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Executives

Brad Cohen - ICR

Leo S. Ullman – Chairman of the Board, President & Chief Executive Officer

Lawrence E. Kreider, Jr. – Chief Financial Officer

Thomas B. Richey – Vice President Development Construction Services

Brenda J. Walker – Vice President

Nancy H. Mozzachio – Vice President Leasing

Analysts

Paul Adornato – BMO Capital Markets

Nathan Isbee – Stifel Nicolaus & Company, Inc.

[Quentin Favalley] – Citigroup

[Arthur Friedman – Friedman Asset Management]

David Fick – Stifel Nicolaus

[Ben Rosenick – Private Fund Management]

Cedar Shopping Centers, Inc. (CDR) Q2 2009 Earnings Call July 30, 2009 11:00 AM ET

Operator

Welcome to the Cedar Shopping Centers Incorporated second quarter 2009 earnings conference call. At this time participants have been placed in a listen only mode and the floor will be open to your questions following the presentation. It is now my pleasure to turn the floor over to your host Brad Cohen of ICR.

Brad Cohen

At this time management would like me to inform you that certain statements made during this conference call which are not historical facts may be deemed forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995.

Although the company believes that expectations reflected in any forward-looking statements are based upon reasonable assumptions, they are subject to various risks and uncertainties. The company can provide no assurance that expectations will be achieved and actual results may differ. Many of the factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday’s press release and from time-to-time in the company’s filings with the SEC.

In the end, the company undertakes no obligation to revise or update any forward-looking statements reflected in or circumstances after the date of the company’s release. It is now my pleasure to turn the call over to Mr. Leo Ullman, Chairman, CEO and President.

Leo S. Ullman

Thank you very much for joining us today on the Cedar Shopping Center earnings conference call for the second quarter of 2009 results. With me on the call is Larry Kreider our Chief Financial Officer. Other members of our team including Tom Richey our Vice President of development and construction, Brenda Walker our vice President of Operations and Nancy Mozzachio our Vice President of Leasing are also on our call and available to you.

The three things that I would like to stress today are: first of all, the continuing strength of our operations based on such metrics as occupancy levels, collections, lease renewals, cash flows and alike; secondly, the deliveries of our development properties as they approach completion; and thirdly, constancy and consistency of our business plan throughout these difficult times.

First, with respect to our operations we note yet again, that occupancy for our stabilized properties remains remarkably strong and undiminished at 95%. We again stress that substantially all of our supermarket tenants are doing well. They’re sales averaging more than $500 per square foot throughout our portfolio and an estimated $650 per square foot for our largest supermarket tenants remain strong. In most instances, our supermarket tenants are the dominate grocers in their respective areas.

Our ancillary retail also remains solid as evidenced by the velocity of leasing activity and results for this quarter. Under Nancy Mozzachio’s leadership, we signed 329,000 square feet of renewal leases this quarter with increases at more than 10% and 76,000 square feet of new leases at attractive rates. We have no arranged extensions for new leases for more than 80% of the lease terminations scheduled during the current year and more than a third of the leases maturing next year.

Contrary to much of the folklore rampant in reports we have read, at least as it pertains to Cedar’s portfolio, our retail operations generally in addition to our grocery and drug store anchors continue to demonstrate strength and have not been exposed to the deterioration evidenced for example by many fashion and large box store tenancies. We have of course had a small number of tenants vacate their space prior to lease expiration like everyone else even in good times as well as the bad.

As a result of such continued operating strength in our portfolio our numbers for the quarter are solid and powerful. Our FFO for the quarter is $0.29 per share before an appropriate write off of a property we decided not to develop and other non-cash items including market-to-market adjustments for certain stock awards. The quarter’s FFO thus compares favorably to recent and historic quarters.

On the development front that we have been discussing for the past few years, we are quite pleased to be delivering several of these important projects under Tom Richey’s leadership. Specifically, we are continuing to achieve lease up and completion of our development properties and to that end we have secured the necessary funds in excess of our equity contributions from our development and construction financing facilities. The completion and deliveries of properties in our development pipeline continues including the recently announced large Upland Square property which opened this month in Pottsgrove Pennsylvania.

