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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2000; Commission file number 0-14510
CEDAR INCOME FUND, LTD.
(Exact name of registrant as specified in its charter)
Maryland 42-1241468
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
44 South Bayles Avenue, #304, Port Washington, NY 11050
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 767-6492
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- -------------------------
Common Stock, $0.01 par value The NASDAQ Stock Market
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 __X__ No_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based on the closing sales price on March 21, 2001 of $3.50 per share, the
aggregate market value of the voting stock held by non-affiliates of the
registrant was $1,755,509.
The number of shares outstanding of the registrant's common stock $.01 par value
was 692,111 on March 21, 2001.
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
TABLE OF CONTENTS
Form 10-K
Item No. Report Page
- -------- -----------
PART I
1. Business.................................................................. 1
2. Properties................................................................ 4
3. Legal Proceedings......................................................... 9
4. Submission of Matters to a Vote of Security Holders....................... 9
PART II
5. Market for Registrant's Common Equity and Related Stockholders' Matters... 10
6. Selected Financial Data................................................... 12
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 13
7(a). Quantitative and Qualitative Disclosures about Market Risk................ 18
8. Financial Statements and Supplemental Data................................ 19
9. Changes in, and Disagreements with Accountants on, Accounting
and Financial Disclosure........................................... 20
PART III
10. Directors and Executive Officers of the Registrant........................ 21
11. Executive Compensation.................................................... 22
12. Security Ownership of Certain Beneficial Owners and Management............ 22
13. Certain Relationships and Related Transactions............................ 23
PART IV
14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K...... 27
15. Signatures................................................................ 30
Part I.
Item 1. Business
Cedar Income Fund, Ltd. (the "Company") was originally incorporated in
Iowa on December 10, 1984 and qualified to operate as a real estate investment
trust ("REIT"). Shortly thereafter, the Company's Common Stock was listed on the
NASDAQ securities market. In June 1998, the Company was reorganized and included
in an "umbrella partnership REIT" structure through the contribution of
substantially all of its assets to a limited partnership (the "Operating
Partnership") in exchange for the sole general partnership interest and all
2,245,411 limited partnership interests ("Units") of the Operating Partnership.
Immediately thereafter, Cedar Bay Company, ("CBC"), a New York general
partnership, which, as a result of a tender offer completed in April 1998,
became the largest stockholder of the Company, exchanged 1,703,300 shares of
Common Stock for 1,703,300 Units owned by the Company. Following these
transactions, substantially all of the Company's assets consisted of the
controlling general partnership interest of the Operating Partnership and
approximately 24% of the Units; substantially all of CBC's assets consisted of
189,737 shares of Common Stock (approximately 35% of the then-issued and
outstanding shares of Common Stock) and approximately 76% of the Units.
As of November 5, 1999, a Subscription Agreement was entered into by
and between the Company and Uni-Invest Holdings (U.S.A.) B.V., pursuant to which
Uni-Invest Holdings (U.S.A.) B.V. acquired on or about November 15, 1999,
through a private placement, 150,000 shares of Common Stock of the Company at
$4.50 per share (which price as of such date of issue was higher than the quoted
price for such shares on the NASDAQ). As a result of such placement and the
other private placements of an additional 250,000 shares of Common Stock, as of
November 15, 1999, Uni-Invest Holdings (U.S.A.) B.V. owned approximately 16% of
the Common Stock of the Company. CBC's Common Stock ownership was
correspondingly reduced from approximately 35% to approximately 20%. Also in
accordance with the Subscription Agreement, and pursuant to Board of Directors'
approval and shareholders' approval at a special meeting held on February 24,
2000, the Company changed its name to "Uni-Invest (U.S.A.), Ltd." effective as
of February 29, 2000. The name of the Operating Partnership was correspondingly
changed to "Uni-Invest (U.S.A.) Partnership, L.P." as of that date.
In addition, the Company, Uni-Invest Holdings (U.S.A.) B.V. and CBC
entered into a Stockholders' Agreement effective as of the issuance of stock
pursuant to the Subscription Agreement, as further described in the Company's
1999 Annual Report and 10-K.
The Subscription Agreement, among other things, as further described in
the 1999 Annual Report and 10-K, also called for the guaranty by Uni-Invest
Holdings (U.S.A.) B.V. of the funding on or before May 15, 2000 of $7.5 million
in exchange for shares of the Company and/or Units in the Operating Partnership
at $4.50 per share/ Unit.
In the event that funding by Uni-Invest Holdings (U.S.A.) B.V. did not
occur, the Company had the right to unwind the entire transaction with
Uni-Invest Holdings (U.S.A.) B.V., subject to certain conditions, including but
not limited to, the Company's option to repurchase the shares of Common Stock of
the Company held by Uni-Invest Holdings (U.S.A.) B.V., to change the name of the
Company and the Operating Partnership to eliminate the Uni-Invest
1
Item 1. Business (continued)
name and to remove representatives of Uni-Invest Holdings (U.S.A.) B.V. as
directors and officers of the Company. Accordingly, upon notice given on or
about August 11, 2000, Uni-Invest (U.S.A.) B.V.'s representatives Richard
Homburg and Loek Marcus submitted their resignations as members of the Board of
Directors and officers of the Company and Lawrence Freeman submitted his
resignation as Assistant Secretary effective as of July 31, 2000. In addition,
the Company bought back 150,000 shares of the Company's Common Stock from
Uni-Invest Holdings (U.S.A.) B.V. at $4.60 per share.
Effective as of August 3, 2000, the Company changed its name back to
Cedar Income Fund, Ltd. Correspondingly, the name of the Operating Partnership
was changed back to Cedar Income Fund Partnership, L.P. The Company's NASDAQ
stock market symbol was changed back to "CEDR" as of August 7, 2000.
Further, and in addition to the "unwind" provisions outlined in the
Subscription Agreement, the Company agreed to repurchase, or arrange for the
purchase by others, of a total of 100,000 shares of stock in the Company
proportionately (40%) from each of seven shareholders introduced by Uni-Invest
Holdings (U.S.A.) B.V. at the same price per share and upon the same conditions
as the repurchase of shares of the Company from Uni-Invest Holdings (U.S.A.)
B.V. Such repurchase of shares was completed by December 2000. The Company also
undertook to register the remaining 150,000 shares of stock in the Company owned
by such seven shareholders and to use its best efforts to purchase or find
replacement purchasers for the remaining 150,000 shares owned by such seven
shareholders at the same price per share described above, subject to the NASDAQ
and SEC rules. The Company and Uni-Invest Holdings (U.S.A.) B.V. exchanged
mutual releases against any claims either may have had against each other
arising prior to July 31, 2000.
On May 11, 2000, pursuant to the provisions of a "buy-sell" provision
in its tenancy-in-common agreement with Life Investors Insurance Company of
America ("Life Investors"), an affiliate of the Company's former management
company and advisor, the Company sold an undivided 50% interest in Germantown
Square, a 74,267 s.f. retail property to Life Investors for $3,000,000. As of
July 1, 2000, the Company, through its Operating Partnership, invested a
substantial portion of the proceeds from such sale for the purchase of a 50%
sole general partnership interest in The Point Shopping Center in Harrisburg,
Pennsylvania ("The Point") for approximately $2.1 million over then-existing
indebtedness of $9.3 million plus closing costs of approximately $385,000. That
property interest was purchased from an affiliate of CBC, which owns the balance
as a limited partner, after receipt by the Company of a "fairness opinion" with
respect to the terms of such purchase.
On May 10, 2000, the Company obtained a $10 million line of credit from
a national commercial bank secured by first mortgage liens on properties of the
Operating Partnership. The first drawdown in the amount of $1,515,644 was used
to retire the then-existing first mortgage on the Company's Utah property and to
pay related loan closing costs.
2
Item 1. Business (continued)
The Company continues to operate as a real estate investment trust
("REIT"). To qualify as a REIT under applicable provisions of the Internal
Revenue Code of 1986, as amended, and Regulations thereto, the Company must have
a significant percentage of its assets invested in, and income derived from,
real estate and related sources. The Company's objectives are to provide to its
shareholders a professionally managed, diversified portfolio of commercial real
estate investments which will provide the best available cash flow and present
an opportunity for capital appreciation.
The Company's shares are traded on the NASDAQ (Small Cap Market) under
the symbol "CEDR".
The Company, through its Operating Partnership, owns and operates three
office properties aggregating approximately 224,000 square feet, located in
Jacksonville, Florida, Salt Lake City, Utah and Bloomington, Illinois; and a 50%
sole general partnership interest in a 260,000 square foot shopping center
property located in Harrisburg, Pennsylvania.
Currently, a Unit in the Operating Partnership and a share of Common
Stock of the Company have essentially the same economic characteristics, as they
effectively share equally in net income or loss and distributions of the
Operating Partnership.
Cedar Bay Realty Advisors, Inc. ("CBRA") serves as investment advisor
to the Company pursuant to an Administrative and Advisory Agreement with the
Company on terms substantially similar to the terms of that agreement previously
in effect between the Company and AEGON USA Realty Advisors, Inc. ("AEGON") of
Cedar Rapids, Iowa, which served as investment advisor to the Company from
formation until April 3, 1998. Brentway Management LLC ("Brentway" and/or
"Property Manager"), a New York limited liability company provides property
management services for the Company's properties pursuant to a Management
Agreement with the Company on substantially the same terms as the agreement
previously in effect with AEGON. Brentway and CBRA are both affiliates of CBC,
SKR Management Corp. and Leo S. Ullman. Leo S. Ullman is President and Chairman
of the Board of the Company. The terms of the Administrative and Advisory
Agreement and Management Agreement are further discussed in Note 6.
CBRA agreed to defer until termination of its services as investment
advisor to the Company, any acquisition fees to which it would otherwise be
entitled with respect to the acquisition by the Company or the Operating
Partnership of the 50% general partnership interest in The Point Shopping Center
property from CBC or its affiliates, described above and in Item 2 below.
3
Item 2. Properties
Retail Property
The Point Shopping Center
Harrisburg, Pennsylvania
As of July 1, 2000, pursuant to a Purchase and Sale Agreement dated as
of that date, the Operating Partnership, through a newly-created limited
liability company (The Point Shopping Center LLC), in which the Operating
Partnership, of which the Company is the sole general partner, is the sole
member, purchased a 50% partnership interest in The Point Associates, L.P.,
the partnership entity that owns The Point, then a 320,000 s.f. shopping center,
for $2,100,000 plus closing adjustments of approximately $385,000. The purchase
price was based on 50% of the appraised value of the property less the
then-existing first mortgage debt (i.e. 50% of $13,500,000 less $9,300,000). As
set forth above, the purchase price was funded primarily by the proceeds of the
sale of the Operating Partnership's interest in Germantown Square in Louisville,
Kentucky.
The 50% interest in The Point Associates, L.P., acquired by the
Operating Partnership, was purchased from Selbridge Corp. ("Selbridge"), then
the sole general partner of The Point Associates, L.P., by assignment of a 42%
general partnership interest and from Leo S. Ullman, then the sole limited
partner of The Point Associates, L.P. by assignment of an 8% limited partnership
interest. Ullman's 8% limited partnership interest represented his entire
interest in The Point Associates, L.P. Simultaneously with the assignment of
partnership interests, Selbridge became a limited partner and The Point Shopping
Center LLC became the general partner. The transfers resulted in the Operating
Partnership (through The Point Shopping Center LLC) owning a 50% partnership
interest in The Point Associates, L.P.
The proceeds of Mr. Ullman's 8% limited partnership interest were used
to repay a loan from Selbridge to Mr. Ullman to buy such partnership interest.
Selbridge paid a disposition fee to SKR Management Corp. in the amount of
$67,500. Mr. Ullman is sole owner, director and President of SKR Management
Corp. CBRA. has waived any rights to any acquisition fee from the Company to
which it may otherwise have been entitled as a result of The Point transaction.
The Operating Partnership has the right to acquire an additional 39%
partnership interest from Selbridge at any time at a price equal to the
fractional interest to be acquired, multiplied by ten times net operating
income, less the outstanding first mortgage debt. Selbridge is prohibited from
selling its remaining interest in The Point Associates, L.P. without first
offering to sell such interest to the Operating Partnership based upon the
aforementioned formula.
