SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive proxy statement
[X] Definitive additional materials
[ ] Soliciting material under Rule 14a-12
Cedar Shopping Centers, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share and units of Cedar Shopping Centers
Partnership, L.P.
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(2) Aggregate number of securities to which transaction applies:
To be determined at the effective time of the Mergers
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
The Filing Fee is $1,213.50, which is $80.90 per million dollars of the market
value of the securities proposed to be transferred to security holders in the
transaction.
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(4) Proposed maximum aggregate value of transaction:
$15,000,000
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(5) Total fee paid:
$1,213.50
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[X] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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(CEDAR SHOPPING CENTERS LOGO)
September 23, 2003
Dear Stockholder:
Recently, you received a Proxy Statement dated September 10, 2003 relating
to the annual meeting of stockholders of Cedar Shopping Centers, Inc. to be held
October 9, 2003. In connection with our upcoming October 9, 2003 annual meeting,
you are being asked to approve several matters, including the proposal to merge
our advisors into us.
We have made changes to the pro forma financial information that was
included in the Proxy Statement to eliminate certain one-time non-recurring
charges resulting from the mergers and other transactions and to take into
account a minor change in the method of payment of the consideration in the
mergers. We have eliminated the one-time non-recurring charges for the issuance
of common stock in the mergers to the current owners of our advisors (including
the undersigned) and for the related transfer by the undersigned of a portion of
that common stock to some of our employees as a reward for their service and
dedication. Under the revised method of payment, those employees will be issued
shares of common stock directly by Cedar Shopping Centers in the mergers and the
amount issued to the undersigned will be reduced. The undersigned will also
personally fund approximately $300,000 of the taxes payable by the employees as
a result of their receipt of the stock. Although these changes have a positive
effect on our pro forma results of operations since we have eliminated one-time
non-recurring charges, they do not affect the amount of consideration to be paid
in the mergers or any other aspects of the mergers.
We have enclosed revised pro forma financial information which replaces the
previous information which appeared on pages 30 and 31 and F-1 through F-24 of
the September 10, 2003 Proxy Statement, together with a revised Exhibit A (the
Agreement and Plan of Merger with Cedar Bay Realty Advisors and SKR Management
Corp.).
IF YOU HAVE NOT YET VOTED, WE URGE YOU TO VOTE AS SOON AS POSSIBLE BY
COMPLETING, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD. If you have
voted and do not intend to change your vote, nothing further is required from
you. If you have not voted or have voted and wish to change your vote or revoke
your prior proxy, please complete, sign, date and return the enclosed proxy card
in the postage-paid envelope as soon as possible. The affirmative vote of
holders of at least two-thirds of our outstanding shares is required to approve
the mergers. Your vote is important to us.
Very truly yours
Leo S. Ullman
Chairman, Chief Executive Officer and
President
44 South Bayles Avenue, Port Washington, N.Y. 11050
Tel: (516) 767-6492 - Fax: (516) 767-6497
PROXY STATEMENT SUPPLEMENT
OF
CEDAR SHOPPING CENTERS, INC.
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
OCTOBER 9, 2003
This Proxy Statement Supplement amends and supplements the proxy statement
dated September 10, 2003, which we previously mailed to you relating to the
annual meeting of stockholders to be held October 9, 2003, at 4:00 PM at the
offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, 34th Floor, New York,
New York 10038.
PRO FORMA FINANCIAL INFORMATION
The pro forma financial information appearing on pages 30 and 31 and pages
F-1 through F-24 of the Proxy Statement dated September 10, 2003, and Exhibit A
to the Proxy Statement, are hereby replaced with the attached.
UNAUDITED SUMMARY SELECTED PRO FORMA FINANCIAL DATA
The Company currently intends to complete a public offering of its common
stock as soon as practicable. The Company intends to use any proceeds from such
public offering to finance its operations, repay existing indebtedness, redeem
certain of its outstanding securities, acquire additional properties and advance
its business objectives. The following tables set forth the Company's selected
financial data on a pro-forma basis as if the Company completed the offering
transaction, acquired the properties and the management companies, completed the
refinancing transactions and the Company qualified as a REIT, distributed 90% of
its taxable income and, therefore , incurred no income tax expense during the
period. The unaudited pro-forma operating data for the six months ended June 30,
2003 is presented as if the Company completed the offering transaction, acquired
the properties and the management companies and completed the refinancing
transactions on January 1, 2003. The unaudited pro-forma operating data for the
year ended December 31, 2002 is presented as if the Company completed the
offering transaction, acquired the properties and the management companies and
completed the refinancing transactions on January 1, 2002. The unaudited
pro-forma balance sheet as of June 30, 2003 is presented as if the Company
completed the offering transaction, acquired the properties and the management
companies and completed the refinancing transactions on June 30, 2003.
The pro-forma information is based upon assumptions that are included in
the notes to the pro-forma financial information included elsewhere in this
proxy statement. The pro forma information is unaudited and is not necessarily
indicative of what the Company's financial position and results of operations
would have been as of and for the dates or periods indicated, nor does it
purport to represent the future financial position of the Company and results of
operations for future dates or periods.
PRO-FORMA
PRO-FORMA TWELVE
SIX MONTHS MONTHS
ENDED ENDED
JUNE 30, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED) (UNAUDITED)
STATEMENT OF OPERATING DATA:
Revenues
Rents..................................................... $20,705,441 $39,776,178
Interest and other income................................. 632,601 584,030
----------- -----------
Total Revenues.............................................. 21,338,042 40,360,208
Operating Expenses
Operating, maintenance and management..................... 5,535,758 8,564,313
Real estate taxes......................................... 2,063,033 3,869,599
General and administrative................................ 1,500,000 3,000,000
Depreciation and amortization............................. 3,474,599 6,895,696
Interest expense.......................................... 5,340,778 11,801,214
----------- -----------
Total Operating Expenses.................................... 17,914,168 34,130,822
----------- -----------
Operating income............................................ 3,423,874 6,229,386
Minority interests.......................................... (423,667) (531,617)
----------- -----------
Net income.................................................. $ 3,000,207 $ 5,697,769
=========== ===========
Net earnings per share/unit................................. 0.28 0.52
30
PRO-FORMA
PRO-FORMA TWELVE
SIX MONTHS MONTHS
ENDED ENDED
JUNE 30, DECEMBER 31,
2003 2002
----------- ------------
(UNAUDITED) (UNAUDITED)
Dividends to shareholders................................... -- --
Dividends to shareholders per share......................... -- --
Average number of shares/units outstanding(1)............... 10,902,000 10,864,000
PRO-FORMA
JUNE 30, 2003
-------------
(UNAUDITED)
BALANCE SHEET DATA:
Real estate before accumulated depreciation................. $333,641,890
Real estate after accumulated depreciation.................. 329,725,890
Real estate held for sale................................... --
------------
Total assets................................................ 344,913,697
Mortgage loans and loan payable............................. 181,864,591
Minority interest........................................... 12,656,511
Limited partner's interest in consolidated operating
partnership............................................... --
------------
Shareholders' equity........................................ $135,327,437
============
---------------
(1) For purposes of the shares/units outstanding the reverse split was
calculated based on the stock price at June 30, 2003 of $2.62 per share.
31
CEDAR SHOPPING CENTERS, INC.
INDEX TO PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED COMBINED INFORMATION:
Pro Forma Condensed Combined Balance Sheet, as of June 30,
2003 and related notes.................................... F-2
Pro Forma Condensed Combined Statement of Operations for the
six months ended June 30, 2003 and related notes.......... F-9
Pro Forma Condensed Combined Statement of Operations for the
twelve months ended December 31, 2002 and related notes... F-17
F-1
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Balance Sheet is
presented as if the Company had completed the offering transaction, acquired the
properties and completed the refinancing transactions all on June 30, 2003. This
Pro Forma Condensed Combined Balance Sheet should be read in conjunction with
the Pro Forma Condensed Combined Statement of Operations of the Company and the
historical financial statements and notes thereto of the Company for the six
months ended June 30, 2003. The Pro Forma Condensed Combined Balance Sheet is
unaudited and is not necessarily indicative of what the actual financial results
would have been had the Company completed the offering transaction, acquired the
properties and completed the refinancing transactions on June 30, 2003, nor does
it purport to represent the future financial position of the Company.
ACQUISITION OF
THE REMAINING
CEDAR 50% OWNERSHIP ACQUISITION OF
SHOPPING DRAW ON THE OF THE POINT THE GIANT
CENTERS INC. LINE OF THE SHOPPING BUILDING AT
HISTORICAL CREDIT OFFERING CENTER LOYAL PLAZA
DESCRIPTION (A) (B) (B) (C) (D)
----------- ------------ -------------- ------------- ------------------ ------------------
Assets
Real estate, net.............. $168,515,000 $ -- $ -- $ 1,275,998 $ 5,400,000
Cash and cash equivalents..... 1,117,000 10,000,000 155,182,867 (2,400,000) (5,400,000)
(13,966,458)
Cash at joint ventures and
restricted cash............. 2,818,000 -- -- -- --
Property deposits............. 3,438,000 -- -- -- --
Real estate tax deposits...... 1,015,000 -- -- -- --
Rents and other receivables,
net......................... 495,000 -- -- -- --
Prepaid expenses, net......... 853,000 -- -- -- --
Deferred rental income........ 739,000 -- -- -- --
Deferred charges, net......... 3,506,000 -- -- -- --
------------ ------------ ------------ ----------- -----------
Total assets.................. $182,496,000 10,000,000 $141,216,409 $(1,124,002) $ --
============ ============ ============ =========== ===========
Liabilities and Shareholders'
Equity......................
Liabilities...................
