On September 17, The Wall Street Transcript interviewed Leo S. Ullman, Chairman of the Board of Directors, President, and Chief Executive Officer of Cedar Shopping Centers, Inc (NYSE:CDR). Key excerpts follow:
TWST: Would you give us a brief historical sketch of the company and a picture of the things you are doing at the present time?
Mr. Ullman: I created and ran a real estate management company for 25 years, representing foreign investors with respect to investments in US real estate. In 1998, the management company was merged into a small publicly traded REIT, listed on the NASDAQ Small Cap Market, that was originally run by affiliates of the Aegon Insurance Company. In October 2003, we took that company to the New York Stock Exchange, and have grown it from $13 million or so in assets in 2001 to its present size of nearly $1.5 billion in assets. Our company is focused almost entirely on supermarket-anchored shopping centers, primarily strip community centers, in the northeast quadrant of the US. In addition, perhaps 10% or so of our portfolio consists of newly developed drug store-anchored convenience centers, located primarily in eastern Ohio. Going forward, we contemplate a continued focus primarily on the same kind of supermarket-anchored products in the coastal Mid-Atlantic and New England states, with a very low risk profile and generally having long-term leases with a principal grocer or other anchor tenant.
TWST: What have been the drivers of your success?
Mr. Ullman: Our company itself, has a special and attractive story in that we have been in the business for 25 years and we have assembled an excellent management team and portfolio of very attractive properties. During the past three years we were able to build a portfolio without substantial flaws or warts of any sort. They were all appraised; many were new; they were clean environmentally; and they were fine structurally and legally. We were thus able to assemble a new portfolio of solid properties with very low-risk profiles. In doing so, we were able to benefit from strong relationships with a number of anchors, including especially supermarkets that are strong operators in their respective geographic areas.
TWST: Looking ahead for the next few years, what are the main opportunities that lie ahead and what are the main strategies that you will be employing?
Mr. Ullman: We hope to continue to build on what we have started with, which is to enhance the portfolio that we have been developing primarily in Pennsylvania, Massachusetts, Connecticut, Virginia, Maryland, New Jersey, New York and Delaware. We think these are uniquely strong areas and we think we are very well positioned in those areas to continue to compete effectively. We look to develop where we can, either ourselves or in partnership with a few local developers that we would finance and help, banking on our special development experience and on our relationships with grocery anchors, for example, as the driving force for these types of property developments. They would generally be 120,000 to 180,000 square foot centers with a grocer that might represent 40% to 60% of that area. We would continue generally not to take down a development site until we have a signed lease with primarily a grocery anchor, for example.
TWST: What about possible challenges or problems to worry about?
Mr. Ullman: We will worry about interest rates, of course. However, we believe that we've protected ourselves very well and have strengthened our balance sheet so that we need not contemplate substantial floating rate borrowings for quite a while, and, correspondingly, that we do not expect to need to approach the equity markets for quite a while. We worry to some extent about the possibility that disposable income will be affected by what is happening with interest rates, home prices and gas prices, for example, although our company in particular is perhaps least affected of almost anyone on the retail spectrum in that people will still shop for groceries and necessities. We worry only slightly about certain "big box" challenges, such as the Wal-Mart super stores, for example; we are probably least exposed to such competition in that in the eastern part of Pennsylvania and in the coastal states, for a number of reasons, Wal-Mart is not a strong competitive factor. Of course, our biggest challenge, day-to-day, is to continue to perform and achieve results for our shareholders.
TWST: What is the picture that you would like to see for the company in about three years?
Mr. Ullman: We would like to keep doing what we are doing, enhancing our position and the values of our properties in our geographic areas. We would like to strengthen our balance sheet so that our debt-to-total-capital remains in a range of 40%-50%. We'd like to achieve double-digit total returns for our shareholders, although we cannot promise that we can do that, but we will certainly work to try to do that, in large part through successful leasing/re-leasing of tenant spaces and successful completion of our development pipeline. We would like to create a lot of additional value in our properties that will translate into meaningful net asset value growth for our company. In terms of size, we hope that over the next three to five years, we will continue to grow, perhaps even doubling in size, while managing that growth effectively. We will also focus much effort and attention on enhancing our very robust development pipeline, from which we hope to deliver great products during the next two to four years on a profitable basis. Also, importantly, we hope to keep together our excellent management team, enjoying coming to work and creating value for shareholders.