We have also noted in this regard the impending completion of the Blue Mountain Commons project in Harrisburg Pennsylvania and the Northside Commons property in Campbelltown Pennsylvania both of which are supermarket anchored with modest ancillary retail, both of which are substantially fully leased and both of which are expected to be completed this quarter. Our pipeline properties now feature committed leases of 72% and additional letters of intent of 16% of total GLA. These properties should start contributing to our cash flow in this and future quarters.

With respect to our business and capital plans, we believe that we are positioned well and that we do not have to engage in a massive and dilutive reequitization of the company, rather we have taken four basic steps to deal with current challenges in the economy and to preserve the integrity of our balance sheet. These include: one, suspending our dividend; two, initiating a recycling of capital plan; three, pursuing property specific fixed rate financing; and four, continuing to monitor, evaluate and utilize the capital markets to achieve long term value creation for our shareholders and the company.

With respect to our recycling of capital plan, we are first working towards the conclusion of a joint venture for eight to 10 properties from which we would expect if successful to raise up to $100 million above existing property specific debt where applicable. Excess proceeds will be used to pay down our credit facility. Also, with respect to recycling of capital we are actively engaged in selling off small properties at the periphery of our portfolio. We previously announced the sale of a CVS and a McDonalds Waffle House property, we’ve gone hard and expect to close next week on the sale of a Staples property in New York state and we expect to announce other sales in the coming quarters.

We would expect to raise approximately $9 million net above debt from sales of certain properties of the primarily Ohio Discount Drug Mart anchored properties presently at various stages of contracts and negotiations. With respect to property specific fixed rate financings we have completed some of such financings and we are continuing efforts to finance some of the properties in the collateral pool for our stabilized property credit facility as well as arranging fixed rate financing on some properties in our development credit facility as they reach stabilization.

We note our reported successes in this regard for attractive financings placed with local lenders on our Columbus Crossing Center and a few ground up CVS developments. Having regard to all of these approaches we believe that we will be well positioned to benefit from the extension of our $300 million secured revolving credit facility for stabilized properties which is scheduled to mature in January of 2010. We are presently scheduled to close an extension of that facility during the third quarter.

The lead lenders in the credit facility to be extended have arranged for new appraisals for 17 of the 34 properties presently collateralizing this facility. The appraisals supporting the new line have come in at levels higher than our expectations. We believe availability under that facility when successfully extended although presumably somewhat less than availability under our current line, will be sufficient to support the operations of the company in accordance with our multipronged approach to supporting our capital structure.

I would like now to turn the microphone over to Larry Kreider who will walk you through some of our highly transparent financial metrics. Thereafter, we would of course, welcome your questions and comments.

Lawrence E. Kreider, Jr.

For full details of our financial results for the quarter ended June 30, 2009 I refer you to our press release issued last night as well as our supplemental financial information published on our website and also available at www.SEC.gov. Our results in the second quarter continue to demonstrate the stability of our operations and are predominately grocery and drug store anchored customer base. In our press release we primarily focused on the second quarter of 2009 as compared to the second quarter 2008.

Here, I’ll supplement that by comparing the second quarter results of 2009 to the first quarter of 2009. FFO was $0.29 per diluted share in the second quarter of 2009 as compared to $0.31 per diluted share in the first quarter of 2009 after giving effect in both quarters to some unusual items that masked the underlying steadiness of our operations and cash flows. As reported, FFO was $0.23 per diluted share in the second quarter of 2009 as compared to $0.33 per diluted share in the first quarter of 2009.

As I will detail below, the current quarter has approximately $0.06 per share of unusual non-cash charges and the prior quarter has approximately $0.02 per share net of unusual credits primarily offset by cash charges. The underlying consistency of our operations is exemplified primarily by our continued steady occupancy, leasing results, core financial results and operating cash flows. With respect to occupancy and leasing, we continued our occupancy of 95% for our stabilized properties and 92% overall and the increase in GAAP based rents in our leasing renewals was 10.2%.