Mortgage Notes Payable........ $130,566,000 $ -- $ -- $ -- $ --
Line of Credit................ -- 10,000,000 -- -- --
Loan Payable.................. 9,767,000 -- -- -- --
Loan payable (repayment with
offering proceeds).......... -- -- -- -- --
Accounts payable and accrued
expenses.................... 2,380,000 -- -- -- --
Security Deposits............. 427,000 -- -- -- --
Deferred Liabilities.......... 6,581,000 -- -- -- --
Advance Rents................. 917,000 -- -- -- --
------------ ------------ ------------ ----------- -----------
Total liabilities............. 150,638,000 10,000,000 -- -- --
Minority interest............. 18,915,000 -- (1,124,002) --
Limited partner's interest in
consolidated Operating
Partnership................. 7,026,000 -- -- -- --
Series A preferred 9%
convertible, redeemable
Operating Partnership
units....................... 3,000,000 -- -- -- --
------------ ------------ ------------ ----------- -----------
10,026,000 -- -- -- --
Common stock.................. 14,000 -- 96,989 -- --
Accumulated other
comprehensive loss.......... (276,000) -- -- -- --
Additional paid in capital.... 3,179,000 -- 141,119,420 -- --
------------ ------------ ------------ ----------- -----------
Total shareholders' Equity.... 2,917,000 -- 141,216,409 -- --
Total liabilities and
shareholders' equity........ $182,496,000 10,000,000 $141,216,409 $(1,124,002) $ --
============ ============ ============ =========== ===========
ACQUISITION OF
GOLDEN
TRIANGLE
SHOPPING
CENTER
DESCRIPTION (E)
----------- ----------------
Assets
Real estate, net.............. $11,317,118
Cash and cash equivalents..... (2,100,000)
Cash at joint ventures and
restricted cash............. --
Property deposits............. --
Real estate tax deposits...... --
Rents and other receivables,
net......................... --
Prepaid expenses, net......... --
Deferred rental income........ --
Deferred charges, net......... 662,882
-----------
Total assets.................. $ 9,880,000
===========
Liabilities and Shareholders'
Equity......................
Liabilities...................
Mortgage Notes Payable........ $ 9,880,000
Line of Credit................ --
Loan Payable.................. --
Loan payable (repayment with
offering proceeds).......... --
Accounts payable and accrued
expenses.................... --
Security Deposits............. --
Deferred Liabilities.......... --
Advance Rents................. --
-----------
Total liabilities............. 9,880,000
Minority interest............. --
Limited partner's interest in
consolidated Operating
Partnership................. --
Series A preferred 9%
convertible, redeemable
Operating Partnership
units....................... --
-----------
--
Common stock.................. --
Accumulated other
comprehensive loss.......... --
Additional paid in capital.... --
-----------
Total shareholders' Equity.... --
Total liabilities and
shareholders' equity........ $ 9,880,000
===========
F-2
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET -- (CONTINUED)
AS OF JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Balance Sheet is
presented as if the Company had completed the offering transaction, acquired the
properties and completed the refinancing transactions all on June 30, 2003. This
Pro Forma Condensed Combined Balance Sheet should be read in conjunction with
the Pro Forma Condensed Combined Statement of Operations of the Company and the
historical financial statements and notes thereto of the Company for the six
months ended June 30, 2003. The Pro Forma Condensed Combined Balance Sheet is
unaudited and is not necessarily indicative of what the actual financial results
would have been had the Company completed the offering transaction, acquired the
properties and completed the refinancing transactions on June 30, 2003, nor does
it purport to represent the future financial position of the Company.
ACQUISITION OF ACQUISITION OF ACQUISITION OF ACQUISITION OF THE
VALLEY PLAZA PINE GROVE HUNTINGDON PLAZA WAL-MART ACQUISITION OF
SHOPPING CENTER SHOPPING CENTER SHOPPING CENTER SHOPPING CENTER SWEDE SQUARE
DESCRIPTION (F) (G) (H) (I) (J)
----------- --------------- --------------- ---------------- ------------------ --------------
Assets
Real estate, net..................... $ -- $ 51,056 $ 4,598,282 $12,960,564 $ 177,457
Cash and cash equivalents............ (3,462,000) (2,175,000) (2,100,000) (3,921,250) (3,188,000)
Cash at joint ventures and restricted
cash............................... -- -- -- -- --
Property deposits.................... -- -- -- -- --
Real estate tax deposits............. -- -- -- -- --
Rents and other receivables, net..... -- -- -- -- --
Prepaid expenses, net................ -- -- -- -- --
Deferred rental income............... -- -- -- -- --
Deferred charges, net................ -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total assets......................... $(3,462,000) $(2,123,944) $ 2,498,282 $ 9,039,314 $(3,010,543)
=========== =========== =========== =========== ===========
Liabilities and Shareholders'
Equity.............................
Liabilities..........................
Mortgage Notes Payable............... $(3,462,000) $ -- $ -- $ 5,443,750 $ --
Line of Credit....................... -- -- 2,400,000 -- --
Loan Payable......................... -- -- -- 3,921,250 --
Loan payable (repayment with offering
proceeds).......................... -- -- -- (3,921,250) --
Accounts payable and accrued
expenses........................... -- -- -- -- --
Security Deposits.................... -- -- -- -- --
Deferred Liabilities................. -- -- 98,282 3,595,564 --
Advance Rents........................ -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total liabilities.................... (3,462,000) -- 2,498,282 9,039,314 --
Minority interest.................... -- (2,123,944) -- -- (3,010,543)
Limited partner's interest in
consolidated Operating
Partnership........................ -- -- -- -- --
Series A preferred 9% convertible,
redeemable Operating Partnership
units.............................. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Common stock......................... -- -- -- -- --
Accumulated other comprehensive
loss............................... -- -- -- -- --
Additional paid in capital........... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total shareholders' Equity........... -- -- -- -- --
Total liabilities and shareholders'
equity............................. $(3,462,000) $(2,123,944) $ 2,498,282 $ 9,039,314 $(3,010,543)
=========== =========== =========== =========== ===========
F-3
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET -- (CONTINUED)
AS OF JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Balance Sheet is
presented as if the Company had completed the offering transaction, acquired the
properties and completed the refinancing transactions all on June 30, 2003. This
Pro Forma Condensed Combined Balance Sheet should be read in conjunction with
the Pro Forma Condensed Combined Statement of Operations of the Company and the
historical financial statements and notes thereto of the Company for the six
months ended June 30, 2003. The Pro Forma Condensed Combined Balance Sheet is
unaudited and is not necessarily indicative of what the actual financial results
would have been had the Company completed the offering transaction, acquired the
properties and completed the refinancing transactions on June 30, 2003, nor does
it purport to represent the future financial position of the Company.
SOUTH PHILADELPHIA ACQUISITION OF ACQUISITION OF ACQUISITION OF
SHOPPING CENTER COLUMBUS CROSSING RIVERVIEW I, II & LAKE RAYSTOWN
TRANSACTION SHOPPING CENTER III SHOPPING CENTERS SHOPPING CENTER
DESCRIPTION (K) (L) (L) (M)
----------- ------------------ ----------------- --------------------- ------------------
Assets
Real estate, net............................ $ 42,557,110 $25,109,884 $ 47,502,219 $ 8,287,202
Cash and cash equivalents................... (41,560,000) (8,000,000) (54,900,000) (1,900,000)
Cash at joint ventures and restricted
cash........................................ -- -- -- --
Property deposits........................... (3,438,000) -- -- --
Real estate tax deposits.................... -- -- -- --
Rents and other receivables, net............ -- -- -- --
Prepaid expenses, net....................... -- -- -- --
Deferred rental income...................... -- -- -- --
Deferred charges, net....................... -- 1,390,116 1,997,781 --
------------ ----------- ------------ -----------
Total assets................................ $ (2,440,890) $18,500,000 $ (5,400,000) $ 6,387,202
============ =========== ============ ===========
Liabilities and Shareholders' Equity........ $ -- $ -- $ -- $ --
Liabilities................................. -- -- -- --
Mortgage Notes Payable...................... -- 18,500,000 -- --
Line of Credit.............................. -- -- -- 5,600,000
Loan Payable................................ -- -- 1,000,000 --
Loan payable (repayment with offering
proceeds)................................... (3,480,000) -- (1,000,000) --
Accounts payable and accrued expenses....... -- -- -- --
Security Deposits........................... -- -- -- --
Deferred Liabilities........................ 1,279,110 -- -- 787,202
Advance Rents............................... -- -- -- --
------------ ----------- ------------ -----------
Total liabilities........................... (2,200,890) 18,500,000 -- 6,387,202
Minority interest........................... -- -- -- --
Limited partner's interest in consolidated
Operating Partnership..................... -- -- -- --
Series A preferred 9% convertible,
redeemable Operating Partnership units.... -- -- -- --
------------ ----------- ------------ -----------
Common stock................................ -- -- -- --
Accumulated other comprehensive loss........ -- -- -- --
Additional paid in capital.................. (240,000) -- (5,400,000) --
------------ ----------- ------------ -----------
Total shareholders' Equity.................. (240,000) -- (5,400,000) --
Total liabilities and shareholders'
equity.................................... $ (2,440,890) $18,500,000 $ (5,400,000) $ 6,387,202
============ =========== ============ ===========
F-4
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET -- (CONTINUED)
AS OF JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Balance Sheet is
presented as if the Company had completed the offering transaction, acquired the
properties and completed the refinancing transactions all on June 30, 2003. This
Pro Forma Condensed Combined Balance Sheet should be read in conjunction with
the Pro Forma Condensed Combined Statement of Operations of the Company and the
historical financial statements and notes thereto of the Company for the six
months ended June 30, 2003. The Pro Forma Condensed Combined Balance Sheet is
unaudited and is not necessarily indicative of what the actual financial results
would have been had the Company completed the offering transaction, acquired the
properties and completed the refinancing transactions on June 30, 2003, nor does
it purport to represent the future financial position of the Company.