The Point Associates, L.P. is redeveloping The Point into a 260,000
s.f. strip shopping center based primarily upon construction of a new 54,000
s.f. store reflecting a lease dated June 19, 2000 between Giant Food Stores,
Inc. ("Giant") and The Point Associates, L.P. Such lease requires, among other
things, construction of the new Giant premises, demolition and reconstruction of
certain existing portions of the shopping center, relocation of certain existing
tenants, new stores for certain new tenants and reconfiguration and repaving of
the parking lot. In addition, pursuant to the terms of the Giant lease, Giant
was required to pay $1,500,000 to The Point Associates, L.P. towards the
termination of certain leases, and up to an additional $250,000 for certain
other tenant relocations. In consideration of receipt of $1,500,000 from Giant,
The Point Associates, L.P. undertook to post a $1,500,000 letter of credit or an
acceptable guaranty of $1,500,000 for Giant's benefit for two years. The Company
ultimately gave such guaranty and Selbridge gave the Company a letter of credit
equal to $750,000, representing its 50% share of the guaranty.
4
Item 2. Properties (continued)
As of November 20, 2000, the first mortgage loan on The Point was
increased from $9,300,000 to $17,900,000. Net proceeds of such refinancing in
the amount of approximately $8,100,000 became available to The Point Associates
for redevelopment costs, which costs (after crediting the Giant payments) are
estimated to be approximately $9,650,000; resulting in additional capital
required of The Point Associates, L.P. in the approximate amount of $1,550,000,
which will be funded through the cash receipts received from The Point Shopping
Center.
During the period commencing July 1, 2000 until the earlier of (i) the
date Giant commences to pay rent or (ii) December 31, 2001, Selbridge has
guaranteed to The Point Shopping Center LLC, a 10% return on its purchase price
of $2,100,000 (i.e. $210,000 per annum).
As The Point was previously wholly owned by an affiliate of CBC, the
owner of 189,767 shares (approximately 27%) of the outstanding stock of the
Company, and 1,703,000 (approximately 71%) of the outstanding Operating
Partnership units, the Board of Directors of the Company retained Houlihan Lokey
Howard & Zukin Financial Advisors, Inc., an investment bank unaffiliated with
the Company, to render an opinion as to the fairness, from a financial point of
view, to the Company/Operating Partnership of the purchase by the Operating
Partnership of an interest in any or all of the three shopping centers,
including The Point, owned by an affiliate of CBC, at the appraised values. In
addition to the fairness opinion, the Company obtained a third party appraisal,
which valued The Point as a whole at $13,500,000 (such appraisal was completed
prior to, and did not include a value for, the executed Giant Food Stores'
lease).
Germantown Square Shopping Center
Louisville, Kentucky
On September 28, 1988, the Company paid $2,963,674 for a 50% undivided
interest as tenant-in-common in a 74,267 square foot neighborhood shopping
center known as Germantown Square Shopping Center in Louisville, Kentucky
("Germantown"). The remaining 50% undivided interest was purchased by Life
Investors Insurance Company of America ("Life Investors"), an affiliate of the
Company's former management company and advisor. Subsequent improvements
increased the Company's recorded cost to $3,746,593.
Germantown represented approximately 20% of the Company's total assets
as of December 31, 1999, and provided approximately 16% of total revenue.
On April 3, 2000, the Company initiated the "buy-sell" provision in its
tenancy-in-common agreement with Life Investors. Life Investors elected to buy
the Company's 50% undivided interest in the property. On May 11, 2000, the
Company sold its interest in the property to Life Investors for $3,000,000,
representing a gain to the Company of $91,012 over its adjusted basis for such
property. The Company invested the net proceeds in qualifying money market
instruments until the funds were used to acquire the Company's 50% sole general
partnership interest in The Point Shopping Center, as described above.
5
Item 2. Properties (continued)
Office Properties
Corporate Center East
Bloomington, Illinois
On March 24, 1988, the Company purchased Corporate Center East, a
25,200 square foot office building in Bloomington, Illinois for $2,221,783 in
cash.
Corporate Center East represented approximately 5% of the Company's
total assets at December 31, 2000, and provided approximately 9% of 2000
revenue. At December 31, 2000, Corporate Center East was 52% leased to four
tenants under leases having a minimum remaining term of twenty-three months (not
including renewal options). Annual base rents range from $10.00 to $12.50 per
square foot. Goshen Fidelity Inc., formerly Corporate Center East's largest
tenant, occupied 12,226 square feet under a lease that initially expired in
February 2000. The tenant surrendered 3,917 s.f. and renewed the lease for the
remaining 8,309 square feet for a term of three years at a slightly higher
average rent. In the Fall of 2000, Goshen Fidelity was in default of certain
rental payment obligations under its lease and the Company engaged local counsel
to pursue eviction proceedings which were subsequently completed in December
2000. Rental receipts from Goshen Fidelity's lease provided approximately 3% of
the Company's 2000 revenue.
The Company executed a lease with EMC Corporation, a NASDAQ-listed,
data storage company, for approximately 10,000 s.f. of the former Goshen
Fidelity premises. The five-year market rent lease requires the Company to pay a
fixed amount towards the tenant's leasehold improvements in the new space; costs
of improvements above the Company's fixed amount will be paid by the tenant. In
addition to the fixed amount, the Company is responsible for the cost of
architectural/engineering services related to the tenant build-out as well as
the leasing commission payable to third party brokers, which commission is based
upon 6% of the aggregate rental payable over the initial five year lease term.
With the addition of EMC's tenancy, Corporate Center East has signed leases for
91% of the rentable square footage of the property as of the date hereof.
The Company received an offer of $1,850,000 for the sale of this 25,200 s.f.
Bloomington, Illinois office facility. The offer was subject to a thirty (30)
day purchaser "due diligence" period. If concluded, the sale would have occurred
on or before September 1, 2000 and a brokerage fee in the amount of $50,000
would have been payable to an outside broker. The proposed purchaser of the
subject office facility elected not to proceed with the acquisition. The
property then had 3,917 s.f. (16%) vacant and a 8,309 s.f. (33%) tenant in
default and in arrears of its rent payments. The Company's then book value was
$2,053,979. In accordance with FASB 121, "Accounting for the impairment of long
lived assets to be disposed of", the Company reduced the carrying value of the
asset to its estimated fair value. Accordingly, an impairment loss of
approximately $204,000 was recorded in the second quarter of 2000. The asset was
reclassified to "Real Estate Held For Sale". The Company's intention is again
to offer this property for sale.
6
Item 2. Properties (continued)
Broadbent Business Center
Salt Lake City, Utah
Broadbent Business Center in Salt Lake City, Utah ("Broadbent") was
purchased on March 31, 1987, for $4,057,950, subject to mortgage loan
indebtedness of $1,966,110. Approximately $300,000 was expended to upgrade the
property immediately after acquisition and subsequent improvements have
increased the property's recorded cost to $4,708,393. New first mortgage
financing was obtained in October 1992 in the amount of $1,500,000.
In May 2000, the first drawdown on the Company's $10 million line of
credit in the amount of $1,515,644 was used to retire the then-existing balance
of the first mortgage loan on the property.
Broadbent consists of eight single-story buildings totaling 119,500
square feet on a 12.5 acre site which includes parking for approximately 320
vehicles. Approximately half of the property is leased for office use and the
balance for service/warehouse use, Broadbent represented approximately 12% of
the Company's total assets at December 31, 2000, and provided approximately 23%
of 2000 revenue. At December 31, 2000, Broadbent was 78% occupied by 43 tenants
under leases having a minimum term of one month (not including renewal options)
with annual base rents ranging from $3.79 to $9.29 per square foot. Leases
representing 17% of the square footage of Broadbent are scheduled to expire
during 2001.
Cyclopss Corporation ("Cyclopss"), Broadbent's largest tenant,
representing approximately 2% of the Company's 2000 revenue, occupies 9,150
square feet under a lease scheduled to expire in December 2001. In the event the
tenant does not renew its lease, the revenues at this property will in all
likelihood be adversely affected, as Cyclopss represents approximately 10% of
projected 2001 revenue for Broadbent. In addition to the potential lost rent,
the Company would expect to incur tenant improvement and leasing commission
costs in order to secure a replacement tenant. Broadbent's second largest tenant
is Purser Associates with 7,500 square feet.
Other national tenants in Broadbent include: IBM, Pitney Bowes, USA
Today (Gannett), Mosler Alarm Systems, and Midwest Industrial Tools.
The Company engaged the services of a national brokerage company to
assist it in seeking to sell Broadbent. The Company has received and accepted an
offer to purchase the property for $5,300,000. The offer is contingent upon (i)
the Purchaser's due diligence review, within thirty days of contract execution
as to, among other things, the physical, financial and environmental conditions
of the property, and (ii) the Purchaser obtaining financing in
7
Item 2. Properties (continued)
the amount of not less than 70% of the purchase price within thirty days
thereafter. Should such sale of Broadbent be consummated, the Company will be
obligated to pay a brokerage commission in the amount of 5% of the sales price.
The Contract of Sale was executed by both parties as of March 7, 2001.
Southpoint Parkway Center
Jacksonville, Florida
Southpoint Parkway Center in Jacksonville, Florida ("Southpoint") was
acquired on May 6, 1986 for $6,505,495 in cash. Capital expenditures made since
the purchase date have increased the property's recorded cost to $8,111,127.
Southpoint is a single-story office service center consisting of 79,010 square
feet of net leaseable area on approximately 10.8 acres which includes 467
parking spaces. Southpoint represented approximately 16% of the Company's total
assets at December 31, 2000, and provided approximately 34% of its revenue.
At December 31, 2000, the property was 99% leased to nine tenants with
remaining terms ranging from two months to five years (not including renewal
options) and annual base rents ranging from $11.00 to $14.05 per square foot.
The General Services Administration ("GSA"), a United States government
agency, occupies 40,447 square feet in Southpoint under a ten-year lease which
expires in December 2001, which lease grants to the tenant the right to
terminate the lease at any time after 90 days' prior written notice. The GSA
lease was negotiated in 1991 and, in connection therewith, the Company purchased
2.9 acres of adjacent land, constructed a parking lot and made interior building
improvements at a total cost of $988,832 (included in the above $8,111,127
recorded cost). Rental receipts from the GSA provided approximately 18% of the
Company's 2000 revenue.
In addition to the 40,447 s.f. (51%) leased to the GSA, another 10,576
s.f. (13%) of leases expire in 2001.
The Company's properties as of December 31, 2000 are summarized in the table
below.
- -----------------------------------------------------------------------------------------------
Occupancy 2000 Revenue
Size at Lease --------------------
Name and Location (Sq. Ft.) December 31, 2000 Expirations Amount Percent
- -----------------------------------------------------------------------------------------------
Corporate Center East 25,200 52% 2001-2009 286,072 9%
Bloomington, Illinois
Broadbent Business Center 119,500 78 2001-2004 715,139 24
Salt Lake City, Utah
Southpoint Parkway Center 79,010 99 2001-2006 1,031,453 34
Jacksonville, Florida
The Point Shopping Center
Harrisburg, Pennsylvania 260,000 (2) 2002-2013 821,907 27
-------------------
Totals: 483,710 2,854,511 94% (1)
(1) Germantown was sold on May 11, 2000 and accounted for approximately 6% of
total revenue in 2000.
(2) Upon completion of redevelopment in September 2001, The Point will be
approximately 88% occupied.
8
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceeding which, in
the opinion of management, is material to the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
NONE.
9
Part II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Dividend Information
The Company is required to distribute at least 95% of its "REIT taxable
income", as defined in the Internal Revenue Code, to continue qualification as a
real estate investment trust. In 2000, the Company paid dividends of $0.10 per
share in March, June and September, totaling $0.30 per share. Subject to the 95%
test described above, as of December 2000, the Board of Directors of the Company
voted unanimously to suspend payment of any dividend on shares and distributions
on operating partnership units for the four quarterly periods from July 1, 2000
through June 30, 2001. The Company has distributed amounts during the last two
calendar years significantly in excess of both distributions required under
applicable rules and the Company's net income.
A Form 1099 is mailed to shareholders at the end of each year
reflecting the dividends paid by the Company in that year. The percentages
indicated below, multiplied by the amount of dividends paid for that year,
result in the amount to be reported for income tax purposes.