With respect to our core operating results, we had an increase in base rents and steady net expense levels in the second quarter as compared to the first. A slight increase in our bad debt expense to the 2.2% of revenues level was substantially offset by the slight increase in the dollar amount of our expense recoveries. We continue to note that our tenant base comprised substantially of grocery store and drug store anchored properties is performing well. Our bad experience continues to be somewhat impacted however by a few in line tenants focused on locally owned gyms, personal care and recreation.

Expense recoveries were at an acceptable 75% level of revenues and benefitted from a decrease in the overall level of expenses, primarily snow removal. The principal decrease in our operating results by about $0.02 per share came from a decrease in revenue from non-cash, straight line and other rents and a non-cash other revenue item in the first quarter of 2009. Other operating results, principally G&A and interest expense were also very steady. The only other significant variability in the first quarter as mentioned above occurred with non-cash terminated deal costs and mark-to-market effects related to our stock-based compensation.

These caused lower net income and FFO in the second quarter of 2009 by approximately $0.06 per share. Conversely, these caused higher net income and FFO per share by approximately $0.02 per share in the first quarter of 2009. With respect to terminated deal costs, we recorded a non-cash charge of approximately $2.3 million net of limited [inaudible] interest or $0.05 per share in the second quarter related to the termination of a development opportunity in Milford Delaware for which we paid all the costs in prior years.

In the first quarter we recorded principally cash transaction expenses net of minority interests of approximately $.8 million or $0.02 per share related to two property acquisitions completed in a joint venture and one potential acquisition not completed. In the first quarter of 2009 we also recorded in FFO a gain on a land parcel and other non-recurring revenue of approximately $0.01 per share. With respect to mark-to-market effects related to stock-based compensation. We recorded an expense increase, also net of limited partners interest of $.5 million or $0.01 per share in the second quarter of 2009 as compared to an expense reduction of $1.6 million or $0.04 per share in the first quarter of 2009.

Lastly, the steadiness of our overall operations and performance of our tenant base are reflected in our cash flows. Net cash provided by operating activities was $16.2 million in the second quarter of 2009 as compared to $8.8 million in the first quarter of 2009 and $16.3 million in the second quarter of 2008. Alternatively, our funds available for distribution or FAD was $8.4 million in the second quarter of 2009 as compared to $9.3 million in the first quarter of 2009 and $8.3 million in the second quarter of 2008.

I’m obliged to tell you that FAD, a non-GAAP but frequently used measure is not an alternative to operating cash flows. I note however, that it is generally lower than operating cash flows in that it deducts recurring capital spending and scheduled debt principal amortization payments that are considered investing and financing activities under GAAP. Our balance sheet and financial position continued to be well positioned. As of today, we have approximately $40 million of borrowing capacity available under our stabilized revolving credit facility plus $16 million in cash at June 30.

In June we placed $23 million of five year property specific debt on three properties with regional and local lenders. Our other sources and uses of cash in the foreseeable future are quite manageable. We have no property specific mortgage debt maturities due in 2009 and only $9.3 million principally comprised of two properties in 2010. In 2011 we have $127 million due comprised of four properties, one of which is the property specific construction line of credit for our Upland Square development site that is extendable under certain conditions for a year to 2012.

The Upland Square development is proceeding well and we announced the grand opening last week. The development property line of credit also due in 2011 is also subject to a one year extension. As previously indicated we believe that virtually all of our development activities will be funded under these existing development lines of credit and we do not expect any further property acquisitions this year. We expect no further common dividends in 2009 having suspended our dividend for the balance of the year as previously announced.

As compared to last year, the reduction of the first quarter dividend coupled with the suspension for the balance of the year will save the company cash of approximately $21 million for the remainder of the year. With respect to the renewal of our $300 million stabilized line of credit, we continue to make good progress with our lenders and we are confident that we will be able to refinance the facility and have sufficient availability to effectively manage our business.

