##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER: 001-31817
 CEDAR SHOPPING CENTERS, INC.
 (Exact name of registrant as specified in its charter)
 Maryland
    
    42-1241468(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 44 South Bayles Avenue, Port Washington, New York
    
    11050-3765(Address of principal executive offices)
    
    (Zip Code)
 (516) 767-6492  (Registrants telephone number, including area code)
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
 Large accelerated filero
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
 Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: At October 31, 2008, there were 44,488,703 shares of Common Stock,
$0.06 par value, outstanding.




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##### 



CEDAR SHOPPING CENTERS, INC.
 INDEX
 Forward-Looking Statements
    
    
    3Part I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets  September 30, 2008 (unaudited) and
December 31, 2007
    
    
    4Consolidated Statements of Income (unaudited)  Three months and
nine months ended September 30, 2008 and 2007
    
    
    5Consolidated Statement of Shareholders Equity (unaudited)  Nine
months ended September 30, 2008
    
    
    6Consolidated Statements of Cash Flows (unaudited)  Nine months
ended September 30, 2008 and 2007
    
    
    7Notes to Consolidated Financial Statements (unaudited) 
September 30, 2008
    
    
    8-26Item 2. Managements Discussion and Analysis of Financial Condition
And Results of Operations
    
    
    27-39Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    39Item 4. Controls and Procedures
    
    
    40Part II. Other InformationItem 1A. Risk Factors
    
    
    41Item 6. Exhibits
    
    
    42Signatures
    
    
    42Exhibit 31Exhibit 32
  2




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Forward-Looking Statements
  3




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CEDAR SHOPPING CENTERS, INC.
 
 Consolidated Balance Sheets
 September 30,
    
    
    December 31,2008
    
    
    2007(unaudited)AssetsReal estate:Land
    
    $
    369,473,000
    
    
    $
    315,599,000Buildings and improvements
    
    
    1,339,489,000
    
    
    
    1,282,180,0001,708,962,000
    
    
    
    1,597,779,000Less accumulated depreciation
    
    
    (135,825,000
    )
    
    
    (103,621,000
    )Real estate, net
    
    
    1,573,137,000
    
    
    
    1,494,158,000Investment in unconsolidated joint venture
    
    
    4,902,000
    
    
    
    3,757,000Cash and cash equivalents
    
    
    5,989,000
    
    
    
    20,307,000Restricted cash
    
    
    17,976,000
    
    
    
    17,839,000Rents and other receivables, net
    
    
    7,861,000
    
    
    
    7,640,000Straight-line rents receivable
    
    
    13,582,000
    
    
    
    11,446,000Other assets
    
    
    11,116,000
    
    
    
    9,778,000Deferred charges, net
    
    
    33,840,000
    
    
    
    30,059,000Total assets
    
    $
    1,668,403,000
    
    
    $
    1,594,984,000Liabilities and shareholders equityMortgage loans payable
    
    $
    682,861,000
    
    
    $
    661,074,000Secured revolving credit facilities
    
    
    274,690,000
    
    
    
    190,440,000Accounts payable and accrued expenses
    
    
    24,911,000
    
    
    
    26,068,000Unamortized intangible lease liabilities
    
    
    65,249,000
    
    
    
    71,157,000Total liabilities
    
    
    1,047,711,000
    
    
    
    948,739,000Minority interests in consolidated joint ventures
    
    
    58,792,000
    
    
    
    62,402,000Limited partners interest in Operating Partnership
    
    
    24,162,000
    
    
    
    25,689,000Shareholders equity:Preferred stock ($.01 par value, $25.00 per share
liquidation value, 12,500,000 shares authorized, 3,550,000
shares issued and outstanding)
    
    
    88,750,000
    
    
    
    88,750,000Common stock ($.06 par value, 150,000,000 shares authorized
44,489,000 and 44,238,000 shares, respectively, issued and
outstanding)
    
    
    2,669,000
    
    
    
    2,654,000Treasury stock (718,000 and 616,000 shares, respectively, at
cost)
    
    
    (9,207,000
    )
    
    
    (8,192,000
    )Additional paid-in capital
    
    
    575,608,000
    
    
    
    572,392,000Cumulative distributions in excess of net income
    
    
    (119,918,000
    )
    
    
    (97,514,000
    )Accumulated other comprehensive (loss) income
    
    
    (164,000
    )
    
    
    64,000Total shareholders equity
    
    
    537,738,000
    
    
    
    558,154,000Total liabilities and shareholders equity
    
    $
    1,668,403,000
    
    
    $
    1,594,984,000
  4




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CEDAR SHOPPING CENTERS, INC.
 
