Wunderlich Upgrades Cedar Realty Trust To Buy, Expects Leverage Ratios To Continue To Decline

Cedar Realty Trust Inc CDR reported its 1Q16 results in line with the estimates and the consensus.

Wunderlich’s Craig Kucera upgraded the rating on the company from Hold to Buy, while raising the price target from $7.50 to $8.00.

Leverage Ratios To Decline

Kucera expects Cedar Realty’s “near-term weakness in fundamentals will improve over the next 12 months, leading to a normalized level of 3+ percent SS NOI, which the market is overly discounting as CDR trades at a 20+ percent discount to its peer group of shopping center REITs.”

The analyst believes that although acquisition volume might increase, deleveraging was likely to continue in 2016, with leverage ratios continuing to decline.

1Q Results

Cedar Realty reported in-line results, with FFO of $0.14, although the NOI was ahead of expectations, driven by lower than anticipated real estate operating expenses, offset by some on-time expenses.

SS NOI grew 1.3 percent year on year, despite a decline in occupancy due to vacancy from four anchor tenants. Leasing spreads improved 8.7 percent.

Kucera expects the company “to draw down $100mm from its recently closed 7-year term loan, which will effectively refinance all of CDR's FY16 debt maturities as well as all of its maturities through FY18.”

The FY16 core FFO estimate has been raised from $0.55 to $0.56, to reflect “some slippage in projected disposition timing.”