Real Estate/Discontinued Operations/Investment In Cedar/RioCan Joint Venture

6 Months Ended

Jun. 30, 2011

Real Estate/Discontinued Operations/Investment In Cedar/RioCan Joint Venture

Real Estate/Discontinued Operations/Investment In Cedar/RioCan Joint Venture

Note 3. Real Estate/Discontinued Operations/Investment in Cedar/RioCan Joint Venture

At June 30, 2011 a substantial portion of the Company's real estate was pledged as collateral for mortgage loans payable and the revolving credit facilities. The following are the significant real estate transactions that occurred during the six months ended June 30, 2011.

Wholly-owned properties

On January 14, 2011, the Company acquired Colonial Commons, a shopping center located in Lower Paxton Township, Pennsylvania. The purchase price for the property was approximately $49.1 million. At closing, the Company entered into a first mortgage in the amount of $28.1 million, which bears interest at 5.55% per annum.

On February 14, 2011, the Company completed the sale of a development land parcel, located near Ephrata, Pennsylvania for approximately $1.9 million, which approximated the property's carrying value at December 31, 2010.

On April 29, 2011, the Company acquired, for future development (and which is substantially pre-leased), a vacant land parcel in Kutztown (Township of Maxatawny), Pennsylvania for a purchase price of approximately $1.6 million.

Discontinued operations

During the period from January 1, 2010 through June 30, 2011, the Company sold or treated as "held for sale and/or conveyance", 26 of its properties, including (1) a 100%-owned single-tenant property in Philadelphia, Pennsylvania, and (2) a number of drug store/convenience centers. The carrying values of the assets and liabilities of these properties, principally the net book values of the real estate and the related mortgage loans payable to be assumed by the buyers (or conveyed to the mortgagee), have been reclassified as "held for sale/conveyance" on the Company's consolidated balance sheets at June 30, 2011 and December 31, 2010. In addition, the properties' results of operations have been classified as "discontinued operations" for all periods presented. In connection therewith, the Company recorded net impairment charges of $12.3 million and $3.0 million for the three months ended June 30, 2011 and 2010, respectively, and $22.5 million and $3.2 million for the six months ended June 30, 2011 and 2010, respectively (such impairment charges aggregated $39.5 million for the entire year ended December 31 2010).

Such charges were based on a comparison of the carrying values of the properties with either (1) the actual sales price less costs to sell for the properties sold or contract amounts for properties in the process of being sold, (2) estimated sales prices based on discounted cash flow analyses if no contract amounts were as yet being negotiated, as discussed in more detail in Note 2 – "Fair Value Measurements", or (3) an "as is" appraisal with respect to the single-tenant property in Philadelphia, Pennsylvania to be conveyed to the mortgagee. Prior to the Company's plan to dispose of assets reclassified to "held for sale/conveyance", the Company performed recoverability analyses based on the estimated cash flows that were expected to result from the real estate investments' use and eventual disposal.

The impairment charge recorded in the three months ended June 30, 2011 relates primarily to the 100%-owned single-tenant property in Philadelphia, Pennsylvania. Similar to the adjacent joint venture property discussed in Note 1 - "Organization and Basis of Preparation", the tenant vacated the premises in April 2011 at which time the Company's wholly-owned subsidiary had a CMBS non-recourse first mortgage loan secured by the property in the amount of $12.9 million maturing in March 2012 (guaranteed by the Company to the extent of $250,000). In May and June 2011, the Company reviewed its investment alternatives and determined that it would not be prudent to proceed with the development, sale or lease of the properties. In addition, it was determined that to advance the funds to repay the mortgages would also not be prudent. Such determination was based on the uncertainty in obtaining favorable revisions to zoning, difficult existing deed restrictions, uncertainty in achieving required economic returns given the extensive additional capital investments required, and uncertain current market conditions for sale or lease. No payments have been made on the 100%-owned property mortgage since May 2011, although the Company has been accruing interest expense and will pay real estate taxes and other property-maintenance expenses as they become due. The carrying value of the property, which is classified as "held for sale/conveyance" was $4.6 million at June 30, 2011, after giving effect to a $9.1 million impairment charge. It is the Company's intention to convey the property to the mortgagee by a deed-in-lieu of foreclosure process, whereby the Company's subsidiary would be released from all obligations, including any unpaid principal (other than the aforementioned $250,000 Company guaranty) and interest. At the time of such conveyance, the Company would recognize a gain (anticipated to approximate $8.3 million) based on the excess of the carrying amount of the liabilities (mortgage principal and accrued interest and real estate taxes) over the carrying amount of the property at June 30, 2011.