 Consolidated Statements of Income
 (unaudited)
 Three months ended September 30,
    
    Nine months ended September 30,2008
    
    2007
    
    2008
    
    2007Revenues:Rents
    
    $
    35,011,000
    
    
    $
    30,784,000
    
    
    $
    104,043,000
    
    
    $
    89,363,000Expense recoveries
    
    
    7,800,000
    
    
    
    6,946,000
    
    
    
    24,936,000
    
    
    
    21,055,000Other
    
    
    511,000
    
    
    
    115,000
    
    
    
    893,000
    
    
    
    568,000Total revenues
    
    
    43,322,000
    
    
    
    37,845,000
    
    
    
    129,872,000
    
    
    
    110,986,000Expenses:Operating, maintenance and management
    
    
    6,974,000
    
    
    
    5,692,000
    
    
    
    22,298,000
    
    
    
    18,459,000Real estate and other property-related taxes
    
    
    4,994,000
    
    
    
    3,953,000
    
    
    
    14,453,000
    
    
    
    11,153,000General and administrative
    
    
    2,654,000
    
    
    
    1,847,000
    
    
    
    7,168,000
    
    
    
    7,065,000Depreciation and amortization
    
    
    11,996,000
    
    
    
    10,140,000
    
    
    
    37,532,000
    
    
    
    29,921,000Total expenses
    
    
    26,618,000
    
    
    
    21,632,000
    
    
    
    81,451,000
    
    
    
    66,598,000Operating income
    
    
    16,704,000
    
    
    
    16,213,000
    
    
    
    48,421,000
    
    
    
    44,388,000Non-operating income and expense:Interest expense, including amortization of
deferred financing costs
    
    
    (11,243,000
    )
    
    
    (10,041,000
    )
    
    
    (33,906,000
    )
    
    
    (27,523,000
    )Interest income
    
    
    35,000
    
    
    
    82,000
    
    
    
    270,000
    
    
    
    580,000Equity in income of unconsolidated joint venture
    
    
    310,000
    
    
    
    150,000
    
    
    
    682,000
    
    
    
    463,000Total non-operating income and expense
    
    
    (10,898,000
    )
    
    
    (9,809,000
    )
    
    
    (32,954,000
    )
    
    
    (26,480,000
    )Income before minority and limited partners interests
    
    
    5,806,000
    
    
    
    6,404,000
    
    
    
    15,467,000
    
    
    
    17,908,000Minority interests in consolidated joint ventures
    
    
    (412,000
    )
    
    
    (333,000
    )
    
    
    (1,600,000
    )
    
    
    (1,028,000
    )Limited partners interest in Operating Partnership
    
    
    (148,000
    )
    
    
    (177,000
    )
    
    
    (347,000
    )
    
    
    (472,000
    )Net income
    
    
    5,246,000
    
    
    
    5,894,000
    
    
    
    13,520,000
    
    
    
    16,408,000Preferred distribution requirements
    
    
    (1,969,000
    )
    
    
    (1,969,000
    )
    
    
    (5,907,000
    )
    
    
    (5,907,000
    )Net income applicable to common shareholders
    
    $
    3,277,000
    
    
    $
    3,925,000
    
    
    $
    7,613,000
    
    
    $
    10,501,000Per common share:Basic
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.17
    
    
    $
    0.24Diluted
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.17
    
    
    $
    0.24Dividends to common shareholders
    
    $
    10,010,000
    
    
    $
    9,952,000
    
    
    $
    30,017,000
    
    
    $
    29,823,000Per common share
    
    $
    0.225
    
    
    $
    0.225
    
    
    $
    0.675
    
    
    $
    0.675Weighted average number of common shares outstanding:Basic
    
    
    44,488,000
    
    
    
    44,231,000
    
    
    
    44,470,000
    
    
    
    44,179,000Diluted
    
    
    44,490,000
    
    
    
    44,234,000
    
    
    
    44,472,000
    
    
    
    44,183,000
  5




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CEDAR SHOPPING CENTERS, INC.
 