Dividend Character
2000 1999 1998
--------------------------------------------------------
Ordinary
income 28.07% 43.57% 57.34%
Nontaxable
return of
capital 71.93% 56.43% 42.66%
Total 100% 100.00% 100.00%
Dividends
paid, per share $0.30 $0.40 $0.40
----------------------------------------------------------
Market Information
As of June 26, 1998, CBC, which had owned from April 2, 1998, 1,893,038
of the 2,245,411 shares of common stock, exchanged 1,703,300 of such shares for
Operating Partnership units of equal number. The shares were cancelled, and,
accordingly, there were 542,111 shares outstanding to 522 shareholders of record
at December 31, 1998. During November 1999, 400,000 shares of New Common Stock
were issued through private placements to eight shareholders. As a result, there
were 942,651 shares of common stock outstanding (to 488 shareholders of record)
at December 31, 1999. Pursuant to the "unwind" provisions outlined in the
Subscription Agreement and as subsequently further agreed, the Company
repurchased all of the 150,000 shares of stock in the Company owned by
Uni-Invest Holdings (U.S.A.) B.V. and 100,000 shares of stock in the Company
10
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(continued)
from the seven shareholders introduced by Uni-Invest Holdings (U.S.A.) B.V. As a
result, there were 692,111 shares of common stock outstanding to 428
shareholders of record at December 31, 2000. The Company's shares began trading
on the NASDAQ under the symbol CEDR on December 17, 1986. As of February 29,
2000 the Company's symbol was changed to UNII. As a result of the termination of
the Uni-Invest Holdings (U.S.A.) B.V. arrangements, the terms of which are
described in the Company's 1999 Annual Report and 10-K, effective as of August
7, 2000, the Company changed its NASDAQ symbol back to "CEDR". At March 21,
2001, the Company's last reported sale of common stock was $3.50 as reported by
Wedbush/Morgan Securities, Inc., Newport Beach, California and Herzog, Heine,
Geduld, Inc., New York, New York, the principal market makers for shares of the
Company. No shares were in fact traded on that date. Prices for shares of the
Company reflect quotations between dealers without adjustment for retail mark-
ups, mark-downs or commissions and do not necessarily represent actual
transactions.
Market Price Range
Quarter Over-the-Counter Sales Prices
Ended High Low Close
-----------------------------------------------------
2000
March 31 6 3/16 6 1/8 6 3/16
June 30 4 4 4
September 30 4 1/2 3 3/4 5
December 31 2 3/4 2 3/4 2 3/4
1999
March 31 $6 1/4 $5 $4 7/8
June 30 5 4 4 1/2
September 30 4 3/4 4 1/4 4 9/32
December 31 5 3/4 3 1/4 5 3/4
-----------------------------------------------------
11
Item 6. Selected Financial Data
- -----------------------------------------------------------------------------------------------------------------
Years ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Operating Data
REVENUE
Rents 3,036,943 $2,413,958 $2,505,372 $2,386,549 $2,121,866
Other - 75,000 - - -
Interest 178,838 26,329 59,653 81,309 95,160
------------------------------------------------------------------------------
Total revenue 3,215,781 2,515,287 2,565,025 2,467,858 2,217,026
------------------------------------------------------------------------------
EXPENSES
Property expenses:
Payroll 23,966 - - - -
Real estate taxes 308,386 258,597 262,761 233,160 239,324
Repairs and maintenance 247,896 273,253 252,320 385,806 255,621
Utilities 235,740 167,886 163,279 159,762 146,772
Management fee 127,826 124,358 126,520 130,084 128,053
Insurance 36,385 21,764 18,336 19,270 18,817
Other 182,390 124,883 73,737 92,396 95,517
------------------------------------------------------------------------------
Property expenses, excluding
depreciation and amortization 1,162,589 970,741 896,953 1,020,388 884,104
Depreciation 520,934 492,716 480,410 462,687 436,739
Amortization 100,575 - - - -
------------------------------------------------------------------------------
Total property expenses 1,784,098 1,463,457 1,377,363 1,483,075 1,320,843
Interest 604,182 127,700 130,197 136,137 138,209
Administrative fees 97,872 102,397 99,180 101,192 100,363
Directors' fees and expenses 82,636 97,872 100,703 49,417 42,382
Other administrative 344,661 343,901 587,684 197,851 53,613
------------------------------------------------------------------------------
Total expenses 2,913,449 2,135,327 2,295,127 1,967,672 1,655,410
------------------------------------------------------------------------------
Net income (loss) before
minority interest 302,332 379,960 269,898 500,186 561,616
Minority interest 7,669 - - - -
------------------------------------------------------------------------------
Net income (loss) before loss on
impairment and gain on disposal 310,001 - - - -
Loss on impairment (203,979)
Gain on disposal 91,012 - - - -
------------------------------------------------------------------------------
Net income before limited partner's
interest in Operating Partnership 197,034 379,960 269,898 500,186 561,616
Limited partner's interest (191,615) (315,490) (89,950) - -
------------------------------------------------------------------------------
Net income (loss) before
extraordinary item 5,419 64,470 179,948 500,186 561,616
Extraordinary item
Early extinguishment of debt (17,502) - - - -
Net income (loss) $ (12,083) $ 64,470 179,948 $ 500,186 $ 561,616
========== ========== ========== ========== ==========
Net income before
extraordinary item per share 0.01 0.11 0.13 0.22 0.25
Extraordinary loss per
share (0.02) - - - -
Net earnings per share $ (0.01) $ 0.11 $ 0.13 $ 0.22 $ 0.25
========== ========== ========== ========== ==========
Dividends to shareholders $ 267,951 $ 256,990 $ 557,504 $ 898,164 $ 898,164
========== ========== ========== ========== ==========
Dividends to shareholders
per share $ 0.30 $ 0.40 $ 0.40 $ 0.40 $ 0.40
========== ========== ========== ========== ==========
Average number of shares
outstanding 869,481 593,618 1,393,761 2,245,411 2,245,411
========== ========== ========== ========== ==========
- -----------------------------------------------------------------------------------------------------------------
12
Item 6. Selected Financial Data continued
- --------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
- ------------------
Real estate before accumulated
depreciation $28,271,530 $ 19,186,022 $18,903,767 $18,762,887 $18,462,902
Real estate after accumulated
depreciation $24,094,923 $ 13,995,197 $14,205,658 $14,545,188 $14,707,890
Total assets $35,567,317 $ 16,692,560 $15,323,315 $15,941,683 $16,270,149
Mortgage loan payable $19,415,644 $ 1,346,750 $ 1,374,751 $ 1,400,259 $ 1,423,492
Limited partner's interest in
consolidated Operating Partnership $ 9,241,509 $ 9,560,913 $10,309,316 $ - $ -
Shareholders' equity $ 3,814,901 $ 5,242,935 $ 3,289,520 $14,227,102 $14,625,080
Other Data
Funds from operations
for the Operating Partnership (1) $ 823,266 $ 872,676 $ 750,308 $ - $ -
Funds from operations
for the Company (1) $ 211,394 $ 196,276 $ 477,324 $ 962,873 $ 998,355
Total properties square feet 483,710 297,977 297,977 297,977 297,977
Total properties percent leased 83% 92% 95% 98% 89%
- --------------------------------------------------------------------------------------------------------------------
(1) See "Management Discussion and Analysis" for discussion of funds from
operations.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
historical financial statements of Cedar Income Fund, Ltd. (the "Company") and
related notes.
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, business strategy, projected
costs, projected savings, and plans and objectives of management. Such
forward-looking statements are identified by the use of forward-looking words or
phrases such as "anticipates," "intends," "expects," "plans," "believes,"
"estimates," or words or phrases of similar import. These forward-looking
statements are subject to numerous assumptions, risks, and uncertainties, and
the statements looking forward beyond 2000 are subject to greater uncertainty
because of the increased likelihood of changes in underlying factors and
assumptions. Actual results could differ materially from those anticipated by
the forward-looking statements.
In addition to factors previously disclosed and factors identified
elsewhere herein, certain other factors could cause actual results to differ
materially from such forward-looking statements. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
behalf of the Company are expressly qualified in their entirety by reference to
such factors.
The Company's forward-looking statements represent its judgement only
on the dates such statements are made. By making any forward-looking statements,
the Company assumes no duty to update them to reflect new, changed, or
unanticipated events or circumstances.
13
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations
The Company owns office, office/warehouse, and retail properties in
four U.S. cities. The Company's properties continue to compete with centers and
office buildings of similar size, tenant mix and location. As of December 31,
2000, the combined lease occupancy of the Company's three office properties
(Corporate Center East, Southpoint Parkway Center and Broadbent Business Center)
was approximately 83%. The Company's fourth property, a 50% interest in The
Point Shopping Center, is currently undergoing a redevelopment, including
construction of a new 54,000 square foot Giant Food store, the elimination of
approximately 100,000 square feet of internal mall area, and construction of a
number of new stores. Upon completion, expected in September 2001, the center
will measure approximately 260,000 rentable square feet and will be
approximately 88% occupied. Operating results in the forthcoming year will be
influenced by the ability of current tenants to continue paying rent, and the
Company's ability to renew expiring tenant leases and obtain new leases at
competitive rental rates.
2000 Compared to 1999
The Company's net income before extraordinary items for the year ended December
31, 2000 was $5,419 ($.01 per share) compared to $64,470 ($.11 per share) for
the year ended December 31, 1999 (all per share amounts are on a basic and
diluted basis). The decrease in net income from 1999 to 2000 was primarily due
to the recognition of the impairment loss on the Bloomington office property and
the increase in amortization expense relating to the financing costs incurred to
obtain the $10 million line of credit.
Rental income was $3,036,943 in 2000 compared to $2,413,958 in 1999, an increase
of $622,985. This increase is attributable to the additional rental income
generated by the acquisition of a 50% partnership interest in The Point Shopping
Center as of July 1, 2000.
Interest income increased by approximately $150,000 due to the higher cash
balance and interest accrued on the reserve accounts associated with the first
mortgage loan on The Point Shopping Center.
Property expenses, excluding depreciation, amortization and interest expense
increased from $970,741 in 1999 to $1,162,589 in 2000, an increase of
approximately $192,000. This increase is due to the additional expenses
generated by the acquisition of The Point Shopping Center.
Other administrative expenses increased from $343,901 in 1999 to $344,661 in
2000. Administrative costs of $344,661 in 2000 consisted of approximately
$80,000 for accounting fees, $62,000 for professional fees, $37,000 for legal
fees, $36,000 for printing, $36,000 for mailing, $22,500 for disposition fees,
$21,000 in unamortizable loan fees, $10,000 in business travel and $40,000 for
other corporate expenses such as state taxes, NASDAQ costs and fees associated
with memberships in professional organizations.
14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
1999 Compared to 1998
The Company's net income for the year ended December 31, 1999 was
$64,470 ($.11 per share) compared to $179,948 ($.13 per share) for the year
ended December 31, 1998 (all per share amounts are on a basic and diluted
basis). The decrease in net income from 1998 to 1999 was primarily due to the
issuance of Units in 1998.
Rental income was $2,413,958 in 1999 compared to $2,505,372 in 1998, a
decrease of $91,414 or 4%. Rental income at Broadbent Business Center decreased
by approximately $66,000 due to a 9% increase in vacancy with an average market
rent of $5.90 per square foot. Rental income at Corporate Center East decreased
by approximately $46,000. This was attributable to the establishment of the
Merrill Lynch tenancy in November 1999 and the resulting temporary loss of
rental income from the former tenant. This decline is offset, in part, by the
increase in rental income at the Southpoint Parkway Center.
Other income increased by $75,000 due to termination fees received from
a vacating tenant at Corporate Center East.
Interest income decreased by approximately $33,000 due to the lower
cash balance and the liquidation in March 1998 of the mortgage receivable
formerly with Life Investors.
Property expenses, excluding depreciation, increased from $896,953 in
1998 to $970,741 in 1999, an increase of 8%. This was due to an increase in
property administrative expenses resulting from increased legal expense at
Broadbent Business Center because of short term lease preparations and renewals.
Repairs and maintenance increased at Southpoint and Germantown.
Other administrative expenses decreased from $587,684 in 1998 to
$343,901 in 1999. This decrease was attributable to legal and consulting fees in
1998, which were not present in 1999. The 1998 expenses relate primarily to the
April 1998 tender offer, the Company's subsequent reorganization, and the
creation of the Operating Partnership structure. Administrative costs of
$343,901 consisted of approximately $100,000 in legal, $100,000 in financial
advisory fees, $67,000 in accounting and $77,000 in printing, mailing and other
corporate expenses.
Funds from Operations
Management believes that Funds From Operations ("FFO") is an
appropriate measure of performance of an equity REIT. FFO is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as net income
or loss, excluding gains or losses from debt restructurings and sales of
properties, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. FFO does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles and is not indicative of cash available to fund cash
needs. FFO should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flow as a measure of liquidity. (See Selected Financial Data). In March 1995,
NAREIT issued a "White Paper" analysis to address certain interpretive issues
under its definition of FFO.
15
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The White Paper provides that amortization of deferred financing costs and
depreciation of non-rental real estate assets are no longer to be added back to
net income to arrive at FFO.
As all companies and analysts do not calculate FFO in the same manner,
the Company's calculation of FFO presented herein may not be comparable to
similarly titled measures as reported by other companies.