PAY-OFF OF ACQUISITION OF ACQUISITION OF ACQUISITION OF
HUDSON REALTY/ HOMBURG OP CEDAR BAY MGMT
SWH FINANCING UNITS OP UNITS COMPANIES
DESCRIPTION (N) (O) (P) (Q)
----------- ----------------- -------------- -------------- ----------------
Assets
Real estate, net............................ $ -- $ -- $ 1,974,000 $ --
Cash and cash equivalents................... (8,000,000) (3,960,000) (9,000,000) (1,450,000)
2,350,000 -- -- --
Cash at joint ventures and restricted
cash...................................... -- -- -- --
Property deposits........................... -- -- -- --
Real estate tax deposits.................... -- -- -- --
Rents and other receivables, net............ -- -- -- --
Prepaid expenses, net....................... -- -- -- --
Deferred rental income...................... -- -- -- --
Deferred charges, net....................... (405,972) -- -- --
----------- ----------- ----------- -----------
Total assets................................ $(6,055,972) $(3,960,000) $(7,026,000) $(1,450,000)
=========== =========== =========== ===========
Liabilities and Shareholders' Equity........ $ -- $ -- $ -- $ --
Liabilities................................. -- -- -- --
Mortgage Notes Payable...................... -- -- -- --
Line of Credit.............................. -- -- -- --
Loan Payable................................ 2,350,000 -- -- --
Loan payable (repayment with offering
proceeds)................................. (7,750,000) -- -- --
Accounts payable and accrued expenses....... -- -- -- (1,000,000)
Security Deposits........................... -- -- -- --
Deferred Liabilities........................ -- -- -- --
Advance Rents............................... -- -- -- --
----------- ----------- ----------- -----------
Total liabilities........................... (5,400,000) -- -- (1,000,000)
Minority interest........................... -- -- -- --
Limited partner's interest in consolidated
Operating Partnership....................... -- -- (7,026,000) --
Series A preferred 9% convertible,
redeemable Operating Partnership units...... -- (3,000,000) -- --
----------- ----------- ----------- -----------
-- (3,000,000) (7,026,000) --
Common stock................................ 9,375
Accumulated other comprehensive loss........ --
Additional paid in capital.................. (655,972) (960,000) -- (459,375)
----------- ----------- ----------- -----------
Total shareholders' Equity.................. (655,972) (960,000) -- (450,000)
Total liabilities and shareholders'
equity.................................... $(6,055,972) $(3,960,000) $(7,026,000) $(1,450,000)
=========== =========== =========== ===========
F-5
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET -- (CONTINUED)
AS OF JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Balance Sheet is
presented as if the Company had completed the offering transaction, acquired the
properties and completed the refinancing transactions all on June 30, 2003. This
Pro Forma Condensed Combined Balance Sheet should be read in conjunction with
the Pro Forma Condensed Combined Statement of Operations of the Company and the
historical financial statements and notes thereto of the Company for the six
months ended June 30, 2003. The Pro Forma Condensed Combined Balance Sheet is
unaudited and is not necessarily indicative of what the actual financial results
would have been had the Company completed the offering transaction, acquired the
properties and completed the refinancing transactions on June 30, 2003, nor does
it purport to represent the future financial position of the Company.
PURCHASE
REFINANCING OF PAY-OFF SELBRIDGE OF INTEREST
WASHINGTON CENTER LOANS RATE PRO FORMA
DESCRIPTION MORTGAGE(R) PAYABLE(S) CAP(T) JUNE 30, 2003
----------- ------------------ ----------------- ------------ -------------
Assets
Real estate, net.................... $ -- $ -- $ -- $329,725,890
Cash and cash equivalents........... (6,963,159) (887,000) (1,000,000) 1,117,000
8,800,000 --
Cash at joint ventures and
restricted cash................... -- -- -- 2,818,000
Property deposits................... -- -- -- --
Real estate tax deposits............ -- -- -- 1,015,000
Rents and other receivables, net.... -- -- -- 495,000
Prepaid expenses, net............... -- -- -- 853,000
Deferred rental income.............. -- -- -- 739,000
Deferred charges, net............... -- -- 1,000,000 8,150,807
----------- ----------- ------------ ------------
Total assets........................ $ 1,836,841 $ (887,000) $ -- $344,913,697
=========== =========== ============ ============
Liabilities and Shareholders'
Equity............................ $ -- $ -- $ -- $ --
Liabilities......................... -- -- -- --
Mortgage Notes Payable.............. 8,800,000 -- -- 163,864,591
(5,863,159) --
Line of Credit...................... -- -- 18,000,000
Loan Payable........................ -- (887,000) -- --
Loan payable (repayment with
offering proceeds)................ -- --
Accounts payable and accrued
expenses.......................... -- -- -- 1,380,000
Security Deposits................... -- -- -- 427,000
Deferred Liabilities................ -- -- -- 12,341,158
Advance Rents....................... -- -- -- 917,000
----------- ----------- ------------ ------------
Total liabilities................... $ 2,936,841 $ (887,000) -- $196,929,749
Minority interest................... -- -- 12,656,511
Limited partner's interest in
consolidated Operating
Partnership....................... -- -- -- --
Series A preferred 9% convertible,
redeemable Operating Partnership
units............................. -- -- -- --
----------- ----------- ------------ ------------
Common stock........................ 120,364
Accumulated other comprehensive
loss.............................. (276,000)
Additional paid in capital.......... (1,100,000) -- -- 135,483,073
----------- ----------- ------------ ------------
Total shareholders' Equity.......... (1,100,000) -- -- 135,327,437
Total liabilities and shareholders'
equity............................ $ 1,836,841 $ (887,000) -- $344,913,697
=========== =========== ============ ============
F-6
CEDAR SHOPPING CENTERS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
PRO FORMA CONDENSED COMBINED BALANCE SHEET
a. Reflects the Company's historical balance sheet as of June
30, 2003.
b. Reflects the Company's offering of approximately 9,699,000
shares at $16 per share less costs to complete the equity
transaction of approximately $13,970,000 and a draw on the
line of credit of $10,000,000.
c. Reflects the acquisition of the remaining 50% interest of
The Point Shopping Center through use of proceeds of
approximately $2,400,000.
d. Reflects the acquisition of a Giant Shopping Store located
at Loyal Plaza Associates LP through the use of proceeds of
approximately $5,400,000 (including $500,000 of closing
costs).
e. Reflects the acquisition of the Golden Triangle Shopping
Center for approximately $11,500,000 (including closing
costs of $600,000) through use of proceeds of approximately
$2,100,000 and the assumption of a mortgage note payable of
approximately $9,880,000. Included in real estate is an
additional asset of $662,882 related to a FAS 141/142
adjustment.
f. Reflects the pay-off of the loan payable associated with
Valley Plaza Shopping Center for approximately $3,462,000 of
proceeds.
g. Reflects the pay-off of the limited partner's equity
associated with Pine Grove Shopping Center for approximately
$2,175,000 of proceeds.
h. Reflects the acquisition of Huntingdon Plaza Shopping Center
for approximately $4,500,000 (including closing costs of
$500,000) through use of proceeds of approximately
$2,100,000 and the draw down on the line of credit in the
amount of $2,400,000. Included in real estate is a liability
of $98,282 related to a FAS 141/142 adjustment.
i. Reflects the acquisition of Wal-Mart Shopping Center for
approximately $9,365,000 (including closing costs of
$875,000) through use of proceeds of approximately
$3,921,000 and the assumption of a mortgage in the amount of
$5,443,750. Included in real estate is a liability of
$3,595,564 related to a FAS 141/142 adjustment.
j. Reflects the pay-off of the limited partner's equity
associated with Swede Square for approximately $3,188,000 of
proceeds.
k. Reflects the acquisition of South Philadelphia Shopping
Center for approximately $41,600,000 (including closing
costs of approximately $2,600,000) through use of proceeds
of approximately $41,320,000. Included in real estate is a
liability of $1,279,110 related to a FAS 141/142 adjustment.
l. Reflects the acquisition of Columbus Crossing Shopping
Center and Riverview I, II & III Shopping Center for
approximately $76,000,000 (including closing costs of
$2,500,000) through use of proceeds of approximately
$62,700,000 and obtaining a new mortgage note payable in the
amount of $18,500,000 and a prepayment penalty in the amount
of $5,200,000 paid in relation to paying off the then
existing mortgage on the Riverview Property. Included in
real estate is an additional asset of $3,387,897 related to
a FAS 141/142 adjustment. The pro forma financial statements
do not include a $5.2 million defeasance fee which will be
recorded as interest expense on the Company's statement of
operations. The intent of the accompanying pro forma
statement of operations for the six month period ended June
30, 2003 and the year ended December 31, 2002 is to reflect
the expected continuing impact of the pro-forma
transactions, therefore the one time defeasance charge noted
above has been excluded.
m. Reflects the acquisition of Lake Raystown Shopping Center
for approximately $7,500,000 (including closing costs of
$500,000) through use of proceeds of approximately
$1,900,000 and the draw down on the line of credit in the
amount of $5,600,000. Included in real estate is a liability
of $787,202 related to a FAS 141/142 adjustment.
F-7
n. Reflects the obtaining of new financing of approximately
$2,350,000 and then pay-off of loan payable related to
Hudson Realty/SWH financing of approximately $8,000,000
(including exit fee of $250,000), through use of proceeds.
o. Reflects the acquisition of the Series A preferred
convertible redeemable partnership units for approximately
$3,960,000, through use of proceeds (including a premium of
120% of liquidation value).
p. Reflects the acquisition of Cedar Bay's partnership units
for approximately $9,000,000, through use of proceeds.
q. Reflects the $9,375 par value of the shares of common stock
issued in connection with the termination of the management
contracts with Cedar Bay and SKR Management, the payment of
all accrued fees owed to the management companies of
approximately $1,000,000 and the payment of $450,000 in
advisory fees. For accounting purposes the mergers are not
considered the acquisition of a "business" for the purposes
of applying Financial Accounting Standards Board Statement
141 "Business Combinations." The pro forma financial
statements do not include a one time $9.85 million operating
expense and a $5.15 million compensation expense reflecting
the issuance of common stock and/or units in the mergers and
a $300,000 compensation expense to be funded by Mr. Leo
Ullman related to income taxes payable by certain employees
of the Company as a result of their receipt of stock in the
mergers. The intent of the accompanying Pro Forma Statement
of Operations for the six months ended June 30, 2003 and for
the year ended December 31, 2002 is to reflect the expected
continuing impact of the pro forma transactions, therefore
the one time charge has been excluded.
r. Reflects the refinancing of the Washington Center Shoppes
mortgage note payable of $5,863,159 with a new mortgage in
the amount of $8,800,000. The pro forma financial statements
do not include a $1.1 million defeasance fee which will be
recorded as interest expense on the Company's statement of
operations. The intent of the accompanying pro forma
statement of operations for the six month period ended June
30, 2003 and for the year ended December 31, 2002 is to
reflect the expected continuing impact of the pro forma
transactions, therefore the one time defeasance charge has
been excluded.
s. Reflects the pay-off of a loan payable with Selbridge (an
affiliate of CBC) related to the acquisition of the Red Lion
Shopping Center of approximately $887,000.
t. Reflects the purchase of an interest rate cap on $30 million
of the Company's floating rate debt (Libor Cap at 4 1/2% for
5 years) at a cost of approximately $1 million as of June
30, 2003.