 Consolidated Statement of Shareholders Equity
 Nine months ended September 30, 2008
 (unaudited)
 Preferred stock
    
    
    Common stock
    
    
    
    
    
    
    
    
    
    
    Cumulative
    
    
    Accumulated$25.00
    
    
    
    
    
    
    
    
    
    
    Treasury
    
    
    Additional
    
    
    distributions
    
    
    other
    
    
    TotalLiquidation
    
    
    
    
    
    
    $0.06
    
    
    stock,
    
    
    paid-in
    
    
    in excess of
    
    
    comprehensive
    
    
    shareholdersShares
    
    
    value
    
    
    Shares
    
    
    Par value
    
    
    at cost
    
    
    capital
    
    
    net income
    
    
    (loss) income
    
    
    equityBalance, December 31, 2007
    
    
    3,550,000
    
    
    $
    88,750,000
    
    
    
    44,238,000
    
    
    $
    2,654,000
    
    
    $
    (8,192,000
    )
    
    $
    572,392,000
    
    
    $
    (97,514,000
    )
    
    $
    64,000
    
    
    $
    558,154,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,520,000
    
    
    
    
    
    
    
    13,520,000Unrealized loss on change in fair value of cash flow
hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228,000
    )
    
    
    (228,000
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,292,000Deferred compensation activity, net
    
    
    
    
    
    
    
    
    
    
    247,000
    
    
    
    14,000
    
    
    
    (1,015,000
    )
    
    
    2,835,000
    
    
    
    
    
    
    
    
    
    
    
    1,834,000Conversion of OP Units into common stock
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    1,000
    
    
    
    
    
    
    
    53,000
    
    
    
    
    
    
    
    
    
    
    
    54,000Preferred distribution requirements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,907,000
    )
    
    
    
    
    
    
    (5,907,000
    )Dividends to common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,017,000
    )
    
    
    
    
    
    
    (30,017,000
    )Reallocation adjustment of limited partners interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328,000
    
    
    
    
    
    
    
    
    
    
    
    328,000Balance, September 30, 2008
    
    
    3,550,000
    
    
    $
    88,750,000
    
    
    
    44,489,000
    
    
    $
    2,669,000
    
    
    $
    (9,207,000
    )
    
    $
    575,608,000
    
    
    $
    (119,918,000
    )
    
    $
    (164,000
    )
    
    $
    537,738,000
  6




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CEDAR SHOPPING CENTERS, INC.
 
 Consolidated Statements of Cash Flows
 (unaudited)
 Nine months ended September 30,2008
    
    
    2007Cash flow from operating activities:Net income
    
    $
    13,520,000
    
    
    $
    16,408,000Adjustments to reconcile net income to net cash provided by operating activities:Non-cash provisions:Earnings in excess of distributions of consolidated joint venture
minority interests
    
    
    1,361,000
    
    
    
    231,000Equity in income of unconsolidated joint venture
    
    
    (682,000
    )
    
    
    (463,000
    )Distributions from unconsolidated joint venture
    
    
    634,000
    
    
    
    397,000Limited partners interest in Operating Partnership
    
    
    347,000
    
    
    
    472,000Straight-line rents receivable
    
    
    (2,136,000
    )
    
    
    (2,686,000
    )Depreciation and amortization
    
    
    37,532,000
    
    
    
    29,921,000Amortization of intangible lease liabilities
    
    
    (10,377,000
    )
    
    
    (7,624,000
    )Amortization relating to stock-based compensation
    
    
    2,238,000
    
    
    
    1,456,000Amortization of deferred financing costs
    
    
    1,227,000
    
    
    
