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Marathon Man

Cedar Shopping Centers' Leo Ullman gets ready for a busy year.

Running a publicly traded REIT certainly has some advantages, including easy access to capital and a reputation for transparency that makes other companies more willing to do business with your firm.

It also has some disadvantages — for example, the market's refusal to recognize the true value of your company even when it has built a pretty impressive track record, says Leo S. Ullman, chairman, CEO and president of Cedar Shopping Centers Inc., a Port Washington, N.Y.-based shopping center REIT.

On the morning of January 14, for example, Cedar's stock traded at $6.23 per share, more than 25 percent below its 52-week high of $8.39 per share. To Ullman, who speaks of the REIT almost as it were one of his children, this seems less than fair, especially given the company's stated commitment to running a stable, well-leased portfolio. Cedar's focus is on grocery-anchored shopping centers and community centers, most of them located in Northeastern U.S. — exactly the kinds of assets that have outperformed the market in the past three years. As of third quarter of 2010, the REIT owned and managed 132 properties totaling 15.5 million square feet. And that portfolio boasted an overall occupancy of 91 percent, which trails other shopping center REIT average occupancies by about 100 basis points.

Cedar's shares are trading at a discount compared to other shopping center REITs because the firm has had slow internal growth and there are a few troubled properties in Ohio in its portfolio, which has hurt its overall occupancy rates, according to a note by Todd M. Thomas, a REIT analyst with KeyBanc Capital Markets Inc. On the other hand, Thomas was impressed with Cedar's aggressive run of purchasing assets over the past 12 months, which has created the company's solid external growth. Overall, KeyBanc Capital Markets currently has the REIT at a Hold rating.

During its recent acquisition spree, undertaken primarily through a joint venture with Canadian giant RioCan REIT, Cedar has been able to grow its portfolio at a very attractive profit margin, Ullman notes. Like many other investors these days, the REIT wants to buy core properties in core markets with high occupancy levels and long-term leases with national, credit-rated tenants.

But unlike many firms that spent most of 2010 thinking whether they should wait for property values to drop further, Cedar's executives chose to strike while the iron was hot.

As a result, they've secured many high-grade assets at cap rates in the 7.5 percent to 8 percent range last year. Altogether in 2010, Cedar and RioCan purchased $345 million worth of shopping centers. The biggest chunk of that came when the joint venture purchased seven properties from mall REIT PREIT in a $200 million transaction.

“The borrowing costs were at historic lows so we were able to finance properties at very attractive leveraged yields and we were able to buy them at fair cap rates,” Ullman notes. “And the joint venture agreement increased our yield considerably because we were able to accrete various fees on property management, leasing, etc. So our return was very attractive and we felt that the product we were looking for was the right product at the time.”

Ullman's willingness to put Cedar at the front of the line in making acquisitions in 2010 makes perfect sense in view of his personal history.

One of Ullman's bigger regrets as he looks back on his life is that he was always in such a hurry to complete things, he says. As a result, he might have missed out on savoring moments.

For example, rather than wait to be drafted into the Army as a young man, Ullman joined the Marine Corps voluntarily for six months in the summer of 1959 — “I wanted to put it behind me and just go on,” he says.

Modest roots

Ullman, who was born in Amsterdam, is a Dutch Jew. When he was a child, a Dutch policeman helped save his life by hiding him from the Nazis.

After the war, Ullman was reunited with his parents and moved to the U.S., where the family settled in Port Washington, N.Y. Today, Ullman and his wife still live in the same town. It also serves as home to three of his four children.

Ullman, who was eight-and-a-half at the time of the move and spent more than a year working in the Netherlands as a young man, speaks fluent Dutch. In fact, he writes a monthly column for a Netherlands-based publication on real estate investment in the United States.

After graduating from Harvard College in the early 1960s, he worked on his law degree and his business degree from Columbia University at the same time. Then, starting in the early 1970s, he spent years running his own law firm and representing Dutch and Belgian investors in the U.S. as a side business.

Ullman's involvement in real estate eventually took over his professional life. In 1998, he purchased Cedar Income Fund, a small cap real estate company that traded on the Nasdaq with the aim of growing its portfolio. Three years later, in 2001, he gave up his law career to devote his attention to real estate investment and management full time.

At the time of the purchase, Cedar Income Fund had only $30.5 million in properties in its portfolio. Five years later, Ullman and his partners grew the portfolio to many times that size. It formed joint ventures with Kimco Realty Corp. and completed acquisitions financed by Dutch lenders.

With the help of Richard Saltzman, then vice chairman of Merrill Lynch, the company undertook an IPO in October 2003. “It was just a wonderful experience, going from asset managing a few properties for some foreign investors to managing a publicly traded REIT,” Ullman says.

In 2011, Cedar's management plans to continue growing its portfolio through the joint venture with RioCan, but it would also like to start looking into redevelopment and repositioning of its wholly owned properties as well as contemplating some ground-up development projects.

Many of Cedar's supermarket tenants are currently looking at adding new stores, Ullman notes, and Cedar would like to strike new construction deals with them for community centers of less than 100,000 square feet in size. Of course, this will only be done on a pre-leased basis and the conditions of the leases will have to be such that they will carry the debt required for building the centers, Ullman adds.

In his personal life, Ullman hopes to continue his athletic pursuits. When he was 53 years old, he and three of his children decided to run in the New York City Marathon together. After the Marathon took place, Ullman felt so invigorated that he took up running, biking and swimming full time.

Over the past 18 years, he has participated in the New York City Marathon multiple types, has biked across America and has taken part in the Ironman Triathlon, which includes a 2.4-mile swim, a 112-mile bike ride and a 26-mile run. He trained for the event for a year, working out four hours every weekday and six hours on Saturdays and Sundays.

“If I show up to a triathlon, I get a medal because there are hardly any people my age doing this sort of stuff,” he says. “It's the only thing I wish I could have started earlier — my triathlon career.”

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