As of June 30, 2009 our pro rata share of debt was $997.2 million which amounted to 64.4% of our total book basis capitalization of approximately $1.55 billion. The pro rata share of floating rate debt amounted to approximately 25% of total book basis capitalization. Our EBITDA to fixed charge coverage ratio for the quarter ended June 30, 2009 was approximately 2.1 to 1, adjusted by the other charges outlined above. We have reiterated the 2009 guidance we issued of between $0.85 per share and $1.00 per share.

I would now like to turn the call back to Leo for Q&A and closing remarks.

Leo S. Ullman

Operator, we’d be pleased to take question at this point.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Paul Adornato – BMO Capital Markets.

Paul Adornato – BMO Capital Markets

I was wondering if you could just comment with respect to the capital recycling program, given this environment and also given the fact that some of those Ohio properties were perhaps experiencing a little bit of difficulty, are you satisfied that the pricing is appropriate to put them in to a joint venture at this point, that you’re getting full value for the real estate?

Leo S. Ullman

The short answer is yes, Paul. We are of course aware of the implied cap rates in the Regency Macquarie transaction. We do not believe that to be a signal of value in supermarket anchored properties in the Northeast. Based on our experience can cite four or five supermarket anchored properties which have either gone hard or closing with sub eights in cap rates in this area. We believe that right now based on attractive debt financing on some of properties which generate attractive ingoing yields with debt maturities extending five or six years or more that we will be able to price in a joint venture based on ingoing yields at an attractive cap rate which would be below nine.

Paul Adornato – BMO Capital Markets

Can you talk about the joint venture partner, why is it attractive to your partner at this point?

Leo S. Ullman

Well, it’s attractive to our partner Paul of course because we are so attractive. But, in general we are talking to several potential partners. As you are aware, we concluded a joint venture with a UK partner and we are having some continuing discussion with that partner. We are also in discussions with three or four other groups, one of which is another foreign group and three domestic groups. We are proceeding with these joint venture partners and providing information, doing due diligence, we had a site tour just this week with one of the candidates. We believe that we will successfully conclude this because their interest is in stabilized cash flow, long term leases with very good operators, well positioned properties with some upsides.

But very importantly, very few challenges on the downside. These are attractive properties in markets with relatively little competition and severe barriers to entry with grocers which are the dominate grocers in their area and those are attractive products to a lot of joint venture partners.

Paul Adornato – BMO Capital Markets

Could you provide and update or a roll forward of the health of your small tenants? And also, what type of credit underwriting you’re undertaking today as you sign new leases with small tenants?

Leo S. Ullman

Well, I think it’s fair to say and Nancy and Brenda can jump in on this, I think it’s fair to say that much of the challenges in the smaller tenancies in Ohio have been dealt with as you heard in Larry’s comments, the specific area that has been somewhat challenging to us has been privately owned fitness facilities as an example of which we have three or four which are challenged. But, other than that the tenancies have performed well in general.

The smaller tenancies in the East have been extremely stable with very little challenges and in Ohio, as I mentioned, we are in the process of potentially negotiating the sale of up to eight properties in which we are in various stages of completion.

Paul Adornato – BMO Capital Markets

Finally, with respect to the renewal of the revolving credit facility, I think you said that 17 out of 34 appraisals have been completed for the properties, is that correct?

Leo S. Ullman

That’s correct, that’s all that was required.

Lawrence E. Kreider, Jr.

New appraisals, they’re all done.

Paul Adornato – BMO Capital Markets

I thought there might be a kind of slowdown in that process?

Leo S. Ullman

No, we basically had arranged with the lenders that the appraisals that were made after October of last year were acceptable to the lenders and we basically redid the appraisals for prior periods. Those were all commissioned by the banks.

Paul Adornato – BMO Capital Markets

Still as you mentioned a third quarter event?

Leo S. Ullman

Yes, we still look forward to doing that in the third quarter. As you can imagine, we have borrowed currently under the existing facility at an extremely attractive rate and we will have to pay much greater interest but right now continuing the facility until closing is of benefit to us.