The following table presents the Operating Partnership's FFO calculation for the
years ended December 31,
2000 1999
------------------------------
Net earnings before limited partner's
interest in Operating Partnership $ 197,034 $379,960
------------------------------
Less:
Limited partner's interest in the
Operating Partnership 191,615 315,490
------------------------------
Net income available to common shareholders 5,419 64,470
Adjustment for funds from operations
Add:
Limited partner's interest in the
Operating Partnership 191,615 315,490
Depreciation 520,934 492,716
Impairment loss 203,979
Loss:
Gain on Sale of real estate (91,012)
Minority Interest ( 7,669)
------------------------------
Basic and diluted funds from operations $ 823,266 $872,676
=============================
Weighted average shares/units outstanding (1) 2,572,781 2,296,918
=============================
(1) Assumes conversion of limited partnership Units of the Operating
Partnership; reflects the issuance of 400,000 new shares of Common Stock
on November 15, 1999 and the repurchase of 150,000 shares of common stock on
November 22, 2000 and repurchase of 100,000 shares of common stock on
December 14, 2000.
Note: The Operating Partnership was formed in June 1998.
16
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The following table represents the Company's FFO calculation for the years ended
December 31,
2000 1999
Net earnings before limited partner's
interest in Operating Partnership $197,034 $379,960
--------------------------
Less:
Limited partner's interest in the
Operating Partnership 191,615 315,490
--------------------------
Net income available to common shareholders 5,419 64,470
Adjustment for funds from operations
Add:
Depreciation 150,498 131,806
Impairment loss 70,026 -
Less:
Minority interest (2,216) -
Gain on sale of real estate (26,293)
--------------------------
Basic and diluted funds from operation 197,434 196,276
==========================
Weighted average share/units outstanding (1) 869,481 593,618
==========================
(1) Assumes conversion of limited partnership Units of the Operating
Partnership; reflects the issuance of 400,000 new shares of Common Stock
on November 15, 1999 and the repurchase of 150,000 shares of common stock on
November 22, 2000 and repurchase of 100,000 shares of common stock on
December 14, 2000.
Liquidity and Capital Resources
The Company's capital resources consist of its current equity in real estate
investments (carrying value less mortgage indebtedness). The Company maintains
the real estate in good condition and provides adequate insurance coverage.
Real estate before deduction for accumulated depreciation equals $11.80 per
share/OP Unit based on shares/OP Units outstanding as of 12/31/00. Real Estate
at cost, less accumulated deductions for depreciation equals $10.06 per share/OP
Unit on shares/OP Units outstanding as of 12/31/00.
The Company's rental revenues for 2000 were $3,036,943. The rental revenues for
2001 are expected to increase by approximately $825,000 to $3,861,943 reflecting
fairly conservative estimates for leasing current and expected vacancies during
the year. As a result, vacancy at the end of 2001 is expected to decrease from
approximately 94,000 square feet to 65,000 square feet. The leasing time-table,
between getting a lease signed, building-out the space and the tenant taking
possession, varies depending on the market in the geographic location of the
property. Exclusive of The Point Shopping Center, management estimates that the
Company will incur approximately $427,000 in tenant improvement and leasing
costs to lease-up vacancies during 2001. Despite the increase in tenant
improvement and leasing costs, liquidity is considered sufficient to meet
current obligations, which include capital expenditures, and is represented by
cash and cash equivalents of $841,111 as of December 31, 2000. Tenant
improvement and leasing costs for The Point Shopping Center are being funded by
the new $17,900,000 mortgage loan and approximately $1,550,000 equity described
in Item 2 above.
Net cash provided by operating activities, as shown in the Statements
of Cash Flows, was $995,246 for the year ended December 31, 2000. The major uses
of cash in 2000 were dividends to shareholders and distributions to the limited
partner of the Operating Partnership totaling $511,019, and capital expenditures
of $2,066,268 ($10,754 at Corporate Center East, $57,091 at Broadbent, $38,405
at Southpoint and $1,960,018 at The Point (such capital expenditure at The Point
was funded from the proceeds of the mortgage loan described above). The Board
17
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
of Directors continues to closely monitor occupancies, leasing activity, overall
Company operations, and liquidity in determining quarterly dividends.
The Company's debt service commitments for the mortgage loan payable
are described in Note 6 to the Financial Statements.
Inflation
Low to moderate levels of inflation during the past several years have
favorably impacted the Company's operations by stabilizing operating expenses.
At the same time, low inflation has had the indirect effect of reducing the
Company's ability to increase tenant rents. The Company's properties have
tenants whose leases include expense reimbursements and other provisions to
minimize the effect of inflation. These factors, in the long run, are expected
to result in more attractive returns from the Company's real estate portfolio as
compared to short-term investment vehicles.
Item 7(a). Quantitative and Qualitative Disclosures about Market Risk
The Company uses an interest rate cap to reduce the Company's exposure
to interest rate fluctuations on a certain variable rate loan. The intention is
for the cap agreement to be held to maturity and the company does not use
derivative financial instruments for trading purposes.
The Company is exposed to changes in interest rates primarily from its
floating debt arrangements. The Company's primary strategy is to protect against
this risk by using derivative transactions as appropriate to minimize the
variability that floating rate interest fluctuations could have on cash flow. In
November 2000, The Company through a subsidiary it controls, entered into an
interest rate cap agreement effective December 1, 2000 with a financial
institution for a notional amount of $17,900,000 to hedge against unfavorable
fluctuations in the LIBOR rates of its secured mortgage loan facility. The hedge
has a 7.5% fixed rate and expires on June 1, 2002.
Because of the Company's minimal use of derivatives, management does
not anticipate that the adoption of the new Statement will have a significant
effect on earnings or on the financial position of the Company.
The following table sets forth the Company's long-term debt
obligations, principal cash flows by scheduled maturity, weighted average
interest rates and estimated fair market value ("FMV") at December 21, 2000.
Expected Maturity Date
2001 2002 2003 Total FMV
- -------------------------------------------------------------------------------------------------------------------
Variable Rate Debt: - $19,415,644 -0- $19,415,644 $19,415,644
Average Interest Rate 9.656% 9.656% 9.656%
18
Item 8. Financial Statements and Supplemental Data
Page
----
Report of Independent Auditors................................... F-1
Consolidated Balance Sheets as of December 31, 2000 and
December 31, 1999.......................................... F-2
Consolidated Statements of Income for the years ended
December 31, 2000, 1999 and 1998........................... F-3
Consolidated Statements of Stockholder's Equity for the years
ended December 31, 2000, 1999 and 1998..................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998........................... F-5
Notes to Financial Statements.................................... F-6
19
Report of Independent Auditors
The Board of Directors and Shareholders
Cedar Income Fund, Ltd.
We have audited the accompanying consolidated balance sheets of Cedar
Income Fund, Ltd. as of December 31, 2000 and 1999, and the related statements
of operations, shareholders' equity and cash flows for each of the three years
in the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cedar
Income Fund, Ltd. at December 31, 2000 and 1999, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young, LLP
--------------------------------------
New York, NY
February 28, 2001
F-1
Cedar Income Fund, Ltd.
Balance Sheets
December 31, December 31,
2000 1999
---- ----
Assets
Real estate
Land $ 5,681,696 $ 4,144,705
Buildings and improvements 22,589,834 15,041,317
----------- -----------
28,271,530 19,186,022
Less accumulated depreciation (4,176,607) (5,190,825)
----------- -----------
Real estate 24,094,923 13,995,197
Real estate held for sale 1,850,000 -
Cash and cash equivalents 841,111 2,298,334
Restricted cash 7,298,671 -
Rents and other receivables 211,685 98,629
Deferred financing costs, net 831,128 -
Deferred legal, net 98,833 -
Prepaid expenses, net 100,720 101,892
Deferred lease commissions 79,960 122,944
Due from co-tenancy partner - 56,993
Deferred rental income 43,762 12,312
Taxes held in escrow 152,963 6,259
----------- -----------
Total Assets $35,603,756 $16,692,560
=========== ===========
Liabilities and Shareholders' Equity
Liabilities
Mortgage loan payable $17,900,000 $ 1,346,750
Line of credit 1,515,644 -
Accounts payable and accrued expenses 670,351 365,790
Due to co-tenancy partner - 46,158
Security deposits 66,980 87,919
Advance rents 103,261 42,095
----------- -----------
Total Liabilities 20,256,236 1,888,712
Minority interest 2,291,110 -
Limited partner's interest in consolidated
operating partnership 9,241,509 9,560,913
Shareholders' Equity
Common stock ($.01 par value - -
50,000,000 shares authorized, 692,111
and 942,111 shares outstanding, as of
12/31/2000 and 1999 respectively) 6,921 9,421
Additional paid-in-capital 3,807,980 5,233,514
----------- -----------
Total Shareholders' Equity 3,814,901 5,242,935
----------- -----------
Total Liabilities and Shareholders' Equity $35,603,756 $16,692,560
=========== ===========
See the accompanying notes to financial statements
F-2
Cedar Income Fund, Ltd.
Statements of Operations
- --------------------------------------------------------------------------------------------------------------------------
Years ended December 31,
2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Revenue
Rents $3,036,943 $2,413,958 $2,505,372
Other - 75,000 -
Interest 178,838 26,329 59,653
---------- ---------- ----------
3,215,781 2,515,287 2,565,025
Expenses
Property expenses
Payroll 23,966 - -
Real estate taxes 308,386 258,597 262,761
Repairs and maintenance 247,896 273,253 252,320
Utilities 235,740 167,886 163,279
Management fees 127,826 124,358 126,520
Insurance 36,385 21,764 18,336
Other 182,390 124,883 73,737
---------- ---------- ----------
Property expenses, excluding depreciation 1,162,589 970,741 896,953
Depreciation 520,934 492,716 480,410
Amortization 100,575 - -
---------- ---------- ----------
Total property expenses 1,784,098 1,463,457 1,377,363
Interest 604,182 127,700 130,197
Administrative fees 97,872 102,397 99,180
Directors' fees and expenses 82,636 97,872 100,703
Other administrative 344,661 343,901 587,684
---------- ---------- ----------
2,913,449 2,135,327 2,295,127
---------- ---------- ----------
Net income before minority interest 302,332 379,960 269,898
Minority interest 7,669 - -
---------- ---------- ----------
Net income before loss on impairment
and gain on disposal 310,001 379,960 269,898
Loss on impairment (203,979) - -
Gain on disposal 91,012 - -
---------- ---------- ----------
Net income before limited partner's
interest in operating partnership 197,034 379,960 269,898
Limited partner's interest (191,615) (315,490) (89,950)
---------- ---------- ----------
Net income before extraordinary item 5,419 $ 64,470 $ 179,948
Extraordinary item
Early extinguishment of debt (17,502) - -
---------- ---------- ----------
Net (loss) income $ (12,083) $ 64,470 $ 179,948
========== ========== ==========
Net earnings before extraordinary item
per share 0.01 0.11 0.13
Extraordinary loss per share (0.02) - -
Net (loss) earnings per share (0.01) 0.11 0.13
Basic and diluted net income per share $ (0.01) $ .11 $ .13
========== ========== ==========
Dividends to shareholders $ 267,951 $ 256,990 $ 557,504
========== ========== ==========
Dividends to shareholders per share 0.30 $ .43 $ .40
========== ========== ==========
Average number of shares outstanding 869,481 593,618 1,393,761
========== ========== ==========
See the accompanying notes to financial statements.
F-3
Cedar Income Fund, Ltd.
Statements of Shareholders' Equity
- -------------------------------------------------------------------------------------------------------------------------------
Years ended December 31, 2000, 1999, and 1998
- -------------------------------------------------------------------------------------------------------------------------------
Additional Undistributed Total
Common Paid-In Net Shareholders'
Stock Capital Earnings Equity
- -------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1998 $2,245,411 $11,981,691 $ - $14,227,102
Net earnings - - 179,948 179,948
Dividends to shareholders - (377,556) (179,948) (557,504)
Change in par value (536,690) 536,690 - -
Cancelled shares (1,703,300) 1,703,300 - -
Limited partner's interest in
Operating Partnership - (10,560,026) - ( 10,560,026)
---------- ----------- --------- -----------
Balance at December 31, 1998 5,421 3,284,099 - 3,289,520
========== =========== ========= ===========
Net Earnings - 64,470 64,470
Dividends to shareholders - (192,520) (64,470) (256,990)
Sale of additional shares 4,000 2,141,935 - 2,145,935
---------- ----------- --------- -----------
Balance at December 31, 1999 $ 9,421 $5,233,514 $ - $ 5,242,935
========== =========== ========= ===========
Net earnings - (12,083) (12,083)
Dividends to shareholders - (280,034) 12,083 (267,951)
Treasury stock (2,500) (1,145,500) - (1,148,000)
---------- ----------- --------- -----------
Balance at December 31, 2000 $6,921 $3,807,980 $ - $ 3,814,901
========== =========== ========= ===========
See the accompanying notes to financial statements.
F-4
Cedar Income Fund, Ltd.