F-8
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Company completed the offering transaction,
acquired the properties and the management companies and completed the
refinancing transactions all as of January 1, 2003, and the Company qualified as
a REIT, distributed 90% of its taxable income and, therefore, incurred no income
tax expense during the period. This Pro Forma Condensed Combined Statement of
Operations should be read in conjunction with the Pro Forma Condensed Combined
Balance Sheet of the Company and the historical financial statements and notes
thereto of the Company for the six months ended June 30, 2003. The Pro Forma
Condensed Combined Statement of Operations is unaudited and is not necessarily
indicative of what the actual financial results would have been had the Company
completed the offering transaction, acquired the properties and the management
companies and completed the refinancing transactions all as of January 1, 2003,
nor does it purport to represent the future financial position of the Company.
ACQUISITION OF
THE REMAINING ACQUISITION OF ACQUISITION OF
CEDAR 50% OWNERSHIP THE GIANT GOLDEN
SHOPPING OF THE POINT STORE AT TRIANGLE
CENTERS INC. SHOPPING LOYAL SHOPPING
DESCRIPTION HISTORICAL (U) CENTER (V) PLAZA (W) CENTER (X)
----------- -------------- --------------- -------------- --------------
Revenues:
Base rent.................................. $11,203,000 $ -- $588,072 $706,438
Interest and other......................... 219,000 -- -- 1,446
----------- ------- -------- --------
Total revenues............................. 11,422,000 -- 588,072 707,884
=========== ======= ======== ========
Expenses:
Operating expenses......................... 3,206,000 -- 309,029 145,750
Real estate taxes.......................... 1,232,000 -- -- 120,769
Administrative............................. 1,172,000 -- -- --
Interest expense........................... 4,290,000 -- -- --
Depreciation and amortization.............. 1,767,000 -- -- --
----------- ------- -------- --------
Total operating expenses................... 11,667,000 -- 309,029 266,519
----------- ------- -------- --------
Income (loss).............................. (245,000) -- 279,043 441,365
Limited partner's interest................. 449,000 -- -- --
Distribution to preferred shareholders..... (21,000) -- -- --
Minority interests......................... (422,000) 23,314 -- --
----------- ------- -------- --------
Net (loss) income.......................... $ (239,000) $23,314 $279,043 $441,365
=========== ======= ======== ========
Basic and Diluted Net Income per Share..... ($0.02)
=========== ======= ======== ========
F-9
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Company completed the offering transaction,
acquired the properties and the management companies and completed the
refinancing transactions all as of January 1, 2003, and the Company qualified as
a REIT, distributed 90% of its taxable income and, therefore, incurred no income
tax expense during the period. This Pro Forma Condensed Combined Statement of
Operations should be read in conjunction with the Pro Forma Condensed Combined
Balance Sheet of the Company and the historical financial statements and notes
thereto of the Company for the six months ended June 30, 2003. The Pro Forma
Condensed Combined Statement of Operations is unaudited and is not necessarily
indicative of what the actual financial results would have been had the Company
completed the offering transaction, acquired the properties and the management
companies and completed the refinancing transactions all as of January 1, 2003,
nor does it purport to represent the future financial position of the Company.
ACQUISITION OF
ACQUISITION OF HUNTINGDON ACQUISITION OF
ACQUISITION PINE GROVE PLAZA WAL-MART ACQUISITION OF
OF VALLEY PLAZA SHOPPING SHOPPING SHOPPING SWEDE SQUARE
DESCRIPTION SHOPPING CENTER (Y) CENTER (Z) CENTER (AA) CENTER (BB) (CC)
----------- ------------------- ------------------- ------------------- -------------------- --------------
Revenues:
Base rent............ $526,167 $284,672 $194,624 $492,934 $387,359
Interest and other... 141 -- 4,272 36,296 61,696
-------- -------- -------- -------- --------
Total revenues....... 526,308 284,672 198,896 529,230 449,055
======== ======== ======== ======== ========
Expenses:
Operating expenses... 79,400 133,438 115,156 221,832 65,757
Real estate taxes.... 35,271 -- 33,154 76,651 47,857
Administrative....... -- -- -- -- --
Interest expense..... -- (94,441) -- -- (59,345)
Depreciation and
amortization....... -- (43,725) -- -- (29,561)
-------- -------- -------- -------- --------
Total operating
expenses........... 114,671 (4,728) 148,310 298,483 24,708
-------- -------- -------- -------- --------
Income (loss)........ 411,637 289,400 50,586 230,747 424,347
Limited partner's
interest........... -- -- -- -- --
Minority interests... -- -- -- -- --
-------- -------- -------- -------- --------
Net (loss) income.... $411,637 $289,400 $ 50,586 $230,747 $424,347
======== ======== ======== ======== ========
Basic and Diluted Net
Income per Share...
======== ======== ======== ======== ========
F-10
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Company completed the offering transaction,
acquired the properties and the management companies and completed the
refinancing transactions all as of January 1, 2003, and the Company qualified as
a REIT, distributed 90% of its taxable income and, therefore, incurred no income
tax expense during the period. This Pro Forma Condensed Combined Statement of
Operations should be read in conjunction with the Pro Forma Condensed Combined
Balance Sheet of the Company and the historical financial statements and notes
thereto of the Company for the six months ended June 30, 2003. The Pro Forma
Condensed Combined Statement of Operations is unaudited and is not necessarily
indicative of what the actual financial results would have been had the Company
completed the offering transaction, acquired the properties and the management
companies and completed the refinancing transactions all as of January 1, 2003,
nor does it purport to represent the future financial position of the Company.
ACQUISITION
OF THE ACQUISITION
COLUMBUS OF HALIFAX,
SOUTH CROSSING AND ACQUISITION PAY-OFF OF FAIRVIEW AND
PHILADELPHIA RIVERVIEW OF LAKE THE HUDSON NEWPORT
SHOPPING CENTER I, II & III RAYSTOWN REALTY/SWH SHOPPING REFINANCING OF
TRANSACTION SHOPPING SHOPPING FINANCING CENTERS WASHINGTON
DESCRIPTION (DD) CENTERS (EE) CENTER (FF) (GG) (HH) CENTER (II)
----------- ---------------- ------------ ------------ -------------- ------------ --------------
Revenues:
Base rent............ $1,915,174 $4,082,404 $405,083 $ -- $136,585 $ --
Interest and other... 357 586 718 -- 29,162 --
---------- ---------- -------- --------- -------- ---------
Total revenues....... 1,915,531 4,082,990 405,801 -- 165,747 --
========== ========== ======== ========= ======== =========
Expenses:
Operating expenses... 270,093 691,769 103,177 -- 34,783 --
Real estate taxes.... 228,646 246,305 25,389 -- 16,991 --
Administrative....... -- -- -- -- -- --
Interest expense..... -- -- -- (384,380) 55,883 158,400
-- -- -- -- -- (222,602)
Depreciation and
amortization....... -- -- -- (85,469) 28,700 --
---------- ---------- -------- --------- -------- ---------
Total operating
expenses........... 498,739 938,074 128,566 (469,849) 136,357 (64,202)
---------- ---------- -------- --------- -------- ---------
Income (loss)........ 1,416,792 3,144,916 277,235 469,849 29,390 64,202
Limited partner's
interest........... -- -- -- -- (3,086) --
Minority interests... -- -- -- -- (24,981) --
---------- ---------- -------- --------- -------- ---------
Net (loss) income.... $1,416,792 $3,144,916 $277,235 $ 469,849 $ 1,323 $ 64,202
========== ========== ======== ========= ======== =========
Basic and Diluted Net
Income per Share...
========== ========== ======== ========= ======== =========
F-11
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003
The following unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Company completed the offering transaction,
acquired the properties and the management companies and completed the
refinancing transactions all as of January 1, 2003, and the Company qualified as
a REIT, distributed 90% of its taxable income and, therefore, incurred no income
tax expense during the period. This Pro Forma Condensed Combined Statement of
Operations should be read in conjunction with the Pro Forma Condensed Combined
Balance Sheet of the Company and the historical financial statements and notes
thereto of the Company for the six months ended June 30, 2003. The Pro Forma
Condensed Combined Statement of Operations is unaudited and is not necessarily
indicative of what the actual financial results would have been had the Company
completed the offering transaction, acquired the properties and the management
companies and completed the refinancing transactions all as of January 1, 2003,
nor does it purport to represent the future financial position of the Company.
ACQUISITION OF ACQUISITION OF
ACQUISITION OF THE CEDAR BAY HOMBURG
THE MANAGEMENT LIMITED PARTNER OP UNITS PRO FORMA PRO FORMA
DESCRIPTION COMPANIES UNITS (NN) (OO) ADJUSTMENTS JUNE 30, 2003
----------- ---------------- ------------------ -------------- ----------- -------------
Revenues:
Base rent............... $ -- $ -- $ -- $ 79,095(pp) $20,705,441
-- -- -- (296,166)(qq) --
Interest and other...... 278,927(jj) -- -- -- 632,601
--------- --------- ------- ----------- -----------
Total revenues.......... 278,927 -- -- (217,071) 21,338,042
========= ========= ======= =========== ===========
Expenses:
Operating expenses...... (550,941)(kk) -- -- -- 5,535,758
710,515(ll) -- -- -- --
-- -- -- --
Real estate taxes....... -- -- -- -- 2,063,033
Administrative.......... 794,000(mm) -- -- -- 1,500,000(mm)
(466,000)(kk) -- -- -- --
Interest expense........ -- -- -- 1,497,263(rr) 5,340,778
100,000(ss)
Depreciation and
amortization.......... -- -- -- 1,837,654(tt) 3,474,599
--------- --------- ------- ----------- -----------
Total operating
expenses.............. 487,574 -- -- 3,434,917 17,914,168
--------- --------- ------- ----------- -----------
Income (loss)........... (208,647) -- -- (3,651,988) 3,423,874
Limited partner's
interest.............. -- (445,914) -- -- --
Distribution to
preferred
shareholders.......... -- -- 21,000 -- --
Minority interests...... -- -- -- (423,667)
--------- --------- ------- ----------- -----------
Net (loss) income....... $(208,647) $(445,914) $21,000 $(3,651,988) $ 3,000,207
--------- --------- ------- ----------- -----------
Basic and Diluted Net
Income per Share...... $ 0.28(uu)
========= ========= ======= =========== ===========
F-12
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 2003
u. Reflects the historical operations of the Company for the six months
ended June 30, 2003, as previously filed.