Operator

Your next question comes from Nathan Isbee – Stifel Nicolaus & Company, Inc.

Nathan Isbee – Stifel Nicolaus & Company, Inc.

Just to follow up on the line question, can you give us a little more detail on what your expected availability will be?

Leo S. Ullman

I can generally refer to that. Under our existing facility, as you heard, we have $40 million of availability and we are borrowing at this point approximately $235 million under that existing facility. We think under the new facility we will not be jeopardized with respect to that level of borrowing and that the availability will be there for that level of borrowing as we speak. That’s about as much as we would know right now.

Nathan Isbee – Stifel Nicolaus & Company, Inc.

What type of commitment do you have?

Leo S. Ullman

Well, we have, and I can’t go too specific in that, but we have the four lead lenders, each of which have committed to $44 million. Those are Bank of America, Keybank, M&T Bank and Regions Bank. We do have other commitments and we do have several of the lenders, some from our prior facility and a couple who are not in that facility working their way through credit committee approvals, due diligence, etc. which we expect to have completed as we mentioned during this quarter.

Nathan Isbee – Stifel Nicolaus & Company, Inc.

One last question, do you feel comfortable commenting about an expected dividend run rate when you start up again?

Leo S. Ullman

No, that’s going to be a board decision. Right now of course, we are benefitting from the fact that we are saving on an annualized basis about $40 million in our dividend suspension program. We could conceivably continue that suspension because with some depreciation changes we will not be compelled to distribute monies probably for the next year as well. But, in the meantime we would hope that our results are such that the board would consider reinstituting some level of dividend in the future but that’s a future decision.

Operator

Your next question comes from [Quentin Favalley] – Citigroup.

[Quentin Favalley] – Citigroup

Just going back to the joint ventures, I think you said it would be $100 million of net cash to you after the retention of your ownership stake, any debt that goes with the joint ventures but what’s the total asset size of the joint venture likely to be?

Leo S. Ullman

The total gross value would be between $160 and $200 million roughly.

[Quentin Favalley] – Citigroup

And you said that the implied [inaudible] against that joint venture was quite attractive to purchasers. What would be the average rate on the debt?

Leo S. Ullman

Well, it’s a little bit hard to predict. As you know, our overall fixed rate debt is at 5.9% and has approximately 5.9 years to run. The picture for these properties if they have debt on them would probably not be too much different from that. Some of the potential participants would prefer to have unencumbered properties and some prefer to have debt at some level. So, it’s probably fair to assume that for the preponderance of the properties, seven of the 10 or eight of the 10 there would be debt at that kind of level.

Correspondingly, we have considered with respect to the discussion with certain of the joint venture candidates including two of our development properties which are coming on stream during this quarter, one the Blue Mountain Commons, the other Northside Commons, are both supermarket anchored on which there is as yet no fixed rate debt and which are being funded primarily out of our construction facility. We would contemplate if those go in and if they’re stabilized at the time we conclude the joint venture that we would put fixed rate debt on those properties.

[Quentin Favalley] – Citigroup

Is this joint venture likely to be closed in or finite locked or is there the opportunity over time and once the development total picks up again that you could potentially sell additional assets in to the joint venture?

Leo S. Ullman

There’s always that opportunity. I mean, we have to carry a burden of convincing a partner that they should expand their commitment to us. But, I think quite likely and hopefully if the credit situation eases and our availability is sufficient that we would have the opportunity with a joint venture partner to acquire in joint venture mode or to develop in joint venture mode.

[Quentin Favalley] – Citigroup

The last thing just on the line and the [inaudible] assets that you’re using as security, is there any chance that you’ll have to increase the number of the assets and the value of those assets for additional security?

Leo S. Ullman

Not at this time. Only, we would contemplate the possibility of rolling a stabilized development property in to the collateral pool when it stabilizes. But, other than that we would not contemplate additional assets.