    1,152,000Increases/decreases in operating assets and liabilities:Cash at consolidated joint ventures
    
    
    (979,000
    )
    
    
    40,000Rents and other receivables, net
    
    
    (221,000
    )
    
    
    (899,000
    )Other
    
    
    (3,035,000
    )
    
    
    (5,343,000
    )Accounts payable and accrued expenses
    
    
    (204,000
    )
    
    
    3,769,000Net cash provided by operating activities
    
    
    39,225,000
    
    
    
    36,831,000Cash flow from investing activities:Expenditures for real estate and improvements
    
    
    (71,001,000
    )
    
    
    (134,014,000
    )Purchase of consolidated joint venture minority interests
    
    
    (17,454,000
    )
    
    
    Investment in unconsolidated joint venture
    
    
    (1,097,000
    )
    
    
    (8,000
    )Construction escrows and other
    
    
    (755,000
    )
    
    
    (1,033,000
    )Net cash (used in) investing activities
    
    
    (90,307,000
    )
    
    
    (135,055,000
    )Cash flow from financing activities:Net advances from revolving lines of credit
    
    
    84,250,000
    
    
    
    118,420,000Proceeds from sales of common stock
    
    
    
    
    
    
    3,910,000Redemption of Operating Partnership Units
    
    
    (122,000
    )
    
    
    Proceeds from mortgage financings
    
    
    80,947,000
    
    
    
    25,693,000Mortgage repayments
    
    
    (90,840,000
    )
    
    
    (8,468,000
    )Contributions from minority interest partners, net
    
    
    4,260,000
    
    
    
    1,048,000Distributions in excess of earnings from consolidated joint venture
minority interests
    
    
    (27,000
    )
    
    
    Distributions to limited partners
    
    
    (1,368,000
    )
    
    
    (1,336,000
    )Preferred distribution requirements
    
    
    (5,907,000
    )
    
    
    (5,907,000
    )Distributions to common shareholders
    
    
    (30,017,000
    )
    
    
    (29,823,000
    )Payments of deferred financing costs, net
    
    
    (4,412,000
    )
    
    
    (2,050,000
    )Net cash provided by financing activities
    
    
    36,764,000
    
    
    
    101,487,000Net (decrease) increase in cash and cash equivalents
    
    
    (14,318,000
    )
    
    
    3,263,000Cash and cash equivalents at beginning of period
    
    
    20,307,000
    
    
    
    17,885,000Cash and cash equivalents at end of period
    
    $
    5,989,000
    
    
    $
    21,148,000
  7




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Cedar Shopping Centers, Inc.
 
 Notes to Consolidated Financial Statements
 September 30, 2008
 (unaudited)
 Note 1. Organization and Basis of Preparation
     8




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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
     Note 2. Summary of Significant Accounting Policies
  9




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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
  Real Estate Investments and Discontinued Operations
     10




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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
    Intangible Lease Assets/Liabilities
   11




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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
     12




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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
 Cash and Cash Equivalents
  Restricted Cash
  Rents and Other Receivables
   13




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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
 Concentration of Credit Risk
  Other Assets
  Sep 30,
    
    Dec 31,2008
    
    2007Prepaid expenses
    
    $
    7,394,000
    
    
    $
    4,493,000Deposits
    
    
    3,435,000
    
    
    
    4,594,000Other
    
    
    287,000
    
    
    
    691,000$
    11,116,000
    
    
    $
    9,778,000
 Deferred Charges, Net
  Sep 30,
    
    Dec 31,2008
    
    2007Lease origination costs (i)
    
    $
    19,496,000
    
    
    $
    19,417,000Financing costs (ii)
    
    
    11,078,000
    
    
    
    7,941,000Other
    
    
    3,266,000
    
    
    
    2,701,000$
    33,840,000
    
    
    $
    30,059,000
 
 (i)
    
    Deferred lease origination costs include intangible lease assets resulting from
purchase accounting allocations of $13,508,000 and $14,116,000, respectively.(ii)
    
    Deferred financing costs are incurred in connection with the Companys credit
facilities and other long-term debt.  14




