, and I'm going to ask him to go into a little more detail in the financing of these particular - the particular financing that we're looking at for later this year or early next. At this point, we have other sources of capital. And so while we're continuing to advance the assets that are held for sale, the notion of continuing to bring out other assets is something that while we monitor we're not as actively pursuing. Phil I don't know if you want to comment a little bit on the secured financing or expand on what you said earlier.

Yes, Floris I think, you'll see us have a preference for a life company secured debt over CMBS. But we will be looking at both, but definitely towards - with a preference towards the life company. To extent we're around, I don't want to get to all the math around our revolver and line of credit, but to extent we're around at 65% loan to value we generally pick up a little incremental capacity on our revolver when we do that. To extent we're down around the 60% loan to value it's generally close to neutral as far as creating additional capacity. Right now, we are seeing loans close at 65%. So if the market holds steady here, we should be able to play some secured debt on properties and turn out the line a little bit. And maybe even pick up a little capacity on top of that.

Thanks Phil, no that's helpful. And just - do you expect the people who will be the buyers of your assets that are held for sale? Are those financial assets in your view or are those going to be cash buyers?

Floris that's a great question. Some of these assets are definitely being sold per pound, and those will be cash buyers or low value assets. I think the stabilized assets that are more rural, could probably be financed. Again, I'm not an expert in this, but just we at this point are becoming pretty knowledgeable about this market. And just based on what we're hearing, they could probably be financed. But not at that kind of level that from an LTV perspective that we're seeing with respect to the assets that are part of our core portfolio that we're looking to finance. So you could probably put some debt on it. But again, it wouldn't be at that 65% level again, based on just what we're seeing in the market right now.

Right, one last question in terms of your leasing, obviously very encouraging new lease spreads? I noticed the TI numbers were down as well, I'm just get the [technical difficulty] is it sustainable or where there some one-offs in there?

So yes.

Yes together, so we're sort of hand signaling to each other.

Yes, so forgive our dance is not as elegant as it sometimes is. Related to leasing and TI, I never want to have a crystal ball from quarter-to-quarter as far as how that will be. I mean, we always look at each deal strategically, and making sure that we are getting the best net effective rent on each deal as it comes through and making sure that for each deal that we're getting the highest rent that we can get and paying the least amount of capital to attract that tenancy. So as far as you know picking a trend and saying that TI will be lower any specific dollar amount for the same foreseeable future. I wouldn't - I wouldn't say that, but I wouldn't necessarily say it's going to be higher either. What I would say is that the same strategic thought and approach that we take on a deal-by-deal basis, we will continue from quarter-to-quarter.

Thank you. This concludes the question-and-answer session. I would like to turn the conference back over to Bruce Schanzer for closing remarks.

Thank you all for joining us this evening. We wish you all good health and look forward to continuing to advance the interests of Cedar and its shareholders in the months ahead.

Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.