As previously disclosed, the Company's properties in Ohio, principally drugstore-anchored centers, were disproportionately impacted, relative to the Company's other properties, by continuing unemployment and adverse economic conditions attributable in large part to the decline in automobile production and sales which, in turn, resulted in factory closings and/or downsizing. This resulted in disproportionately larger vacancies at those properties. As a result of the challenges in maintaining viable tenancies in those areas, the Company developed a strategy to dispose of these and several other properties. Impairment charges related to these properties recorded in the six months ended June 30, 2011 included approximately $2.0 million for two additional properties reclassified to "held for sale/conveyance" during the three months ended March 31, 2011 and additional charges of approximately $7.9 million and $2.6 million for the three month periods ended March 31 and June 30, 2011, respectively, principally representing adjustments to the net realizable values of certain of the properties treated as "held for sale/conveyance" as of December 31, 2010. The additional charges were based principally on changes in the structure of previously-negotiated transactions. In March 2011, the Company terminated a contract to swap three properties for certain land parcels in Ohio and instead entered into a new agreement to sell the properties for cash and assumption of existing debt, and, subsequent to June 30, 2011, the Company was unable to obtain the required lender consents for the sale of 14 additional "held for sale/conveyance" properties, discussed below (the buyers in both cases being members of the group from which the Company originally acquired the drug store/convenience centers).

On April 27, 2011, the Company made a two-year $4.1 million loan to the developers of a site located in Columbus, Ohio (the developers are certain other members of the group from which the Company acquired the drug store/convenience centers). The loan was made in consideration of the borrowers facilitating (but not being parties to) the contract for the sale of the 14 properties. The loan (which may be increased, under certain conditions, by an additional $300,000) bears interest at 6.25% per annum and is collateralized by a first mortgage on the development parcel, which has an appraised value in excess of $8 million.

On April 29, 2011, the Company entered into a contract for the sale of the 14 properties, subject to lenders approvals, with a closing anticipated during the latter part of 2011. The $33.2 million net aggregate sales price for the properties, after reflecting estimated closing costs and expenses, includes approximately $25.3 million of mortgage loans payable to be assumed, and approximates the properties' carrying values as of March 31, 2011. As a result of being unable to obtain lender consents, the Company is in the process of renegotiating the transaction, may not sell all 14 properties at this time, and, accordingly, has revalued the properties on an individual, and not portfolio, basis.

In addition to the three and 14-property transactions noted above, the Company, on March 30, 2011, completed the sale of two of the "held for sale/conveyance" properties for approximately $3.8 million, which approximated their adjusted carrying values. In addition, on April 15, 2011, the Company completed the sale of another "held for sale/conveyance" property for approximately $10.8 million, which approximated $0.5 million in excess of its adjusted carrying value.