Statements of Cash Flow
Years ended December 31,
2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
Operating Activities
Net (loss) income $ (12,083) $ 64,470 $ 179,948
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Gain on sale of real estate (91,012) - -
Loss on real estate impairment 203,979 - -
Minority interest 7,669 - -
Limited partner's interest in operating partnership 191,615 315,490 89,950
Depreciation and amortization 621,509 496,992 483,161
(Increase) decrease in deferred rental receivable (31,450) 9,188 (21,500)
Changes in operating assets and liabilities:
(Increase)decrease in rent and other receivable (113,056) 9,567 22,419
Decrease in interest receivable - - 3,881
Decrease (increase) in prepaid expenses 1,172 1,115 (410)
(Increase) decrease in deferred lease commissions (32,016) 8,406 33,477
(Increase) decrease in tax held in escrow (146,704) 3,550 6,087
Increase in accounts payable and accrued expenses 304,561 193,432 10,038
Decrease (increase) in amounts
due from co-tenancy partner 56,993 4,330 (61,323)
(Decrease) increase in due to co-tenancy partner (46,158) (412) (16,000)
Security deposits collected, net (20,939) 3,453 4,381
Decrease (increase) in advance rents 61,166 (4,239) 36,986
----------- --------- ------------
Net cash provided by operating activities 995,246 1,105,342 771,095
----------- --------- ------------
Cash Flow from Investing Activities
Increase in deferred legal (98,833) - -
Acquisition of The Point (1,916,559) - -
Proceeds on sale of Germantown 2,982,641 - -
Increase in restricted cash (7,298,670) - -
Capital expenditures (2,066,268) (282,255) (140,880)
Sale and collection of mortgage loan receivable - - 564,437
----------- --------- ------------
Net cash (used in) provided by in investing activities (8,397,689) (282,255) 423,557
----------- --------- ------------
Cash Flow from Financing Activities
Principal portion of scheduled mortgage payments (1,346,750) (28,001) (25,508)
Dividends paid (267,951) (256,990) (557,504)
Distributions to limited partner (511,019) (681,681) (340,660)
-
Gross proceeds from sale of stock - 1,800,000 -
Costs associated with sale of stock - (36,277) -
Proceeds from mortgage 8,600,000 - -
Increase in deferred financing costs (856,704) - -
Proceeds from draw on line of credit 1,515,644 - -
Reacquisition of treasury stock (1,148,000) - -
----------- --------- ------------
Net cash provided by (used in)financing activities 5,985,220 797,051 (923,672)
----------- --------- ------------
Net (decrease) increase in cash and cash equivalents (1,457,223) 1,620,138 270,980
Cash and cash equivalents at beginning of the period 2,298,334 678,196 407,216
----------- --------- ------------
Cash and cash equivalents at end of the period $ 841,111 $2,298,334 $ 678,196
=========== ========== ============
Supplemental Disclosure of Cash Activities
Interest paid $ 604,182 $ 127,700 $ 130,197
=========== ========== ============
Supplemental Disclosure of Non-Cash Financing
Activities
Reallocation of Limited Partner Interest for Sale of
Shares below book value $ - $ 382,211 $ -
=========== ========== ============
Cancelled shares $ - $ - $ (1,703,300)
=========== ========== ============
Decrease in par value from $1 to $.01 $ - $ - $ (506,690)
=========== ========== ============
Recordation of initial Limited
Partner's Interest $ - $ - $(10,560,026)
=========== ========== ============
Assumption of mortgage payable $ 9,600,000 $ - $ -
=========== ========== ============
F-5
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 1 Background, Organization and Reorganization of the Company
Cedar Income Fund, Ltd. (the "Company") was originally incorporated in
Iowa on December 10, 1984 and qualified to operate as a real estate investment
trust ("REIT"). Shortly thereafter, the Company's Common Stock was listed on the
NASDAQ securities market. In June 1998, the Company was reorganized and included
in an "umbrella partnership REIT" structure through the contribution of
substantially all of its assets to a limited partnership (the "Operating
Partnership") in exchange for the sole general partnership interest and all
2,245,411 limited partnership interests ("Units") of the Operating Partnership .
Immediately thereafter, Cedar Bay Company, ("CBC"), a New York general
partnership, which, as a result of a tender offer completed in April 1998,
became the largest stockholder of the Company, exchanged 1,703,300 shares of
Common Stock for 1,703,300 Units owned by the Company. Following these
transactions, substantially all of the Company's assets consisted of the
controlling general partnership interest of the Operating Partnership and
approximately 24% of the Units; substantially all of CBC's assets consisted of
189,737 shares of Common Stock (approximately 35% of the then-issued and
outstanding shares of Common Stock) and approximately 76% of the Units.
As of November 5, 1999, a Subscription Agreement was entered into by
and between the Company and Uni-Invest Holdings (U.S.A.) B.V., pursuant to which
Uni-Invest Holdings (U.S.A.) B.V. acquired on or about November 15, 1999,
through a private placement, 150,000 shares of Common Stock of the Company at
$4.50 per share (which price as of such date of issue was higher than the quoted
price for such shares on the NASDAQ). As a result of such placement and the
other private placements of an additional 250,000 shares of Common Stock, as of
November 15, 1999, Uni-Invest Holdings (U.S.A.) B.V. owned approximately 16% of
the Common Stock of the Company. CBC's Common Stock ownership was
correspondingly reduced from approximately 35% to approximately 20%. Also in
accordance with the Subscription Agreement, and pursuant to Board of Directors'
approval and shareholders' approval at a special meeting held on February 24,
2000, the Company changed its name to "Uni-Invest (U.S.A.), Ltd." effective as
of February 29, 2000. The name of the Operating Partnership was correspondingly
changed to "Uni-Invest (U.S.A.) Partnership, L.P." as of that date.
In addition, the Company, Uni-Invest Holdings (U.S.A.) B.V. and CBC
entered into a Stockholders' Agreement effective as of the issuance of stock
pursuant to the Subscription Agreement, as further described in the Company's
1999 Annual Report and 10-K.
The Subscription Agreement, among other things, as further described in
the 1999 Annual Report and 10-K, also called for the guaranty by Uni-Invest
Holdings
F-6
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 1 Background, Organization and Reorganization of the Company (continued)
(U.S.A.) B.V. of the funding on or before May 15, 2000 of $7.5 million in
exchange for shares of the Company and/or Units in the Operating Partnership
at $4.50 per share/ Unit.
In the event that funding by Uni-Invest Holdings (U.S.A.) B.V. did not
occur, the Company had the right to unwind the entire transaction with
Uni-Invest Holdings (U.S.A.) B.V., subject to certain conditions, including but
not limited to, the Company's option to repurchase the shares of Common Stock of
the Company held by Uni-Invest Holdings (U.S.A.) B.V., to change the name of the
Company and the Operating Partnership to eliminate the Uni-Invest name and to
remove representatives of Uni-Invest Holdings (U.S.A.) B.V. as directors and
officers of the Company. Accordingly, upon notice given on or about August 11,
2000, Uni-Invest Holdings (U.S.A.) B.V. representatives Richard Homburg and Loek
Marcus submitted their resignations as members of the Board of Directors and
officers of the Company and Lawrence Freeman submitted his resignation as
Assistant Secretary effective as of July 31, 2000. In addition, the Company
bought back 150,000 shares of the Company's Common Stock from Uni-Invest
Holdings (U.S.A.) B.V. at $4.60 per share.
Effective as of August 3, 2000, the Company changed its name back to
Cedar Income Fund, Ltd. Correspondingly, the name of the Operating Partnership
was changed back to Cedar Income Fund Partnership, L.P. The Company's NASDAQ
stock market symbol was changed back to "CEDR" as of August 7, 2000.
Further, and in addition to the "unwind" provisions outlined in the
Subscription Agreement, the Company agreed to repurchase, or arrange for the
purchase by others, of a total of 100,000 shares of stock in the Company
proportionately (40%) from each of seven shareholders introduced by Uni-Invest
Holdings (U.S.A.) B.V. at the same price per share and upon the same conditions
as the repurchase of shares of the Company from Uni-Invest Holdings (U.S.A.)
B.V. Such repurchase of shares was completed by December 2000. The Company also
undertook to register the remaining 150,000 shares of stock in the Company owned
by such seven shareholders and to use its best efforts to purchase or find
replacement purchasers for the remaining 150,000 shares owned by such seven
shareholders at the same price per share described above, subject to the NASDAQ
and SEC rules. The Company and Uni-Invest Holdings (U.S.A.) B.V. exchanged
mutual releases against any claims either may have had against each other
arising prior to July 31, 2000.
On May 11, 2000, pursuant to the provisions of a "buy-sell" provision
in its tenancy-in-common agreement with Life Investors Insurance Company of
America ("Life Investors"), an affiliate of the Company's former management
company and advisor, the Company sold an undivided 50% interest in Germantown
Square, a 74,267 s.f. retail property to Life Investors for $3,000,000. As of
July 1, 2000, the Company, through its Operating Partnership, invested a
substantial portion of the proceeds from such sale for the purchase of a 50%
sole general partnership interest in The Point Shopping Center in Harrisburg,
Pennsylvania ("The Point") for approximately $2.1 million over then-existing
indebtedness of $9.3 million plus closing costs of approximately $385,000. That
property interest was purchased from an affiliate of CBC, which
F-7
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 1 Background, Organization and Reorganization of the Company (continued)
owns the balance as a limited partner, after receipt by the Company of a
"fairness opinion" with respect to the terms of such purchase.
On May 10, 2000, the Company obtained a $10 million line of credit from
a national commercial bank secured by first mortgage liens on properties of the
Operating Partnership. The first drawdown in the amount of $1,515,644 was used
to retire the then-existing first mortgage on the Company's Utah property and to
pay related loan closing costs.
The Company continues to operate as a real estate investment trust
("REIT"). To qualify as a REIT under applicable provisions of the Internal
Revenue Code of 1986, as amended, and Regulations thereto, the Company must have
a significant percentage of its assets invested in, and income derived from,
real estate and related sources. The Company's objectives are to provide to its
shareholders a professionally managed, diversified portfolio of commercial real
estate investments which will provide the best available cash flow and present
an opportunity for capital appreciation.
The Company's shares are traded on the NASDAQ (Small Cap Market) under
the symbol "CEDR".
The Company, through its Operating Partnership, owns and operates three
office properties aggregating approximately 224,000 square feet, located in
Jacksonville, Florida, Salt Lake City, Utah and Bloomington, Illinois; and a 50%
sole general partnership interest in a 260,000 square foot shopping center
property located in Harrisburg, Pennsylvania.
The Company has retained brokerage companies to explore the sale of its
office properties in Jacksonville, Florida, Salt Lake City, Utah and
Bloomington, Illinois to qualified purchasers.
Currently, a Unit in the Operating Partnership and a share of Common
Stock of the Company have essentially the same economic characteristics, as they
effectively share equally in net income or loss and distributions of the
Operating Partnership.
Cedar Bay Realty Advisors, Inc. ("CBRA") serves as investment advisor
to the Company pursuant to an Administrative and Advisory Agreement with the
Company on terms substantially similar to the terms of that agreement previously
in effect between the Company and AEGON USA Realty Advisors, Inc. ("AEGON") of
Cedar Rapids, Iowa, which served as investment advisor to the Company from
formation until April 3, 1998. Brentway Management LLC ("Brentway" and/or
"Property Manager"), a New York limited liability company provides property
management services for the Company's properties pursuant to a Management
Agreement with the Company on substantially the same terms as the agreement
previously in effect with AEGON. Brentway and CBRA are both affiliates of CBC,
SKR Management Corp. and Leo S. Ullman. Leo S. Ullman is President and Chairman
of the Board of the Company. The terms of the Administrative and Advisory
Agreement and Management Agreement are further discussed in Note 6.
F-8
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 1 Background, Organization and Reorganization of the Company (continued)
CBRA agreed to defer until termination of its services as investment
advisor to the Company, any acquisition fees to which it would otherwise be
entitled with respect to the acquisition by the Company or the Operating
Partnership of the 50% general partnership interest in The Point Shopping Center
property from CBC or its affiliates, described above.
Note 2. Description of Business and Significant Accounting Policies
Consolidation Policy and Related Matters
The accompanying consolidated financial statements include the
consolidated financial position of the Company and the Operating Partnership as
of December 31, 2000. All significant intercompany balances and transactions
have been eliminated in consolidation.
As the Company owns the sole general partnership interest in the
Operating Partnership, which provides the Company with effective control over
all significant activities of the Operating Partnership, the Operating
Partnership is consolidated with the Company in the accompanying financial
statements as of December 31, 2000.
The Company owns the sole general partnerships interest in The Point
Shopping Center Associates, L.P. The Point is consolidated with the Company in
the accompanying financial statements, as of December 31, 2000.