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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
  Income Taxes
  Derivative Financial Instruments
  Earnings Per Share
  15




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
  Stock-Based Compensation
   16




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Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
  Three months ended Sep 30,
    
    Nine months ended Sep 30,2008
    
    2007
    
    2008
    
    2007Restricted share grants
    
    
    
    
    
    
    
    
    
    
    247,000
    
    
    
    179,000Average per-share grant price
    
    $
    
    
    
    $
    
    
    
    $
    9.39
    
    
    $
    14.52Recorded as deferred compensation, net
    
    $
    
    
    
    $
    
    
    
    $
    2,312,000
    
    
    $
    2,605,000Charged to operations:Amortization relating to stock-based
compensation
    
    $
    595,000
    
    
    $
    418,000
    
    
    $
    1,851,000
    
    
    $
    1,737,000Adjustments to reflect changes in market
price of Companys common stock
    
    
    302,000
    
    
    
    (116,000
    )
    
    
    387,000
    
    
    
    (281,000
    )Total charged to operations
    
    $
    897,000
    
    
    $
    302,000
    
    
    $
    2,238,000
    
    
    $
    1,456,000Non-vested shares:Non-vested, beginning of period
    
    
    627,000
    
    
    
    382,000
    
    
    
    380,000
    
    
    
    203,000Grants
    
    
    
    
    
    
    
    
    
    
    247,000
    
    
    
    179,000Vested during period
    
    
    (74,000
    )
    
    
    (9,000
    )
    
    
    (74,000
    )
    
    
    (9,000
    )Forfeitures
    
    
    (1,000
    )
    
    
    
    
    
    
    (1,000
    )
    
    
    Non-vested, end of period
    
    
    552,000
    
    
    
    373,000
    
    
    
    552,000
    
    
    
    373,000Value of shares vested during the
period (based on grant price)
    
    $
    1,071,000
    
    
    $
    120,000
    
    
    $
    1,071,000
    
    
    $
    120,000
    17




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
  Supplemental consolidated statement of cash flows information
 Nine months ended Sep 30,2008
    
    2007Supplemental disclosure of cash activities:Interest paid
    
    $
    36,292,000
    
    
    $
    28,892,000Supplemental disclosure of non-cash activities:Additions to deferred compensation plans
    
    
    2,312,000
    
    
    
    2,605,000Issuance of non-interest-bearing purchase money
mortgage (a)
    
    
    (14,435,000
    )
    
    
    Assumption of mortgage loans payable
    
    
    (18,156,000
    )
    
    
    (120,664,000
    )Assumption of interest rate swap liability
    
    
    (2,288,000
    )
    
    
    Issuance of OP Units
    
    
    
    
    
    
    (18,000
    )Conversion of OP Units into common stock
    
    
    54,000
    
    
    
    45,000Purchase accounting allocations:Intangible lease assets
    
    
    7,593,000
    
    
    
    21,001,000Intangible lease liabilities
    
    
    (4,469,000
    )
    
    
    (10,516,000
    )Net valuation decreases in non-interest-
bearing purchase money mortgage and assumed
mortgage loans payable (a)
    
    
    724,000
    
    
    
    447,000Other non-cash investing and financing activities:Accrued real estate improvement costs
    
    
    (3,230,000
    )
    
    
    1,940,000Accrued construction escrows
    
    
    (387,000
    )
    
    
    Accrued financing costs
    
    
    (48,000
    )
    
    
    Accrued stock issuance expenses
    
    
    
    
    
    
    (222,000
    )Capitalization of deferred financing costs
    
    
    592,000
    
    
    
    
 
 (a)
    
    The valuation decrease in the purchase money mortgage obligation results from adjusting the
contract rate (non-interest- bearing) to a market rate of 9.25% per annum. Recently-Issued Accounting Pronouncements
  18




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008  (unaudited)
    19




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
   Note 3. Real Estate
     20




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
    Joint Venture Activities
    21




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
    22




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
 Pro Forma Financial Information (unaudited)
  Three months ended Sep 30,
    