v. Reflects the acquisition of the remaining 50% interest in The Point
Shopping Center for the six months ended June 30, 2003.
w. Reflects the operations of the Giants Foods Store located at Loyal
Plaza for the six months ended June 30, 2003.
x. Reflects the operations of Golden Triangle Shopping Center for the
six months ended June 30, 2003.
y. Reflects the operations of Valley Plaza Shopping Center for the six
months ended June 30, 2003.
z. Reflects the operations of Pine Grove Shopping Center for the six
months ended June 30, 2003, excluding amounts included in Cedar
Shopping Centers, Inc. historical.
aa. Reflects the operations of Huntingdon Plaza Shopping Center for the
six months ended June 30, 2003.
bb. Reflects the operations of Wal-Mart Shopping Center for the six
months ended June 30, 2003.
cc. Reflects the operations of Swede Square for the six months ended June
30, 2003, excluding amounts included in Cedar Shopping Centers, Inc.
historical.
dd. Reflects the operations of South Philadelphia Shopping Center for the
six months ended June 30, 2003.
ee. Reflects the operations of Columbus Crossing Shopping Center and the
Riverview I, II & III Shopping Centers for the six months ended June
30, 2003.
ff. Reflects the operations of Lake Raystown Shopping Center for the six
months ended June 30, 2003.
gg. Reflects the pay-down of the Hudson Realty/SWH loan payable for the
six months ended June 30, 2003.
hh. Reflects the operations for Halifax, Fairview and Newport Shopping
Centers for the period from January 1, 2003 through their dates of
respective acquisitions.
ii. Reflects the refinancing of the Washington Center mortgage as
follows:
MORTGAGE INTEREST
BALANCE EXPENSE
---------- ----------
Original Mortgage.......................................... $5,863,159 $ (222,602)
New Mortgage............................................... 8,800,000 158,400
jj. Reflects the management fee income associated with the continuance
of the management of the joint venture properties and properties
outside of Cedar Shopping Centers, Inc., as follows:
MANAGEMENT MINORITY
PROPERTY FEES SHARE FEE INCOME
-------- ---------- -------- ----------
API Red Lion....................................... $ 69,353 80% $ 55,824
Loyal Plaza........................................ 49,294 75% 36,971
Halifax, Newport & Fairview........................ 44,474 70% 31,132
Shore Mall......................................... 155,000 155,000
-------- -- --------
$318,121 $278,927
F-13
kk. Reflects the elimination of management, advisory fees and legal fees
paid to Cedar Bay, SKR Management and other third party management,
as a result of the consummation of the mergers, as follows:
MANAGEMENT LEGAL AND
ENTITY FEES CEDAR SHOPPING CENTERS ADVISORY
------ ---------- ----------------------------- ---------
Cedar Shopping Centers....... $393,000 Legal........................ $ 82,000
Golden Triangle.............. 20,161 Advisory fees................ 384,000
--------
Valley Plaza................. 12,000 $466,000
Pine Grove................... 21,863
Huntingdon Plaza............. 27,800
Wal-Mart..................... 19,109
Swede Square................. 3,508
South Philadelphia........... 24,000
Lake Raystown................ 29,500
--------
$550,941
ll. Reflects the management costs incurred to operate all of the new
acquisition properties.
mm. Represents additional estimated general and administrative costs
expected to be incurred as a result of the mergers and the acquisition
of the new properties. Components of such costs are as follows:
FOR THE SIX
MONTHS ENDED
DESCRIPTION JUNE 30, 2003
----------- -------------
Employee compensation....................................... $1,200,000
Other General and administrative costs...................... 300,000
----------
$1,500,000
nn. Reflects the acquisition of Cedar Bay's partnership units.
oo. Reflects the acquisition of all of the Preferred Units.
F-14
pp. Reflects the increase in the straight line rental income associated
with the acquisitions of Valley Plaza, Pine Grove, Wal-Mart, Swede
Square, South Philadelphia, Golden Triangle, Lake Raystown,
Huntingdon Plaza, Riverview and Columbus Crossing as follows:
STRAIGHT LINE
AS ACQUIRED ADJUSTMENT AS
STRAIGHT LINE ACQUIRED ON PRO FORMA
PROPERTY ADJUSTMENT JANUARY 1, 2003 ADJUSTMENT
-------- ------------- --------------- ----------
Golden Triangle............................... $ 7,403 $ 2,889 $ (4,514)
Valley Plaza.................................. 9,501 21,557 12,056
Pine Grove.................................... 19,600 3,850 (15,750)
Huntingdon Plaza.............................. 1,034 1,832 798
Wal-Mart...................................... 22,579 28,512 5,933
Swede Square.................................. 6,525 8,587 2,062
South Philadelphia............................ 119,177 141,277 22,100
Columbus Crossing and Riverview I, II & III... 83,868 136,178 52,310
Lake Raystown................................. 10,301 14,401 4,100
Giant at Loyal Plaza.......................... -- -- --
--------
$ 79,095
qq. Reflects the FAS 141/142 adjustment to rental income related to the
newly acquired properties.
rr. Reflects the increase in interest expense related to the acquisition
of Golden Triangle, Valley Plaza, Pine Grove, Wal-Mart, Swede Square,
Huntingdon Plaza, Lake Raystown and Columbus Crossing as follows:
INTEREST EXPENSE
FOR THE SIX
PRINCIPAL MONTHS ENDED
PROPERTY AMOUNT INTEREST RATE JUNE 30, 2003
-------- ------------ ------------- ----------------
Golden Triangle..................... $ 9,880,000 7.39 % $ 365,066
Valley Plaza........................ 6,429,800 LIBOR + 2.5 %(1) 115,736
Pine Grove.......................... 5,963,000 6.24 % 186,046
Wal-Mart............................ 5,443,750 LIBOR + 2.5 %(1) 97,988
Swede Square........................ 5,560,000 7.25 % 201,551
Draw on line of credit.............. 18,000,000 LIBOR + 2.25%(1) 301,500
Columbus Crossing................... 18,500,000 LIBOR + 1.25%(1) 229,376
------------ ----------
$ 69,776,550 $1,497,263
------------
(1) -- As of June 30, 2003 the LIBOR rate is 1.10%.
ss. Reflects the amortization of the interest rate cap of $100,000 for
January 1 through June 30, 2003, which is included in interest
expense.
tt. Reflects the increase in depreciation expense associated with the
acquisitions of Valley Plaza, Pine Grove, Wal-Mart, Swede Square,
South Philadelphia, Golden Triangle, Lake Raystown, Hunting-
F-15
don Plaza, Riverview, Columbus Crossing and for Halifax, Newport and
Fairview from January 1, 2003 through their respective dates of
acquisition as follows:
PURCHASE
PRICE DEPRECIATION EXPENSE
ADJUSTED DEPRECIABLE FOR THE SIX MONTHS
PROPERTY FAS 141/142 BASE(1) ENDED JUNE 30, 2003
-------- ----------- ----------- --------------------
Golden Triangle......................... $11,317,118 $9,053,694 $ 113,171
Halifax, Newport and Fairview (2)....... 20,471,000 16,376,800 27,246
The Point............................... 1,275,998 1,020,798 12,760
Valley Plaza............................ 9,784,700 7,827,750 97,847
Pine Grove.............................. 8,065,080 6,452,064 80,651
Huntingdon Plaza........................ 4,598,282 3,678,626 45,983
Wal-Mart................................ 12,960,564 10,368,451 109,706
Swede Square............................ 8,060,030 6,448,023 80,600
South Philadelphia...................... 42,557,110 34,045,688 415,571
Columbus Crossing and Riverview I, II &
III................................... 72,612,103 58,089,682 717,247
Lake Raystown........................... 8,287,202 6,629,762 82,872
Giant at Loyal Plaza.................... 5,400,000 4,320,000 54,000
----------
$1,837,654
uu. For purposes of the shares/units outstanding, the reverse split was
calculated based on the stock price at June 30, 2003 of $2.62 per
share.
--------------------
(1) -- The depreciable base represents 80% of the purchase price of the
property.
(2) -- Represents the depreciation expense for the period from January 1,
2003 through the dates of acquisition.
F-16
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
The following unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Company completed the offering transaction,
acquired the properties and the management companies and completed the
refinancing transactions all as of January 1, 2002, and the Company qualified as
a REIT, distributed 90% of its taxable income and, therefore, incurred no income
tax expense during the period. This Pro Forma Condensed Combined Statement of
Operations should be read in conjunction with the Pro Forma Condensed Combined
Balance Sheet of the Company and the historical financial statements and notes
thereto of the Company for the twelve months ended December 31, 2002. The Pro
Forma Condensed Combined Statement of Operations is unaudited and is not
necessarily indicative of what the actual financial results would have been had
the Company completed the offering transaction, acquired the properties and the
management companies and completed the refinancing transactions all as of
January 1, 2002, nor does it purport to represent the future financial position
of the Company.