The limited partner's interest as of December 31, 2000 (currently owned
entirely by CBC) represents approximately a 71% limited partnership interest in
the equity of the Operating Partnership.
Currently, a Unit in the Operating Partnership and a share of Common
Stock of the Company have essentially the same economic characteristics, as they
effectively share equally in net income or losses and distributions of the
Operating Partnership.
The minority interest represents the limited partner's 50% interest in
The Point Shopping Center.
As described in Note 1, approximately 20% of The Point Shopping Center
is under redevelopment. Therefore 20% of the operating costs and related
mortgage interest have been capitalized.
The accompanying financial statements includes the 50% co-tenancy
interest in the assets, liabilities and operations of the Germantown retail
property, until the date of sale on May 11, 2000.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Revenue Recognition
Minimum rental income is recognized on a straight-line basis over the
term of the lease. The excess of rents recognized over amounts contractually due
is included in deferred rents receivable on the accompanying balance sheets.
Contractually due but unpaid rents are included in tenant receivables on the
accompanying balance sheets. Certain lease agreements provide for reimbursement
of real estate taxes, insurance, common area maintenance costs and certain other
costs which are recorded on an accrual basis.
F-9
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 2. Description of Business and Significant Accounting Policies (continued)
Real Estate
Depreciation is computed utilizing the straight-line method over the
estimated useful lives of ten to forty years for buildings and improvements.
Tenant improvements, which are included in buildings and improvements, are
amortized on a straight-line basis over the term of the related lease.
Cash Equivalents
The Company considers highly liquid investments with a maturity of
three months or less, when purchased, to be cash equivalents.
Deferred Costs
Leasing fees and loan costs are capitalized and amortized over the life
of the related lease or loan.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," (SFAS No. 123) requires use of option
valuation models that were not developed for use in valuing employee stock
options.
The Company established a stock option plan (the "Plan") for the
purpose of attracting and retaining executive officers, directors and other key
employees. 500,000 of the Company's authorized shares of Common Stock have been
reserved for issuance under the Plan. The Plan is administered by a committee of
the Board of Directors, which committee will, among other things, select the
number of shares subject to each grant, the vesting period for each grant and
the exercise price (subject to applicable regulations with respect to incentive
stock options) for the options.
Earnings Per Share
Statement of Financial Accounting Standard Board ("FASB") No. 128,
Earnings per Share, was issued and adopted by the Company during 1997. Statement
No. 128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Since the Company has no potentially
dilutive securities outstanding, basic and diluted net income per share in
accordance with Statement No. 128 are the same and do not differ from amounts
previously reported as net income per share (primary earnings per share).
Accordingly, basic and diluted net income per share is computed using the
weighted average number of shares outstanding during the year.
Basic and diluted net income per share is based on the weighted average
number of shares outstanding (869,481 in 2000, 593,618 in 1999, 1,393,761 in
1998, and 2,245,411 for 1997). Dividends to shareholders per share are based on
the actual number of shares outstanding on the respective dates.
F-10
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 2. Description of Business and Significant Accounting Policies (continued)
Comprehensive Income
In 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement 130") which is effective for fiscal years beginning after
December 15, 1997. Statement 130 established standards for reporting
comprehensive income and its components in a full set of general-purpose
financial statements. Statement 130 requires that all components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The adoption of this standard
had no impact on the Company's financial position or results of operations.
Segment Reporting
In 1997, the FASB issued Statement No. 131 "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131") which is effective for
fiscal years beginning after December 15, 1997. SFAS 131 establishes standards
for reporting information about operating segments in annual financial
statements and in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The adoption of this standard had no impact on the Company's
financial position or results of operations. The Company owns all of the
interests in real estate properties through the Operating Partnership.
Previously, each of the properties were evaluated on an individual basis.
However, due to the numerous changes being made by the Company as discussed in
Note 1, the company has changed the composition of its reportable segments to
one segment.
Recent Pronouncements
In June 1999, the FASB issued Statement No. 137, amending Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
extended the required date of adoption to the years beginning after June 15,
2000. The Company will adopt the new Statement effective January 1, 2001.
Because of the Company's minimal use of derivatives, management does not
anticipate that the adoption of the new Statement will have a significant effect
on earnings or the financial position of the Company.
F-11
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 2. Description of Business and Significant Accounting Policies (continued)
Income Taxes
The Company generally will not be subject to federal income taxes as
long as it qualifies as a real estate investment trust ("REIT") under Section
856-869 of The Internal Revenue Code of 1986, as amended (the "Code"). A REIT
will generally not be subject to federal income taxation on that portion of
income that qualifies as REIT taxable income and to the extent that it
distributes such taxable income to its stockholders and complies with certain
requirements of the Code relating to income and assets. As a REIT, the Company
is allowed to reduce taxable income by all or a portion of distributions to
stockholders and must distribute at least 95% of its taxable income to qualify
as a REIT. As distributions, for federal income tax purposes, have exceeded
taxable income, no federal income tax provision has been reflected in the
accompanying consolidated financial statements. State income taxes are not
significant.
Impairment of Long-Lived Assets
The Company's real estate assets are reviewed for impairment whenever events or
changes in circumstances indicate that the net carrying amount may not be
recoverable. When such events occur, the Company measures impairment by
comparing the carrying value of the long-lived asset to the estimated
undiscounted future cash flows expected to result from use of the assets and
their eventual disposition. If the sum of the expected undiscounted future cash
flows is less than the carrying amount of the assets, the Company would
recognize an impairment loss. Management during the year ended December 31, 2000
recognized a $203,979 impairment loss related to the Corporate Center East
property.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Cash and cash equivalents: The carrying amounts of cash and cash equivalents
approximate their fair values.
Mortgage loan payable: The fair value of the mortgage loan payable is estimated
utilizing discounted cash flow analysis, using interest rates reflective of
current market conditions and the risk characteristics of the loans.
Interest Cap: The fair value of the interest rate approximates its carrying
value.
F-12
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
2. Description of Business and Significant Accounting Policies (continued)
Fair Values of Financial Instruments (continued)
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of Statement of
Financial Accounting Standard No. 107:
2000 1999
-----------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
Assets
Cash and cash equivalents $841,111 $841,111 $2,298,334 $2,298,334
Liabilities
Mortgage loan payable 17,900,000 17,900,000 1,346,750 1,414,160
Line of Credit 1,515,644 1,515,644 - -
Note 3. Real Estate and Accumulated Depreciation
The Company's properties are leased to various tenants, whereby the
Company incurs normal real estate operating expenses associated with ownership.
In 2000, the Company incurred capital expenditures of $2,066,268. Improvements
for new and existing tenants totaled $2,066,268. In 1999 the Company incurred
capital expenditures of $282,255 of which $228,572 were improvements for new and
existing tenants. Information regarding the Company's investment in each
property is presented in the Schedule of Real Estate and Accumulated
Depreciation that follows.
Information on Real Estate and Accumulated Depreciation
Gross Amount at Which Carried
Initial Cost to Company December 31, 2000
------------------------------------- ----------------------------------------------------------
Property Description Subsequent
Name and Location Amount of Buildings & Cost Buildings &
of Property Encumbrance Land Improvements Capitalized Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
Broadbent Business Center $595,000 $3,462,950 $650,471 $599,681 $4,108,725 $4,708,406
Salt Lake City, Utah
(Office/Service Facility)
Southpoint Parkway Center -- 2,005,495 4,500,000 1,605 664 2,382,059 5,729,099 8,111,158
Jacksonville, Florida
(Office/Service Facility)
The Point Shopping Center
Harrisburg, Pennsylvania
(Shopping Center) 2,700,495 10,800,000 2,541,631 2,700,000 12,752,010 15,452,010
- ------------------------------------------------------------------------------------------------------------------------------------
$5,300,990 $18,762,950 $4,797,766 $5,681,740 $22,589,834 $28,271,574
========== =========== ========== ========== =========== ===========
Life on Which
Property Description Depreciation
Name and Location Accumulated Date Date is Computed
of Property Depreciation Built Acquired (in years)
- ------------------------------------------------------------------------------------------------------------
Broadbent Business Center $1,487,422 1978 3/87 10-40
Salt Lake City, Utah
(Office/Service Facility)
Southpoint Parkway Center 2,550,723 1984 5/86 10-40
Jacksonville, Florida
(Office/Service Facility)
The Point Shopping Center
Harrisburg, Pennsylvania
(Shopping Center) 138,462 1972 7/00 10-40
- ------------------------------------------------------------------------------------------------------------
$4,176,607
==========
F-13
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
3. Real Estate and Accumulated Depreciation (continued)
The activity in real estate and related accumulated depreciation for the
three-year period ended December 31, 2000 are summarized in the table below.
Years ended December 31,
2000 1999 1998
- ---------------------------------------------------------------------------------------------------
Cost
Beginning of year improvements 19,186,022 $18,903,767 $18,762,887
Improvement additions 2,066,268 282,255 140,880
The Point acquisition 13,500,000 - -
Impairment loss (2,715,386) - -
Sale of Germantown (3,765,374)
-----------------------------------------------
End of year $28,271,530 $19,186,022 $18,903,767
=========== =========== ===========
Accumulated Depreciation
Beginning of year 5,190,825 $ 4,698,109 $4,217,699
Additions during year depreciation expense 520,934 492,716 480,410
Impairment property (661,407) - -
Sale of Germantown (873,745) - -
----------------------------------------------
End of year $4,176,607 $ 5,190,825 $4,698,109
========== =========== ==========
Note 4. Real Estate Held For Sale
The Company received an offer of $1,850,000 for the sale of this 25,200 s.f.
Bloomington, Illinois office facility. The offer was subject to a thirty (30)
day purchaser "due diligence" period. If concluded, the sale would have occurred
on or before September 1, 2000 and brokerage fee in the amount of $50,000 would
have been payable to an outside broker. The proposed purchaser of the subject
office facility elected not to proceed with the acquisition. The property then
had 3,917 s.f. (16%) vacant and a 8,309 s.f. (33%) tenant in default and in
arrears of its rent payments. The property's book value at that time was
$2,053,979. In accordance with FASB 121, "Accounting for the impairment of long
lived assets to be disposed of", the Company reduced the carrying value of the
asset to its estimated fair value. Accordingly, an impairment loss of
approximately $204,000 was recorded in the second quarter of 2000. The asset was
reclassified to "Real Estate Held For Sale". The Company's intention is again to
offer this property for sale.
F-14
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 5. Leased Assets
The Company's properties are leased to tenants under short-term,
non-cancelable operating lease agreements. Future minimum lease rentals to be
received under the terms of these lease agreements are approximately as follows:
Year Amount
2001 $ 2,673,000
2002 2,782,000
2003 2,291,000
2004 2,060,000
2005 1,980,000
Thereafter 17,594,000
-----------
$29,383,000
===========
Contingent rentals (expense recoveries) provided by various leases were
included in rental income for 2000, 1999 and 1998 in the amounts of $450,470,
$253,755 and $281,874 respectively.
The Company derived approximately 26% or more of its revenue from two
major tenants in 2000. Revenues from GSA, a tenant at Southpoint, were $535,198
in 2000. Revenues from Intuition, a tenant at Southpoint, were $233,036 in 2000.
Note 6. Mortgage Loan Payable
On October 30, 1992 the Company borrowed $1,500,000 to finance an
existing property. The Company paid off the mortgage loan on May 10, 2000 with a
drawdown on its commercial bank line of credit. The total due to the mortgagee
was $1,358,789 which amount was net of the real estate tax escrow and included
accrued interest and a 3% pre-payment penalty of $40,104. Such prepayment
penalty along with unamortized loan fees are included in the accompanying
Consolidated Statement of Operations as an extraordinary item.
On July 1, 2000 The Point Shopping Center was encumbered by a first
mortgage loan in the amount of $9,300,000. On November 17,2000 The Point
Shopping Center increased its first mortgage from $9,300,000 to $17,900,000. The
proceeds of which are to be used for the redevelopment of the shopping center.
Included in restricted cash are the reserve and escrow accounts associated with
the loan. Deferred financing costs of $527,063 are attributable to The Point
loan. As a result of the Company has $7,298,671 of cash restricted for interest,
taxes and future tenant improvements.
F-15
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 6. Mortgage Loan Payable (continued)
As discussed in Note 1, the Company has a $10,000,000 line of credit,
of which $1,515,644 was outstanding at December 31, 2000. There were $329,641 in
deferred financing costs incurred on this loan. Any further draw downs on the
line of credit are subject to restrictions which may limit the Company's ability
to obtain additional draw downs under the line of credit.