The following table summarizes information relating to the Company's properties which were sold or treated as "held for sale and/or conveyance", as of June 30, 2011 and December 31, 2010:

											Mortgage loans payable
			Property carrying value				Maturity	Int.			Financial statement carrying value
Property Description	State		Jun. 30, 2011		Dec. 31, 2010		date	rate			Jun. 30, 2011		Dec. 31, 2010
Carrolton Discount Drug Mart Plaza (a)	OH	$	-		$	-	-	-		$	-	$	-
Centerville Discount Drug Mart Plaza	OH		2,382,000			2,481,000	May 2015	5.2	%		2,716,000		2,743,000
Clyde Discount Drug Mart Plaza	OH		2,196,000			2,287,000	May 2015	5.2	%		1,884,000		1,903,000
Columbia Mall	PA		10,175,000		10,774,000		-	-			-		-
Enon Discount Drug Mart Plaza (b)	OH		-			4,598,000	-	-			-		-
Family Dollar at Zanesville (a)	OH		-			-	-	-			-		-
Fairfield Plaza (b)	CT		-		10,150,000		July 2015	5.0	%		-		5,009,000
FirstMerit Bank at Akron	OH		693,000			760,000	-	-			-		-
FirstMerit Bank at Cuyahoga Falls	OH		546,000			569,000	-	-			-		-
Gahanna Discount Drug Mart Plaza	OH		5,316,000			7,103,000	Nov 2016	5.8	%		4,886,000		4,924,000
Grove City Discount Drug Mart Plaza	OH		1,893,000			2,911,000	-	-			-		-
Hilliard Discount Drug Mart Plaza	OH		1,472,000			2,627,000	-	-			-		-
Hills & Dales Discount Drug Mart Plaza (b)	OH		-			3,263,000	-	-			-		-
Lodi Discount Drug Mart Plaza	OH		2,346,000			2,550,000	May 2015	5.2	%		2,295,000		2,319,000
Long Reach Village (a)	MD		-			-	-	-			-		-
Mason Discount Drug Mart Plaza	OH		4,319,000			4,499,000	-	-			-		-
McCormick Place	OH		1,796,000			3,942,000	Aug 2017	6.1	%		2,568,000		2,587,000
Ontario Discount Drug Mart Plaza	OH		2,315,000			2,534,000	May 2015	5.2	%		2,120,000		2,141,000
Pickerington Discount Drug Mart Plaza	OH		3,391,000			3,532,000	Jul 2015	5.0	%		4,031,000		4,072,000
Polaris Discount Drug Mart Plaza	OH		4,453,000			4,640,000	May 2015	5.2	%		4,327,000		4,369,000
Pondside Plaza (a)	NY		-			-	-	-			-		-
Powell Discount Drug Mart Plaza (a)	OH		-			-	-	-			-		-
Roosevelt II	PA		4,600,000		13,687,000		Mar 2012	6.5	%		12,865,000		12,940,000
Shelby Discount Drug Mart Plaza	OH		1,848,000			1,925,000	May 2015	5.2	%		2,120,000		2,141,000
Westlake Discount Drug Mart Plaza	OH		1,434,000			1,667,000	Dec 2016	5.6	%		3,139,000		3,165,000
			51,175,000		86,499,000						42,951,000		48,313,000
Development Land Parcel (b)	PA		-			1,849,000					-		-
		$	51,175,000	$	88,348,000					$	42,951,000	$	48,313,000

	Three months ended June 30,		Six months ended June 30,
	2011	2010	2011	2010
Revenues:
Rents	$    1,735,000	$   2,364,000	$    4,418,000	$   5,046,000
Expense recoveries	540,000	672,000	1,302,000	1,386,000
Other	6,000	18,000	311,000	46,000
Total revenues	2,281,000	3,054,000	6,031,000	6,478,000
Expenses:
Operating, maintenance and management	781,000	960,000	1,804,000	2,318,000
Real estate and other property-related taxes	546,000	535,000	1,145,000	1,115,000
Depreciation and amortization	162,000	1,155,000	384,000	2,387,000
Interest expense	527,000	561,000	1,220,000	1,172,000
	2,016,000	3,211,000	4,553,000	6,992,000
Income (loss) from discontinued operations before
impairment charges	265,000	(157,000)	1,478,000	(514,000)
Impairment charges	(12,258,000)	(2,990,000)	(22,544,000)	(3,238,000)
(Loss) from discontinued operations	$ (11,993,000)	$ (3,147,000)	$ (21,066,000)	$ (3,752,000)
Gain (loss) on sales of discontinued operations	$       474,000	$        (5,000)	$       474,000	$      170,000