ACQUISITION OF
CEDAR THE REMAINING ACQUISITION OF ACQUISITION
SHOPPING 50% OWNERSHIP THE GIANT OF GOLDEN
CENTERS INC. COMPLETED OF THE POINT STORE AT TRIANGLE
HISTORICAL TRANSACTIONS SHOPPING CENTER LOYAL PLAZA SHOPPING
DESCRIPTION (VV) (WW) (XX) (YY) CENTER (ZZ)
----------- ------------ ------------ --------------- -------------- -----------
Revenues:
Base rent........................ $12,964,000 $8,277,000 $ -- $1,176,144 $1,280,452
Interest and other income........ 25,000 -- -- -- --
----------- ---------- -------- ---------- ----------
Total revenues................... 12,989,000 8,277,000 -- 1,176,144 1,280,452
=========== ========== ======== ========== ==========
Expenses:
Operating expenses............... 2,313,000 2,279,550 -- 618,057 236,217
Real estate taxes................ 1,527,000 701,000 -- -- 233,102
Administrative................... 2,005,000 727,000 -- -- --
Interest expense................. 6,010,000 3,024,000 -- -- --
Depreciation and amortization.... 2,546,000 1,158,000 -- -- --
----------- ---------- -------- ---------- ----------
Total operating expenses......... 14,401,000 7,889,550 -- 618,057 469,319
----------- ---------- -------- ---------- ----------
Income (loss).................... (1,412,000) 387,450 -- 558,087 811,133
Limited partner's interest....... 1,152,000 (386,000) -- -- --
Minority interests............... (159,000) (273,000) (99,617) -- --
Loss on sale of properties....... (49,000) 49,000 -- -- --
----------- ---------- -------- ---------- ----------
Net (loss) income................ $ (468,000) $ (222,550) $(99,617) $ 558,087 $ 811,133
=========== ========== ======== ========== ==========
Basic and Diluted Net Income per
Share.......................... ($0.04)
=========== ========== ======== ========== ==========
F-17
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
The following unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Company completed the offering transaction,
acquired the properties and the management companies and completed the
refinancing transactions all as of January 1, 2002, and the Company qualified as
a REIT, distributed 90% of its taxable income and, therefore, incurred no income
tax expense during the period. This Pro Forma Condensed Combined Statement of
Operations should be read in conjunction with the Pro Forma Condensed Combined
Balance Sheet of the Company and the historical financial statements and notes
thereto of the Company for the twelve months ended December 31, 2002. The Pro
Forma Condensed Combined Statement of Operations is unaudited and is not
necessarily indicative of what the actual financial results would have been had
the Company completed the offering transaction, acquired the properties and the
management companies and completed the refinancing transactions all as of
January 1, 2002, nor does it purport to represent the future financial position
of the Company.
ACQUISITION OF
ACQUISITION ACQUISITION OF HUNTINGDON ACQUISITION OF
OF VALLEY PLAZA PINE GROVE PLAZA THE WAL-MART ACQUISITION OF
SHOPPING CENTER SHOPPING CENTER SHOPPING CENTER SHOPPING CENTER SWEDE SQUARE
DESCRIPTION (AAA) (BBB) (CCC) (DDD) (EEE)
----------- --------------- --------------- --------------- --------------- --------------
Revenues:
Base rent................. $1,141,194 $767,061 $595,886 $1,076,255 $1,103,604
Other income.............. -- -- -- -- --
Interest.................. 401 673 -- -- --
---------- -------- -------- ---------- ----------
Total revenues............ 1,141,595 767,734 595,886 1,076,255 1,103,604
========== ======== ======== ========== ==========
Expenses:
Operating expenses........ 144,869 201,863 228,012 308,991 147,264
Real estate taxes......... 69,227 16,301 66,308 145,305 203,571
Administrative............ -- -- -- -- --
Interest expense.......... -- -- -- -- --
Depreciation and
amortization............ -- -- -- -- --
---------- -------- -------- ---------- ----------
Total operating
expenses................ 214,096 218,164 294,320 454,296 350,835
---------- -------- -------- ---------- ----------
Income (loss)............. 927,499 549,570 301,566 621,959 752,769
Limited partner's
interest................ -- -- -- -- --
Minority interests........ -- -- -- -- --
Loss on sale of
properties.............. -- -- -- -- --
---------- -------- -------- ---------- ----------
Net (loss) income......... $ 927,499 $549,570 $301,566 $ 621,959 $ 752,769
========== ======== ======== ========== ==========
Basic and Diluted Net
Income per Share........
========== ======== ======== ========== ==========
F-18
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
The following unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Company completed the offering transaction,
acquired the properties and the management companies and completed the
refinancing transactions all as of January 1, 2002, and the Company qualified as
a REIT, distributed 90% of its taxable income and, therefore, incurred no income
tax expense during the period. This Pro Forma Condensed Combined Statement of
Operations should be read in conjunction with the Pro Forma Condensed Combined
Balance Sheet of the Company and the historical financial statements and notes
thereto of the Company for the twelve months ended December 31, 2002. The Pro
Forma Condensed Combined Statement of Operations is unaudited and is not
necessarily indicative of what the actual financial results would have been had
the Company completed the offering transaction, acquired the properties and the
management companies and completed the refinancing transactions all as of
January 1, 2002, nor does it purport to represent the future financial position
of the Company.
ACQUISITION ACQUISITION ACQUISITION
SOUTH OF COLUMBUS OF RIVERVIEW OF LAKE
PHILADELPHIA CROSSING I, II & III RAYSTOWN PAY-OFF OF THE
SHOPPING SHOPPING SHOPPING SHOPPING HUDSON
CENTER CENTER CENTER CENTER REALTY/SWH
DESCRIPTION TRANSACTION (F F F) (GGG) (GGG) (HHH) FINANCING (III)
----------- ------------------- ------------ ------------- ------------ ---------------
Revenues:
Base rent................. $3,085,134 $2,576,713 $5,291,659 $822,010 $ --
Other income.............. -- -- -- -- --
Interest.................. 1,280 -- -- -- --
---------- ---------- ---------- -------- ---------
Total revenues............ 3,086,414 2,576,713 5,291,659 822,010 --
========== ========== ========== ======== =========
Expenses:
Operating expenses........ 459,453 310,672 580,822 188,222 --
Real estate taxes......... 364,208 147,264 345,259 51,054 --
Administrative............ -- -- -- -- --
Interest expense.......... -- -- -- -- (298,903)
Depreciation and
amortization............ -- -- -- -- (503,940)
---------- ---------- ---------- -------- ---------
Total operating
expenses................ 823,661 457,936 926,081 239,276 (802,843)
---------- ---------- ---------- -------- ---------
Income (loss)............. 2,262,753 2,118,777 4,365,578 582,734 802,843
Limited partner's
interest................ -- -- -- -- --
Minority interests........ -- -- -- -- --
Loss on sale of
properties.............. -- -- -- -- --
---------- ---------- ---------- -------- ---------
Net (loss) income......... $2,262,753 $2,118,777 $4,365,578 $582,734 $ 802,843
========== ========== ========== ======== =========
Basic and Diluted Net.....
Income per Share..........
========== ========== ========== ======== =========
F-19
CEDAR SHOPPING CENTERS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
The following unaudited Pro Forma Condensed Combined Statement of
Operations is presented as if the Company completed the offering transaction,
acquired the properties and the management companies and completed the
refinancing transactions all as of January 1, 2002, and the Company qualified as
a REIT, distributed 90% of its taxable income and, therefore, incurred no income
tax expense during the period. This Pro Forma Condensed Combined Statement of
Operations should be read in conjunction with the Pro Forma Condensed Combined
Balance Sheet of the Company and the historical financial statements and notes
thereto of the Company for the twelve months ended December 31, 2002. The Pro
Forma Condensed Combined Statement of Operations is unaudited and is not
necessarily indicative of what the actual financial results would have been had
the Company completed the offering transaction, acquired the properties and the
management companies and completed the refinancing transactions all as of
January 1, 2002, nor does it purport to represent the future financial position
of the Company.
ACQUISITION OF
THE CEDAR
ACQUISITION OF BAY LIMITED REFINANCING OF PRO FORMA
THE MANAGEMENT PARTNERS WASHINGTON PRO FORMA DECEMBER 31,
DESCRIPTION COMPANIES UNITS (NNN) CENTER (OOO) ADJUSTMENTS 2002
----------- -------------- -------------- -------------- ----------- ------------
Revenues:
Base rent............ $ -- $ -- $ -- $ 211,401(ppp) $ 39,776,178
-- -- -- (592,335)(qqq)
Interest and other
income............. 556,676(jjj) -- -- -- 584,030
------------ ----------- ---------- ----------- ------------
Total revenues....... 556,676 -- -- (380,934) 40,360,208
============ =========== ========== =========== ============
Expenses:
Operating expenses... (873,709)(kkk) -- -- -- 8,564,313
1,421,030(lll) -- -- --
-- -- --
Real estate taxes.... -- -- -- -- 3,869,599
Administrative....... 838,000(mmm) -- -- -- 3,000,000(mmm)
(570,000)(kkk) -- -- --
Interest expense..... -- -- 316,800 2,994,521(rrr) 11,801,214
-- -- (445,204) 200,000(sss)
Depreciation and
amortization....... -- -- -- 3,695,636(ttt) 6,895,696
------------ ----------- ---------- ----------- ------------
Total operating
expenses........... 815,321 -- (128,404) 6,890,157 34,130,822
------------ ----------- ---------- ----------- ------------
Income (loss)........ (258,645) -- 128,404 (7,271,091) 6,229,386
Limited partner's
interest........... -- (766,000) -- -- --
Minority interests... -- -- -- (531,617)
Loss on sale of
properties......... -- -- -- -- --
------------ ----------- ---------- ----------- ------------
Net (loss) income.... $ (258,645) $ (766,000) $ 128,404 $(7,271,091) $ 5,697,769
============ =========== ========== =========== ============
Basic and Diluted Net
Income per Share... $ 0.52(uuu)
============ =========== ========== =========== ============
F-20
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 2002
vv. Reflects the historical operations of the Company for the twelve
months ended December 31, 2002, as previously filed.
ww. Reflects the income statement effect of the sale of Southpoint
Parkway Center as of January 1, 2002, the acquisition of Loyal Plaza,
Red Lion and Camp Hill for the period from January 1, 2002 through
their dates of acquisition, for the refinancing of The Point Shopping
Center mortgage from January 1, 2002 through the date of refinance
and for Halifax, Newport and Fairview Shopping Centers for the period
from January 1, 2002 through December 31, 2002 as filed in the 8-K
dated April 17, 2003.
xx. Reflects the acquisition of the remaining 50% interest in The Point
Shopping Center for the year ended December 31, 2002.
yy. Reflects the operations of the Giants Foods Store located at Loyal
Plaza for the year ended December 31, 2002.
zz. Reflects the operations of Golden Triangle Shopping Center for the
year ended December 31, 2002.
aaa. Reflects the operations of Valley Plaza Shopping Center for the year
ended December 31, 2002.
bbb. Reflects the operations of Pine Grove Shopping Center for the year
ended December 31, 2002.
ccc. Reflects the operations of Huntingdon Plaza Shopping Center for the
year ended December 31, 2002.
ddd. Reflects the operations of Wal-Mart Shopping Center for the year
ended December 31, 2002.
eee. Reflects the operations of Swede Square for the year ended December
31, 2002.
fff. Reflects the operations of South Philadelphia Shopping Center for
the year ended December 31, 2002.
ggg. Reflects the operations of the Columbus Crossing Shopping Center and
Riverview I, II and III Shopping Centers for the year ended December
31, 2002.