[Quentin Favalley] – Citigroup

In addition I guess, and this ties back to the joint ventures as a potential source of capital funds for development once you start again, I mean given your leverage level and you said basically you don’t want to –

Leo S. Ullman

Quentin let me just interrupt, you’re focusing on the joint venture as a means of funding development projects. Appreciate, that we have at this point substantial availability under our development facilities to fund substantial additional activity there. We have funded all the equity that we needed so far for those development projects and we don’t have many others other than Trexlertown, Shore Mall and one property in Kutztown that we contemplate developing. So, it’s not our intent to use that just for development activities.

[Quentin Favalley] – Citigroup

I’m sort of trying to focus on when and if you increase the level of development again, when [inaudible] the current projects continue, and given your leverage is high and you said that you don’t want to raise additional equity, you’ll get some proceeds from the joint venture assets but I’m just trying to think where [inaudible] developing whether you’ll be potentially raising equity?

Leo S. Ullman

What we would do with the proceeds of course is pay down the line and that would give us some availability to fund the equity portion of a development project where we already have the financing facility in place for the debt. We think the mode by which we would develop going forward may well be quite limited to participation with existing smaller developers who are unable to complete projects because they have no access to the necessary credit where we could come in after the project has been substantially entitled and substantially preleased, come in with a preferred return with 90% to 95% of the cash required and achieve a very handsome profit participation and perhaps a promote while the project could be completed in as little as a year for example.

That’s a very attractive possibility which we think will continue to be available to us going forward. That’s reflected in fact in our Upland project and in a little project called Limerick which involved a Walgreens that we have just done.

Operator

Your next question comes from [Arthur Friedman – Friedman Asset Management].

[Arthur Friedman – Friedman Asset Management]

I was wondering if you were willing to provide some color and share some insight in to your management strategy? Let me just sort of set this up, we have a lot of malls across the country that are closing and there was in fact some recent huge articles about tenants leaving, malls closing, rents going down on the one hand. Here you are on the other hand, and this is a positive question, here you are on the other hand, I’m just trying to understand this and you and your headline in your PR you maintain a 95% occupancy rate, you just signed 42 renewals leases, you had an average increase in your base rents of 10.2%. On July 21st you opened up the Upland Square and you’ve also arranged financings on the Columbia Cross Shopping Center in Philly and a CVS ground up development.

I’m trying to get at what do you think is your success and just sort of going against the tides that is going on across the country? I wanted to understand what is your role in deciding on the tenants when you set up properties? Are you involved in identifying in them, are you involved in approving them?

Leo S. Ullman

Well, I’d like just focus on why we think we can differentiate ourselves from some of the other companies in our sphere. First of all it’s the focus on the supermarket anchors. The supermarkets really drive the shopping centers throughout most of our portfolio and we have had the fortune of having up to 13 chains substantially all of whom are doing well and producing extraordinary sales in bad times. That really drives these centers.

Also, the stability in the Northeast at the moment works very strongly in our favor and the lack of opportunity to build new properties in the area and lack of competition in most of our markets. We have a strong commitment to Eastern Pennsylvania and that has been very good to us. But, I think the other part of it is one, that we are all over our tenants. Brenda Walker how is our Vice President of Operations, runs an extremely tight ship. You do not want to be behind in your rent and deal with Brenda Walker is my experience.

We also are very careful, we have a programmatic treatment of tenants when they are unable to pay their rent in terms of writing off their rents and in terms of starting legal if they are unable to catch up within 120 days. We have very limited experience to date of having to provide rent concessions and if we do so, we try to get something back. When we get new tenants we do a great deal of due diligence beforehand. Nancy Mozzachio has been in this business a long time and we have a very good leasing team which is very disciplined.

But again, it’s driven very largely by the supermarkets and the tenants that want to be there. It’s not so much that we go out and find these tenants, it’s the location that drives the opportunities for tenants. It’s quite a lot different in that regard for shopping centers than office buildings for example. So, we think that we have a very good product that in these times works very well. But, by having that much occupancy, by having so little commitment to the high fashion and luxury kind of tenants we are focused on the stability and the downside rather than the extraordinary upsides which you might have with the Madison Avenue retail shop.