    Nine months ended Sep 30,2008
    
    2007
    
    2008
    
    2007Revenues
    
    $
    43,322,000
    
    
    $
    42,153,000
    
    
    $
    130,199,000
    
    
    $
    127,355,000Net income applicable to common shareholders
    
    $
    3,277,000
    
    
    $
    3,693,000
    
    
    $
    7,936,000
    
    
    $
    9,199,000Per common share:Basic
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.18
    
    
    $
    0.21Diluted
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.18
    
    
    $
    0.21Weighted average number of common shares outstanding:Basic
    
    
    44,488,000
    
    
    
    44,231,000
    
    
    
    44,470,000
    
    
    
    44,179,000Diluted
    
    
    44,490,000
    
    
    
    44,234,000
    
    
    
    44,472,000
    
    
    
    44,183,000
 Real Estate Pledged
  Note 4. Mortgage Loans Payable and Secured Revolving Credit Facilities; Property-Specific
Construction Facility
  23




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
 Sep 30, 2008
    
    Dec 31, 2007Interest rates
    
    
    
    
    
    
    Interest ratesBalance
    
    
    Weighted
    
    
    
    
    
    Balance
    
    
    WeightedDescription
    
    outstanding
    
    
    average
    
    Range
    
    outstanding
    
    
    average
    
    RangeFixed-rate mortgages
    
    $
    641,499,000
    
    
    
    
    5.7
    %
    
    
    4.8%  8.5
    %
    
    $
    656,320,000
    
    
    
    
    5.7
    %
    
    
    4.8%  7.6
    %Variable-rate mortgages
    
    
    41,362,000
    
    
    
    
    5.4
    %
    
    
    4.6%  5.9
    %
    
    
    4,754,000
    
    
    
    
    7.7
    %
    
    
    7.7
    %682,861,000
    
    
    
    
    5.7
    %
    
    
    
    
    
    
    661,074,000
    
    
    
    
    5.7
    %Stabilized property credit facility
    
    
    230,690,000
    
    
    
    
    3.9
    %
    
    
    
    
    
    
    190,440,000
    
    
    
    
    6.2
    %Development property credit facility
    
    
    44,000,000
    
    
    
    
    4.7
    %
    
    
    
    
    
    
    
    
    
    
    
    $
    957,551,000
    
    
    
    
    5.2
    %
    
    
    
    
    
    $
    851,514,000
    
    
    
    
    5.8
    %
 Stabilized Property Credit Facility
   24




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
 Development Property Credit Facility
  Property-Specific Construction Facility
  Note 5. Subsequent Events
  25




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##### Table of Contents



Cedar Shopping Centers, Inc.
Notes to Consolidated Financial Statements
September 30, 2008
(unaudited)
    26




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Executive Summary
     27




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Impact of Recent Overall Real Estate and Financial Market Conditions
    28




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##### Table of Contents



Summary of Critical Accounting Policies
   Revenue Recognition
   29




---



##### Table of Contents



Real Estate Investments
    30




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##### Table of Contents



Stock-Based Compensation
  31




---



##### Table of Contents



Results of Operations
  32




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##### Table of Contents



Comparison of the quarter ended September 30, 2008 to the quarter ended September 30, 2007
 PropertiesThree months ended Sep 30,
    
    
    
    
    
    Percentage
    
    Acquisitions
    
    held in2008
    
    2007
    
    Increase
    
    change
    
    and other (ii)
    
    both periodsTotal revenues
    
    $
    43,322,000
    
    
    $
    37,845,000
    
    
    $
    5,477,000
    
    
    
    14
    %
    
    $
    5,494,000
    
    
    $
    (17,000
    )Property operating expenses
    
    
    11,968,000
    
    
    
    9,645,000
    
    
    
    2,323,000
    
    
    
    24
    %
    
    
    1,864,000
    
    
    
    459,000Depreciation and amortization
    
    
    11,996,000
    
    
    
    10,140,000
    
    
    
    1,856,000
    
    
    
    18
    %
    
    
    1,777,000
    
    
    
    79,000General and administrative
    
    
    2,654,000
    
    
    
    1,847,000
    
    
    
    807,000
    
    
    