hhh. Reflects the operations of Lake Raystown Shopping Center for the year
ended December 31, 2002.
iii. Reflects the pay-down of the Hudson Realty/SWH loan payable for the
year ended December 31, 2002.
jjj. Reflects the management fee income associated with the continued
management of the joint venture properties and properties outside
of Cedar Shopping Centers, Inc., as follows:
MANAGEMENT
PROPERTY FEES MINORITY INTEREST MINORITY SHARE
-------- ---------- ----------------- --------------
API Red Lion.............................. $142,258 80% $113,806
Loyal Plaza............................... 102,141 75% 76,606
Halifax, Newport & Fairview............... 88,948 70% 62,264
Shore Mall................................ 304,000 304,000
-------- --------
$637,347 $556,676
F-21
kkk. Reflects the elimination of management, advisory fees and legal fees
paid to CBRA, SKR Management and other third party management, as a
result of the consummation of the mergers and the acquisition of the
properties, as follows:
MANAGEMENT LEGAL AND
ENTITY FEES CEDAR SHOPPING CENTERS ADVISORY
------ ---------- ---------------------- ---------
Cedar Shopping Centers....... $536,000 Legal........................ $210,000
Golden Triangle.............. 40,866 Advisory fees................ 360,000
--------
Valley Plaza................. 24,000 $570,000
Pine Grove................... 22,016
Huntingdon Plaza............. 86,000
Wal-Mart..................... 41,911
Swede Square................. 7,016
South Philadelphia........... 48,000
Lake Raystown................ 67,900
--------
$873,709
lll. Reflects additional management costs incurred to operate all of the
new acquisition properties.
mmm. Represents the estimated general and administrative costs expected to
be incurred as a result of the mergers. Components of such costs are
as follows:
FOR THE TWELVE
MONTHS ENDED
DECEMBER 31,
DESCRIPTION 2002
----------- --------------
Employee compensation....................................... $2,400,000
Other general and administrative costs...................... 600,000
----------
$3,000,000
nnn. Reflects the acquisition of Cedar Bay's partnership units.
ooo. Reflects the refinancing of the Washington Center mortgage as
follows:
MORTGAGE INTEREST
BALANCE EXPENSE
---------- ----------
Original Mortgage.......................................... $5,863,159 $ (445,204)
New Mortgage............................................... 8,800,000 316,800
F-22
ppp. Reflects the increase in the straight line rental income associated
with the acquisitions of Valley Plaza, Pine Grove, Wal-Mart, Swede
Square, South Philadelphia, Golden Triangle, Lake Raystown,
Huntingdon Plaza, Riverview I, II & III and Columbus Crossing as
follows:
STRAIGHT LINE
AS ACQUIRED ADJUSTMENT AS
STRAIGHT LINE ACQUIRED ON PRO FORMA
PROPERTY ADJUSTMENT JANUARY 1, 2002 ADJUSTMENT
-------- ------------- --------------- ----------
Golden Triangle............................... $ 2,586 $13,148 $ 10,562
Valley Plaza.................................. 17,823 37,476 19,653
Pine Grove.................................... 25,323 79,133 53,810
Huntingdon Plaza.............................. 633 1,783 1,150
Wal-Mart...................................... 35,303 41,872 6,569
Swede Square.................................. 7,229 9,494 2,265
South Philadelphia............................ 116,836 148,853 32,017
Columbus Crossing and Riverview I, II & III... 183,555 262,679 79,124
Lake Raystown................................. 13,223 19,474 6,251
Giant at Loyal Plaza.......................... -- -- --
--------
$211,401
qqq. Reflects the FAS 141/142 adjustment to rental income related to the
newly acquired properties.
rrr. Reflects the increase in interest expense related to the
acquisition of Golden Triangle, Valley Plaza, Pine Grove, Wal-Mart,
Swede Square and Columbus Crossing as follows:
INTEREST EXPENSE
FOR THE TWELVE
MONTHS ENDED
PRINCIPAL DECEMBER 31,
PROPERTY AMOUNT INTEREST RATE 2002
-------- ------------ ------------- ----------------
Golden Triangle..................... $ 9,880,000 7.39 % $ 730,132
Valley Plaza........................ 6,429,800 LIBOR + 2.5 %(1) 231,473
Pine Grove.......................... 5,963,000 6.24 % 372,091
Wal-Mart............................ 5,443,750 LIBOR + 2.5 %(1) 195,975
Swede Square........................ 5,560,000 7.25 % 403,100
Draw on line of credit.............. 18,000,000 LIBOR + 2.25%(1) 603,000
Columbus Crossing................... 18,500,000 LIBOR + 1.25%(1) 458,750
------------ ----------
$ 69,776,550 $2,994,521
------------
(1) As of June 30, 2003 the LIBOR rate is 1.10%.
sss. Reflects the amortization of the interest rate cap of $200,000 from
January 1, 2002 through December 31, 2002, which is included in
interest expense.
ttt. Reflects the increase in depreciation expense associated with the
acquisitions of Valley Plaza, Pine Grove, Wal-Mart, Swede Square,
South Philadelphia, Golden Triangle, Lake Raystown, Hunt-
F-23
ingdon Plaza, Riverview I, II & III, Columbus Crossing and for
Halifax, Newport and Fairview from January 1, 2002 through their
respective dates of acquisition as follows:
DEPRECIATION
PURCHASE EXPENSE FOR THE
PRICE TWELVE MONTHS
ADJUSTED FOR DEPRECIABLE ENDED DECEMBER 31,
PROPERTY FAS 141/142 BASE(1) 2003
-------- ------------ ----------- ------------------
Golden Triangle......................... $11,317,118 $ 9,053,694 $ 226,342
Halifax, Newport and Fairview........... 20,471,000 16,376,800 74,820
The Point............................... 1,275,998 1,020,798 25,520
Valley Plaza............................ 9,784,700 7,827,750 195,694
Pine Grove.............................. 8,065,080 6,452,064 161,302
Huntingdon Plaza........................ 4,598,282 3,678,626 91,966
Wal-Mart................................ 12,960,564 10,368,451 219,412
Swede Square............................ 8,060,030 6,448,023 161,200
South Philadelphia...................... 42,557,110 34,045,688 831,142
Columbus Crossing and Riverview I, II &
III................................... 72,612,103 58,089,682 1,434,494
Lake Raystown........................... 8,287,202 6,629,762 165,744
Giant at Loyal Plaza.................... 5,400,000 4,320,000 108,000
----------
$3,695,636
uuu For purposes of the shares/units outstanding, the reverse split was
calculated based on the stock price at June 30, 2003 of $2.62 per
share.
------------
(1) -- The depreciable base represents 80% of the purchase price of the
property.
F-24
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CEDAR SHOPPING CENTERS, INC.
CEDAR BAY REALTY ADVISORS, INC.
AND
SKR MANAGEMENT CORP.
DATED AS OF , 2003
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated , 2003, by
and among CEDAR SHOPPING CENTERS, INC., a Maryland corporation (the "Company"),
CEDAR BAY REALTY ADVISORS, INC., a New York corporation ("CBRA") and SKR
MANAGEMENT CORP., a New York corporation ("SKR").
W I T N E S S E T H
WHEREAS, the respective boards of directors of CBRA, SKR and the Company
deem it advisable and in the best interests of such corporations and their
respective stockholders that SKR and CBRA be merged with and into the Company,
in accordance with the Maryland General Corporation Law (the "MGCL") and the
terms and conditions of this Agreement;
WHEREAS, the board of directors of CBRA and SKR have received, in
accordance with applicable laws, the approval of the stockholders of each of
CBRA and SKR to execute this Agreement and consummate the transactions
contemplated hereby; and
WHEREAS, the board of directors of the Company has approved, subject to the
further approval of the Company's stockholders, this Agreement and the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration set forth herein, the parties
hereto agree as follows:
1. The Merger.
1.1 Merger of SKR, CBRA and the Company. Subject to the terms and
conditions of this Agreement, at the Effective Time (as hereinafter defined)
each of SKR and CBRA (together, the "Merged Corporations") shall be merged with
and into the Company (the "Merger") and the separate existence of SKR and CBRA
shall cease. The Company shall be the surviving corporation and shall continue
its corporate existence under the laws of the State of Maryland. The Merger
shall have the effects set forth in the MGCL.
1.2 Filing of Articles of Merger; Effective Time. Subject to the
provisions of this Agreement and provided that this Agreement has not been
terminated pursuant to Article 5, articles of merger shall be duly prepared,
executed and acknowledged by the parties and thereafter delivered to the State
Department of Assessments and Taxation of the State of Maryland (the "Maryland
State Department") for filing in accordance with Section 3-107 of the MGCL as
soon as practicable after the conditions to closing in Article 6 have been
fulfilled. The effective time of the Merger (the "Effective Time") shall be when
the Articles of Merger are accepted by the Maryland State Department pursuant to
Section 3-113 of the MGCL.
1.3 Certificate of Incorporation and By-laws of the Surviving
Corporation. The certificate of incorporation and by-laws of the Company, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation and by-laws of the Company, as the surviving corporation, after
the Effective Time, until amended in accordance with applicable law and the
provisions of such certificate of incorporation and by-laws.
1.4 Officers and Directors of the Surviving Corporation. The directors
and officers of the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers of the Company, as the surviving
corporation, until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Company's certificate of incorporation and by-laws.
1.5 Exchange and Conversion of Shares. The manner and basis of converting
shares of the Merged Corporations into shares of the Company shall be as
follows:
1.5.1 At and after the Effective Time, each outstanding share of
stock of CBRA and each outstanding share of stock of SKR shall be
surrendered and cancelled and each holder of any such shares of stock and
the employees of CBRA shall be entitled, upon such surrender and
cancellation, to receive the number of shares of common stock of the
Company on the basis provided herein. Until so surrendered and cancelled,
the outstanding shares of the stock of either of the Merged Corporations to
be
converted into the stock of the Company as provided herein, may be treated
by the Company for all corporate purposes as evidencing the ownership of
shares of the Company as though said surrender, cancellation and exchange
had taken place. At and after the Effective Time, each registered owner of
any shares of the stock of either of the Merged Corporations shall have
such shares cancelled and said registered owner and the employees of CBRA
shall be entitled to the number of shares of the surviving corporation on
the basis provided herein.