Also, we don’t have much in the way of covered malls. The secondary and tertiary malls in this market, we realize are very challenged but our centers are basically 100,000 to 120,000 foot shopping center dominated by a 65,000 or 75,000 square foot grocer and ancillary retail that thrives from that grocer. I think that’s sort of the whole story.

[Arthur Friedman – Friedman Asset Management]

One last question, I just want to make sure I understood this because it was said pretty quickly, other than the revolving credit facility, you don’t have any other debt that needs refinancing in ’09, is that correct?

Leo S. Ullman

That’s correct.

[Arthur Friedman – Friedman Asset Management]

In 2010 there were just a few you said?

Lawrence E. Kreider, Jr.

$9.3 million.

Operator

Your next question comes from David Fick – Stifel Nicolaus.

David Fick – Stifel Nicolaus

Leo, I just want to explore a little bit further with you, not an attack by any means but just trying to get my head around your statement that your dividend suspension plan is source of capital, it’s also a reduction in return to investors who expect a total return from REIT that’s substantially supported by dividend. Yet, you’re out there still playing a certain amount of offense both from a development and acquisitions at least through JVs where you do have to deploy some capital. So, in essence what you are doing is taking capital that would otherwise go to investors for investment purposes at a time that there’s a lot of question about what value is in the market. I’m just wondering if that’s a logical place to be? I think you’re the only REIT now that has said, that I’m aware of, that you may continue the suspension program through next year.

Leo S. Ullman

I haven’t said that. What I did say is that we would be in a position to do that because we can deal with our depreciation deductions in a manner that we would not be required to distribute. I’m not saying that we wouldn’t distribute, that’s a board decision. The thing I would like to stress, I think there’s some wrong underpinnings of your question David. First of all, we are not in an acquisition mode and we have undertaken more or less not to acquire further this year. The only things that we acquired, as you know, were two properties in January that were committed very long beforehand. They involved $7.1 million of investment by our company only with a joint venture structure that’s extremely favorable and a going in yield of better than 12% with long term debt at attractive rates.

So, we are not in a mode of taking money away from the investors and using it internally in the sense that you’ve indicated. We do think it’s been prudent to conserve our cash in the face of having to renew our credit facility and that was the primary motivating function of. Once that credit facility is in place we’re going to look at what will be best for the company and for the shareholders. We believe very much in the mantra that you yourself have created that dilution is forever and that’s why we’ve been very careful and suspending the dividend has been a part of that approach.

David Fick – Stifel Nicolaus

We clearly think that suspending the dividend is preferable to issuing significantly dilutive shares at a price that is way below asset value so we completely support that. However, you are deploying some offensive capital if you will and what is your remaining investment commitment for example on the outstanding development program?

Leo S. Ullman

Absolutely none.

Lawrence E. Kreider, Jr.

Well, we have $68 million left to spend all of which is from the development lines of credit in place.

Leo S. Ullman

We have no further equity commitments for the development program and as we indicated we have no acquisitions in sight.

David Fick – Stifel Nicolaus

You do imply, because you’re levering in the process of that spend so you are still spending money.

Lawrence E. Kreider, Jr.

Well, we needed to complete those David.

Operator

Your next question comes from [Ben Rosenick – Private Fund Management].

[Ben Rosenick – Private Fund Management]

Just a few quick questions here, just going through the transcript of your last call, I saw you talk a little bit about some of the rent concessions that you had to give and you had kind of seen that as the quarter kind of came to a close that some of your bigger boxes, I think you referenced Bon-Ton and some of the others had requested rent relief and you said you would kind of evaluate this quarter. I was just wondering if you had given any concessions there or if you had seen any new retailers kind of being in a position to demand concessions?

Leo S. Ullman

I think consistent with the prior call, and of course, I don’t have the benefit of the transcript but we have not given concession to Bon-Ton. We did give some concessions to a chain called Peebles and we mentioned that I believe, to the tune of $1 per square foot for three of their six properties totaling therefore on an annualized basis $60,000. That’s all we committed to with respect to those. We do contemplate some relief for Fashion Bug, for a couple of stores in return for which they will close their store on Union Deposit Road at Point Shopping Center, permitting us to expand a Giant Store. Other than that there’s been very little in the way of substantial concessions.

