Organization And Basis Of Preparation

9 Months Ended

Sep. 30, 2011

Organization And Basis Of Preparation

Organization And Basis Of Preparation

Note 1.Organization and Basis of Preparation

Cedar Realty Trust, Inc. (formerly known as Cedar Shopping Centers, Inc. - the "Company") was organized in 1984 and elected to be taxed as a real estate investment trust ("REIT") in 1986. The Company currently focuses primarily on ownership and operation of supermarket-anchored shopping centers. The Company has recently determined (1) to exit the Ohio market, principally the Discount Drug Mart portfolio of drugstore/convenience centers, and concentrate on the mid-Atlantic and Northeast coastal regions (12 properties "held for sale" as of September 30, 2011), (2) to concentrate on grocery-anchored strip centers, by disposing of its mall and single-tenant/triple-net-lease properties (14 properties "held for sale" as of September 30, 2011), and (3) to focus on improving operations and performance at the Company's remaining properties, and to reduce development activities, by disposing of certain development projects, land acquired for development, and other non-core assets (seven properties "held for sale/conveyance" as of September 30, 2011). In addition, discontinued operations reflect the anticipated consummation of the Homburg joint venture buy/sell transactions (seven properties "held for sale" as of September 30, 2011). At September 30, 2011, the Company owned and managed 92 operating properties (excluding properties "held for sale/conveyance"), including 22 properties in the unconsolidated Cedar/RioCan joint venture.

Cedar Realty Trust Partnership, L.P. (formerly known as Cedar Shopping Centers Partnership, L.P. - the "Operating Partnership") is the entity through which the Company conducts substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. At September 30, 2011 the Company owned a 98.0% economic interest in, and was the sole general partner of, the Operating Partnership. The limited partners' interest in the Operating Partnership (2.0% at September 30, 2011) is represented by Operating Partnership Units ("OP Units"). The carrying amount of such interest is adjusted at the end of each reporting period to an amount equal to the limited partners' ownership percentage of the Operating Partnership's net equity. Allocations of amounts between the Company and its limited partners include the impact of the equity award shares discussed in Note 2 – "Stock- Based Compensation". The approximately 1.4 million OP Units outstanding at September 30, 2011 are economically equivalent to the Company's common stock and are convertible into the Company's common stock at the option of the respective holders on a one-to-one basis.

As used herein, the "Company" refers to Cedar Realty Trust, Inc. and its subsidiaries on a consolidated basis, including the Operating Partnership or, where the context so requires, Cedar Realty Trust, Inc. only.

The consolidated financial statements include the accounts and operations of the Company, the Operating Partnership, its subsidiaries, and certain joint venture partnerships in which it participates. The Company consolidates all variable interest entities ("VIEs") for which it is the primary beneficiary. Generally, a VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) as a group, the holders of the equity investment at risk (i) lack the power to make decisions about the entity's activities that significantly impacts the entity's performance through voting or similar rights, (ii) have no obligation to absorb the expected losses of the entity, or (iii) have no right to receive the expected residual returns of the entity, or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity's activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The Company follows the accounting guidance for determining whether an entity is a VIE, which requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. The guidance requires an entity to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity's economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

With respect to its 13 consolidated operating joint ventures, the Company has general partnership interests of 20% in nine properties, 40% in two properties, 50% in one property, and 75% in one property. As (i) such entities are not VIEs, and (ii) the Company is the sole general partner and exercises substantial operating control over these entities, the Company has determined that such entities should be consolidated for financial statement purposes. Current accounting guidance provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or similar entity in which it owns a minority interest. Seven of the nine 20%-owned properties, and the 50%-owned and 75%-owned properties are treated as "held for sale/conveyance" at September 30, 2011 (see note 3 – "Real Estate – Discontinued Operations and Land Dispositions").

The Company's three 60%-owned joint ventures originally formed as development projects in Limerick, Pottsgrove and Stroudsburg, Pennsylvania, are consolidated as they are deemed to be VIEs and the Company is the primary beneficiary in each case. At September 30, 2011, these VIEs owned real estate with a carrying value of $140.0 million. The assets of the consolidated VIEs can be used to settle obligations other than those of the consolidated VIEs. At that date, one of the VIEs had a property-specific mortgage loan payable aggregating $63.8 million, and the real estate owned by the other two VIEs partially collateralized the secured revolving development property credit facility (the "development property credit facility") to the extent of $28.1 million. Such obligations are guaranteed by, and are recourse to, the Company. For such development projects, the Company reviews the applicable budgets and provides supervisory support. The development project located in Limerick, Pennsylvania is treated as "held for sale/conveyance" at September 30, 2011 (see note 3 – "Real Estate – Discontinued Operations and Land Dispositions").

            With respect to its unconsolidated joint ventures, the Company has a 20% interest in a joint venture with RioCan Real Estate Investment Trust of Toronto, Canada, a publicly-traded Canadian real estate investment trust ("RioCan") formed initially for the acquisition of seven shopping center properties owned by the Company; all seven properties had been transferred to the joint venture by May 2010 and, as of September 30, 2011, the joint venture owned 22 properties. Although the Company provides management and other services, RioCan has significant management participation rights. The Company has determined that this joint venture is not a VIE and, accordingly, the Company accounts for its investment in this joint venture under the equity method. The accounting treatment presentation on the accompanying consolidated statements of operations for the nine months ended September 30, 2010 reflects the results of the properties' operations through the respective dates of transfer in current operations and, prospectively following their transfer to the joint venture, as "equity in income (loss) of unconsolidated joint ventures". Accordingly, the accompanying statements of operations for the nine months ended September 30, 2010 includes revenues of $3.3 million applicable to the periods prior to the dates of transfer.

Until June 2011, the Company had an approximate 85% limited partner's interest in an unconsolidated joint venture (increased from approximately 76% in the second quarter of 2011 for a payment of $745,000) which owned a single-tenant property in Philadelphia, Pennsylvania (together with an adjacent property 100%-owned by the Company, and leased to the same tenant, both properties originally acquired for future redevelopment). The Company had determined that this joint venture was not a VIE, as the Company had no control over the entity, did not provide any management or other services to the entity, and had no substantial participating or "kick out" rights. The Company had accounted for its investment in this joint venture under the equity method. The tenant vacated both premises in April 2011, at which time both the joint venture and the Company's wholly-owned subsidiary had CMBS non-recourse first mortgage loans secured by the properties in the amounts of $14.7 million due for payment in May 2011 and $12.9 million due for payment in March 2012, respectively. 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, or to advance the funds necessary to pay off the mortgages. Such determination was based on the uncertainty in obtaining favorable revisions to zoning, difficult existing deed restrictions, the uncertainty in achieving required economic returns given the extensive additional capital investments required, and uncertain current market conditions for sale or lease. As a result, in exchange for a payment by the Company of $838,000 to its joint venture partners, the Company (a) obtained appropriate releases, and (b) assigned its limited partnership interest to other partners of the joint venture. Accordingly, the Company wrote off its investment in the joint venture ($8.0 million recorded during the three months ended June 30, 2011), and recorded an impairment charge, included in discontinued operations, related to the value of the 100%-owned adjacent property ($9.1 million recorded during the three months ended June 30, 2011, as more fully discussed in Note 3 - "Real Estate - Discontinued Operations and Land Dispositions").

At September 30, 2011, the Company had a deposit of $0.5 million on a land parcel (which is its maximum exposure) to be purchased for future expansion at an existing property. Although the entity holding the deposit is considered a VIE, it is not consolidated as the Company is not the primary beneficiary.