RioCan Joint Venture

The Company and RioCan have entered into an 80% (RioCan) and 20% (Cedar) joint venture (i) initially for the purchase of seven supermarket-anchored properties previously owned by the Company, and (ii) then to acquire additional primarily supermarket-anchored properties in the Company's primary market areas, in the same joint venture format.  The transfers of the initial seven properties, which commenced in December 2009, were completed in May 2010. At June 30, 2011, the Company was owed approximately $3.0 million ($0.7 million related to contingent consideration) relating to post-closing adjustments applicable to properties transferred to or acquired by the joint venture.

On April 15, 2011, the joint venture acquired Northwoods Crossing shopping center, located near Boston, Massachusetts. The purchase price was approximately $23.4 million, including the assumption of a $14.4 million first mortgage maturing in 2016 and bearing interest at 6.4% per annum.

The Company earned fees from the joint venture of approximately $0.7 million and $0.2 million for the three months ended June 30, 2011 and 2010, respectively, and $1.2 million and $0.3 million for the six months ended June 30, 2011 and 2010, respectively, representing accounting fees, management fees, acquisition fees and financing fees. Such fees are included in other revenues in the accompanying statements of operations.  During the three and six months ended June 30, 2010, the Company recorded an impairment charge of approximately $0.6 million and $2.1 million, respectively, related principally to the remaining completion work at the Blue Mountain Commons property transferred to the joint venture in December 2009. In connection with the joint venture transactions, the Company paid fees to its investment advisor of approximately $0.2 million for the six months ended June 30, 2010, which are included in transaction costs in the accompanying statement of operations.

The following are the 22 properties owned by the Cedar/RioCan joint venture as of June 30, 2011:

		Date of		Transfer
		transfer		or	Mortgage
		or		purchase	Loans	Int.
Property Description	State	acquisition		price	Payable (b)	rate
Blue Mountain Commons	PA	12/10/2009	(a)	$   32,150,000	$   17,500,000	5.0%
Columbus Crossing	PA	2/23/2010	(a)	24,538,000	16,880,000	6.8%
Creekview Plaza	PA	9/29/2010		26,240,000	14,432,000	4.8%
Cross Keys Place	NJ	10/13/2010		26,336,000	14,600,000	5.1%
Exeter Commons	PA	8/3/2010		53,000,000	30,000,000	5.3%
Franklin Village Plaza	MA	2/4/2010	(a)	54,656,000	43,500,000	4.8%
Gettysburg Marketplace	PA	10/21/2010		19,850,000	10,918,000	5.0%
Loyal Plaza	PA	5/26/2010	(a)	26,950,000	12,615,000	7.2%
Marlboro Crossroads	MD	10/21/2010		12,500,000	6,875,000	5.1%
Monroe Marketplace	PA	9/29/2010		41,990,000	23,095,000	4.8%
Montville Commons	CT	9/29/2010		18,900,000	10,500,000	5.8%
New River Valley	VA	9/29/2010		27,970,000	15,163,000	4.8%
Northland Center	PA	10/21/2010		10,248,000	6,298,000	5.0%
Northwoods Crossing	MA	4/15/2011		23,448,000	14,429,000	6.4%
Pitney Road Plaza	PA	9/29/2010		11,060,000	6,083,000	4.8%
Shaw's Plaza	MA	4/27/2010	(a)	20,363,000	14,200,000	6.0%
Stop & Shop Plaza	CT	4/27/2010	(a)	8,974,000	7,000,000	6.2%
Sunset Crossing	PA	12/10/2009	(a)	9,850,000	4,500,000	5.0%
Sunrise Plaza	NJ	9/29/2010		26,460,000	13,728,000	4.8%
Town Square Plaza	PA	1/26/2010		18,854,000	11,000,000	5.0%
Towne Crossings	VA	10/21/2010		19,000,000	10,450,000	5.0%
York Marketplace	PA	10/21/2010		29,200,000	16,060,000	5.0%
				$ 542,537,000	$ 319,826,000
(a) Initial seven properties previously owned by the Company that were transferred to the Cedar/RioCan joint venture.
(b) Mortgage loans payable represent either (i) the outstanding balance at the date of transfer, excluding any mortgage discount or (ii) the loan amount on the dates of borrowing and/or assumption.