[Ben Rosenick – Private Fund Management]

Going back to the charge relating to the terminated development in I think you said Milford Delaware, can you just talk about it? I think you had said previously that you’re constantly evaluating the possibility that you might have to take the charge and terminate these developments that you’ve already put in a good amount of equity, I think you said your entire equity portion there. So, kind of what goes in to evaluating that and how are the rest of the development projects going to be evaluated on a going forward basis?

Leo S. Ullman

That’s a fair and important question. We got away from our usual modus operandi with Milford Delaware in that we spent approximately $1.1 million for deposits on land before we had a grocer signed up. At the same time we spent about $.5 million on engineering for that project, some of which we hope to get back still incidentally. Then, if you add to that construction period interest accruals that’s what got us to the $2.4. That is by far the largest of the development projects that we have contemplated terminating.

The others are smaller land parcels like [fax and lumber] we call it in Williamsport, we’re looking at that and we potentially have a buyer for that, actually a contract for which we’re awaiting a deposit. A small property which we call [Birdstrasa] and with those exceptions there’s not much that we are considering writing off and those are much, much smaller amounts.

[Ben Rosenick – Private Fund Management]

Lastly, just one more thing, I think I’ve just gotten a little bit confused on how you’re moving all your assets around a little bit with the facility. But, just real quick what is the unencumbered pool look like, that doesn’t have any property specific or is it in the stabilized pool, what kind of unencumbered group are you looking at just in case?

Leo S. Ullman

We have basically very little.

Lawrence E. Kreider, Jr.

Very few unencumbered properties at this point.

Leo S. Ullman

The secured revolving credit facility for stabilized properties has those 34 properties collateralizing it. The floating rate facility for development projects which the $150 million is also fully collateralized and the Upland property specific multi lender facility is also of course collateralized by that. With those exceptions there’s very little.

[Ben Rosenick – Private Fund Management]

So for step three of your plan I guess, the property specific fixed rate financing, that mainly relates to stuff that’s rolling off of development?

Leo S. Ullman

Rolling off of development but also properties that are in the collateralized pool where we think we can get attractive financing which we think in this market will be relatively close to the floating rate and will provide a hedge against inflation. We think the floating rate financing under that facility when renewed will be in the 5.5% area plus fees. We think, and we’ve been able to get for our smaller sized properties from local and regional banks attractive quotes at those kind of levels from 5.5% to 6.5% and that’s happening as we speak and we’re working on several of those.

[Ben Rosenick – Private Fund Management]

Just out of curiosity what are the LTVs that you’re looking at for those?

Leo S. Ullman

They’re quoting 65% to 70%.

Operator

We have no further questions at this time.

Leo S. Ullman

I’d like to just in closing reiterate a few points. The message that we hope to continue to convey to our investors, analysts, lenders and friends is simple and fairly constant; we are a company that is operating very well at this time even though there are difficult economic circumstances surrounding our company and its operations to which are of course, not blind. However, the supermarkets throughout our portfolio evidence exceptionally strong sales. They remain the dominate grocers in most markets in which we operate.

Our smaller tenants also continue to evidence remarkable strength. In short again, we are a very strong company. We are highly cognoscente of the challenges to our balance sheet and to our level of debt. We are dealing effectively to preserve the strength of our balance sheet in a multipronged and thoughtful manner. Thus, with the expected extension of our credit facility, a joint venture for certain of our properties, sales of our smaller Ohio etc. properties, property specific financings and other measures, we believe that we will be able to evidence to shareholders balance sheet strength without undue dilution of their interests or compromises to a fair valuation based on per share performance of our stock.

We look forward to the future, to our continued strength and to your support. Thank you very much.

Operator

That does conclude today’s conference call. We thank you for your participation.

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Source: Cedar Shopping Centers, Inc. Q2 2009 Earnings Call Transcript
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