Note 7. Related Party Transactions
The Company does not have any employees and has contracted with Cedar
Bay Realty Advisors, Inc., a New York corporation ("CBRA") to provide
administrative, advisory, acquisition and divestiture services to the Company
pursuant to an Administrative and Advisory Agreement (the "Advisory Agreement")
entered into in April 1998, and amended as of August 21, 2000. CBRA is wholly
owned by Mr. Ullman. Mr. Ullman is President and a director of, and Brenda J.
Walker is Vice President of, CBRA. Mr. Ullman is President and Chairman of the
Company. The term of the amended Advisory Agreement is for five (5) years and is
automatically renewed annually thereafter for an additional year subject to the
right of a majority of independent directors to cancel the Advisory Agreement
upon 60 days written notice.
Further, such Advisory Agreement may be terminated i) for cause upon
not less than sixty (60) day's written notice and ii) by vote of at least 75% of
the independent directors at the end of the third or fourth year of such five
year term in the event gross assets fail to increase by 15% per annum.
CBRA has agreed to defer certain acquisition fees to which it may
otherwise be entitled with respect to the possible acquisition by the Company or
the Operating Partnership of certain properties owned by CBC and/or its
affiliates. This includes acquisition fees otherwise payable with respect to the
purchase by the Operating Partnership of its 50% interest in The Point
Associates, L.P. Further, CBRA has agreed to defer certain fees otherwise
payable with respect to the sale of the Operating Partnership's interest in the
Germantown property.
Such deferred acquisition or disposition fees otherwise payable to CBRA
will be reduced to 50% if the Administrative Advisory Agreement with CBRA is
continued beyond December 31, 2004 and by an additional 10% for each year such
agreement remains in effect thereafter.
Under the Advisory Agreement, CBRA is obligated to: (a) provide office
space and equipment, personnel and general office services necessary to conduct
the day-to-day operations of the Company; (b) select and conduct relations with
accountants, attorneys', brokers, banks and other lenders, and such other
parties as may be considered necessary in connection with the Company's business
and investment activities, including, but not limited to, obtaining services
required in the acquisition, management and disposition of investments,
collection and disbursement of funds, payment of debts and fulfillment of
obligations of the Company, and prosecuting, handling and settling any claims of
the Company; (c) provide property acquisition and disposition services,
research, economic and statistical data, and investment and financial advice to
the Company; and (d) maintain appropriate legal, financial, tax accounting and
general business records of activities of the Company and render appropriate
periodic reports to the Directors and stockholders of the Company and to
regulatory agencies, including the Internal Revenue Service, the Securities and
Exchange Commission, and similar state agencies.
F-16
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
Note 7. Related Party Transactions (continued)
CBRA receives fees for its administrative and advisory services as
follows: (a) a monthly administrative and advisory fee equal to 1/12 of 3/4 of
1% of the estimated current value of real estate assets of the Company, plus
1/12 of 1/4 of 1% of the estimated current value of all other assets of the
Company; (b) an acquisition fee equal to 5% of the gross purchase price (before
expenses and without deducting indebtedness assumed) of any real property
acquired during the term of the Advisory Agreement; provided that the total of
all such acquisition fees plus acquisition expenses in connection with the
purchase of any real property shall be reasonable and shall not exceed 6% of the
amount paid or allocated to the purchase, development, construction or
improvement of a property, exclusive of acquisition fees and acquisition
expenses; and (c) a disposition fee equal to 3% of the gross sales price (before
expenses but without deducting any indebtedness against the property) of any
real property disposed of during the term of the Advisory Agreement; provided
that no disposition fee shall be paid unless and until the stockholders have
received certain distributions from the Company. In addition, CBRA may receive
one-half of the brokerage commission on such a disposition but only up to 3% of
the price actually paid for the property, subject to certain limitations. Those
fees are essentially the same as those previously applicable under the
Administrative and Advisory Agreement between the Company and Aegon U.S.A.
Realty Advisors, Inc. "Aegon" from the date of formation until April 3, 1998.
The Company paid $97,872 in administrative fees during 2000. A disposition fee
for the sale of Germantown in the amount of $22,500 was paid to CBRA during the
second quarter of 2000. No incentive or acquisition fees were paid during 2000.
Management Services
Brentway Management LLC, a New York Limited Liability Company
("Brentway") provides property management and leasing services to the Company's
real property pursuant to a Management Agreement entered into in April 1998 (the
"Management Agreement"). Brentway is owned by Mr. Ullman and Ms. Walker, who are
also Chairman and President of Brentway, respectively. Mr. Ullman is President
and Chairman of the Company. The term of the Management Agreement is for one (1)
year and is automatically renewed annually for an additional one (1) year
subject to the right of either party to cancel the Management Agreement upon 60
days' written notice. Under the Management Agreement, Brentway is obligated to
provide property management services, which include leasing and collection of
rent, maintenance of books and records, establishment of bank accounts and
payment of expenses, maintenance and operation of property, reporting and
accounting the Company regarding property operations, and maintenance of
insurance. All of the duties of Brentway are to be fulfilled at the Company's
expense; provided, however, that the Company is not required to reimburse
Brentway for personnel expenses other than for on-site personnel at the
properties managed. Brentway receives fees for its property management services
as follows: with the exception of The Point Shopping Center, a monthly
management fee equal to 5% of the gross income from properties managed and
leasing fees of up to 6% of the rent to be paid during the term of the lease
procured. In the case of The Point Shopping Center, the monthly management fee
is equal to 3% of the gross income and the leasing fees are limited to 4.5% of
the rent to be paid during the term of the lease procured.
F-17
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2000
7. Related Party Transactions (continued)
Brentway was paid $78,928 in property management fees and no leasing fees in
2000. Leasing fees paid by the Company in 2000 were paid to third parties.
Brentway has subcontracted with various local management companies for site
management and leasing services for the Company's office properties.
Schedule of Management, Administrative and Advisory and Leasing Fees
Years ended December 31,
Jan 1 - Apr 1 -
2000 1999 Mar 31, 1998 Dec 31, 1998
---- ---- ------------ ------------
Management Fees
AEGON $9,118 $ 18,705 $31,952 $16,440
====== ======= ======= =======
Brentway $69,611 $ 50,683 $ - $44,587
======= ======== ======= =======
Construction Management
Brentway $28,239 $ - $ - $ -
======= ======== ======= =======
Leasing Fees
AEGON -0- $ - $23,561 $ -
======= ======== ======= =======
Brentway $44,063 $ - $ - $ -
======= ======== ======= =======
Administrative and Advisory
Cedar Bay Realty Advisors, Inc. $97,872 $ 97,872 $ - $73,404
======= ======== ======= =======
AEGON $ -0- $ - $25,770 $ -
======= ======== ======= =======
HVB $ -0- $100,000 $ - $58,808
======= ======== ======= =======
Legal
Stuart H. Widowski/
SKR Management Corp. $33,088 $28,350 $ - $ -
======= ======= ======= =======
Fees of $33,088 were paid to Stuart H. Widowski, Esq., SKR Management
Corp.'s in-house counsel and Secretary of the Company, through SKR Management
Corp., an affiliate of CBRA, Brentway, CBC and Leo S. Ullman, for legal services
provided.
The fee paid to HVB Capital Markets, Inc. was for services rendered
pursuant to a financial advisory agreement terminated as of 12/31/99. Jean
Bernard Wurm, a director of HVB, was also a director of the Company prior to
12/31/99.
F-18
CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements (continued)
8. Selected Quarterly Financial Data (Unaudited)
Quarter Ended
------------------------------------------------------------------ Year Ended
Year 3/31 6/30 9/30 12/31 12/31
- ----------------------------------------------------------------------------------------------------------------------------------
2000
Revenue 696,440 600,838 965,963 952,540 3,215,781
Net income (loss) 63,575 (55,615) (28,373) 8,330 (12,083)
Basic and diluted net income per share $0.07 (.06) (.03) .01 (.01)
- ----------------------------------------------------------------------------------------------------------------------------------
1999
Revenue $660,226 $675,946 $605,307 $573,808 $2,515,287
Net income (loss) 37,356 19,522 7,733 (141) 64,470
Basic and diluted net income per share .07 .04 .01 (.01) .11
- ----------------------------------------------------------------------------------------------------------------------------------
1998
Revenue $670,324 $644,278 $635,612 $614,811 $2,565,025
Net income (loss) 175,726 20,686 (8,581) (7,883) 179,948
Basic and diluted net income per share .08 .01 (.02) (.01) .13
- ----------------------------------------------------------------------------------------------------------------------------------
Item 9. Changes in, and Disagreements with Accountants on, Accounting and
Financial Disclosure
None.
20
Part III.
Item 10. Directors and Executive Officers of the Registrant
LEO S. ULLMAN, age 61, is President of the Company. He has been
Chairman and President of SKR Management Corp. and Chairman of Brentway
Management LLC from 1994 through the current date; and President of Cedar Bay
Realty Advisors, Inc. since the latter company's formation in January 1998 Mr.
Ullman served as Chairman of the Company from April 1998 until November 1999,
when he was replaced by Richard Homburg; Mr. Ullman was reelected to the
position of Chairman of the Company in December 2000; Mr. Ullman has also been
the President and sole director of Selbridge Corp. and Buttzville Corp. (the two
former partners of CBC) from 1994 through the current date, as well as President
and sole director of Duncomb Corp., Lindsay Management Corp. and Hicks Corp.,
the partners of CBC as from December 31, 1999. From 1992 through 1995, Mr.
Ullman was President of API Management Services Corp. and API Asset Management,
Inc. Mr. Ullman has been involved in real estate property and asset management
for approximately twenty years. Mr. Ullman has been a member of the New York Bar
since 1966. From 1993 until the end of 1998, Mr. Ullman served as "of counsel"
to the New York office of the law firm Schnader Harrison Segal & Lewis, LLP.
J.A.M.H. DER KINDEREN, age 60, was the Director of Investments from
1984 through 1994 for Rabobank Pension Fund, and has been or is Chairman of the
Board of the following entities: Noro America Real Estate B.V. (1995-present);
Noro Amerika Vast Goed B.V. (1985-present); Mass Mutual Pierson (M.M.P.)
(1988-present); and, from 1996 to 2000 , a director of Warner Building
Corporation. Mr. der Kinderen became a Director of the Company in 1998.
EVERETT B. MILLER, III, age 53, is currently the Senior Vice President
and Chief Executive Officer of CommonFund Realty, Inc. a regulated investment
advisor. Prior to that, starting in March 1997, Mr. Miller was the Senior Vice
President and Chief Executive Officer of two finite REITs, Endowment Realty
Investors and Endowment Realty Investors II. From January 1995 through March
1997, Mr. Miller was the Principal Investment Officer for Real Estate and
Alternative Investment at the Office of the Treasurer of the State of
Connecticut. Prior to that, Mr. Miller was employed for twenty years at
Travelers Realty Investment Co., at which his last position was Senior Vice
President. Mr. Miller became a Director of the Company in 1998.
BRENDA J. WALKER, age 48, is Vice President of the Company. She has
been President of Brentway Management LLC and Vice President of SKR Management
Corp. from 1994 through the current date; Treasurer of the Company from April
1998 until November 1999. Vice President of API Management Services Corp. and
API Asset Management, Inc. from 1992 through 1995. Ms. Walker has been involved
in real estate property and asset management for approximately twenty years. Ms.
Walker became Vice President and Director of the Company in 1998.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
21
Item 10. Directors and Executive Officers of the Registrant (continued)
The Company believes that during 2000 all of its officers, directors
and holders of more than 10% of its Common Stock complied with all filing
requirements under Section 16(a) of the Securities Exchange Act of 1934.
Item 11. Executive Compensation
The officers and directors of the Company who are affiliated with CBC
and the former officers and directors of the Company who were affiliated with
Uni-Invest Holdings (U.S.A.) B.V. do not/did not receive any remuneration for
their services to the Company other than reimbursement of travel and other
expenses incurred in connection with their duties. During 1999, directors not
affiliated with CBC and Uni-Invest Holdings (U.S.A.) B.V., Mr. Miller and Mr.
der Kinderen, each received an annual fee of $5,000 plus $750 for each board
meeting attended.
The Company established a stock option plan (the "Plan") for the
purpose of attracting and retaining executive officers, directors and other key
employees. As of December 31, 2000, 500,000 of the Company's authorized shares
of Common Stock have been reserved for issuance under the Plan. The Plan is
administered by a committee of the Board of Directors, which committee will,
among other things, select the number of shares subject to each grant, the
vesting period for each grant and the exercise price (subject to applicable
regulations with respect to incentive stock options) for the options. As of
December 31, 2000, no options have been granted under the Plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The following table sets forth information with respect to each person
and group (as that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934) known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding Shares of the Company as of December 31, 2001.
Each such owner has sole voting and investment powers with respect to the Shares
owned by it.