The following summarizes certain financial information related to the Company's investment in the Cedar/RioCan unconsolidated joint venture at June 30, 2011 and December 31, 2010, respectively, and for the three and six months ended June 30, 2011 and 2010, respectively:

	June 30, 2011	December 31, 2010
Assets:
Real estate, net (a)	$        538,948,000	$          524,447,000
Cash and cash equivalents	11,535,000	5,934,000
Restricted cash	5,802,000	4,464,000
Rent and other receivables	3,369,000	2,074,000
Straight-line rent	1,876,000	1,000,000
Deferred charges, net	4,425,000	13,269,000
Other assets	13,351,000	8,514,000
Total assets	$        579,306,000	$          559,702,000
Liabilities and partners' capital:
Mortgage loans payable (a)	$        319,295,000	$          293,400,000
Due to the Company	3,016,000	6,036,000
Unamortized lease liability	23,155,000	24,573,000
Other liabilities	5,316,000	7,738,000
Preferred stock	97,000	97,000
Partners' capital:
RioCan	182,367,000	181,239,000
The Company	46,060,000	46,619,000
Total partners' capital	228,427,000	227,858,000
Total liabilities and partners' capital	$        579,306,000	$          559,702,000
(a) The joint venture's property-specific mortgage loans payable are collateralized by all of the joint venture's real estate, and bear interest at rates ranging from 4.8% to 7.2% per annum

	Three months ended June 30,		Six months ended June 30,
	2011	2010	2011	2010
Revenues	$      15,296,000	$        5,161,000	$      31,289,000	$        8,246,000
Property operating and other expenses	1,307,000	761,000	3,966,000	1,220,000
Management fees to the Company	483,000	176,000	950,000	275,000
Real estate taxes	1,819,000	517,000	3,551,000	818,000
Acquisition transaction costs	790,000	-	858,000	594,000
General and administrative	61,000	51,000	132,000	102,000
Depreciation and amortization	5,177,000	1,283,000	10,140,000	1,795,000
Interest and other non-operating expenses, net	4,684,000	1,353,000	9,079,000	1,831,000
Net  income	$           975,000	$        1,020,000	$        2,613,000	$        1,611,000
RioCan	780,000	827,000	2,090,000	1,322,000
The Company	195,000	193,000	523,000	289,000
	$           975,000	$        1,020,000	$        2,613,000	$        1,611,000

Secured Revolving Credit Facility.  On November 15, 2010, the joint venture closed a secured revolving credit facility with TD Bank, National Association as administrative agent and Royal Bank of Canada as syndication agent, with total commitments aggregating $50.0 million.  The principal terms of the facility include (i) an availability based primarily on appraisals with a 50% advance rate, (ii) an interest rate based on (a) LIBOR plus 300 basis points ("bps") with a 100 bps floor, or (b) the prime rate, as defined, plus 200 bps, (iii) an unused portion fee of 50 bps, and (iv) a leverage ratio limited to 65%.  The facility will expire on November 15, 2012, subject to a one-year extension option.  As the joint venture has not pledged any properties as collateral under the facility, there were no amounts outstanding and no amounts available for borrowing at June 30, 2011. The facility may be used to fund acquisitions, capital expenditures, mortgage repayments, partnership distributions, working capital and other general partnership purposes. The facility is subject to customary financial covenants, including limits on leverage, and other financial statement ratios. As of June 30, 2011, the joint venture was in compliance with the financial covenants as required by the terms of the facility.