1.5.2 At and after the Effective Time, each shareholder of CBRA shall be
entitled, upon surrender and cancellation of his or her stock, to a pro rata
portion of the number of shares of the common stock of the Company having an
aggregate Value (as defined below) of $2,850,000 and the employees of CBRA shall
be entitled to receive a number of shares of common stock of the Company having
an aggregate Value of $5,150,000; provided, however, that if the Offering (as
defined below) is priced above the Midpoint (as defined below), then the number
of shares issuable pursuant to this Section 1.5.2 shall equal the quotient of
each of $2,850,000 and $5,150,000 divided by the public offering price per share
in the Offering.
1.5.3 At and after the Effective Time, each shareholder of SKR shall be
entitled, upon surrender and cancellation of his or her stock, to a pro rata
portion of the number of shares of common stock of the Company having an
aggregate Value of $2,000,000; provided, however, that if the Offering is priced
above the Midpoint, then the number of shares issuable pursuant to this Section
1.5.3 shall equal the quotient of $2,000,000 divided by the public offering
price per share in the Offering.
1.5.4 For purposes of Sections 1.5.2 and 1.5.3, "Value" shall equal the
midpoint (the "Midpoint") of the estimated price range set forth in the
Preliminary Prospectus for the public offering of the Company's shares of common
stock (the "Offering").
2. Representations and Warranties of the Parties. With the exception of
the representations and warranties in each of Sections 2.3, 2.4 and 2.5 which
shall be made solely by the party to which each such Section relates, each party
represents and warrants to the other parties as follows:
2.1 Good Standing. It is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction
of incorporation and has full corporate power and authority to own, lease
and operate its properties and assets and to conduct its business as now
being conducted. It is duly qualified or licensed to do business as a
foreign corporation, and is in good standing, in all jurisdictions where
the character of the properties it owns, leases or operates, or the conduct
of its business, requires such qualification or licensing, except where the
failure to be so qualified would not have a material adverse effect.
2.2 Authorization. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by its board of directors and all other corporate action,
including all stockholder approvals (with the exception of the required
approval of the stockholders of the Company), authorizations and
ratifications necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been taken. This Agreement constitutes the binding obligation of it,
enforceable against it in accordance with its terms, subject to the effect
of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar
laws relating to or affecting creditors' rights generally and court
decisions with respect thereto or to general principles of equity. The
execution and delivery of this Agreement by it and the consummation of the
transactions contemplated hereby will not, except as set forth on a
Schedule to be provided, (a) require the consent of any lender, trustee or
additional consent of any security holder of such party or of any other
person (with the exception of the Maryland State Department), (b) result in
a default under any contract, (c) violate any law or court order, (d)
require it to obtain any license, or (e) conflict with, or result in a
breach or default under, its certificate of incorporation and by-laws,
except, in each case, for violations, conflicts, breaches or defaults which
in the aggregate would not have a material adverse effect.
2.3 Capitalization of the Company. The total number of shares of
stock of all classes which the Company has authority to issue is fifty five
million ( 55,000,000) shares divided into (i) fifty million shares
(50,000,000) shares of common stock with a par value of one cent ($.01) per
share, and (ii) five million (5,000,000) shares of preferred stock with a
par value of one cent ($.01) per share.
2
2.4 Capitalization of SKR. The total number of shares of stock of
all classes which SKR has authority to issue is two hundred (200) shares of
common stock with no par value. One hundred (100) shares of SKR's common
stock are outstanding as of the date hereof.
2.5 Capitalization of CBRA. The total number of shares of stock of
all classes which CBRA has authority to issue is two hundred (200) shares
of common stock with no par value. One hundred (100) shares of CBRA's
common stock are outstanding as of the date hereof.
3. Covenants.
3.1 Company Stockholder Approval. The Company shall use its reasonable
best efforts to obtain, on or prior to June 30, 2004, in accordance with
applicable law, the required approval of its stockholders to effect this
Agreement and to consummate the transactions contemplated hereby.
3.2 Consents and Approvals. The parties shall use their reasonable best
efforts to obtain in writing, prior to the Effective Time, all consents,
approvals, waivers, authorizations, licenses and orders (collectively,
"Consents") necessary or reasonably required to effectuate this Agreement and to
consummate the transactions contemplated hereby, except for where the failure to
obtain the same will not have a material adverse effect on the Agreement or the
transactions contemplated hereby.
3.3 Government Filings. The parties agree to use their reasonable best
efforts to cooperate with one another in (i) determining which filings are
required to be made prior to the Effective Time with, and which Consents are
required to be obtained prior to the Effective Time from, any governmental
entity in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and (ii) timely making all
such filings and timely seeking all such Consents. The parties shall use their
reasonable best efforts to take, or cause to be taken, all other action and
doing, or causing to be done, all other things necessary, proper or appropriate
to consummate and make effective the transactions contemplated by this
Agreement.
4. Indemnification by the Stockholders. The stockholders of SKR and CBRA
(the "Stockholders") jointly and severally agree to indemnify the Company
against and hold it harmless from any and all losses, liabilities, costs,
damages, claims and expenses, including attorneys fees and disbursements
(collectively the "Damages") which the Company may sustain at any time by reason
of (i) the breach or inaccuracy of any of the warranties, representations,
conditions, covenants or agreements of SKR and/or CBRA contained in this
Agreement (the performance of which has not been waived by the Company); (ii)
any debts, liabilities or obligations of any kind and description whether
absolute or contingent, direct or indirect, known or unknown or of any other
nature relating to or arising from the business of CBRA and SKR, including but
not limited to, taxes; and (iii) the operations or activities of SKR and CBRA
prior to the Effective Time.
5. Termination. This Agreement may be terminated at any time prior to the
Effective Time by (i) mutual written agreement of CBRA, SKR and the Company;
(ii) any party upon written notice to the other parties if any governmental
entity of competent jurisdiction shall have issued a final non-appealable order
denying, enjoining or otherwise prohibiting the consummation of any of the
transactions contemplated by this Agreement; (iii) any party if the Company has
not obtained, by June 30, 2004, the approval of its stockholders necessary to
effect this Agreement and the transactions contemplated hereby; (iv) any party
if the Company does not consummate a public offering of its common stock by June
30, 2004; and (v) any party upon written notice to the other parties if there
has been a material violation or breach by one of the other parties of its
covenants or agreements made herein or in connection herewith or if any
representation or warranty of one of the other parties made herein or in
connection herewith proves to be materially inaccurate or misleading and such
violation, breach or inaccuracy has not been cured or waived prior to the
Effective Time.
3
6. Conditions to Closing. The respective obligations of the parties to
effect this Agreement and the transactions contemplated hereby are subject to
the fulfillment at or prior to the Effective Time of the following conditions
unless such conditions are waived in writing by all the parties:
(a) On or prior to June 30, 2004, the stockholders of the Company
shall have approved this Agreement and the transactions contemplated hereby
in accordance with applicable law.
(b) On or prior to June 30, 2004, the Company shall have consummated a
public offering of its common stock.
7. Miscellaneous.
7.1 Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the parties and merges and supersedes all prior
discussions, agreements and understandings of every kind and nature among them
as to the subject matter hereof, and no party shall be bound by any condition,
definition, warranty or representation other than as expressly provided for in
this Agreement or as may be on a date on or subsequent to the date hereof duly
set forth in writing signed by each party which is to be bound thereby.
7.2 Survival of Representations. Each party hereto agrees that all terms,
agreements, representations, warranties, covenants and conditions contained
herein or in any instrument or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby shall
survive the Closing Date.
7.3 No Broker. CBRA and SKR, on the one hand, and the Company, on the
other hand, each represents to the other that no broker or finder has been
involved with any of the transactions relating to this Agreement. In the event
of a claim by any broker or finder that such broker or finder represented or was
retained by the Company, CBRA or SKR, in connection herewith, the Company, CBRA
or SKR, as the case may be, agrees to indemnify and hold the other parties
harmless from and against any and all losses, liabilities, costs, damages,
claims and expenses (including reasonable attorney's fees and disbursements)
which may be incurred in connection with such claim.
7.4 Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be deemed to have
been given when hand delivered, when received if sent by telecopier or by same
day or overnight recognized commercial courier service or three business days
after being mailed in any general or branch office of the United States Postal
Service, enclosed in a registered or
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certified postpaid envelope, addressed to the address of the parties stated
below or to such changed address as such party may have fixed by notice:
To the Company: Cedar Shopping Centers, Inc.
44 South Bayles Avenue
Port Washington, New York 11050
Attention: Leo S. Ullman
Copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: Martin H. Neidell
Telecopier: 212-806-6006
To CBRA and SKR: Cedar Bay Realty Advisors, Inc.
44 South Bayles Avenue
Port Washington, New York 11050
Attention: Leo S. Ullman
SKR Management Corp.
44 South Bayles Avenue
Port Washington, New York 11050
Attention: Leo S. Ullman
provided, that any notice of change of address shall be effective only upon
receipt.
7.5 Governing Law. THIS AGREEMENT AND ITS VALIDITY, CONSTRUCTION AND
PERFORMANCE SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
7.6 Benefit of Parties; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The Agreement may not be assigned by the
Company, CBRA or SKR. Nothing herein contained shall confer or is intended to
confer on any third party or entity which is not a party to this Agreement any
rights under this Agreement.
7.7 Consent to Jurisdiction and Service of Process. The parties hereto
(i) hereby irrevocably submit to the jurisdiction of, and agree that any suit
shall be brought only in, the state and federal courts located in City and State
of New York for the purpose of any suit, action or other proceeding arising out
of or based upon this Agreement or the transactions contemplated hereby and (ii)
hereby waive to the extent not prohibited by applicable law, and agree not to
assert, by way of motion, as a defense or otherwise, in any such proceeding, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution, that
any such proceeding brought in one of the above-named courts is brought in an
inconvenient forum, that the venue of any such proceeding brought in one of the
above-named courts is improper, or that this Agreement, or the transactions
contemplated hereby may not be enforced in or by such court.
7.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
CEDAR SHOPPING CENTERS, INC.
By:
--------------------------------------
Name:
Title:
CEDAR BAY REALTY ADVISORS, INC.
By:
--------------------------------------
Name:
Title:
SKR MANAGEMENT CORP.
Agreed and Acknowledged as to Section 4 only By:
---------------------------------------------
Name:
Title:
By:
---------------------------------------------
Leo S. Ullman
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