    44
    %
    
    
    n/a
    
    
    
    n/aNon-operating income and
expense, net (i)
    
    
    10,898,000
    
    
    
    9,809,000
    
    
    
    1,089,000
    
    
    
    11
    %
    
    
    n/a
    
    
    
    n/a
 
 (i)
    
    Non-operating income and expense consists principally of interest expense (including amortization of deferred financing costs),
and equity in income of an unconsolidated joint venture.(ii)
    
    Includes principally the results of properties acquired after July 1, 2007. Amounts also include (a) unallocated property and
construction management compensation and benefits (including stock-based compensation), and (b) results of a property in Wyoming,
Michigan that was demolished in the second quarter of 2008 as part of the redevelopment plans for the property. Properties held in both periods
 Total
revenues
 Property
operating expenses
 General and administrative expenses
 Non-operating income and expense, net
 33




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##### Table of Contents



Comparison of the nine months ended September 30, 2008 to the nine months ended September 30,
2007
 PropertiesNine months ended Sep 30,
    
    
    
    
    
    Percentage
    
    Acquisitions
    
    held in2008
    
    2007
    
    Increase
    
    change
    
    and other (ii)
    
    both periodsTotal revenues
    
    $
    129,872,000
    
    
    $
    110,986,000
    
    
    $
    18,886,000
    
    
    
    17
    %
    
    $
    19,898,000
    
    
    $
    (1,012,000
    )Property operating expenses
    
    
    36,751,000
    
    
    
    29,612,000
    
    
    
    7,139,000
    
    
    
    24
    %
    
    
    6,154,000
    
    
    
    985,000Depreciation and amortization
    
    
    37,532,000
    
    
    
    29,921,000
    
    
    
    7,611,000
    
    
    
    25
    %
    
    
    7,999,000
    
    
    
    (388,000
    )General and administrative
    
    
    7,168,000
    
    
    
    7,065,000
    
    
    
    103,000
    
    
    
    1
    %
    
    
    n/a
    
    
    
    n/aNon-operating income and
expense, net (i)
    
    
    32,954,000
    
    
    
    26,480,000
    
    
    
    6,474,000
    
    
    
    24
    %
    
    
    n/a
    
    
    
    n/a
 
 (i)
    
    Non-operating income and expense consists principally of interest expense (including amortization of deferred financing costs),
and equity in income of an unconsolidated joint venture.(ii)
    
    Includes principally the results of properties acquired after January 1, 2007. Amounts also include (a) unallocated property and
construction management compensation and benefits (including stock-based compensation), and (b) results of a property in Wyoming,
Michigan that was demolished in the second quarter of 2008 as part of the redevelopment plans for the property, resulting in a
one-time depreciation charge of $1.9 million. Properties held in both periods
 Total
revenues
 Property
operating expenses
 Depreciation
and amortization
 General and administrative expenses
 34




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##### Table of Contents



Non-operating income and expense, net
 Liquidity and Capital Resources
    35




---



##### Table of Contents



36




---



##### Table of Contents



Net Cash Flows
 Operating Activities
  Investing Activities
  Financing Activities
  37




---



##### Table of Contents



Funds From Operations
    38




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##### Table of Contents



Three months ended Sep 30,
    
    Nine months ended Sep 30,2008
    
    2007
    
    2008
    
    2007Net income applicable to common shareholders
    
    $
    3,277,000
    
    
    $
    3,925,000
    
    
    $
    7,613,000
    
    
    $
    10,501,000Add (deduct):Real estate depreciation and amortization
    
    
    11,921,000
    
    
    
    10,080,000
    
    
    
    37,321,000
    
    
    
    29,747,000Limited partners interest
    
    
    148,000
    
    
    
    177,000
    
    
    
    347,000
    
    
    
    472,000Minority interests in consolidated joint ventures
    
    
    412,000
    
    
    
    333,000
    
    
    
    1,600,000
    
    
    
    1,028,000Minority interests share of FFO applicable to
consolidated joint ventures
    
    
    (1,368,000
    )
    
    
    (448,000
    )
    
    
    (4,566,000
    )
    
