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Snow Park Capital Sends Letter to Cedar Realty Board of DirectorsSnow Park Capital Partners, LP ("Snow Park" or "we"), an investment advisor focused on publicly traded real estate securities that beneficially owns approximately 3.5% of the outstanding common shares of Cedar Realty Trust, Inc. (NYSE:CDR) ("Cedar" or the "Company"), today sent the following letter to the Board of Directors of Cedar (the "Board"). October 25, 2017
Cedar Realty Trust, Inc. Dear Independent Members of the Board: Thank you for allowing us to voice some of our views in an introductory call on October 9th. While we are encouraged that the Board has at least taken an initial step to listen to shareholder concerns, we remain concerned that the Board may not have learned from some of its prior missteps and is on a course that will perpetuate the Company's consistent track record of underperformance. As the owner of approximately 3.5% of Cedar's outstanding shares, we believe that Cedar can do more to create value for all of its investors. In fact, Snow Park estimates Cedar to have an NAV of $7.00 to $8.25 per share.3 We believe such NAV levels are readily attainable should the Company take the appropriate steps because its portfolio is comprised of highly liquid grocery-anchored shopping centers for which investment demand remains robust.4 Snow Park has communicated with multiple firms, both financial and strategic, that have specifically expressed interest in Cedar's portfolio. Many of these parties have either formally or informally reached out to the Company, only to be rebuffed. Cedar's lack of willingness to even entertain a market check on the Company's assets has left shareholders suffering in an inefficient and underperforming REIT with very little hope that Cedar's discount to private market value will ever be closed. As the Board is aware, under CEO Bruce J. Schanzer's tenure, from June 1, 2011 through September 28, 2017,5 Cedar's shares have declined in absolute terms.6 And further, Cedar's most loyal shareholders have suffered greatest, as the current stock price is lower than any follow-on offering in the Company's history spanning both the tenures of Mr. Schanzer and former CEO Leo S. Ullman, all under Board Chairman Roger M. Widmann's stewardship since the 2003 IPO (see table below).
Furthermore, we do not find credible management's claims that the "next leg of value creation" will come from the high-risk, mixed-use developments that it has described only in abstract terms and for which the Company has no core competence or identifiable experience. Even more baffling to us is that after researching certain projects, we have been unable to even find plans or permit information for them.8 We believe that management's claims are nothing more than an attempt to obfuscate their performance and garner another seven years to earn compensation packages more typically seen at Fortune 500 companies or professional athletic teams rather than tiny, subscale REITs. We are also disappointed in the Board's proclivity to enter into agreements that have made a small group of insiders wealthy. For over 14 years, insiders have consistently over-promised and under-delivered while shareholders have continued to suffer in the highly inefficient structure of Cedar. Troublingly, Cedar has generated negative 14% total shareholder returns since its 2003 IPO while named executives and Board members have earned over $85 million.9 Cedar's current annualized G&A expense load equates to nearly 3.5% of the equity market capitalization,10 and nearly 20% of NOI (as compared to approximately 12% of NOI in 2011). Simply stated, while the Company owns desirable and eminently salable assets, but unfortunately for shareholders these assets are hopelessly trapped in a flawed and inefficient structure that has done nothing more than transfer value to insiders since 2003. In fact, since 2011, cumulative compensation to just the top two executives and the Board will have totaled over $40 million by the time Mr. Schanzer's contract expires in June 2018, compared to a market capitalization of only $350 million at the time his contract was entered into in June 2011.11 Snow Park is not alone in its concerns regarding the Company's compensation. Tellingly, Cedar shareholders overwhelmingly voted against the Company's executive compensation practices at the annual meeting following the entry into the employment agreements with Mr. Schanzer and Chief Financial Officer Mr. Philip R. Mays. In essence, the Board's bold 2011 gamble on unproven executives has failed, and shareholders are in no better position today than when Mr. Schanzer's employment agreement was entered into nearly seven years ago. And more recently, Cedar has begun to post negative same store NOI and still retains a seven-year track record that is worst amongst its peers.12 With these costly and ill-advised employment contracts nearing their end,13 it is clear that now is the time for the Board to finally put an end to long-lasting shareholder suffering and explore all alternatives to enable shareholders to salvage the value of the Company's real estate which is worth significantly more than the current trading price of $5.56 per share. We hereby request that the Board take the following actions immediately in order to give shareholders confidence in the Board and hope that Cedar's valuable real estate assets will finally be capitalized upon after 14 years of underperformance:
Snow Park hopes to continue to work constructively with the Board to find a path that provides a solution for shareholders to realize Cedar's significant real estate value. Although we are hopeful that recent overtures from the Board demonstrate a willingness to address Cedar's continued underperformance and shortcomings, we will continue to evaluate all opportunities to enhance value for the benefit of all Cedar shareholders. We will not hesitate to take any action that we believe is necessary to protect shareholders' best interests, including nominating a slate of independent director candidates for election at the 2018 Annual Meeting. Best regards, Jeffrey Pierce, Managing Partner
Snow Park Capital Partners, LP ("Snow Park") is an investment advisor that focuses on publicly traded real estate securities. ____________________
1 Implied cap rate is in-line with recent comparables as
highlighted in Cedar's May 2017 investor presentation and Snow Park
research.
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