Number of Shares
Name and Address Beneficially Owned Percent of Class
- ---------------- ------------------ ----------------
Cedar Bay Company 1 1,893,037 79%
c/o SKR Management Corp.
44 South Bayles Avenue
Port Washington, NY 11050
Security Ownership of Management
- -----------------
(1) Represents 189,737 shares of Common Stock and 1,703,300 Units convertible
into shares of Common Stock owned by Cedar Bay Company plus 1,200 shares
owned personally.
22
Item 12. Security Ownership of Certain Beneficial Owners and Management
(continued)
The following table sets forth the number of shares of Common Stock
beneficially owned as of, 2000 by each Director and officer and by all Directors
and officers as a group (5 persons).
Amount and Nature
Name of Beneficial Ownership Percent of Class
- ---- ----------------------- ----------------
Leo S. Ullman(2) 1,894,237 79.07%
J.A.M.H. der Kinderen 200 o
Everett B. Miller III 200 o
Brenda J. Walker 200 o
Stuart H. Widowski 200 o
Directors and Officers as a group 79.07%
(5 persons)
All of the shares of Common Stock and all of the Units held by CBC were
pledged to its share loan lender as of the closing date of the April 1998 tender
offer, at which time CBC became the largest shareholder in the Company. CBC
paid-off the share loan in full as of December 23, 1999, thus eliminating any
restrictions on CBC's interests.
Item 13. Certain Relationships and Related Transactions
The Company has no employees and has contracted with CBRA to provide
the Company with administrative, advisory, acquisition, divestiture, property
management, leasing and stockholder services. A description of the agreements
between CBRA and certain of its affiliates and the Company follows. The
description of the agreements is qualified in its entirety by reference to the
terms and provisions of such agreements.
- -------------
(2) Mr. Ullman may be deemed to be the beneficial owner of all the shares of
Common Stock and Units owned by Cedar Bay Company. Mr. Ullman disclaims
beneficial ownership of such securities.
23
Item 13. Certain Relationships and Related Transactions (continued)
CBC is a New York general partnership. The Point Associates, L.P. a
Pennsylvania limited partnership, and Triangle Center Associates, L.P. a
Pennsylvania limited partnership, were the sole partners of CBC during 1998.
Until July 1, 2000, The general partner of The Point Associates, L.P. was
Selbridge Corp., a Delaware corporation. The general partner of Triangle Center
Associates is Buttzville Corp., a Delaware corporation. Until July 1, 2000, Leo
S. Ullman was the sole limited partner in The Point Associates, L.P. Mr. Ullman
remains the sole limited partner in Triangle Center Associates, L.P. and is an
executive officer and a Director of each of Selbridge Corp. and Buttzville Corp.
During March and April 1999 The Point Associates, L.P. and Triangle Center
Associates, L.P., respectively transferred their interests in CBC to TPA
Ownership L.L.C. ("TPA") resulting in TPA temporarily being sole partner of CBC.
Hicks Management Corp. ("Hicks"), Ledford Corp. ("Ledford"), and Thomsville
Corp. ("Thomsville") were equal members in TPA. Leo S. Ullman is an executive
officer and a Director of each of the aforementioned members of TPA. Effective
December 31, 1999 TPA was dissolved and all of the member interests were
assigned to Hicks, Ledford, and Thomsville, as general partnership interests, in
equal one-third portions. Immediately following and also effective December 31,
1999, each of the aforementioned general partners transferred its one-third
general partnership interests to Duncomb Corp., Lindsay Management Corp., and
Hicks Corp. The transfer resulted in Duncomb Corp. having a 55% interest,
Lindsay Management Corp. a 40% interest, and Hicks Corp., a 5% interest. Mr.
Ullman is an executive officer and a director in Duncomb Corp., Lindsay
Management Corp., and Hicks Corp.
CBRA is wholly-owned by Leo S. Ullman. Mr. Ullman is President and a
Director of, and Brenda J. Walker is Vice President of, CBRA.
Brentway Management LLC, a New York limited liability company
("Brentway"), is owned by Mr. Ullman and Ms. Walker. Mr. Ullman is Chairman and
Ms. Walker is President of Brentway.
Administrative and Advisory Services
The Company does not have any employees and has contracted with Cedar
Bay Realty Advisors, Inc., a New York corporation ("CBRA") to provide
administrative, advisory, acquisition and divestiture services to the Company
pursuant to an Administrative and Advisory Agreement (the "Advisory Agreement")
entered into in April 1998, and amended as of August 21, 2000. CBRA is wholly
owned by Mr. Ullman. Mr. Ullman is President and a director of, and Brenda J.
Walker is Vice President of, CBRA. Mr. Ullman is President and Chairman of the
Company. The term of the amended Advisory Agreement is for five (5) years and is
automatically renewed annually thereafter for an additional year subject to the
right of a majority of independent directors to cancel the Advisory Agreement
upon 60 days written notice.
Further, such Advisory Agreement may be terminated i) for cause upon
not less than sixty (60) day's written notice and ii) by vote of at least 75% of
the independent directors at the end of the third or fourth year of such five
year term in the event gross assets fail to increase by 15% per annum.
24
Item 13. Certain Relationships and Related Transactions (continued)
CBRA has agreed to defer certain acquisition fees to which it may
otherwise be entitled with respect to the possible acquisition by the Company or
the Operating Partnership of certain properties owned by CBC and/or its
affiliates. This includes acquisition fees otherwise payable with respect to the
purchase by the Operating Partnership of its 50% interest in The Point
Associates, L.P. Further, CBRA has agreed to defer certain fees otherwise
payable with respect to the sale of the Operating Partnership's interest in the
Germantown property.
Such deferred acquisition or disposition fees otherwise payable to CBRA
will be reduced to 50% if the Administrative Advisory Agreement with CBRA is
continued beyond December 31, 2004 and by an additional 10% for each year such
agreement remains in effect thereafter.
Under the Advisory Agreement, CBRA is obligated to: (a) provide office
space and equipment, personnel and general office services necessary to conduct
the day-to-day operations of the Company; (b) select and conduct relations with
accountants, attorneys', brokers, banks and other lenders, and such other
parties as may be considered necessary in connection with the Company's business
and investment activities, including, but not limited to, obtaining services
required in the acquisition, management and disposition of investments,
collection and disbursement of funds, payment of debts and fulfillment of
obligations of the Company, and prosecuting, handling and settling any claims of
the Company; (c) provide property acquisition and disposition services,
research, economic and statistical data, and investment and financial advice to
the Company; and (d) maintain appropriate legal, financial, tax accounting and
general business records of activities of the Company and render appropriate
periodic reports to the Directors and stockholders of the Company and to
regulatory agencies, including the Internal Revenue Service, the Securities and
Exchange Commission, and similar state agencies.
CBRA receives fees for its administrative and advisory services as
follows: (a) a monthly administrative and advisory fee equal to 1/12 of 3/4 of
1% of the estimated current value of real estate assets of the Company, plus
1/12 of 1/4 of 1% of the estimated current value of all other assets of the
Company; (b) an acquisition fee equal to 5% of the gross purchase price (before
expenses and without deducting indebtedness assumed) of any real property
acquired during the term of the Advisory Agreement; provided that the total of
all such acquisition fees plus acquisition expenses in connection with the
purchase of any real property shall be reasonable and shall not exceed 6% of the
amount paid or allocated to the purchase, development, construction or
improvement of a property, exclusive of acquisition fees and acquisition
expenses; and (c) a disposition fee equal to 3% of the gross sales price (before
expenses but without deducting any indebtedness against the property) of any
real property disposed of during the term of the Advisory Agreement; provided
that no disposition fee shall be paid unless and until the stockholders have
received certain distributions from the Company. In addition, CBRA may receive
one-half of the brokerage commission on such a disposition but only up to 3% of
the price actually paid for the property, subject to certain limitations. Those
fees are essentially the same as those previously applicable under the
Administrative and Advisory Agreement between the Company and Aegon U.S.A.
Realty Advisors, Inc. "Aegon" from the date of formation until April 3, 1998.
The Company paid $97,872 in administrative fees during 2000. A disposition fee
for the sale of Germantown in the amount of $22,500 was paid to CBRA during the
second quarter of 2000. No incentive or acquisition fees were paid during 2000.
25
Item 13. Certain Relationships and Related Transactions (continued)
Management Services
Brentway Management LLC, a New York Limited liability company
("Brentway") provides property management and leasing services to the Company's
real property pursuant to a Management Agreement entered into in April 1998 (the
"Management Agreement"). Brentway is owned by Mr. Ullman and Ms. Walker, who are
also Chairman and President of Brentway, respectively. Mr. Ullman is President
and Chairman of the Company. The term of the Management Agreement is for one (1)
year and is automatically renewed annually for an additional one (1) year
subject to the right of either party to cancel the Management Agreement upon 60
days' written notice. Under the Management Agreement, Brentway is obligated to
provide property management services, which include leasing and collection of
rent, maintenance of books and records, establishment of bank accounts and
payment of expenses, maintenance and operation of property, reporting and
accounting the Company regarding property operations, and maintenance of
insurance. All of the duties of Brentway are to be fulfilled at the Company's
expense; provided, however, that the Company is not required to reimburse
Brentway for personnel expenses other than for on-site personnel at the
properties managed. Brentway receives fees for its property management services
as follows: with the exception of The Point Shopping Center, a monthly
management fee equal to 5% of the gross income from properties managed and
leasing fees of up to 6% of the rent to be paid during the term of the lease
procured. In the case of The Point Shopping Center, the monthly management fee
is equal to 3% of the gross income and the leasing fees are limited to 4.5% of
the rent to be paid during the term of the lease procured.
Brentway was paid $78,928 in property management fees and no leasing fees in
2000. Leasing fees paid by the Company in 2000 were paid to third parties.
Brentway has subcontracted with various local management companies for site
management and leasing services for the Company's office properties.
26
Part IV
Item 14. Financial Statements and Schedules, Exhibits Reports on Form 8-K
(a) List of Documents
1. Financial Statements.
The following financial statements are included in Item 8:
Consolidated Balance Sheets, December 31, 2000 and 1999.
Consolidated Statements of Operations, Years ended December 31, 2000, 1999, and
1998.
Consolidated Statements of Shareholders' Equity, Years ended December 31, 2000,
1999 and 1998.
Consolidated Statements of Cash Flows, Years ended December 31, 2000, 1999 and
1998.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
All schedules have been omitted because they are not required, or because the
required information, where material, is included in the financial statements or
accompanying notes.
27
Item 14. Financial Statements and Schedules, Exhibits and Reports on Form 8-K
(continued)
3. Exhibits
(3.1) Articles of Incorporation.
(3.2) By-laws.
(3.3) Agreement of Limited Partnership for the Operating
Partnership.
(10.1) Administrative and Advisory Agreement dated April 2, 1998
between Cedar Bay Realty Advisors, Inc. and the Company.
(10.2) Management Agreement dated April 2, 1998 between Brentway
Management LLC and the Company.
(10.3) Financial Advisory Agreement dated June 1, 1998 between BV
Capital Markets, Inc. and the Company.
(b) Reports on Form 8-K.
None
(c) The required exhibits applicable to this section are listed in
Item 14(a)3.
(d) There are no financial statement schedules applicable to this section.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CEDAR INCOME FUND, LTD.
/s/ Leo S. Ullman /s/ Brenda J. Walker
- ------------------------------- ------------------------------------
Leo S. Ullman Brenda J. Walker
President and Chairman Vice President and Director
(principal executive officer) (principal financial officer)
/s/ Ann Maneri
------------------------------------
Ann Maneri
Controller
(principal accounting officer)
_______________, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and as of the date indicated.
/s/ J.A.M.H. der Kinderen
- -------------------------------
J.A.M.H. der Kinderen
Director
/s/ Everett B. Miller, III
- -------------------------------
Everett B. Miller, III
Director
______________, 2001
29
EXHIBIT INDEX
Exhibit
Item Title or Description
- ------- --------------------
(3.1)* Articles of Incorporation.
(3.2)* By-laws.
(3.3)* Agreement of Limited Partnership for the Operating
Partnership.
(10.1)* Administrative and Advisory Agreement dated April 2, 1998
between Cedar Bay Realty Advisors, Inc. and the Company.
(10.2)* Management Agreement dated April 2, 1998 between Brentway
Management LLC and the Company.
(10.3)* Financial Advisory Agreement dated June 1, 1998 between BV
Capital Markets, Inc. and the Company.
- ------
* Exhibits filed previously with the registrant's report on Form 10-Q dated
June 30, 1998.
(b) Reports on Form 8-K.
None
(c) The required exhibits applicable to this section are listed in
Item 14(a)3.
(d) There are no financial statement schedules applicable to this section.
30