    
    (1,365,000
    )Equity in income of unconsolidated joint venture
    
    
    (310,000
    )
    
    
    (150,000
    )
    
    
    (682,000
    )
    
    
    (463,000
    )FFO from unconsolidated joint venture
    
    
    360,000
    
    
    
    233,000
    
    
    
    941,000
    
    
    
    701,000Funds From Operations
    
    $
    14,440,000
    
    
    $
    14,150,000
    
    
    $
    42,574,000
    
    
    $
    40,621,000FFO per common share (assuming conversion of OP Units):Basic
    
    $
    0.31
    
    
    $
    0.31
    
    
    $
    0.92
    
    
    $
    0.88Diluted
    
    $
    0.31
    
    
    $
    0.31
    
    
    $
    0.92
    
    
    $
    0.88Weighted average number of common shares:Shares used in determination of basic earnings per share
    
    
    44,488,000
    
    
    
    44,231,000
    
    
    
    44,470,000
    
    
    
    44,179,000Additional shares assuming conversion of OP Units (basic)
    
    
    2,019,000
    
    
    
    1,982,000
    
    
    
    2,026,000
    
    
    
    1,984,000Shares used in determination of basic FFO per share
    
    
    46,507,000
    
    
    
    46,213,000
    
    
    
    46,496,000
    
    
    
    46,163,000Shares used in determination of diluted earnings per share
    
    
    44,490,000
    
    
    
    44,234,000
    
    
    
    44,472,000
    
    
    
    44,183,000Additional shares assuming conversion of OP Units (diluted)
    
    
    2,020,000
    
    
    
    1,981,000
    
    
    
    2,026,000
    
    
    
    1,993,000Shares used in determination of diluted FFO per share
    
    
    46,510,000
    
    
    
    46,215,000
    
    
    
    46,498,000
    
    
    
    46,176,000
 Inflation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   39




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##### Table of Contents



Item 4. Controls and Procedures
   40




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##### Table of Contents



Part II Other Information
 
    
    
    Local oversupply, increased competition or declining demand for real estate;
    
    Non-payment or deferred payment of rent or other charges by tenants;
    
    Vacancies or an inability to rent space on acceptable terms;
    
    Inability to finance property development, tenant improvements or acquisitions on
acceptable terms;
    
    Increased operating costs, including real estate taxes, insurance premiums, utilities,
repairs and maintenance;
    
    Volatility and/or increases in interest rates, or non-availability of funds in the
credit markets in general;
    
    Increased costs of complying with current, new or expanded governmental regulations;
    
    The relative illiquidity of real estate investments;
    
    Changing market demographics;
    
    Changing traffic patterns; and
    
    Inability to arrange replacement financing for maturing debt in acceptable amounts or on
acceptable terms.
  
    
    We may not be able to refinance our existing stabilized property credit facility when it
matures, as extended, on January 30, 2010 on terms that provide adequate liquidity at an
acceptable cost.
    
    We have recently experienced and expect to continue to experience growth in assets and
operations, and may not be able to integrate additional properties effectively into our
operations or otherwise manage such growth, which in turn may adversely affect our
operating results.
    
    Our substantial indebtedness and constraints on credit may impede our operating
performance, as well as our development, redevelopment and acquisition activities, and put
us at a competitive disadvantage.
    
    The financial covenants in our credit facilities and loan agreements may restrict our
operating or acquisition activities, which may harm our financial condition and operating
results.
 41




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##### Table of Contents




    
    Substantially all of our properties are located in certain Northeast and Mid-Atlantic
states, which exposes us to greater economic risks than if our properties were owned in
several geographic regions.
 
 Item 6. Exhibits
   
 SIGNATURES
   By:
    
    /s/ LEO S. ULLMAN
    
    
    
    By:
    
    /s/ LAWRENCE E. KREIDER, JR.Leo S. Ullman
    
    
    
    
    
    Lawrence E. Kreider, Jr.Chairman of the Board, Chief
    
    
    
    
    
    Chief Financial OfficerExecutive Officer and President
    
    
    
    
    
    (Principal financial officer)(Principal executive officer)
  42